document stringlengths 8.64k 13.4k | summary stringlengths 179 2.97k | __index_level_0__ int64 0 16.8k |
|---|---|---|
for the fiscal year ended june 30 , 2018 , capital expenditures were $ 29.4 million including $ 13.8 million for the construction of a new manufacturing facility and $ 12.6 million invested to upgrade the business information system . the company 's main sources of liquidity are cash and cash equivalents , investments , cash flows from operations and credit arrangements . as of june 30 , 2018 and 2017 , the company had cash and cash equivalents totaling $ 27.7 million and $ 28.9 million , respectively . the company invested $ 16.0 million and $ 18.0 million in short-term investments as of june 30 , 2018 and 2017 , respectively . these investments consist of treasury bills and u.s. agencies that will mature within six months of purchase date . the company entered into an unsecured credit agreement on june 30 , 2018 , that provides short-term working capital financing up to $ 10.0 million with interest of libor plus 1 % , including up to $ 4.0 million of letters of credit . letters of credit outstanding at june 30 , 2018 totaled $ 1.3 million . other than the outstanding letters of credit , the company did not utilize borrowing availability under the credit facility , leaving borrowing availability of $ 8.7 million as of june 30 , 2018. the credit agreement expires june 30 , 2019. at june 30 , 2018 , the company was in compliance with all of the financial covenants contained in the credit agreement . the company maintains an additional unsecured $ 10.0 million line of credit , with interest at prime minus 2 % . no amount was outstanding on the line of credit at june 30 , 2018 or 2017. this line of credit matures december 31 , 2018. net cash provided by operating activities was $ 27.3 million and $ 26.4 million in fiscal years 2018 and 2017 , respectively . the company had net income of $ 17.7 million that included $ 8.2 million in non-cash charges and cash provided by changes in operating assets and liabilities of $ 3.4 million in fiscal year 2018. non-cash charges included depreciation of $ 7.4 million . in fiscal year 2017 , the company had net income of $ 23.8 million that included $ 9.0 million in non-cash charges , which were offset by cash utilized for operating assets and liabilities of $ 6.4 million . non-cash charges included depreciation of $ 7.9 million . net cash used in investing activities was $ 21.4 million and $ 29.7 million in fiscal years 2018 and 2017 , respectively . in fiscal year 2018 , the company had capital expenditures of $ 29.4 million , proceeds from the disposition of capital assets of $ 6.2 million and net proceeds of investments of $ 1.9 million . in fiscal year 2017 , the company had net purchases of investments of $ 18.1 million and capital expenditures of $ 13.5 million . net cash used in financing activities was $ 7.1 million in fiscal year 2018 which included dividend payments of $ 6.7 million . net cash used in financing activities was $ 4.6 million in fiscal year 2017 which included dividend payments of $ 6.1 million , which was partially offset by excess stock benefits of $ 1.5 million and proceeds from issuance of common stock of $ 1.1 million . management believes that the company has adequate cash and cash equivalents , investments , cash flows from operations and credit arrangements to meet its operating and capital requirements for fiscal year 2019. in the opinion of management , the company 's liquidity and credit resources provide it with the ability to react to opportunities as they arise , to pay quarterly dividends to its shareholders , and to purchase productive capital assets that enhance safety and improve operations . at june 30 , 2018 , the company had no debt obligations and therefore , had no interest payments related to debt . the following table summarizes the company 's contractual obligations at june 30 , 2018 and the effect these obligations are expected to have on the company 's liquidity and cash flow in the future ( in thousands ) : total 1 year 2 - 3 years 4 - 5 years more than 5 years operating lease obligations $ 11,370 $ 4,659 $ 5,720 $ 991 $ — 12 at june 30 , 2018 , the company had no capital lease obligations , and no purchase obligations for raw materials or finished goods . the purchase price on all open purchase orders was fixed and denominated in u.s. dollars . the company has excluded the uncertain tax positions from the above table as the timing of payments , if any , can not be reasonably estimated . financing arrangements see note 6 to the consolidated financial statements of this annual report on form 10-k. outlook during fiscal 2019 , the company expects continued sales growth with inflationary pressure on raw materials and moderating labor cost increases . in addition , the company is acutely aware of the impending tariff affecting all imported furniture and certain furniture components from china into the united states which represents a significant risk to earnings . should these tariffs go into effect , the company plans to pass through any incremental costs to customers during the time these tariffs are enforced . in addition , the company is looking at supply chain options to mitigate the tariff impacts should they be implemented . the company is focused and committed to driving gross margin expansion through improved operational execution , targeted sales price increases and enhanced service levels . in the fiscal fourth quarter of 2018 , the company completed the first deployment of the new business information system . during the readiness phase , the company determined that multiple deployments would ensure effective implementation . the first deployment is now operating in approximately 20 % story_separator_special_tag for the fiscal year ended june 30 , 2018 , capital expenditures were $ 29.4 million including $ 13.8 million for the construction of a new manufacturing facility and $ 12.6 million invested to upgrade the business information system . the company 's main sources of liquidity are cash and cash equivalents , investments , cash flows from operations and credit arrangements . as of june 30 , 2018 and 2017 , the company had cash and cash equivalents totaling $ 27.7 million and $ 28.9 million , respectively . the company invested $ 16.0 million and $ 18.0 million in short-term investments as of june 30 , 2018 and 2017 , respectively . these investments consist of treasury bills and u.s. agencies that will mature within six months of purchase date . the company entered into an unsecured credit agreement on june 30 , 2018 , that provides short-term working capital financing up to $ 10.0 million with interest of libor plus 1 % , including up to $ 4.0 million of letters of credit . letters of credit outstanding at june 30 , 2018 totaled $ 1.3 million . other than the outstanding letters of credit , the company did not utilize borrowing availability under the credit facility , leaving borrowing availability of $ 8.7 million as of june 30 , 2018. the credit agreement expires june 30 , 2019. at june 30 , 2018 , the company was in compliance with all of the financial covenants contained in the credit agreement . the company maintains an additional unsecured $ 10.0 million line of credit , with interest at prime minus 2 % . no amount was outstanding on the line of credit at june 30 , 2018 or 2017. this line of credit matures december 31 , 2018. net cash provided by operating activities was $ 27.3 million and $ 26.4 million in fiscal years 2018 and 2017 , respectively . the company had net income of $ 17.7 million that included $ 8.2 million in non-cash charges and cash provided by changes in operating assets and liabilities of $ 3.4 million in fiscal year 2018. non-cash charges included depreciation of $ 7.4 million . in fiscal year 2017 , the company had net income of $ 23.8 million that included $ 9.0 million in non-cash charges , which were offset by cash utilized for operating assets and liabilities of $ 6.4 million . non-cash charges included depreciation of $ 7.9 million . net cash used in investing activities was $ 21.4 million and $ 29.7 million in fiscal years 2018 and 2017 , respectively . in fiscal year 2018 , the company had capital expenditures of $ 29.4 million , proceeds from the disposition of capital assets of $ 6.2 million and net proceeds of investments of $ 1.9 million . in fiscal year 2017 , the company had net purchases of investments of $ 18.1 million and capital expenditures of $ 13.5 million . net cash used in financing activities was $ 7.1 million in fiscal year 2018 which included dividend payments of $ 6.7 million . net cash used in financing activities was $ 4.6 million in fiscal year 2017 which included dividend payments of $ 6.1 million , which was partially offset by excess stock benefits of $ 1.5 million and proceeds from issuance of common stock of $ 1.1 million . management believes that the company has adequate cash and cash equivalents , investments , cash flows from operations and credit arrangements to meet its operating and capital requirements for fiscal year 2019. in the opinion of management , the company 's liquidity and credit resources provide it with the ability to react to opportunities as they arise , to pay quarterly dividends to its shareholders , and to purchase productive capital assets that enhance safety and improve operations . at june 30 , 2018 , the company had no debt obligations and therefore , had no interest payments related to debt . the following table summarizes the company 's contractual obligations at june 30 , 2018 and the effect these obligations are expected to have on the company 's liquidity and cash flow in the future ( in thousands ) : total 1 year 2 - 3 years 4 - 5 years more than 5 years operating lease obligations $ 11,370 $ 4,659 $ 5,720 $ 991 $ — 12 at june 30 , 2018 , the company had no capital lease obligations , and no purchase obligations for raw materials or finished goods . the purchase price on all open purchase orders was fixed and denominated in u.s. dollars . the company has excluded the uncertain tax positions from the above table as the timing of payments , if any , can not be reasonably estimated . financing arrangements see note 6 to the consolidated financial statements of this annual report on form 10-k. outlook during fiscal 2019 , the company expects continued sales growth with inflationary pressure on raw materials and moderating labor cost increases . in addition , the company is acutely aware of the impending tariff affecting all imported furniture and certain furniture components from china into the united states which represents a significant risk to earnings . should these tariffs go into effect , the company plans to pass through any incremental costs to customers during the time these tariffs are enforced . in addition , the company is looking at supply chain options to mitigate the tariff impacts should they be implemented . the company is focused and committed to driving gross margin expansion through improved operational execution , targeted sales price increases and enhanced service levels . in the fiscal fourth quarter of 2018 , the company completed the first deployment of the new business information system . during the readiness phase , the company determined that multiple deployments would ensure effective implementation . the first deployment is now operating in approximately 20 %
| contract net sales were $ 75.5 million for the year ended june 30 , 2018 , an increase of 3.9 % from net sales of $ 72.7 million for the year ended june 30 , 2017. fiscal year 2018 included an all-time record quarter for net sales in the second quarter , followed by a record third quarter . this result was primarily driven by high single-digit growth in residential products sold to furniture retailers and greater than 20 % growth in contract products targeting the recreational and hospitality markets . these successes in the year were partially offset by a 13 % decline in sales to e-commerce customers primarily driven by product placement disruption and the new business information system transition . 10 gross margin for the fiscal year ended june 30 , 2018 was 20.1 % compared to 23.2 % for the prior year period . higher labor costs primarily drove the gross margin decline for fiscal year 2018 over the prior year . after rapid growth in certain core product categories , additional manufacturing associates were hired to support product delivery speeds customers have come to expect from the company . the company manufactures a majority of custom upholstered furniture in the united states with a highly skilled workforce and has experienced higher average wage rates and turnover from the tightening labor market . to bolster the company 's success attracting and retaining skilled workers in the highly competitive labor market , during the fiscal second and third quarters of this year the company changed its compensation approach for the u.s.-based manufacturing workforce . as this modified compensation structure was implemented , the company experienced declines in productivity . the company is working to return to productivity levels realized before the compensation structure changes . long term , the company expects these changes to result in skilled workforce attraction and retention , reduced turnover and training costs , and continued improvement in quality and productivity to support the long-term growth of the company . additionally , the company experienced higher than expected cost originating from its juarez , mexico facility due to contracted employee wage rates increasing significantly due to mexican government mandated wage increases . higher material
| 11,580 |
on a given project , actual salary and indirect labor costs incurred are measured and compared against the total estimated costs of such items at the completion of the project . revenue is recognized based upon the percentage-of-completion calculation of total incurred costs to total estimated costs . the company infrequently works on fixed-price projects that include significant amounts of material or other non-labor related costs which could distort the percent complete within a percentage-of-completion calculation . the company 's estimate of the total labor costs it expects to incur over the term of the contract is based on the nature of the project and our past experience on similar projects , and includes management judgments and estimates which affect the amount of revenue recognized on fixed-price contracts in any accounting period . the company 's revenue from contracts accounted for under time-and-material , progress billing , and percentage-of-completion methods as a percentage of consolidated revenue for the years ended december 31 , 2016 , 2015 and 2014 is as follows : replace_table_token_11_th 16 results of operations the table below sets forth percentage information calculated as a percentage of consolidated revenue as reported on the company 's consolidated statements of operations as included in item 8 , “ financial statements and supplementary data ” in this report . replace_table_token_12_th 2016 as compared with 2015 the company recorded revenue in 2016 and 2015 as follows : replace_table_token_13_th reimbursable expenses billed to clients and included in revenue totaled $ 4.0 million and $ 6.5 million in 2016 and 2015 , respectively . the decrease in reimbursable expenses year-over-year is primarily due to a reduction in the number of consultants in our healthcare vertical market , as many of those employees travel to client locations to perform services . the revenue decrease in north america in 2016 as compared with 2015 was primarily due to a significant decrease in demand for the company 's it solutions business , primarily in our healthcare vertical market , and a decrease in demand for our it and other staffing services business from several large clients . the revenue increase in europe is primarily due to strong demand for the company 's services in the european markets we serve . on a consolidated basis , it solutions revenue decreased $ 27.3 million or 22.4 % in 2016 as compared with 2015. the company 's healthcare vertical market grew from 2008-2012 primarily from installing electronic health records ( ehr ) systems in hospitals and health systems . as of today , ehr installations are largely complete within the u.s. healthcare market . beginning in late 2014 , the company began to see significant reductions in billable resources at a number of its larger healthcare clients which further decreased it solutions revenue in the company 's healthcare vertical market as existing projects came to an end . this decrease in spending on healthcare it projects continued throughout 2016 for the clients that we serve . as part of our strategy to shift to non-ehr services , the company expanded its healthcare it business development team in 2016 with individuals who have experience selling healthcare it services such as advisory and technical services , outsourcing , and staff augmentation . however , in 2016 this team as a whole was not successful in reducing our revenue losses in this vertical market , and expanding the non-ehr healthcare related services we provide . also on a consolidated basis , it and other staffing revenue decreased $ 17.3 million or 7.0 % during 2016 as compared with 2015. the it staffing decrease was primarily due to a decrease in demand from a number of the company 's largest staffing clients . additionally , during the 2016 third quarter , the company was informed by its largest client that there would be significant reductions in both requirements and billable rates for certain of the employees provided to this client beginning in the 2016 fourth quarter . originally , these employee reductions could have totaled as much as 40 % of the total revenue earned from this client . however , ctg was able to negotiate the retention of a number of these requirements , although many of the retained employees were subject to reductions in billable rates . the company reduced its cost structure supporting its staffing clients in the 2016 fourth quarter to partially offset this loss in revenue and reductions in billable rates . 17 the company 's headcount was approximately 3,400 employees at december 31 , 2016 , which was a 6 % decrease from approximately 3,600 employees at december 31 , 2015. approximately 90 % of this headcount is for technical resource s , and 10 % for support positions . the increase in revenue in the company 's european operations in 2016 as compared with the corresponding 2015 period was due to an increase in demand for the company 's it solutions services across a number of the vertical markets we serve , partially offset by weakness relative to the u.s. dollar of the currencies of belgium , luxembourg , and the united kingdom , the countries in which the company 's european subsidiaries operate . in belgium and luxembourg , the functional currency is the euro , while in the united kingdom the functional currency is the british pound . in 2016 as compared with 2015 , the average value of the euro decreased 0.3 % , and the average value of the british pound decreased 11.3 % . a significant portion of the company 's revenue from its european operations is generated in belgium and luxembourg . had there been no change in these exchange rates from 2015 to 2016 , total european revenue would have been approximately $ 0.6 million higher , or $ 71.2 million as compared with the $ 70.6 million reported . when considering the year-over-year change in revenue in constant currencies , revenue from our european operations increased 5.9 % . operating income was essentially unchanged in 2016 as compared with 2015 given the change in the exchange rates year-over-year . story_separator_special_tag the company is currently assessing the potential impact , if any , that the united kingdom 's pending exit from the european union will have on the company 's operations . as the total revenue generated by our british subsidiary is immaterial when compared with the company 's total consolidated revenue , we do not expect the impact of the pending exit to have a material impact on the company 's operations . international business machines corporation ( ibm ) was ctg 's largest client and accounted for $ 98.4 million or 30.3 % and $ 99.2 million or 26.9 % of the company 's consolidated revenue in 2016 and 2015 , respectively . during the 2014 fourth quarter , the nts agreement with ibm was renewed for three years until december 31 , 2017. as part of the nts agreement , the company also provides its services as a predominant supplier to ibm 's integrated technology services and the systems and technology group business units . this agreement accounted for approximately 89 % of all of the services provided to ibm by the company in 2016. as previously mentioned , although there could have been a significant reduction in the number of requirements from this client beginning in the 2016 fourth quarter , the headcount losses were partially mitigated as of the 2016 year-end , and the expected annual loss in revenue is approximately $ 15-20 million in 2017. the company 's accounts receivable from ibm at december 31 , 2016 and 2015 totaled $ 28.0 million and $ 26.4 million , respectively . sdi was the company 's second largest client and accounted for $ 34.5 million or 10.6 % and $ 44.0 million or 11.9 % of the company 's consolidated revenue in 2016 and 2015 , respectively . sdi acts as a vendor manager for lenovo , and all of the company 's revenue generated through sdi relates to ctg employees working at lenovo . the company 's accounts receivable from sdi at december 31 , 2016 and december 31 , 2015 totaled $ 5.6 million and $ 5.5 million , respectively . we expect to continue to derive a significant portion of our revenue from ibm and sdi in future years ; however a significant decline or the loss of the revenue from these clients would have a significant negative effect on our operating results . no other client accounted for more than 10 % of the company 's revenue in 2016 or 2015. direct costs , defined as costs for billable staff including billable out-of-pocket expenses , were 81.8 % of consolidated revenue in both 2016 and 2015. in the 2016 second quarter , the company 's european operations recorded a payroll tax credit totaling approximately $ 0.7 million which reduced direct costs in 2016. the credited amounts returned certain costs incurred from 2011-2014 , and the company does not anticipate a significant credit in the future . in the 2015 second quarter , the company recorded several charges totaling $ 2.1 million which increased direct costs . when considering these items , direct costs as a percentage of revenue in 2016 increased as compared with 2015. this increase was due to the significant shift in the mix of the company 's business to a much higher level of it staffing revenue . these services are provided to the company 's largest it staffing clients , which have much higher direct costs as a percentage of revenue as compared with the company 's it solutions clients . selling , general and administrative ( sg & a ) expenses were 17.0 % of revenue in 2016 as compared with 15.3 % of revenue in 2015. the increase in sg & a expenses as a percentage of revenue in 2016 as compared with 2015 is primarily due to costs incurred by our operating units as the company continues to make investments in sales , recruiting and delivery resources in order to focus on the company 's long-term growth , and the loss of operating leverage from a decrease in revenue . additionally , severance incurred for the resignation of two former executives totaled $ 1.5 million and was included in the 2016 results . 18 during the 2016 first quarter , the company determined that a goodwill impairment indicator existed which required an interim impairment analysis . as a result of the ana lysis , the company determined the implied fair value of its goodwill balance was below the carrying value . accordingly , the company recorded a non-tax deductible goodwill impairment charge of $ 21.5 million to reduce the value of its goodwill balance to the implied fair value . additionally , during the 2016 third quarter , the company determined that another goodwill impairment indicator existed which required a second interim impairment analysis . as a result of the analysis , the company determined the implied fair value of its goodwill balance was again below the carrying value . accordingly , the company recorded a non-tax deductible goodwill impairment charge of $ 15.8 million to reduce the value of its goodwill balance to the implied fair value , which reduced the company 's goodwill balance to $ 0.0. the significant decrease in operating income in 2016 was due to the goodwill impairment charges taken in the 2016 first and third quarters totaling $ 37.3 million . operating income ( loss ) was ( 10.3 ) % of revenue in 2016 as compared with 2.9 % of revenue in 2015. operating income ( loss ) from north american operations was reduced by goodwill impairment charges of $ 35.6 million , and totaled $ ( 35.7 ) million in 2016 compared with $ 9.0 million in 2015. operating income from our european operations was $ 2.4 million in 2016 compared with $ 1.7 million in 2015. the 2016 results in europe were reduced by a goodwill impairment charge of approximately $ 1.7 million , offset by a payroll tax credit of $ 0.7 million recorded in the 2016 second quarter .
| the company has analyzed each jurisdiction 's tax position , including forecasting potential taxable income in future periods and the expiration of the net operating loss carryforwards as applicable , and determined that it is unclear whether all of these deferred tax assets will be realized at any point in the future . accordingly , at december 31 , 2016 , the company had offset a portion of these assets with a valuation allowance totaling approximately $ 0.9 million , resulting in a net deferred tax asset from net operating loss carryforwards of approximately $ 0.1 million . the company 's deferred tax assets and their potential realizability are evaluated each quarter to determine if any changes should be made to the valuation allowance . any change in the valuation allowance in the future could result in a change in the company 's etr . a 1 % change in the etr in 2016 would have increased or decreased net loss by approximately $ 335,000 , or approximately $ 0.02 per diluted share . other estimates the company has also made a number of estimates and assumptions relating to the reporting of its assets and liabilities and the disclosure of contingent assets and liabilities to prepare the consolidated financial statements pursuant to the rules and regulations of the sec , the fasb , and other regulatory authorities . such estimates primarily relate to the valuation of stock options for recording equity-based compensation expense , allowances for doubtful accounts receivable , investment valuation , discount rates associated with pension plans , incurred but not reported healthcare claims , legal matters , and estimates of progress toward completion and direct profit or loss on contracts , as applicable . as future events and their effect on the company 's operating results can not be determined with precision , actual results could differ from these estimates . changes in the economic climates in which the company operates may affect these estimates and will be reflected in the company 's financial statements
| 11,581 |
our remote power patent generated licensing revenue in excess of $ 105,000,000 from may 2007 through december 31 , 2016. as a result of our acquisition of the mirror worlds patent portfolio in may 2013 , we achieved licensing and other revenue of an aggregate of $ 47,150,000 through december 31 , 2016 ( see note j [ 4 ] and note k to our consolidated financial statements in this annual report ) . at december 31 , 2016 , our principal sources of liquidity consisted of cash and cash equivalents of $ 50,918,000 and working capital of $ 51,415,000. we believe based on our current cash position and projected licensing revenue from existing licensees that we will have sufficient cash to fund our operations for the foreseeable future . based on our cash position , we continually review opportunities to acquire additional intellectual property as well as evaluate other strategic alternatives . - 34 - on december 9 , 2016 , we announced that our board of directors approved the initiation of a dividend policy . the policy provides for the payment of regular semi-annual dividends of $ 0.05 per common share ( $ 0.10 per common share annually ) which are anticipated to be paid in march and september of each year . it is anticipated that the semi-annual dividend will continue to be paid through march 2020 ( expiration of network-1 's remote power patent ) provided that we continue to receive royalties from licensees of our remote power patent . on february 2 , 2017 , our board of directors declared an initial semi-annual dividend $ 0.05 per common share which will be paid on march 24 , 2017 to all shareholders of record on march 3 , 2017 . our revenue from our patent licensing and enforcement business is generated from license agreements entered into as a result of settlements or judgments ( after a jury verdict ) . generally , in the event of settlement of litigation related to our assertion of patent infringement involving our intellectual property , defendants will either pay ( i ) a lump sum payment for a non-exclusive fully-paid license ( a `` fully-paid license '' ) , or ( ii ) a lump sum payment ( license initiation fee ) together with an ongoing obligation to pay quarterly or monthly royalties to us for the life of the licensed patent ( a `` royalty bearing license '' ) . royalty bearing licenses we currently have royalty bearing licenses for our remote power patent with sixteen ( 16 ) licensees pursuant to which such licensees are obligated to pay us ongoing royalties on a quarterly or monthly basis for the life of our remote power patent ( march 2020 ) . revenue from ongoing royalties from our royalty bearing licenses was $ 10,788,000 during the year ended december 31 , 2016 as compared to $ 10,125,000 for the year ended december 31 , 2015. royalty bearing licensees increased from thirteen ( 13 ) to sixteen ( 16 ) licensees during the year ended december 31 , 2016. cisco is our largest royalty bearing licensee . cisco constituted 76 % and 83 % of our ongoing royalty revenue from our royalty bearing licenses for the years ended december 31 , 2016 and december 31 , 2015. due to our annual royalty rate structure with cisco which includes declining rates as the volume of poe products sales increase during the year , royalties from cisco are typically highest in the first quarter of the calendar year and decline for each of the remaining calendar quarters of the year . the obligation of our licensees to continue to make ongoing royalty payments to us from royalty bearing licenses is contingent upon the continued validity of certain claims of our remote power patent . the validity of our remote power patent is currently at issue in our pending litigation against four data equipment manufacturers in the united states district court for the eastern district of texas ( see `` legal proceedings '' at pages 27-28 hereof ) . if certain claims of our remote power patent are ultimately determined to be invalid , such a determination would have a material adverse effect on our business , financial condition and results of operations as our revenue stream is largely dependent upon the continued validity of our remote power patent . - 35 - litigation settlements licensing revenue from litigation settlements ( exclusive of ongoing royalty obligations pursuant to royalty bearing licenses ) was $ 36,800,000 for the year ended december 31 , 2016 as compared to $ 6,440,000 for the year ended december 31 , 2015. with respect to litigation settlements ( exclusive of ongoing royalty obligations pursuant to royalty bearing licenses ) related to our remote power patent , for the year ended december 31 , 2016 we recognized licensing revenue of $ 11,800,000 including settlement payments from dell , alcatel and ale , usa polycom , inc. and sony corporation ( see `` legal proceedings at pages 27-28 hereof ) . with respect to litigation settlements related to our mirror worlds patent portfolio , for the year ended december 31 , 2016 we received aggregate settlement payments of $ 42,500,000 consisting of a fully paid license with apple inc. of $ 25,000,000 ( see `` legal proceedings '' at pages 28-29 hereof ) and $ 17,500,000 in settlement of a professional liability claim ( see page 21 hereof ) . pending litigation we currently have pending patent infringement litigations involving our remote power patent and certain patents within our cox patent portfolio . in september 2011 , we initiated patent litigation against sixteen ( 16 ) data equipment manufacturers in the united states district court for the eastern district of texas , tyler division , for infringement of our remote power patent . we have since settled the litigation against twelve ( 12 ) of the defendants . story_separator_special_tag the remaining four defendants in the litigation are hewlett packard company , inc. , juniper networks , inc. , avaya inc. and axis communications , inc. the first of the trials for the defendants is scheduled to commence on november 6 , 2017 ( see `` legal proceedings '' at pages 27-28 hereof ) . in april , 2014 and december , 2014 , we initiated patent infringement litigation against google inc. and youtube , llc in the united states district court for the southern district of new york for infringement of several patents within our cox patent portfolio ( see `` legal proceedings '' at page 29 hereof ) . these litigations are currently subject to a court ordered stay pending appeal to the united states court of appeals for the federal circuit of final written decisions of the patent trial and appeal board ( ptab ) of the uspto in our favor relating to four inter partes review proceedings and a covered business method review ( cbm ) instituted by google ( see `` legal proceedings '' at page 30 of this annual report ) . taxes we utilized our remaining net operating loss carry-forwards ( `` nols '' ) of approximately $ 20.7 million during the three month period ended september 30 , 2016. current federal , state and local income taxes of $ 4,187,000 were recorded for the year ended december 31 , 2016 . the remaining deferred tax assets of $ 207,000 relate to temporary ( timing ) differences with respect to options , warrants and restricted stock units . the personal holding company ( `` phc '' ) rules under the internal revenue code impose a 20 % tax on a phc 's undistributed personal holding company income ( `` phc income '' , which means , in general , taxable income subject to certain adjustments ) . for a corporation to be classified as a phc , it must satisfy two tests : ( i ) that more than 50 % in value of its outstanding shares must be owned directly or indirectly by 5 or fewer individuals at anytime during the second half of the year ( after applying constructive ownership rules to attribute stock owned by entities to their beneficial owners and among certain family members and other related parties ) ( the `` ownership test '' ) and ( ii ) at least 60 % of its adjusted ordinary gross income for a taxable year consists of dividends , interest , royalties , annuities and rents ( the `` income test '' ) . during the second half of 2016 ( as well as prior years ) , we did not meet the ownership test . due to the significant number of shares held by our largest shareholders , we will continually assess our share ownership to determine whether it meets the ownership test . if the ownership test were met and the income generated by us were determined to constitute `` royalties '' within the meaning of the income test , we would constitute a phc and we would be subject to a 20 % tax on the amount of any phc income that we do not distribute to our shareholders . - 36 - story_separator_special_tag 10pt ; font-family : 'times new roman ' , times , serif ; text-align : justify ; text-indent : 36pt '' > net cash used in investing activities for 2016 and 2015 was $ 42,000 and $ 75,000 , respectively , related to the purchase of patents . net cash provided by ( used in ) financing activities for 2016 and 2015 was $ 446,000 and $ ( 2,612,000 ) , respectively , primarily from the exercise of stock options and warrants in 2016 and our repurchase of common stock as part of our share repurchase program in 2015. we maintain our cash primarily in money market accounts . accordingly , we do not believe that our investments have significant exposure to interest rate risk . off-balance sheet arrangements we do not have any off-balance sheet arrangements . contractual obligations we do not have any long-term debt , capital lease obligations , operating lease obligations , purchase obligations or other long-term liabilities except for a lease obligation set forth in note h [ 5 ] to our consolidated financial statements included in this annual report . critical accounting policies our discussion and analysis of our financial condition , results of operations , and cash flows are based on our audited consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of financial statements included in this annual report on form 10-k 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 revenues and expenses during the reporting periods . the significant estimates and assumptions made in the preparation of our consolidated financial statements include deferred income taxes , income tax payable , valuation of warrants and stock-based payments , accrued expenses and valuation of marketable securities . actual results could be materially different from those estimates , upon which the carrying values were based . - 39 - our critical accounting policies include : · revenue recognition ; · patents ; · income taxes · impairment of long lived assets ; and · stock based compensation . revenue recognition we recognize revenue received from the licensing of our intellectual property and other related intellectual property activities . revenue is recognized when ( i ) persuasive evidence of an arrangement exists , ( ii ) all obligations have been performed pursuant to the terms of the license or other applicable agreement , ( iii ) amounts are fixed or determinable , and ( iv ) collectability of amounts is reasonably assured .
| included in the costs of revenue for 2016 were contingent legal fees of $ 18,196,000 ( see note h [ 1 ] to our consolidated financial statements included herein ) , other contractual payments related to net proceeds from settlements of $ 3,345,000 ( see note h [ 2 ] to our consolidated financial statements included herein ) and $ 4,252,000 of incentive bonus compensation payable to our chairman and chief executive officer pursuant to his employment agreement ( see note i [ 1 ] to our consolidated financial statements included in this annual report ) . included in the costs of revenue for 2015 were contingent legal fees of $ 4,564,000 payable to our patent litigation counsel and $ 886,000 of incentive bonus compensation payable to our chairman and chief executive officer pursuant to his employment agreement . general and administrative expenses decreased by $ 92,000 from $ 2,874,000 for 2015 to $ 2,782,000 for 2016 , due primarily to increased expenses during 2015 consisting of a write-off of our investment in lifestreams of $ 576,000 ( see note d to our consolidated financial statements included herein ) and termination of our services agreement resulting in an expense of $ 261,000 ( see note h [ 4 ] to our consolidated financial statements included herein ) . amortization of patents was $ 813,000 for 2016 as compared to $ 1,655,000 for 2015. stock-based compensation expense related to the issuance of restricted stock units and the vesting of stock options was $ 509,000 for 2016 as compared to $ 272,000 for the issuance of stock options for 2015. we also had contingent patent cost of $ 500,000 for 2016. professional fees and related costs were $ 2,590,000 for the 2016 as compared to $ 2,331,000 for 2015 . - 37 - interest income . interest income for 2016 was $ 61,000 as compared to interest income of $ 58,000 for 2015. operating income . we had operating income of $ 32,100,000 for 2016 compared with operating income of $ 3,927,000 for 2015. the increased operating income of $ 28,173,000 for 2016 was primarily due to an increase in licensing revenue of $ 30,360,000 from litigation settlements and revenue of $ 17,500,000 from settlement of a professional liability claim ( see note j and note k to our consolidated financial
| 11,582 |
this overall trend in inventory is driven primarily by our contractually required investments in certain programs , which include the boeing b747-8 , b787 , gulfstream g280 and g650 , airbus a350 xwb , sikorsky ch-53k and rolls-royce br725 programs . the contracts for these programs accounted for a decrease in inventory from 2012 to 2013 of $ 682.7 million , which is net of forward loss charges for each year . excluding the forward loss charges , these programs would have increased inventory by $ 329.4 million from 2012 to 2013. the increases in inventory for new and maturing programs in the last few years are a result of the application of the percentage-of-completion method of contract accounting with regard to inventory and revenue recognition . under this method , investments in new and maturing contracts , including contractual pre-production costs and recurring production costs in excess of the projected average cost to manufacture all units in the contract block , initially accumulate in inventory for the related contract . once production has reached a point where the cost to produce a ship set falls below such projected average cost , the inventory balance for such program will begin to decrease . deferred inventory costs are evaluated for recoverability through their inclusion in the total costs used in the calculation of each contract block 's estimated profit margin . when the estimated total contract block costs exceed total estimated contract block revenues , a forward loss is recorded and an inventory reserve is established . management 's focus the company 's focus is on ensuring that our strategy and our operational and cost performance are world class . overall , we are committed to the concept of change and we have undertaken specific actions recently that highlight that commitment . on may 2 , 2013 , we announced the undertaking of comprehensive strategic and financial reviews of our development programs at our tulsa , wichita , kinston and st. nazaire sites . these reviews were concluded in the fourth quarter of 2013. decisions made as a result of these reviews include some of the actions we announced in 2013 , the most significant of which was 53 our commencement of a process to sell our oklahoma facilities , which we announced on august 6 , 2013. certain of our maturing programs , including the gulfstream g280 and g650 wing and the b787 wing programs , are produced at these facilities . this decision aligns with our strategy to focus on the commercial aerospace and defense segments of the marketplace . we may ultimately decide to sell only a portion of , or certain programs produced at , our oklahoma facilities , to sell separate portions and or programs to different buyers , or to retain the facilities in their entirety . we are also committed to reducing internal cost and improving operational efficiency through centralization of functions as demonstrated by the reduction in workforce activities completed in the third quarter of 2013. additionally , we continue to align the business around our customers and programs with strong emphasis on markets , business management , program management , production and supply chain . we also added new executive talent and reassigned existing executive talent in an effort to strengthen performance in certain areas of our business . we anticipate taking additional actions in the near-term as we continue to focus on positioning the company for future success . new and maturing programs we are currently performing work on several new and maturing programs , which are in various stages of development . the boeing b787-8 has received faa and jaa certifications , as well as easa certification for entry into service . the gulfstream g280 and g650 have each received faa and easa certifications . during 2013 , several events occurred that led to significant changes in cost estimates for several programs resulting in forward losses being recorded on some of these programs . due to these changes , for the twelve months ended december 31 , 2013 , we recorded forward loss charges of $ 1,133.3 million , including $ 240.9 million on the gulfstream g280 , $ 288.3 million on the gulfstream g650 , $ 78.6 million on the airbus a350 xwb fuselage recurring , $ 32.7 million on the airbus a350 xwb fuselage non-recurring , $ 41.1 million on the boeing b747-8 fuselage , $ 16.4 million on the boeing b767 propulsion , $ 422.0 million on the boeing b787 and a net $ 13.3 million on the rolls-royce br725 . these amounts are recorded within the company 's results of operations as part of cost of goods sold as well as on the consolidated balance sheet as forward loss provisions within inventory . a350 xwb we continue to support the development of the a350 xwb program through a wing contract and a fuselage contract , both of which are segmented into a non-recurring design engineering phase and recurring production phase . in the first quarter of 2013 , we reduced the margins for the a350 xwb fuselage recurring and a350 xwb wing recurring programs to break-even to reflect an increase in identified risk profile of these programs . in september and october of 2013 , we agreed with airbus on the work scope for the design and tooling related to the -1000 derivative of the a350 xwb fuselage and wing contracts , respectively . based on current estimates , the agreement for the non-recurring design engineering phase of the -1000 derivative fuselage resulted in a $ 32.7 million forward loss which was recorded in the third quarter of 2013. there is a risk of additional forward loss if we do not successfully execute the design and engineering change process as projected . our a350 xwb fuselage recurring program has experienced various production inefficiencies mostly driven by early development discovery and engineering change to the aircraft design , as well as higher test and transportation costs . airbus is assisting us as we work through these issues and has provided additional resources to work alongside our personnel . story_separator_special_tag in the third quarter of 2013 , we recorded a forward loss of $ 78.6 million for the a350 xwb fuselage recurring contract due to these production inefficiencies . there continues to be risk of additional forward loss associated with the fuselage recurring contract as we work through production issues . although we continue to project the wing recurring production contract to be break-even , there is still a substantial amount of risk similar to what we have experienced on other development programs . 54 particularly , our ability to successfully negotiate favorable terms with our suppliers , manage supplier performance , execute cost reduction strategies , hire and retain skilled production and management personnel , execute quality and manufacturing processes , and manage program schedule delays or adjust to higher rate schedules , among other risks , will determine the ultimate performance of these programs . b787 program as we move into a higher production rate on this program , our performance at the current contracted price depends on our continued ability to achieve cost reductions in manufacturing and support labor as well as supply chain . during the first and second quarters of 2013 , we experienced production inefficiencies at our tulsa facility as we transitioned the b787-9 derivative into production , which drove forward losses of $ 37.3 million on the b787 wing program . additionally in the fourth quarter of 2013 , we revised our estimates of the amount of near-term achievable cost reductions for the b787 program based on cost savings ideas generated , the maturity of those ideas , and the expected realization for the program . this change in cost savings estimates drove a forward loss in the fourth quarter of $ 384.7 million . total forward losses for the program were $ 422.0 million for the twelve months ended december 31 , 2013. continuous improvement in our cost structure has been on-going since the beginning of the program as design engineering for both the b787-8 and b787-9 derivatives finalized and manufacturing plans solidified . near term cost improvement efforts will focus on efficiency gains within our manufacturing process and execution of sourcing strategies . we have not yet established pricing for the b787-9 , b787-10 or any future derivatives . the b787 supply agreement provides that initial prices for the b787-9 and b787-10 are to be determined by a procedure set out in the b787 supply agreement , and to be documented by amendment once that amendment has been agreed to by the parties . the parties have engaged in discussions concerning how to determine initial b787-9 and b787-10 pricing , and have not yet reached agreement . our ability to successfully negotiate fair and equitable prices for these models as well as overall b787 delivery volumes and our ability to achieve forecasted cost improvements on all b787 models are key factors in achieving the projected financial performance for this program . g280 and g650 programs the gulfstream g650 and g280 programs face near term risks that includes our ability to execute our contractual work statement , achieve supply chain cost reductions , and successfully perform to manufacturing plans and delivery schedules . business jet market fluctuations caused by changing customer preferences for business aircraft , including the effect of global economic conditions on the business aircraft market , also present risk to these programs . the g650 program has significant near term risk as we work with our customer to resolve certain commercial issues related to gulfstream 's contention that delivered units failed to meet schedule and weight requirements . supply chain cost reductions g280 and g650 our 2012 cost estimates at completion for the gulfstream g280 and g650 programs included significant cost reductions primarily related to sourcing opportunities projected to be realized between 2015 and 2018. these sourcing opportunities and related savings amounts were based on the experience of the supply chain team and operational management . during the second quarter of 2013 , the supply chain team and operational management determined that a substantial portion of the total cost savings included in the contract estimates for each program would not be realized . this determination was based on a number of changing conditions and new developments including , an assessment of our actual experience with our customers regarding their receptiveness to proposed changes , completion of a detailed part analyses as part of our effort to project future sourcing costs , and our inability to achieve estimated supplier price reductions via negotiations with suppliers . 55 labor estimates tulsa facility the labor cost forecasts within the contract estimates for the g280 , g650 and b787 are based on certain assumptions , including the level of disruption expected in the future . in our contract estimates through the first quarter of 2013 , we assumed that certain disruptions to the manufacturing line caused by ( i ) supplier quality issues and late deliveries , ( ii ) customer inspections occurring in our facilities and ( iii ) our own manufacturing quality issues would be resolved by the middle of 2013. during the second and fourth quarters of 2013 , key performance dates were missed and we extended the expected period of time during which these issues would be resolved in our assumptions for our contract estimates . as a result , we experienced higher actual costs as well as significant increases to forecasted costs , resulting in additional forward losses recognized on all of these programs in the second and fourth quarters of 2013. contractual items g650 as we worked with gulfstream to meet its production demand , we negotiated a temporary transfer of a portion of our work scope to gulfstream for completion . in the second quarter of 2013 , due to the effect of continued production challenges on our forecasted ability to achieve scheduled deliveries , we changed our assumptions to extend the duration of the work transfer and updated our estimates regarding this temporarily transferred work scope which is accounted for as a reduction in forecasted revenue .
| ( 3 ) included in 2011 is recognition of previously deferred revenue associated with the b787 amendment in the second quarter of 2011 , a net $ 81.8 million forward loss charge recorded for the g280 program , a net $ 29.0 million forward loss charge recorded for the sikorsky ch-53k helicopter program , an $ 18.3 million forward loss charge recorded on the b747-8 program and a $ 3.0 million forward loss charge recorded on the a350 xwb non-recurring wing program . in addition , 2011 cost of sales includes a $ 9.0 million charge to replenish warranty and extraordinary rework reserves , $ 1.9 million in early retirement incentives for eligible uaw-represented employees and $ 13.8 million in favorable cumulative catch-up adjustments for periods prior to december 31 , 2011. for the twelve months ended december 31 , 2011 , $ 6.9 million was reclassified from segment operating income to unallocated cost of sales to conform to current year presentation . ( 4 ) includes non-cash stock compensation expenses of $ 19.6 million , $ 15.3 million and $ 11.1 million for the respective periods starting with the twelve months ended december 31 , 2013 . ( 5 ) for 2012 , gain includes a $ 234.9 million insurance settlement amount , offset by $ 88.7 million of costs incurred related to the april 14 , 2012 severe weather event . costs include assets impaired by the storm , clean-up costs , repair costs and incremental labor , freight and warehousing costs associated with the impacts of the storm . comparative ship set deliveries by model are as follows : replace_table_token_10_th for purposes of measuring production or ship set deliveries for boeing aircraft in a given period , the term `` ship set '' refers to sets of structural fuselage components produced or delivered for one aircraft in such period . for purposes of measuring production or ship set deliveries for airbus and business/regional jet aircraft in a given period , the term `` ship set '' refers to all structural aircraft components produced or delivered for one aircraft in such period . other components which are part of the same aircraft ship
| 11,583 |
we remain focused on efficient use of our infrastructure , optimizing our operating costs and centralizing certain functions and procedures during fiscal 2012. our profitability depends upon both the type and volume of services performed and the company 's ability to efficiently manage costs . our staff consists of business process and computer specialists who help our government and civilian customers augment and expand their resident technologic skills and competencies , drive technical innovation , and help develop and maintain a competitive edge in today 's rapidly changing technological environment in business . as a significant portion of our recurring cost structure is labor-related , we must effectively manage these costs to achieve and grow our profitability . another significant portion of our cost structure includes our airtime plans and other vendor-related offerings under our managed mobility solutions services . to date , the company has attempted to maximize its operating margins through efficiencies achieved by the use of its proprietary methodologies , and by offsetting increases in consultant compensation with increases in consultant fees received from its clients . critical accounting policies and estimates refer to note 2 to the consolidated financial statements for a summary of the company 's significant accounting policies referenced , as applicable , to other notes . in many cases , the accounting treatment of a particular transaction is specifically dictated by u.s. gaap and does not require management 's judgment in its application . there are also areas in which management 's judgment in selecting among available alternatives would not produce a materially different result . the company 's senior management has reviewed these critical accounting policies and related disclosures with its audit committee . see note 2 to consolidated financial statements , which contain additional information regarding accounting policies and other disclosures required by u.s. gaap . the following section below provides information about certain critical accounting policies that are important to the consolidated financial statements and that require significant management assumptions and judgments . 15 business combinations the application of purchase accounting to a business acquisition requires that the company identify the individual assets acquired and liabilities assumed and estimate the fair value of each . the company estimates the fair value of purchase consideration in each business combination using an acceptable valuation methodology which may include an income , market and or cost approach . the company assigns a provisional value on the date of purchase and engages qualified third party valuation professionals to estimate the fair value of significant assets acquired and liabilities assumed . purchase consideration is often paid to the seller in the form of cash , seller financed promissory notes and or shares of common stock that may or may not contain a contingency often tied to future financial performance targets . the company generally assesses the estimated fair value of contingent obligations using a probability weighted income approach ( discounted cash flow ) valuation technique which requires the use of observable and unobservable inputs . fluctuations in the fair value of contingent obligations are impacted by two unobservable inputs , management 's estimate of the probability of the acquired company meeting the operating performance target and the estimated discount rate ( a rate that approximates the company 's weighted average cost of capital ) . significant increases ( decreases ) in either of those inputs in isolation would result in a significantly higher ( lower ) fair value measurement . fair value is assessed for contingent obligations on a quarterly basis until such contingencies have been resolved and any changes in fair value are recorded as a gain or loss on change in fair value of contingent obligations within general and administrative expense . the company revised its provisional value of contingent consideration paid related to the avalon global solutions , inc. ( “ ags ” ) business combination to reflect additional information existing at the date of the ags purchase that affected the payout probabilities used in our calculation of fair value and working capital adjustments finalized during fiscal 2012. the company decreased its contingent obligation provisional value from $ 3.0 million to a final fair value $ 2.15 million as of december 31 , 2011. the company reassessed the fair value of contingent consideration during the year ended december 31 , 2012 and recorded a non-cash gain of approximately $ 0.9 million to reflect a reduction in the fair value of its contingent obligation due to non-attainment of certain financial performance targets in fiscal 2012 and changes in the 2013 financial performance based on revised internal forecasts . the fair value of this contingent obligation will be reassessed quarterly until fiscal year ending december 31 , 2013. goodwill and intangible assets often represent a significant portion of the assets acquired in a business combination . the company recognizes the fair value of an acquired intangible apart from goodwill whenever the intangible arises from contractual or other legal rights , or when it can be separated or divided from the acquired entity and sold , transferred , licensed , rented or exchanged , either individually or in combination with a related contract , asset or liability . the company generally assesses the estimated fair values of acquired intangibles using an income and market approach , except for internally developed software which is valued using a cost approach . the fair values of the intangible assets purchased were determined using a combination of valuation techniques . fluctuations in the fair value of intangibles are impacted by two unobservable inputs , management 's five year forecast and the estimated discount rate ( a rate that approximates the company 's weighted average cost of capital ) . significant increases ( decreases ) in either of those inputs in isolation would result in a significantly higher ( lower ) fair value measurement . story_separator_special_tag the company had finite lived intangible assets with a carrying value of approximately $ 5.0 million as of december 31 , 2012. the fair value of intangibles acquired in connection with business combinations continued to generate positive returns above its carrying value . accordingly , the company has concluded the fair value of its intangibles is not impaired at december 31 , 2012. the company could be exposed to increased risk of recoverability to the extent future revenue estimates may not support the recovery of purchased intangible assets . revenue recognition telecommunications expense management and device management services are delivered on a monthly basis based on a standard fixed pricing scale and sensitive to significant changes in per user or device counts which form the basis for monthly charges . revenue is recognized upon the completion of the delivery of monthly managed services based on user or device counts or other metrics . managed services are not interdependent and there are no undelivered elements in these arrangements . if estimated user or device counts are significantly different from actual counts it could significant affect the calculation of reported monthly managed service fees . telecommunications carrier invoice management and payment services requires the company to purchase bands of minutes , text messaging and data services from large carriers and optimizes these services for its mobile customers . the company recognizes revenues and related costs on a gross basis for these arrangements as we have discretion in choosing providers , rate plans , and devices in providing the services to our customers . we establish pricing for our customer contracts . for arrangements in which we do not have such credit risk we recognize revenues and related costs on a net basis . 16 telecommunications audit and optimization services are professional services conducted over a specified period of time . these professional services are billed based on time incurred and actual costs or on a contingency basis . the company recognizes revenues in services performed based on actual hours worked and actual costs incurred . the company recognizes contingent based service arrangements when our savings results are verified by the carrier and accepted by the customer . contingent fees earned are calculated based on projected or proven savings times an agreed upon recovery rate . cost associated with contingent fee arrangements are recognized as incurred . telecommunication mobile device and accessory resale services may require the company to facilitate as an agent on our customers ' account or transact on our own account to deliver third party vendor products and or services to meet our customers ' specific functional requirements . for those transactions in which we procure and deliver products and services for our own account the company recognizes revenues and related costs on a gross basis for these arrangements as we have discretion in choosing providers , rate plans , and devices in providing the services to our customers . for those transactions in which we procure and deliver products and services for our customers ' on their own account we recognize revenues and related costs on a net basis . public key infrastructure ( pki ) credentialing service s are delivered as an on-demand managed service through the cloud to an individual or organization or sold in bulk to an organization capable of self-issuing credentials . credentialing services are not bundled or include other obligations to deliver . revenue is recognized from the sales of credentials to an individual or organization upon issuance or in the case of bulk sales or consoles upon issue or availability to the customer for issuance . there is no obligation to provide post contract services in relation to certificates issued and consoles delivered . certificates issued have a fixed life and can not be modified or reissued . network and consulting services are professional services are provided largely on a project basis based our customers ' specific requirements . these technical professional services are billed based on time incurred and actual costs . the company recognizes revenues in services performed based on actual hours worked and actual costs incurred . goodwill goodwill represents the excess of acquisition cost of an acquired company over the fair value of assets acquired and liabilities assumed . in accordance with gaap , goodwill is not amortized but is tested for impairment at the reporting unit level annually at december 31 and between annual tests if events or circumstances arise , such as adverse changes in the business climate , that would more likely than not reduce the fair value of the reporting unit below its carrying value . the company assigns goodwill to its reporting units for the purpose of impairment testing . a reporting unit is defined as either an operating segment or a business one level below an operating segment for which discrete financial information is available that management regularly reviews . the goodwill impairment test utilizes a two-step approach . the first step identifies whether there is potential impairment by comparing the fair value of a reporting unit to its carrying amount , including goodwill . if the fair value of a reporting unit is less than its carrying amount , the second step of the impairment test is required to measure the amount of any impairment loss . the company has the option to bypass the qualitative assessment for any reporting period and proceed to performing the first step of the two-step goodwill impairment test and then subsequently resume performing a qualitative assessment in any subsequent period . the company bypassed using a qualitative assessment for 2012 . 17 goodwill impairment testing involves management judgment , requiring an assessment of whether the carrying value of the reporting unit can be supported by its fair value using widely accepted valuation techniques , such as the market approach ( earnings multiples or transaction multiples for the industry in which the reporting unit operates ) or the income approach discounted cash flow methods ) .
| excluding revenue growth attributable to customers transitioned over in connection with the ags transaction , we experienced revenue growth of approximately $ 1.0 million . we continued to shift away from lower margin revenue generated from billable reselling of minutes to our federal customers . we continue to believe that growth strategies to expand our reach in the commercial and state government sectors should provide us with the revenue mix and customer diversification sought to meet our overall growth strategies and manage variability in revenue from federal government contracts . § our cyber security managed solutions segment realized revenues of approximately $ 6.9 million , an increase of $ 0.4 million ( or 6 % ) for the year ended december 31 , 2012 as compared to approximately $ 6.5 million in the same period last year . our revenue growth materially reflects continuing credentialing managed service sales in connection with the transportation workers identification credentialing ( twic ) program . we believe our credentialing program will expand from continued support and rollout of additional work with various states in support of our first responders initiatives , and other credentialing initiatives in progress . § our consulting and support services segment realized revenues of approximately $ 17.1 million , an increase of $ 6.1 million ( or 55 % ) for the year ended december 31 , 2012 as compared to $ 11.0 million in the same period last year . our revenue growth in this segment was driven by increases in our technology infrastructure and application consulting services in the commercial sector , as well as increases in product resale 's of hardware , software , mobile device and accessory products to commercial and government sector customers . future performance for this segment may prove erratic from period to period as consulting service and product resale demand is depend upon our customer 's technology requirements and planned program roll-out periods . cost of revenues cost of revenues for the year ended december 31 , 2012
| 11,584 |
our business operations typically generate significant cash flow , affording us the flexibility to invest strategically in our efforts to maximize shareholder value through mergers and acquisitions , share repurchases and capital expenditures . we are carefully managing liquidity and are monitoring any potential effects from the pandemic on our financial results , cash flows and or working capital and intend to take appropriate actions in efforts to mitigate any impacts . business see item 1 . “ business ” for discussion pertaining to our business and reportable segments . recent acquisitions . during the year ended december 31 , 2020 , we completed five acquisitions . these acquisitions included the equity interests of two entities , one that specializes in heavy civil infrastructure that is included within our clean energy and infrastructure segment , and one that specializes in utility service and telecommunications construction that is included within our communications segment . we also acquired the assets of three entities , one that specializes in wireless telecommunications and one that specializes in install-to-the-home services , both of which are included within our communications segment and one that specializes in electrical transmission services that is included within our electrical transmission segment . during the year ended december 31 , 2019 , we completed six acquisitions , one of which specializes in water infrastructure for pipeline companies and is included within our oil and gas segment , four o f which are included within our communications segment , including a wireline/fiber deployment construction contractor and a telecommunications company specializing in a broad range of end-to-end wireless telecommunications solutions , and one of which specializes in construction projects in the power industry and is included in our clean energy and infrastructure segment . during the year ended december 31 , 2018 , we completed two acquisitions , including a construction management firm specializing in steel building systems and a wind turbine service company , both of which are included in our clean energy and infrastructure segment . for additional information , see note 3 - goodwill and other intangible assets in the notes to the audited consolidated financial statements , which is incorporated by reference . economic , industry and market factors in addition to the effects of the pandemic noted above , we closely monitor the effects of changes in economic and market conditions on our customers . general economic and market conditions can negatively affect demand for our customers ' products and services , which can affect our customers ' planned capital and maintenance budgets in certain end-markets . market , regulatory and industry factors could affect demand for our services , including ( i ) changes to our customers ' capital spending plans , including any potential effects from public health issues , such as the recent covid-19 pandemic ; ( ii ) new or changing regulatory requirements or other governmental policy changes or political developments or uncertainty , including from changes in governmental permitting ; ( iii ) economic , political or other market developments , including access to capital for customers in the industries we serve ; ( iv ) changes in technology , tax and other incentives ; and ( v ) mergers and acquisitions among the customers we serve . fluctuations in market prices for oil , gas and other fuel sources and availability of transportation and transmission capacity can also affect demand for our services , in particular , on pipeline and energy generation construction projects . these fluctuations , as well as the highly competitive nature of our industry , can result in lower levels of activity and profit on the services we provide . in the face of increased pricing pressure or other market developments , we strive to maintain our profit margins through productivity improvements , cost reduction programs and or business streamlining efforts . while we actively monitor economic , industry and market factors that could affect our business , we can not predict the effect that changes in such factors may have on our future results of operations , liquidity and cash flows , and we may be unable to fully mitigate , or benefit from , such changes . effect of seasonality and cyclical nature of business 29 our revenue and results of operations can be subject to seasonal and other variations . these variations are influenced by weather , customer spending patterns , bidding seasons , project schedules , public health matters , holidays and or timing , in particular , for large non-recurring projects . typically , our revenue is lowest at the beginning of the year and during the winter months because cold , snowy or wet conditions cause project delays . revenue is generally higher during the summer and fall months due to increased demand for our services when favorable weather conditions exist in many of the regions in which we operate , but continued cold and wet weather can often affect second quarter productivity . in the fourth quarter , many projects tend to be completed by customers seeking to spend their capital budgets before the end of the year , which generally has a positive effect on our revenue . however , the holiday season and inclement weather can cause delays , which can reduce revenue and increase costs on affected projects . any quarter may be positively or negatively affected by adverse or unusual weather patterns , including warm winter weather , excessive rainfall , flooding or natural catastrophes such as hurricanes or other severe weather , making it difficult to predict quarterly revenue and margin variations . additionally , our industry can be highly cyclical . fluctuations in end-user demand within the industries we serve , or in the supply of services within those industries , can affect demand for our services . as a result , our business may be adversely affected by industry declines or by delays in new projects . story_separator_special_tag variations in project schedules or unanticipated changes in project schedules , in particular , in connection with large construction and installation projects , can create fluctuations in revenue , which may adversely affect us in a given quarter , even if not for the full year . in addition , revenue from master service and other service agreements , while generally predictable , can be subject to volatility . the financial condition of our customers and their access to capital ; variations in project margins ; regional , national and global economic , political and market conditions ; regulatory or environmental influences ; and acquisitions , dispositions or strategic investments/other arrangements can also materially affect quarterly results in a given period . accordingly , our operating results in any particular period may not be indicative of the results that can be expected for any other period . the effects of the covid-19 pandemic could also result in greater seasonal and cyclical volatility than would otherwise exist under normal conditions . understanding our results of operations revenue . we provide engineering , building , installation , maintenance and upgrade services to our customers . we derive revenue from projects performed under master and other service agreements as well as from contracts for specific projects requiring the construction and installation of an entire infrastructure system or specified units within an infrastructure system . see item 1 . “ business ” for discussion of our business and revenue-generating activities and “ comparison of fiscal year results ” below for revenue results by reportable segment . costs of revenue , excluding depreciation and amortization . costs of revenue , excluding depreciation and amortization , consists principally of salaries , employee incentives and benefits , subcontracted services , equipment rentals and repairs , fuel and other equipment expenses , material costs , parts and supplies , insurance and facilities expenses . project profit is calculated by subtracting a project 's costs of revenue , including project-related depreciation , from project revenue . project profitability and corresponding project margins will generally be reduced if actual costs to complete a project exceed our project cost estimates . estimated losses on contracts , or the excess of estimated costs to complete a contract over the contract 's remaining revenue , are recognized in the period in which such losses are determined . factors impacting our costs of revenue , excluding depreciation and amortization , include : project mix . the mix of revenue derived from the projects we perform impacts overall project margins , as margin opportunities can vary by project . for example , installation work , which is often performed on a fixed price basis , has a higher level of margin risk than maintenance or upgrade work , which is often performed under pre-established or time and materials pricing arrangements . as a result , changes in project mix between installation work and maintenance or upgrade services can affect our project margins in a given period . our project mix by industry can also affect our overall margins , as project margins can vary by industry and over time . seasonality , weather and geographic mix . seasonal patterns , which can be affected by weather conditions , can have a significant effect on project margins . adverse or favorable weather conditions can affect project margins in a given period . for example , extended periods of rain or snowfall can negatively affect revenue and project margins due to reduced productivity from projects being delayed or temporarily halted . conversely , when weather remains dry and temperatures are accommodating , more work can be done , sometimes with less cost , which can favorably affect project margins . in addition , the mix of business conducted in different geographic areas can affect project margins due to the particular characteristics of the physical locations where work is being performed , such as mountainous or rocky terrain versus open terrain . site conditions , including unforeseen underground conditions , can also affect project margins . price and performance risk . overall project margins may fluctuate due to project pricing , changes in the cost of labor and materials , job productivity and work volume . job productivity can be affected by quality of the work crew and equipment , the quality of engineering specifications and designs , availability of skilled labor , environmental or regulatory factors , customer decisions or delays and crew productivity . crew productivity can be influenced by weather conditions and job terrain , such as whether project work is in a right of way that is open or one that has physical obstructions or legal encumbrances . subcontracted resources . our use of subcontracted resources in a given period is dependent upon activity levels and the amount and location of existing in-house resources and capacity . project margins on subcontracted work can vary from those on self-perform work . as a result , changes in the mix of subcontracted resources versus self-perform work can affect our overall project margins . material versus labor costs . in many cases , our customers are responsible for supplying their own materials on projects ; however , under certain contracts , we may agree to provide all or part of the required materials . project margins are typically lower on projects where we furnish a significant amount of materials due to the fact that margins on materials are generally lower than margins on labor costs . therefore , increases in the percentage of work with significant materials requirements could decrease our overall project margins . general and administrative expense . general and administrative expenses consist principally of compensation and benefit expenses , travel expenses and related costs for our finance , benefits , insurance and risk management , legal , facilities , information technology services and executive functions .
| revenue increases in our clean energy and infrastructure segment of $ 493 million , or 48 % , and in our electrical transmission segment of $ 93 million , or 22 % , were offset by decreases in revenue in our oil and gas segment of $ 1,327 million , or 43 % , and in our communications segment of $ 107 million , or 4 % . acquisitions contributed $ 230 million in revenue for the year ended december 31 , 2020 and organic revenue decreased by approximately $ 1,092 million , or 15 % , as compared with 2019. communications segment . communications revenue was $ 2,512 million in 2020 , as compared with $ 2,619 million in 2019 , a decrease of $ 107 million , or 4 % . acquisitions contributed $ 156 million of revenue for the year ended december 31 , 2020 and organic revenue decreased by approximately $ 262 million , or 10 % , as compared with 2019. the decrease in organic revenue was primarily driven by a decrease in install-to-the-home and wireless revenue , including from the effects of the covid-19 pandemic , offset , in part , by higher levels of wireline/fiber revenue . clean energy and infrastructure segment . clean energy and infrastructure revenue was $ 1,527 million in 2020 , as compared with $ 1,034 million in 2019 , an increase of $ 493 million , or 48 % . organic revenue increased by approximately $ 418 million , or 40 % , as compared with 2019 , and acquisitions contributed $ 74 million of revenue for the year ended december 31 , 2020. the increase in organic revenue was driven primarily by higher levels of clean energy project activity . oil and gas segment . oil and gas revenue was $ 1,790 million in 2020 , as compared with $ 3,117 million in 2019 , a decrease of approximately $ 1,327 million , or 43 % . the expected decrease was primarily due to lower levels of project activity and mix , including the effects of regulatory disruptions on certain pipeline construction activity . electrical transmission segment . electrical transmission revenue was $
| 11,585 |
for example , on july 28 , 2015 , the minnesota public utility commission found that it has authority to regulate charter 's ‘ fixed ' interconnected voip service . in addition to regulatory matters that directly address voip , a number of other regulatory initiatives could impact our business . one such regulatory initiative is net neutrality . on february 26 , 2015 , the fcc adopted strong net neutrality rules . on december 14 , 2017 the fcc voted to reverse its 2015 neutrality rules . the fcc 's recent reversal of its stance on net neutrality may have a negative long term impact on businesses such as ours who rely on the internet to create and deliver products and services . challenges to the fcc 's ruling are underway , with public interest groups , states , local municipalities and companies seeking redress in the courts and or through legislation . see also the discussion under `` regulation '' in note 11 to our financial statements for a discussion of regulatory issues that impact us . key operating data the table below includes key operating data that our management uses to measure the growth and operating performance of the business segment : replace_table_token_5_th ( 1 ) includes revenues of $ 139,665 and $ 58,148 from cpaas for the years ended december 31 , 2017 and december 31 , 2016 , respectively . ( 2 ) ucaas only . revenues . business revenues includes revenues from our business customers from primarily from acquired entities . average monthly revenues per seat . average monthly revenues per seat for a particular period is calculated by dividing our revenues for that period by the simple average number of seats for the period , and dividing the result by the number of months in the period . the simple average number of seats for the period is the number of seats on the first day of the period , plus the number of seats on the last day of the period , divided by two . our average monthly revenues per seat decreased from $ 44.94 for 2016 to $ 43.86 for 2017 in part due to the loss of cloud service revenues for some of the company 's ucaas customers as a result of the sale of our hosted infrastructure product line in may 2017 along with the company 's plan to sell access more selectively during the current year period . seats . seats include , as of a particular date , all paid seats from which a customer can make an outbound telephone call on that date and virtual seats . seats exclude electronic fax lines and toll free numbers , which do not allow outbound telephone calls by customers . seats increased from 638,096 as of december 31 , 2016 to 727,085 as of december 31 , 2017 . this increase is due to continued growth in our business customers as we have increased marketing investment to attract these more profitable customers . 32 vonage annual report 2017 revenue churn . revenue churn is calculated by dividing the monthly recurring revenue from customers or customer locations that have terminated during a period by the simple average of the total monthly recurring revenue from all customers in a given period . the simple average of total monthly recurring revenue from all customers during the period is the total monthly recurring revenue on the first day of the period , plus the total monthly recurring revenue on the last day of the period , divided by two . terminations , as used in the calculation of churn statistics , do not include customers terminated during the period if termination occurred within the first month after activation . other companies may calculate revenue churn differently , and their revenue churn data may not be directly comparable to ours . revenue churn decreased from 1.4 % for the year ended 2016 to 1.3 % for the year ended 2017 . our revenue churn will fluctuate over time due to economic conditions , loss of customers who are acquired , and competitive pressures including promotional pricing . we are continuing to invest in our overall quality of service which includes customer care headcount and systems , billing systems , on-boarding processes and self-service options to ensure we scale our processes to our growth and continue to improve the overall customer experience . the table below includes key operating data that our management uses to measure the growth and operating performance of the consumer segment : replace_table_token_6_th revenues . consumer revenues represents revenue from our consumer customers including revenues from our legacy business customers using vonage voip products . average monthly revenues per subscriber line . average monthly revenues per subscriber line for a particular period is calculated by dividing our revenues for that period by the simple average number of subscriber lines for the period , and dividing the result by the number of months in the period . the simple average number of subscriber lines for the period is the number of subscriber lines on the first day of the period , plus the number of subscriber lines on the last day of the period , divided by two . our average monthly revenues per subscriber line decreased from $ 26.43 for 2016 to $ 26.19 for 2017 due primarily to lower international long distance pay-per-use revenue . subscriber lines . our subscriber lines include , as of a particular date , all paid subscriber lines from which a customer can make an outbound telephone call on that date . our subscriber lines include fax lines , including fax lines bundled with subscriber lines in our small office home office calling plans and soft phones , but do not include our virtual phone numbers and toll free numbers , which only allow inbound telephone calls to customers . story_separator_special_tag subscriber lines decreased from 1,711,366 as of december 31 , 2016 to 1,492,067 as of december 31 , 2017 , reflecting planned actions to enhance the profitability of the assisted sales channel by eliminating lower performing locations and restructuring the pricing offers , and to shift investment to our business market . customer churn . customer churn is calculated by dividing the number of customers that have terminated during a period by the simple average of number of customers in a given period . the simple average number of customers during the period is the number of customers on the first day of the period , plus the number of customers on the last day of the period , divided by two . terminations , as used in the calculation of churn statistics , do not include customers terminated during the period if termination occurred within the first month after activation . other companies may calculate customer churn differently , and their customer churn data may not be directly comparable to ours . customer churn decreased to 2.0 % for 2017 from 2.2 % for 2016 . the decrease was due primarily to our decision to maximize customer value by focusing marketing spend on higher return channels and away from assisted selling channels which had higher early life churn . we monitor customer churn on a daily basis and use it as an indicator of the level of customer satisfaction . customers who have been with us for a year or more tend to have a lower churn rate than customers who have not . in addition , our customers who are international callers generally churn at a lower rate than customers who are domestic callers . our customer churn will fluctuate over time due to economic conditions , competitive pressures including promotional pricing targeting international long distance callers , marketplace perception of our services , and our ability to provide high quality customer care and network quality and add future innovative products and services . customer churn differs from our previously reported average monthly customer churn in that our business customers are no longer included in this metric . see the discussion below for detail regarding churn impacting our business customers . 33 vonage annual report 2017 revenues revenues consist of services revenue and customer equipment and shipping revenue . substantially all of our revenues are services revenue . for consumer customers in the united states , we offer domestic and international rate plans , including a variety of residential plans and mobile plans . through our acquisitions we offer smb , mid-market , and enterprise customers several service plans with different pricing structures and contractual requirements ranging in duration from month-to-month to three years . in addition , we provide managed equipment to business customers for which the customers pay a monthly fee . customers also have the opportunity to purchase premium features for additional fees . in addition , through our acquisition of nexmo we derive revenue from usage-based fees earned from customers using our cloud-based software products . these usage-based software products include our messaging , voice , verify and chat apis . usage-based fees include number of text messages sent or received using our messaging apis , minutes of call duration activity for our voice apis , and number of converted authentications for our verify api . services revenue is offset by the cost of certain customer acquisition activities , such as rebates and promotions . in addition , in certain instances , we charge disconnect fees which are recognized as revenue at the time the disconnect fees are collected from our customer . in the united states , we charge regulatory , compliance , e-911 , and intellectual property-related recovery fees on a monthly basis to defray costs , and to cover taxes that we are charged by the suppliers of telecommunications services . in addition , we recognize revenue on a gross basis for contributions to the federal universal service fund , or usf , and related fees . all other taxes are recorded on a net basis . customer equipment and shipping revenue consists of revenue from sales of customer equipment to our wholesalers or directly to customers and retailers . in addition , customer equipment and shipping revenues include revenues from the sale of voip telephones in order to access our small and medium business services . customer equipment and shipping revenue also includes the fees , when collected , that we charge our customers for shipping any equipment to them . operating expense operating expenses consist of cost of service , cost of goods sold , sales and marketing expense , engineering and development expense , general and administrative expense , and depreciation and amortization . 34 vonage annual report 2017 story_separator_special_tag style= '' vertical-align : bottom ; padding-left:12px ; padding-top:2px ; padding-bottom:2px ; padding-right:2px ; '' > higher product gross margin as a result of a decrease in products costs of 31 % due to decreased customer equipment costs resulting from lower new customer additions in the period and a decrease in reserves related to inventory 6,279 decrease in segment gross margin ( 60,502 ) operating expenses replace_table_token_11_th for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 total other operating expenses decreased by $ 18,376 during the year ended december 31 , 2017 as compared to the year ended december 31 , 2016 due to the following : sales and marketing expense decreased by $ 17,718 , or ( 5 ) % , due to a continued shift during 2017 in traditional marketing investments targeting consumer customers to more selective targeted advertising focused on attracting more profitable business customers resulting in overall fewer media marketing programs being deployed during the current year . general and administrative expense decreased by $ 767 , or ( 1 ) % , primarily due to a decrease in consulting and legal fees associated with the acquisition of nexmo during the previous year .
| for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 the following table describes the increase in business gross margin for the year ended december 31 , 2017 as compared to the year ended december 31 , 2016 : ( in thousands ) service gross margin increased 20 % primarily due to higher cpaas gross margin of $ 8,321 related to nexmo which was acquired on june 3 , 2016 along with an increase in ucaas gross margin of $ 29,944 primarily due to an increase in seats of 14 % during the current year $ 38,265 product gross margin decreased 11 % primarily due to lower costs during the current year period 151 38,416 36 vonage annual report 2017 for the year ended december 31 , 2016 compared to the year ended december 31 , 2015 the following table describes the increase in business gross margin for the year ended december 31 , 2016 as compared to the year ended december 31 , 2015 : ( in thousands ) service gross margin increased 52 % due to an increase in the number of business seats as we have shifted marketing investment to attract more profitable business customers combined with the acquisition of simple signal and icore , both acquired in 2015 , and the acquisition of nexmo in june 2016 offset by higher technical care and network operations costs in support of growth within the segment $ 64,900 product gross margin decreased 70 % due to an increase in costs associated with customer 's equipment and broadband access as a result of increased customer additions and installation costs ( 3,039 ) usf gross margin increased slightly due to the increase in business seats along with the acquisitions of simple signal and icore 18 increase in segment gross margin 61,879 consumer gross margin for the years ended december 31 , 2017 , 2016 , and 2015 replace_table_token_10_th ( 1 ) includes customer premise equipment , professional services , and shipping and handling . ( 2 ) excludes depreciation and amortization of $ 7,208 , $ 9,669 , and $ 9,049 , respectively . 37 vonage annual report 2017 for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 the following table describes the decrease in consumer gross margin for the year ended december 31 , 2017 as compared to the year ended december 31 , 2016 : ( in thousands ) service gross margin decreased 11 % primarily due to a decline in subscriber lines of 13 % over the current year reflecting planned actions to enhance profitability by restructuring pricing offers and targeting
| 11,586 |
this resulted in our paying a substantial premium for alpine resulting in the recognition of goodwill . the total purchase price of $ 149.0 million was funded by $ 41.0 million in cash on hand and borrowings of $ 108.0 million under our credit agreement with keybank national association ( keybank ) , dated may 3 , 2012. see liquidity & capital resources later in this item 7 and note 20 , borrowings , of notes to consolidated financial statements for further information . the results of operations of alpine have been reflected in the accompanying consolidated statements of operations since august 20 , 2012. discontinued operations in march 2012 , we sold our operations in spain ( the spanish operations ) , pursuant to an asset purchase agreement dated march 29 , 2012 and a stock purchase agreement dated march 30 , 2012. we have reflected the operating results related to the operations in spain as discontinued operations in the accompanying consolidated statement of operations for the year ended december 31 , 2012. this business was historically reported as part of the emea segment . see results of operations discontinued operations later in this item 7 for more information . unless otherwise noted , discussions below pertain only to our continuing operations . 24 story_separator_special_tag located in bismarck , north dakota . see note 14 , property and equipment , of the notes to consolidated financial statements for further information . see note 5 , fair value , of the notes to consolidated financial statements for further information regarding the impairment of long-lived assets . other income ( expense ) replace_table_token_15_th the increase in interest income was primarily due to an increase in the amount of average invested funds in 2014 compared to 2013. the decrease in interest ( expense ) was primarily due to a decrease in the amount of average outstanding borrowings in 2014 compared to 2013. other ( expense ) excludes the cumulative translation effects and unrealized gains ( losses ) on financial derivatives that are included in accumulated other comprehensive income in shareholders ' equity in the accompanying consolidated balance sheets . income taxes replace_table_token_16_th the increase in income taxes in 2014 compared to 2013 is primarily due to a $ 23.0 million increase in income in a high tax rate jurisdiction which increased the tax provision by $ 6.3 million . this increase was partially offset by a decrease of $ 2.3 million in foreign withholding taxes recognized in 2014. the remaining change is due to several factors , including fluctuations in earnings among the various other jurisdictions in which we operate , none of which are individually material . 28 2013 compared to 2012 revenues replace_table_token_17_th consolidated revenues increased $ 135.8 million , or 12.0 % , in 2013 from 2012. the increase in americas ' revenues was primarily due to new contract sales of $ 80.3 million and alpine acquisition revenues of $ 68.6 million , partially offset by end-of-life client programs of $ 25.4 million , lower volumes from existing contracts of $ 5.9 million and the negative foreign currency impact of $ 13.9 million . revenues from our offshore operations represented 39.5 % of americas ' revenues , compared to 44.5 % in 2012. the increase in emea 's revenues was primarily due to new contract sales of $ 28.0 million , higher volumes from existing contracts of $ 6.3 million and the positive foreign currency impact of $ 4.5 million , partially offset by end-of-life client programs of $ 6.7 million . direct salaries and related costs replace_table_token_18_th the increase of $ 117.3 million in direct salaries and related costs included a positive foreign currency impact of $ 6.4 million in the americas and a negative foreign currency impact of $ 3.3 million in emea . the increase in americas ' direct salaries and related costs , as a percentage of revenues , was primarily attributable to higher compensation costs of 1.9 % driven by the ramp up for new and existing client programs principally in the communications vertical , partially offset by lower demand within the financial services and healthcare verticals without a commensurate reduction in labor costs , higher auto tow claim costs of 0.1 % due to an increase in the average length of tows without a commensurate increase in fees at our canadian roadside assistance operations and higher other costs of 0.2 % . the increase in emea 's direct salaries and related costs , as a percentage of revenues , was primarily attributable to higher compensation costs of 4.4 % driven by the ramp up for new and existing client programs principally in the communications vertical , partially offset by lower fulfillment materials costs of 0.7 % , lower billable supply costs of 0.5 % , lower severance-related costs of 0.4 % due to the closure of certain sites in connection with the fourth quarter 2011 exit plan , lower recruiting costs of 0.2 % , lower communications costs of 0.2 % , lower travel costs of 0.2 % and lower other costs of 0.1 % . 29 general and administrative replace_table_token_19_th the increase of $ 7.1 million in general and administrative expenses included a positive foreign currency impact of $ 1.5 million in the americas and a negative foreign currency impact of $ 0.8 million in emea . the decrease in americas ' general and administrative expenses , as a percentage of revenues , was primarily attributable to lower compensation costs of 0.6 % , lower facility-related costs of 0.4 % due to rationalization of facilities , lower equipment and maintenance costs of 0.2 % and lower other costs of 0.1 % . the decrease in emea 's general and administrative expenses , as a percentage of revenues , was primarily attributable to lower compensation costs of 0.9 % , lower facility-related costs of 0.3 % , lower communications costs of 0.3 % , lower severance-related costs of 0.2 % principally all due to the closure of certain sites in connection with the fourth quarter 2011 exit plan and lower other costs of 0.2 % . story_separator_special_tag the decrease of $ 4.8 million in corporate 's general and administrative expenses was primarily attributable to lower merger and integration costs of $ 3.5 million , lower consulting costs of $ 1.7 million , lower legal and professional fees of $ 1.0 million , lower travel costs of $ 0.3 million , lower equipment and maintenance costs of $ 0.3 million , lower communications costs of $ 0.2 million , lower training costs of $ 0.2 million and lower other costs of $ 0.3 million , partially offset by higher compensation costs of $ 2.1 million and higher facility-related costs of $ 0.6 million . depreciation and amortization replace_table_token_20_th the increase in depreciation was primarily due to net fixed asset additions . the increase in amortization was primarily due to the august 2012 alpine acquisition . 30 net ( gain ) loss on disposal of property and equipment and impairment of long-lived assets replace_table_token_21_th see note 5 , fair value , of the notes to consolidated financial statements for further information regarding the impairment of long-lived assets . other income ( expense ) replace_table_token_22_th the decrease in interest income reflects lower average invested balances of interest bearing investments in cash and cash equivalents in 2013 compared to 2012. the increase in interest ( expense ) reflects higher average outstanding borrowings primarily related to the august 2012 alpine acquisition . other ( expense ) excludes the cumulative translation effects and unrealized gains ( losses ) on financial derivatives that are included in accumulated other comprehensive income in shareholders ' equity in the accompanying consolidated balance sheets . income taxes replace_table_token_23_th the increase in income taxes in 2013 compared to 2012 is primarily due to withholding taxes on offshore cash movements of $ 3.5 million to take advantage of the american taxpayer relief act of 2012 enacted on january 2 , 2013 , with retroactive application to january 1 , 2012 , u.s. taxation of offshore gains on derivatives and foreign exchange of $ 1.8 million and tax benefits recognized in 2012 related to merger and integration costs as a result of the alpine acquisition of $ 1.1 million . the remaining change is due to several factors , including fluctuations in earnings among the various jurisdictions in which we operate , none of which are individually material . 31 ( loss ) from discontinued operations replace_table_token_24_th in 2012 , the ( loss ) from discontinued operations and the ( loss ) on sale of discontinued operations related to the sale of our operations in spain in march 2012. there was no tax impact on either the ( loss ) from discontinued operations or the ( loss ) on sale of discontinued operations . 32 quarterly results the following information presents our unaudited quarterly operating results from continuing operations for 2014 and 2013. the data has been prepared on a basis consistent with the accompanying consolidated financial statements included elsewhere in this annual report on form 10-k , and includes all adjustments , consisting of normal recurring accruals , that we consider necessary for a fair presentation thereof . replace_table_token_25_th ( 1 ) the quarter ended june 30 , 2013 includes $ 0.5 million in alpine acquisition-related costs . ( 2 ) the quarters ended september 30 , 2014 , june 30 , 2014 , december 31 , 2013 and september 30 , 2013 include $ ( 0.1 ) million , $ ( 0.2 ) million , $ 0.3 million and $ ( 0.1 ) million , respectively , related to the exit plans . see note 4 , costs associated with exit or disposal activities , for further information . ( 3 ) the quarters ended september 30 , 2013 , june 30 , 2013 , march 31 , 2013 , include $ 0.1 million , $ 0.8 million and $ 0.7 million , respectively , in alpine acquisition-related costs . ( 4 ) the quarter ended december 31 , 2014 includes a $ 2.6 million ( gain ) on the sale of fixed assets , land and building located in bismarck , north dakota . see note 14 , property and equipment , for further information . ( 5 ) net income ( loss ) per basic and diluted common share is computed independently for each of the quarters presented and , therefore , may not sum to the total for the year . 33 business outlook for the three months ended march 31 , 2015 , we anticipate the following financial results : revenues in the range of $ 315.0 million to $ 320.0 million ; effective tax rate of approximately 27 % ; fully diluted share count of approximately 42.5 million ; diluted earnings per share in the range of $ 0.27 to $ 0.30 ; and capital expenditures in the range of $ 14.0 million to $ 16.0 million for the twelve months ended december 31 , 2015 , we anticipate the following financial results : revenues in the range of $ 1,300.0 million to $ 1,320.0 million ; effective tax rate of approximately 26 % ; fully diluted share count of approximately 42.9 million ; diluted earnings per share in the range of $ 1.34 to $ 1.46 ; and capital expenditures in the range of $ 55.0 million to $ 60.0 million we continue to experience healthy demand from clients within the communications and technology verticals . in addition , based on early indications , we anticipate some firming of demand within the financial services vertical . as in prior years , with fewer work days in the second quarter , coupled with the timing of seat additions and ramps related to program wins , we expect consolidated second-half 2015 revenues to be greater than the first-half . furthermore , based on foreign exchange rates as of february 2015 , our full-year business outlook reflects the anticipation of approximately $ 50.0 million in negative impact to revenues due to unfavorable foreign currency movements relative to 2014. in addition , we have already eliminated certain sub-profitable programs , which are expected to incrementally impact 2015 revenues by approximately $ 25.0 million .
| on a geographic segment basis , 34,500 seats were located in the americas , a decrease of 1,600 seats from 2013 , and 6,500 seats were located in emea , an increase of 400 seats from 2013. the capacity utilization rate for the americas as of december 31 , 2014 was 77 % , compared to 70 % as of december 31 , 2013 , up primarily due to seat rationalization and growth within new and existing clients . the capacity utilization rate for emea as of december 31 , 2014 was 90 % , compared to 87 % as of december 31 , 2013 , up primarily due to growth within new and existing clients . we strive to attain an 85 % capacity utilization metric at each of our locations . we plan to add approximately 1,700 seats on a gross basis in 2015. more than three-quarters of the new seat count is expected to be added in the first half of 2015. total seat count on a net basis for the full year , however , is expected to remain unchanged relative to 2014 as we plan to rationalize approximately 1,700 seats . direct salaries and related costs replace_table_token_11_th the increase of $ 36.8 million in direct salaries and related costs included a positive foreign currency impact of $ 23.1 million in the americas and a positive foreign currency impact of $ 2.1 million in emea . the decrease in americas ' direct salaries and related costs , as a percentage of revenues , was primarily attributable to lower auto tow claim costs of 0.3 % , lower compensation costs of 0.2 % and lower other costs of 0.1 % . the decrease in emea 's direct salaries and related costs , as a percentage of revenues , was primarily attributable to lower compensation costs of 1.6 % driven by the increase in new client program ramp up costs in the prior period in the communications vertical as well as new client program growth within the technology vertical , and lower billable supply costs of 0.2 % , partially offset by higher communications costs of 0.3 % , higher fulfillment materials costs of 0.3 % and higher other costs of 0.1 % . 26 general and administrative replace_table_token_12_th the increase of $ 0.5 million in general and administrative expenses included a positive foreign currency impact of $ 5.5 million in the americas and a positive
| 11,587 |
during 2018 , we transferred two of our triple net leased senior living communities located in california and colorado that were leased to private operators to our trss and entered management agreements with five star to manage the communities . the senior living community 66 located in colorado is not currently included in any of our pooling agreements with five star . we also have a pooling agreement with five star that combines our management agreements with five star for senior living communities consisting only of independent living units . our management agreements with five star generally expire between 2030 and 2042 , and are subject to automatic renewal for two consecutive 15 year terms , unless earlier terminated or timely notice of nonrenewal is delivered . these management agreements also generally provide that we , and in some cases five star , each have the option to terminate the agreements upon the acquisition by a person or group of more than 9.8 % of the other 's voting stock and upon certain change in control events affecting the other party , as defined in the applicable agreements , including the adoption of any shareholder proposal ( other than a precatory proposal ) with respect to the other party , or the election to the board of directors or trustees , as applicable , of the other party of any individual , if such proposal or individual was not approved , nominated or appointed , as the case may be , by a majority of the other party 's board of directors or board of trustees , as applicable , in office immediately prior to the making of such proposal or the nomination or appointment of such individual . for more information about our management and pooling agreements with five star , including the effects of certain of our property acquisitions and dispositions on these arrangements , please see note 5 to our consolidated financial statements included in part iv , item 15 of this annual report on form 10-k , and for more information about our dealings and relationships with five star generally , and the risks which may arise as a result of these related person transactions , please see “ risk factors—risks related to our relationships with rmr inc. , rmr llc and five star ” in part i , item 1a of this annual report on form 10-k , “ management 's discussion and analysis of financial condition and results of operations—related person transactions ” in part ii , item 7 of this annual report on form 10-k and note 7 to our consolidated financial statements included in part iv , item 15 of this annual report on form 10-k. wellness centers ( included in “ all other operations ” ) . the following table presents a summary of our wellness center leases as of december 31 , 2018 ( dollars in thousands ) : replace_table_token_10_th ( 1 ) annualized rental income is based on rents pursuant to existing leases as of december 31 , 2018 , including straight line rent adjustments and excluding lease value amortization . 67 portfolio lease expiration schedules . the following tables set forth information regarding our lease expirations as of december 31 , 2018 ( dollars in thousands ) : replace_table_token_11_th average remaining lease term for our mobs , triple net leased senior living communities and wellness center properties ( weighted by annualized rental income ) : 7.1 years . ( 1 ) annualized rental income is based on rents pursuant to existing leases as of december 31 , 2018 , including estimated percentage rents , straight line rent adjustments , estimated recurring expense reimbursements for certain net and modified gross leases and excluding lease value amortization at certain of our mobs and wellness centers . rental income amounts also include 100 % of rental income as reported under gaap from a property owned by a joint venture in which we own a 55 % equity interest . ( 2 ) excludes rent received from our managed senior living communities leased to our trss . if the noi from our trss ( three months ended december 31 , 2018 , annualized ) were included in the foregoing table , the percent of total annualized rental income expiring in each of the following years would be : 2019 – 5.9 % ; 2020 – 4.8 % ; 2021 – 3.6 % ; 2022 – 4.2 % ; 2023 – 6.0 % ; 2024 – 14.2 % ; 2025 – 2.2 % ; 2026 – 12.2 % ; 2027 – 1.8 % ; and thereafter – 45.1 % . in addition , if our leases to our trss using the terms of the management agreements for these communities were included in the foregoing table , the average remaining lease term for all properties ( weighted by annualized rental income ) would be 7.9 years . ( 3 ) includes two mob tenants with aggregate annualized rental income of $ 17,773 that we expect to vacate during the second quarter of 2019 . ( 4 ) includes one senior living community leased to a private operator with annualized rental income of $ 4,725 , the operations of which we expect to transfer to five star under our trs structure during the second quarter of 2019 . 68 replace_table_token_12_th ( 1 ) excludes our managed senior living communities leased to our trss . ( 2 ) includes two mob tenants that we expect to vacate during the second quarter of 2019 . story_separator_special_tag ( 3 ) includes one senior living community leased to a private operator , the operations of which we expect to transfer to five star under our trs structure during the second quarter of 2019. square feet ( 1 ) living units ( 2 ) year mobs ( square feet ) wellness centers ( square feet ) total square feet percent of total square feet expiring cumulative percent of total square feet expiring triple net senior living communities percent of total living units / beds expiring cumulative percentage of total living units / beds expiring 2019 ( 3 ) 1,378,457 — 1,378,457 10.8 % 10.8 % 155 0.6 % 0.6 % 2020 1,532,456 — 1,532,456 12.0 % 22.8 % — — % 0.6 % 2021 831,332 — 831,332 6.5 % 29.3 % 361 1.5 % 2.1 % 2022 1,189,282 — 1,189,282 9.3 % 38.6 % — — % 2.1 % 2023 1,141,629 354,000 1,495,629 11.8 % 50.4 % 697 2.9 % 5.0 % 2024 1,720,999 — 1,720,999 13.5 % 63.9 % 6,246 26.0 % 31.0 % 2025 649,743 — 649,743 5.1 % 69.0 % — — % 31.0 % 2026 864,363 — 864,363 6.8 % 75.8 % 6,742 28.1 % 59.1 % 2027 412,573 — 412,573 3.2 % 79.0 % 511 2.1 % 61.2 % 2028 and thereafter ( 4 ) 2,186,889 458,000 2,644,889 21.0 % 100 % 9,318 38.8 % 100.0 % total 11,907,723 812,000 12,719,723 100.0 % 24,030 100.0 % ( 1 ) includes 100 % of square feet from a property owned by a joint venture in which we own a 55 % equity interest . ( 2 ) excludes 9,766 living units from our managed senior living communities leased to our trss . if the number of living units included in our trs leases using the terms of the management agreements for these communities were included in the foregoing table , the percent of total living units expiring in each of the following years would be : 2019 – 0.5 % ; 2020 – 0.0 % ; 2021 – 1.1 % ; 2022 – 0.0 % ; 2023 – 2.1 % ; 2024 – 18.5 % ; 2025 – 0.0 % ; 2026 – 19.9 % ; 2027 - 1.5 % and thereafter – 56.4 % . ( 3 ) includes two mob tenants that we expect to vacate the 526,518 of aggregate square feet leased to them during the second quarter of 2019 . ( 4 ) includes one senior living community leased to a private operator with 369 living units , the operations of which we expect to transfer to five star under our trs structure during the second quarter of 2019 . 69 general industry trends our mobs have been impacted by at least two major industry trends for the past 10 years which are continuing at this time and that have impacted our investment activities . first , medical practices are being consolidated into hospital systems . this has caused the number of free standing medical practices to decline . at the same time , the number of multi-practice medical office buildings that are anchor leased by hospital systems who employ doctors has increased . we believe hospital systems will continue the trend of providing an increasing amount of services in off campus mobs away from main hospital campuses in order to reduce costs and serve as many patients as possible . second , various advances in medical science have caused a large investment in new bio-medical research companies that require office , lab and medical products manufacturing space . we believe that about half of our total investments in mobs may be considered biotech and life science properties . we believe that the primary market for senior living services is individuals age 75 and older , and , according to u.s. census data , that group is projected to be among the fastest growing age cohort in the united states over the next 20 years . also , as a result of medical advances , seniors are living longer . due to these demographic trends , we expect the demand for senior living services to increase for the foreseeable future . despite this trend , future economic downturns , softness in the u.s. housing market , higher levels of unemployment among our potential residents ' family members , lower levels of consumer confidence , stock market volatility and or changes in demographics could adversely affect the ability of seniors to afford the resident fees or entrance fees at our senior living communities . the medical advances which are increasing average life spans are also causing some seniors to delay moving to senior living communities until they require greater care or to forgo moving to senior living communities altogether , but we do not believe this factor is sufficient to offset the long term positive demographic trends causing increased demand for senior living communities for the foreseeable future . in recent years , a significant number of new senior living communities have been developed and continue to be developed . although there are indications that the rate of newly started developments has recently declined , the increased supply of senior living communities that has resulted from recent development activity has increased competitive pressures on our tenants and managers , particularly in certain geographic markets where we own senior living communities , and we expect these competitive challenges to continue for at least the next few years . these competitive challenges may prevent our tenants and manager from maintaining or improving occupancy and rates at our senior living communities , which may increase the risk of default under our leases , reduce the rents and returns we may receive and earn from our leased and managed senior living communities and adversely affect the profitability of our senior living communities , and may cause the value of our properties to decline .
| ( 5 ) these 129 mob properties are comprised of 155 buildings . our mob leases include some triple net leases where , in addition to paying fixed rents , the tenants assume the obligation to operate and maintain the properties at their expense , and some net and modified gross leases where we are responsible for the operation and maintenance of the properties , and we charge tenants for some or all of the property operating costs . a small percentage of our mob leases are `` full-service '' leases where we receive fixed rent from our tenants and no reimbursement for our property operating costs . ( 6 ) senior living communities are categorized by the type of living units which constitute a majority of the living units at the community . ( 7 ) these senior living communities are managed by five star . the occupancy for the 12 month period ended or , if shorter , from the date of acquisitions through , december 31 , 2018 was 86.1 % . ( 8 ) operating data for mobs are presented as of december 31 , 2018 and 2017 and include ( i ) space being fitted out for occupancy and ( ii ) space which is leased but is not occupied or is being offered for sublease by tenants ; operating data for other properties , tenants and manager are presented based upon the operating results provided by our tenants and manager for the 12 months ended september 30 , 2018 and september 30 , 2017 , or the most recent prior period for which tenant operating results are made available to us . rent coverage is calculated as operating cash flows from our tenants ' facility operations of our properties , before subordinated charges , if any , divided by rents payable to us . we have not independently verified tenant operating data . excludes data for periods prior to our ownership of certain properties , as well as data for properties sold or classified as held for sale during the periods presented .
| 11,588 |
although we believe the expectations reflected in these forward-looking statements are reasonable , such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct . actual results could differ from those described in this report because of numerous factors , many of which are beyond our control . these factors include , without limitation , those described under item 1a risk factors. we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes . please see note regarding forward-looking statements at the beginning of this annual report on form 10-k. the following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information appearing elsewhere in this annual report on form 10-k. overview our principal asset is probuphine , the first slow release implant formulation of buprenorphine , designed to maintain a stable , round the clock blood level of the medicine in patients for six months following a single treatment . daily treatment of opioid dependence with sublingual buprenorphine formulations is over a $ 1 billion market in the u.s. , and a transdermal formulation of buprenorphine for the treatment of chronic pain entered the u.s. market in 2011. probuphine is being developed for the treatment of opioid dependence with the potential to enhance patient compliance to medication , and limit diversion and accidental use of the daily dosed formulations . in october 2011 , we had a pre-new drug application meeting with the u.s. food and drug administration ( the fda ) that provided clear guidance on the requirements for submitting a new drug application ( nda ) . the clinical development program is now complete and preparation of the nda is in process . at the request of the fda , we are conducting additional analytical testing of the ethylene vinyl acetate ( an inactive co-polymer in probuphine ) and the final product , probuphine , in order to complete full characterization and establish in-use ' stability . we have also commenced a program with our contract manufacturer to scale-up the manufacturing process for commercial production . we expect to complete these steps and be in a position to submit the nda in the third quarter of 2012. our goal is to enter into one or more partnerships with capable pharmaceutical companies to commercialize probuphine in the u.s. and foreign markets , as well as to potentially develop the product for the treatment of chronic pain . probuphine is the first product to utilize proneura , our novel , proprietary , long-term drug delivery technology . our proneura technology has the potential to be used in developing products for the treatment of other chronic conditions , such as parkinson 's disease , where maintaining stable , round the clock blood levels of a drug can benefit the patient and improve medical outcomes . under a sublicense agreement with novartis pharma ag ( novartis ) , we are entitled to royalty revenue of 8-10 % of net sales of fanapt ® ( iloperidone ) , an atypical antipsychotic compound being marketed in the u.s. by novartis for the treatment of schizophrenia , based on a licensed u.s. patent that expires in april 2017 ( inclusive of a six month pediatric extension ) . during 2011 , we entered into several agreements with deerfield management ( deerfield ) , a healthcare investment fund , in which we agreed to pay most of this future royalty stream to deerfield and have been using the proceeds to advance the development of probuphine and for general corporate purposes . we have retained a portion of the royalty revenue from net sales of fanapt in excess of specified annual threshold levels ; however , based on sales levels to date , it is unlikely that we will receive any revenue from fanapt in the next several years , if ever . 17 critical accounting policies and the use of estimates the preparation of our financial statements in conformity with accounting principles generally accepted in the united states requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes . actual results could differ materially from those estimates . we believe the following accounting policies for the years ended december 31 , 2011 and 2010 to be applicable : revenue recognition we generate revenue principally from royalty payments , collaborative research and development arrangements , technology licenses , and government grants . consideration received for revenue arrangements with multiple components is allocated among the separate units of accounting based on their respective selling prices . the selling price for each unit is based on vendor-specific objective evidence , or vsoe , if available , third party evidence if vsoe is not available , or estimated selling price if neither vsoe nor third party evidence is available . the applicable revenue recognition criteria are then applied to each of the units . revenue is recognized when the four basic criteria of revenue recognition are met : ( 1 ) a contractual agreement exists ; ( 2 ) transfer of technology has been completed or services have been rendered ; ( 3 ) the fee is fixed or determinable ; and ( 4 ) collectibility is reasonably assured . for each source of revenue , we comply with the above revenue recognition criteria in the following manner : royalties earned are based on third-party sales of licensed products and are recorded in accordance with contract terms when third-party results are reliably measurable and collectibility is reasonably assured . story_separator_special_tag pursuant to certain license agreements , we earn royalties on the sale of fanapt by novartis pharma ag in the u.s. as described in note 8 , royalty liability , we are obligated to pay royalties on such sales to sanofi-aventis and deerfield . as we have no performance obligations under the license agreements , we have recorded the royalties earned , net of royalties we are obligated to pay , as revenue in our consolidated statement of operations . collaborative arrangements typically consist of non-refundable and or exclusive technology access fees , cost reimbursements for specific research and development spending , and various milestone and future product royalty payments . if the delivered technology does not have stand-alone value or if we do not have objective or reliable evidence of the fair value of the undelivered component , the amount of revenue allocable to the delivered technology is deferred . non-refundable upfront fees with stand-alone value that are not dependent on future performance under these agreements are recognized as revenue when received , and are deferred if we have continuing performance obligations and have no evidence of fair value of those obligations . cost reimbursements for research and development spending are recognized when the related costs are incurred and when collections are reasonably expected . payments received related to substantive , performance-based at-risk milestones are recognized as revenue upon achievement of the clinical success or regulatory event specified in the underlying contracts , which represent the culmination of the earnings process . amounts received in advance are recorded as deferred revenue until the technology is transferred , costs are incurred , or a milestone is reached . technology license agreements typically consist of non-refundable upfront license fees , annual minimum access fees or royalty payments . non-refundable upfront license fees and annual minimum payments received with separable stand-alone values are recognized when the technology is transferred or accessed , provided that the technology transferred or accessed is not dependent on the outcome of our continuing research and development efforts . government grants , which support our research efforts in specific projects , generally provide for reimbursement of approved costs as defined in the notices of grants . grant revenue is recognized when associated project costs are incurred . 18 share-based payments we recognize compensation expense for all share-based awards made to employees and directors . the fair value of share-based awards is estimated at the grant date based on the fair value of the award and is recognized as expense , net of estimated pre-vesting forfeitures , ratably over the vesting period of the award . we use the black-scholes option pricing model to estimate the fair value method of our awards . calculating stock-based compensation expense requires the input of highly subjective assumptions , including the expected term of the share-based awards , stock price volatility , and pre-vesting forfeitures . we estimate the expected term of stock options granted for the years ended december 31 , 2011 , 2010 and 2009 based on the historical experience of similar awards , giving consideration to the contractual terms of the share-based awards , vesting schedules and the expectations of future employee behavior . we estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock . the assumptions used in calculating the fair value of stock-based awards represent our best estimates , but these estimates involve inherent uncertainties and the application of management judgment . as a result , if factors change and we use different assumptions , our stock-based compensation expense could be materially different in the future . in addition , we are required to estimate the expected pre-vesting forfeiture rate and only recognize expense for those shares expected to vest . we estimate the pre-vesting forfeiture rate based on historical experience . if our actual forfeiture rate is materially different from our estimate , our stock-based compensation expense could be significantly different from what we have recorded in the current period . income taxes we make certain estimates and judgments in determining income tax expense for financial statement purposes . these estimates and judgments occur in the calculation of certain tax assets and liabilities , which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes . as part of the process of preparing our consolidated financial statements , we are required to estimate our income taxes in each of the jurisdictions in which we operate . this process involves us estimating our current tax exposure under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes . we assess the likelihood that we will be able to recover our deferred tax assets . we consider all available evidence , both positive and negative , expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance . if it is not more likely than not that we will recover our deferred tax assets , we will increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable . clinical trial accrual we also record accruals for estimated ongoing clinical trial costs . clinical trial costs represent costs incurred by clinical research organizations , ( cros ) , and clinical sites . these costs are recorded as a component of research and development expenses . under our agreements , progress payments are typically made to investigators , clinical sites and cros .
| during 2011 , our external research and development expenses relating to our probuphine product development program were approximately $ 7.7 million compared to approximately $ 10.1 million for 2010. other research and development expenses include internal operating costs such as clinical research and development personnel-related expenses , clinical trials-related travel expenses , and allocation of facility and corporate costs . as a result of the risks and uncertainties inherently associated with pharmaceutical research and development activities described elsewhere in this report , we are unable to estimate the specific timing and future costs of our clinical development programs or the timing of material cash inflows , if any , from our products or product candidates . general and administrative expenses for 2011 were approximately $ 3.4 million , compared to approximately $ 3.3 million in 2010 , an increase of approximately $ 0.1 million , or 3 % . the increase in general and administrative expenses was primarily related to increases in non-cash stock compensation costs of approximately $ 0.3 million , employee-related costs of approximately $ 0.3 million , marketing-related costs of approximately $ 0.2 million . this was offset in part by decreases in legal fees of approximately $ 0.3 million , consulting and professional fees of approximately $ 0.3 million , and facilities-related costs of $ 0.1 million . net other expense for 2011 was approximately $ 4.7 million , compared to approximately $ 0.8 million in 2010. the increase in net other expense during 2011 was primarily related to interest expense of approximately $ 6.2 million on the deerfield long-term debt and $ 0.2 million of interest expense related to the oxford loans . this was offset in part by a $ 1.9 million non-cash gain related to decreases in the fair value of the deerfield warrants . year ended december 31 , 2010 compared to year ended december 31 , 2009 our net loss applicable to common stockholders for 2010 was approximately $ 5.6 million , or approximately $ 0.09 per share , compared to our net loss applicable to common stockholders of approximately $ 5.9 million , or approximately $ 0.10 per share , for 2009 .
| 11,589 |
the category also benefited from strong growth and targeted expanded consumer reach of le labo and by kilian . increased interest in luxury fragrances in asia has also helped category growth . we look for further opportunities to strengthen our business in this category there through targeted expanded consumer reach of our luxury brands . · in our hair care category , our brands are reaching new consumers globally as we further expanded our presence in the travel retail , online and specialty-multi channels , such as the launch of bumble and bumble in ulta beauty . during fiscal 2018 , the invati advanced product line launch from aveda also contributed to the success in the category . our global footprint provides many avenues of potential growth . our regional organizations , and the expertise of our people there , enable our brands to be more locally and culturally relevant in both product assortment and communications . we are evolving the way we connect with our consumers in stores , online and where they travel , including by expanding our digital and social media presence and the engagement of global and local influencers to amplify brand or product stories . we tailor our strategy by market to drive consumer engagement and embrace an authentic understanding of cultural diversity . we continuously strengthen our presence in large , image-building core markets , such as the united states , the united kingdom and japan , and broaden our presence in emerging markets , including those in the middle east , india , russia , south africa , brazil and mexico . · in north america , we continue to deploy a number of strategies to accelerate growth , despite a challenging environment especially in brick and mortar retail , and in latin america , we continue to launch new brands , expand social media outreach and encourage consumers to trade up from mass beauty products . · in europe , the middle east & africa , we are expanding the consumer reach of many of our brands , strengthening their digital and social media presence and leveraging our strength in the makeup category to gain share in prestige beauty . · in asia/pacific , particularly in china , we are leveraging our diversified brand portfolio and expansion on third-party online platforms to benefit from the strong consumer demand for prestige beauty . we approach distribution strategically by product category and geographic region and seek to optimize distribution by matching each of our brands with appropriate opportunities while maintaining high productivity per door . we are expanding certain brands into geographic markets where we see opportunities to fuel our sales growth . this includes adding brands to higher growth channels , such as travel retail , third-party online platforms , e- and m-commerce and specialty-multi brand retailers . we also focus on brand-building retail activities that will expand consumer coverage for our brands . · as part of this strategy , we continue to build and diversify our business in the travel retail channel around the world across brands and product categories . travel retail continues to be an important channel for brand building and profit margin expansion due to the increase in traveling consumers , particularly those from china , across multiple travel corridors . we continue to invest in digital and social media platforms and advertising , while focusing on locally relevant product assortment and communication skills of our representatives . at the same time , travel retail is susceptible to a number of external factors , including fluctuations in currency exchange rates and consumers ' willingness and ability to travel and spend . 24 · online net sales continue to grow strongly on a global basis , and we continue to launch e- and m-commerce sites in new and existing markets directly with our retail customers or on select third-party online platforms . we collaborate with our retailers and third-party online platforms globally to drive sales of our products on their online sites . we believe our success in delivering particularly strong online growth is a result of customization of our strategy to meet local market and cultural needs . we also continue to develop and implement omnichannel concepts to deliver an integrated consumer experience and better serve consumers as they shop across channels . while our business is performing well overall , we continue to face strong competition globally and economic challenges in certain countries . in particular , we are cautious of the continued decline in retail traffic primarily related to certain brick-and-mortar stores in the united states and the united kingdom as a result of the impact of shifts in consumer preferences as to where and how they shop . we are also cautious of foreign currency movements , including their impact on tourism . additionally , we continue to monitor the effects of the macroeconomic environments in certain countries such as brazil and in the middle east ; the united kingdom 's anticipated exit from the european union ; social and political issues ; regulatory matters , including the imposition of tariffs ; geopolitical tensions ; and global security issues . we believe we can , to some extent , offset the impact of these challenges by developing and pursuing a diversified strategy with multiple engines of growth and accelerating areas of strength among our geographic regions , product categories , brands and channels of distribution . however , if economic conditions or the degree of uncertainty or volatility worsen , or the adverse conditions previously described are further prolonged , there could be a negative effect on consumer confidence , demand , spending and willingness or ability to travel and , as a result , on our business . we will continue to monitor these and other risks that may affect our business . as disclosed in the company 's form 10-q for the fiscal 2018 third quarter , we learned that some of our testing related to certain product advertising claims did not meet our standards , necessitating further validation . story_separator_special_tag as a result of this ongoing review , certain advertising claims are being modified . this is not a product safety issue and does not relate to the quality of the ingredients or the manufacturing of our products . based on our review to date , we do not believe this matter will be material to the company . we navigate through short-term volatility while focusing on our long-term strategy and using our multiple engines of growth that we believe will help promote sustainable results . we are increasing our presence in emerging markets , continuing efforts to revitalize and accelerate growth in our heritage brands , focusing on key demographics and seeking opportunities to add to our diverse brand portfolio . we are also strengthening our consumer engagement by leveraging digital marketing and enhancing our social media strategies and execution . we will continue to drive product , packaging , and conceptual innovation and creativity that we believe enable us to introduce products that resonate with consumers . some initiatives will involve new sub-categories , and others may expand key franchises . leading beauty forward in may 2016 , we announced a multi-year initiative ( leading beauty forward , or the program ) to build on our strengths and better leverage our cost structure to free resources for investment to continue our growth momentum . leading beauty forward is designed to enhance our go-to-market capabilities , reinforce our leadership in global prestige beauty and continue creating sustainable value . we plan to approve specific initiatives under leading beauty forward through fiscal 2019 related to the optimization of select corporate functions , supply chain activities , and corporate and regional market support structures , as well as the exit of underperforming businesses , and expect to complete those initiatives through fiscal 2021. we previously estimated that leading beauty forward would result in related restructuring and other charges totaling between $ 600 million and $ 700 million , before taxes . after reviewing additional potential initiatives and the progress of previously approved initiatives under leading beauty forward that are being implemented , we have revised our estimates for cost approvals under the program . inclusive of approvals from inception through june 30 , 2018 , we now estimate that leading beauty forward may result in related restructuring and other charges totaling between $ 900 million and $ 950 million , before taxes , consisting of employee-related costs , asset write-offs and other costs to implement these initiatives . as many of our previously approved leading beauty forward initiatives are progressing through their implementation stages and with the identification of potential new initiatives , we are revising our previous estimate of annual net benefits of between $ 200 million and $ 300 million , before taxes . after its full implementation , we now expect leading beauty forward to yield annual net benefits , primarily in selling , general and administrative expenses , of between $ 350 million and $ 450 million , before taxes . these savings can be used to improve margin , mitigate risk and invest in future growth initiatives . for additional information about restructuring and other charges , see item 8. financial statements and supplementary data note 7 charges associated with restructuring and other activities . 25 annual impairment testing we assess goodwill and other indefinite-lived intangible assets at least annually for impairment or more frequently if certain events or circumstances exist . during fiscal 2018 , no impairment charges were recognized as a result of our annual goodwill and other intangible asset impairment testing as of april 1 , 2018. the fair values of all reporting units with material goodwill were substantially in excess of their respective carrying values . with regard to trademarks , the fair value of the editions de parfums frédéric malle trademark was equal to its carrying value , and the fair value of the too faced trademark exceeded its carrying value by approximately 14 % . as of june 30 , 2018 , the carrying values of the editions de parfums frédéric malle and too faced trademarks were $ 33 million and $ 525 million , respectively . if these reporting units are adversely affected by a softness in the retail environment for their products , or if other business disruptions arise that cause a change to their long-term financial projections , there could be a negative effect on the fair values of the related trademarks , and it is possible we could recognize an impairment charge in the future . based on our annual goodwill and other intangible asset impairment testing during fiscal 2017 , we recorded impairment charges related to the goodwill and trademark of the editions de parfums frédéric malle reporting unit , and impairment charges for the remaining goodwill and intangible assets related to the rodin olio lusso reporting unit , of $ 31 million combined . for additional information , see item 8. financial statements and supplementary data note 6 goodwill and other intangible assets . net sales replace_table_token_6_th _ ( 1 ) see reconciliations of non-gaap financial measures beginning on page 39 for reconciliations between non-gaap financial measures and the most directly comparable u.s. gaap measures . reported net sales in fiscal 2018 increased in each major product category and grew in each geographic region . each of our product categories and certain of our geographic regions benefited from targeted expanded consumer reach and new product offerings , which primarily reflected growth from the travel retail , online ( including third-party online platforms ) and specialty-multi channels . our skin care product category primarily benefited from net sales increases from estée lauder and la mer . net sales increases from estée lauder , tom ford and m a c , as well as incremental , and higher comparable , net sales from our fiscal 2017 acquisitions of too faced and becca , drove the net sales growth in our makeup category .
| the goodwill and intangible asset impairments and changes in fair value of contingent consideration impacted the operating results of our product categories and geographic regions as follows : replace_table_token_18_th charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they result from activities that are deemed a company-wide initiative to redesign , resize and reorganize select corporate functions and go-to-market structures . accordingly , the following discussions of operating income by product categories and geographic regions exclude the fiscal 2018 , 2017 and 2016 impact of charges associated with restructuring and other activities of $ 257 million , or 2 % of net sales , $ 212 million , or 2 % of net sales , and $ 134 million , or 1 % of net sales , respectively . product categories skin care replace_table_token_19_th reported skin care operating income increased in fiscal 2018 , primarily from estée lauder and la mer , due to higher net sales , in particular , from our travel retail business , china and hong kong . partially offsetting these increases were declines from darphin reflecting higher investment spending to support the brand 's launch in china , and m a c , as a result of the net sales decline in the middle east . reported skin care operating income increased in fiscal 2017 , reflecting higher results from la mer , estée lauder and clinique , partially offset by lower results from m a c. the increase in operating income from la mer and estée lauder reflected higher net sales . the higher results from estée lauder also reflected a favorable comparison to the higher level of support spending in fiscal 2016. the increase in operating income from clinique reflected disciplined expense management . the lower results from m a c reflected lower net sales . skin care operating income also reflected the favorable year-over-year net impact of $ 10
| 11,590 |
we currently have approximately 90 sales representatives as well as established teams of medical science liaisons , regional reimbursement directors , and market access account directors who provide information to payers and physicians on our marketed products ; a national trade account director who works with our network of specialty pharmacies for inbrija ; and market development managers who work collaboratively with field teams and corporate personnel to assist in the execution of the company 's strategic initiatives . our preparations for the commercial sale of inbrija continue , including sales force training and education , managed care discussions , market research and social media initiatives . in advance of the launch of commercial sale , we are visiting movement disorder and key neurology centers to provide education and training on inbrija 's clinical profile , the appropriate use of the inbrija inhaler , and our prescription support services hub , described below . we project that annual peak net revenue of inbrija in the u.s. alone could exceed $ 800 million . in january 2019 , we established prescription support services , which we sometimes refer to as the inbrija hub , a service provided by acorda which is designed to help patients navigate their insurance coverage and offer reimbursement support services , when appropriate . services fall into one of these four categories : insurance verification , to research patient insurance benefits and confirm insurance coverage ; prior authorization support , to identify prior authorization requirements ; appeals support ; and assistance identifying which specialty pharmacy a patient will utilize based on their insurance coverage . for patients that may need assistance paying for their medication , prescription support services will offer several support options , including : a patient assistance program , that provides no cost medication to patients who meet specific program eligibility requirements ; co-pay support , which may help commercially insured ( non-government funded ) patients lower their out-of-pocket costs ; and a bridge program , for federally-insured patients who experience a delay in coverage determination . we intend to implement a no-cost sample program to enable patients and their physicians to assess the value of inbrija before the patient has to incur out-of-pocket co-pay or co-insurance costs . parkinson 's disease is a progressive neurodegenerative disorder resulting from the gradual loss of certain neurons in the brain . these neurons are responsible for producing dopamine and that loss causes a range of symptoms including impaired movement , muscle stiffness and tremors . the standard baseline treatment of parkinson 's disease is oral carbidopa/levodopa , but oral medication can be associated with wide variability in the timing and amount of absorption and there are significant challenges in creating a regimen that consistently maintains therapeutic effects . as parkinson 's progresses , people are likely 67 to experience off periods , which are characterized by the return of parkinson 's symptoms that result from low levels of dopamine between doses oral carbidopa/levodopa . off periods are often highly disruptive to people with parkinson 's . approximately one million people in the u.s. and 1.2 million europeans are diagnosed with parkinson 's ; it is estimated that approximately 40 % of people with parkinson 's in the u.s. experience off periods . inbrija is an on-demand treatment that utilizes our innovative arcus platform for inhaled therapeutics . arcus is a dry-powder pulmonary drug delivery technology that we believe has potential to be used in the development of a variety of inhaled medicines . the arcus platform allows systemic delivery of medication through inhalation , by transforming molecules into a light , porous dry powder . this allows delivery of substantially higher doses of medication than can be delivered via conventional dry powder technologies . we acquired the arcus technology platform as part of our 2014 acquisition of civitas therapeutics . we have worldwide rights to our arcus drug delivery technology , which is protected by extensive know-how and trade secrets and various u.s. and foreign patents , including patents that protect the inbrija dry powder capsules beyond 2030. we have several patents listed in the orange book for inbrija , including patents expiring between 2022 and 2032 , and inbrija is entitled to three years of data exclusivity , through december 2021 , as posted in the orange book . fda approval of inbrija was based on a clinical program that included approximately 900 people with parkinson 's on a carbidopa/levodopa regimen experiencing off periods . the phase 3 pivotal trial for inbrija – span-pd – was a 12-week , randomized , placebo controlled , double blind study evaluating the effectiveness of inbrija in patients with mild to moderate parkinson 's experiencing off periods . in january 2019 , we announced that the lancet neurology published results from the span-pd clinical trial . the span-pd trial met its primary endpoint , with patients showing a statistically significant improvement in motor function at the week 12 visit , as measured by a reduction in unified parkinson 's disease rating scale ( updrs ) part iii score for inbrija 84 mg ( n=114 ) compared to placebo ( n=112 ) at 30 minutes post-dose ( -9.83 points and -5.91 points respectively ; p=0.009 ) . onset of action was seen as early as 10 minutes . maintenance of effect continued to 60 minutes post-dose , which is the longest time point assessed in the trial . updrs iii is a validated scale , which measures parkinson 's disease motor impairment . the most common adverse reactions with inbrija ( at least 5 % and greater than placebo ) in the pivotal trial were cough ( 15 % vs. 2 % ) , upper respiratory tract infection ( 6 % vs. 3 % ) , nausea ( 5 % vs. 3 % ) and discolored sputum ( 5 % vs. 0 % ) . inbrija was also studied in a phase 3 long-term , active-controlled , randomized , open-label study ( n=398 ) assessing safety and tolerability over one year . story_separator_special_tag this study showed the average reduction in fev1 ( forced expiratory volume in 1 second ) from baseline was the same ( -0.1 l ) for the inbrija and observational cohorts . patients with chronic obstructive pulmonary disease ( copd ) , asthma , or other chronic respiratory disease within the last five years were excluded from this study . inbrija is not to be used by patients who take or have taken a nonselective monoamine oxidase inhibitor such as phenelzine or tranylcypromine within the last two weeks . it is not known if inbrija is safe or effective in children . ampyra general ampyra was approved by the fda in january 2010 to improve walking in adults with ms. to our knowledge , ampyra is the first drug approved for this indication . efficacy was shown in people with all four major types of ms ( relapsing remitting , secondary progressive , progressive relapsing and primary progressive ) . net revenue for ampyra was $ 455.1 million for the year ended december 31 , 2018 and $ 543.3 million for the year ended december 31 , 2017. ampyra is marketed in the u.s. through our own specialty sales force and commercial infrastructure , and is distributed in the u.s. primarily through a network of specialty pharmacy providers , which deliver the medication to patients by mail , and asd specialty healthcare , inc. ( an amerisourcebergen affiliate ) , which distributes ampyra to the u.s. bureau of prisons , the u.s. department of defense , the u.s. department of veterans affairs , or va , and other federal agencies . we have relationships with six additional pharmacies through which ampyra is available , each of which is either affiliated with 68 an integrated health delivery network or an academic medical center . these pharmacies are not part of our specialty pharmacy network , but rather receive prescriptions for ampyra directly from prescribers without first being routed through apss . we have contracted with a third party organization with extensive experience in coordinating patient benefits to run ampyra patient support services , or apss , a dedicated resource that coordinates the prescription process among healthcare providers , people with ms , and insurance carriers . we have a 60-day free trial program that provides eligible patients with two months of ampyra at no cost . we are evaluating the level of our continuing investment in certain ampyra sales and marketing programs , including our free trial program and apss , due to the introduction of generic competition and corresponding decline in ampyra sales . we have been engaged in litigation with certain generic drug manufacturers relating to our five initial orange book-listed ampyra patents . in 2017 , the united states district court for the district of delaware ( the “ district court ” ) issued a ruling that upheld our ampyra orange book-listed patent that expired on july 30 , 2018 , but invalidated our four other orange book-listed patents pertaining to ampyra that were set to expire between 2025 and 2027. under this decision , our patent exclusivity with respect to ampyra terminated on july 30 , 2018. we appealed the district court decision to the united states court of appeals for the federal circuit ( the “ federal circuit ” ) , which issued a ruling on september 10 , 2018 upholding the district court 's decision ( the “ appellate decision ” ) . in january 2019 , the federal circuit denied our petition for rehearing en banc . we intend to file a petition for certiorari appealing the case to the u.s. supreme court . this litigation is discussed in further detail in part i , item 3 of this report . we have experienced a significant decline in ampyra sales due to competition from generic versions of ampyra that are being marketed following the appellate decision . we expect that additional manufacturers will market generic versions of ampyra , which may accelerate the decline in our ampyra sales . license and collaboration agreement with biogen ampyra is marketed as fampyra outside the u.s. by biogen international gmbh , or biogen , under a license and collaboration agreement that we entered into in june 2009. fampyra has been approved in a number of countries across europe , asia and the americas . under our agreement with biogen , we are entitled to receive double-digit tiered royalties on sales of fampyra and we are also entitled to receive additional payments based on achievement of certain regulatory and sales milestones . we received a $ 25 million milestone payment from biogen in 2011 , which was triggered by biogen 's receipt of conditional approval from the european commission for fampyra . the next expected milestone payment would be $ 15 million , due when ex-u.s. net sales exceed $ 100 million over four consecutive quarters . in november 2017 , we announced a $ 40 million fampyra royalty monetization transaction with healthcare royalty partners , or hcrp . in return for the payment to us , hcrp obtained the right to receive these fampyra royalties up to an agreed-upon threshold . until this threshold is met , if ever , we will not receive fampyra royalties although we have retained the right to receive any potential future milestone payments , described above . the hcrp transaction is accounted for as a liability , as described in note 11 to our consolidated financial statements included in this report . ampyra patent update six issued ampyra patents have been listed in the orange book . the five initial orange book-listed patents have been the subject of litigation with certain generic drug manufacturers , as described above . in connection with the litigation , our orange book-listed patent that expired on july 30 , 2018 , was upheld , but four other ampyra patents set to expire between 2025 and 2027 were invalidated . the litigation is discussed in further detail in part i , item 3 of this report .
| payment of coverage gap discounts is required under the affordable care act , the health care reform legislation enacted in 2010. discounts and allowances increased in 2018 due to the entry of generic versions of ampyra as a result of invalidation of our ampyra patents in 2017 and they may further increase as a percentage of sales as we enter into managed care contracts in the future . zanaflex we recognized net revenue from the sale of zanaflex products of $ 1.5 million for the year ended december 31 , 2018 , as compared to $ 2.7 million for the year ended december 31 , 2017. net product revenues also included $ 3.0 million representing the sale of our zanaflex capsules authorized generic product to actavis , a subsidiary of teva pharmaceuticals and formerly watson pharma , for the year ended december 31 , 2017. we also recognized product sales on the transfer price of product sold for an authorized generic of zanaflex capsules . in november 2017 , the company entered into an asset purchase agreement to sell its rights and interests related to its zanaflex assets for a purchase price of $ 4.0 million . we recognized a gain on the sale of approximately $ 3.5 million for the year ended december 31 , 2017 , which is reflected as a reduction to selling , general and administrative expenses in the statements of operations . discounts and allowances , which are included as an offset in net revenue , consist of allowances for customer credits , including estimated chargebacks , rebates , returns and discounts . adjustments are recorded for estimated chargebacks , rebates , returns and discounts . 72 qutenza we recognized product sales of qutenza following receipt of product by our specialty distributors . we recognized net revenue from the sale of qutenza of $ 0.5 million and $ 0.7 million for the years ended december 31 , 2018 and 2017 , respectively . in may 2018 , the company entered into an asset purchase agreement to sell its rights and interests related to its qutenza assets for a purchase price of $ 7.9 million . we recognized a gain on the sale of approximately $ 7.8 million for the year ended december 31 ,
| 11,591 |
while we are currently devoting much of our focus on the applications for the e-commerce apparel industry , management believes that all of the above-mentioned applications will be useful to users , retailers and vendors alike . story_separator_special_tag share and five-year warrants to purchase an aggregate of 2,874,375 shares of common stock at a price of $ 0.65 per share and related warrant . the warrants are initially exercisable at an exercise price of $ 0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants . the net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $ 2,130,000. as a result of the public offering , the exercise price of the warrants issued in the october 2017 private placement described below was reduced to $ 0.715 . 32 on october 26 , 2017 , we entered into securities purchase agreements to sell original issue discount non-convertible notes , or the notes , and warrants to purchase 888,888 shares of our common stock to certain accredited investors in a private placement . we received gross proceeds of approximately $ 1,200,000 , before deducting placement agent and other offering expenses . the notes were initially due on the earlier of ( i ) february 28 , 2018 and ( ii ) the first offering of our equity securities or any equity-linked or related securities with aggregate gross proceeds of at least $ 1 million . the maturity date of the notes was subsequently amended to the earlier of ( i ) the closing of our next offering or ( ii ) march 31 , 2018. on december 27 , 2017 , we repaid $ 583,000 in principal amount of the notes , and in february 2018 , we repaid the remaining outstanding balance of the notes . the five-year warrants issued in the private offering were initially exercisable at a price of $ 0.75 per share . the warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of the warrants . as a result of the december 2017 offering , the exercise price of the warrants was reduced to $ 0.715 per share . net cash used in operating activities was $ 3,597,000 for the year ended december 31 , 2018 compared to $ 4,140,000 for the year ended december 31 , 2017. the decrease in cash used in operating activity is derived from an increase in revaluation of warrants , derivatives , stock-based compensation liabilities and convertible loan which was offset by a decrease in stock based compensation expense ( equity and liability ) . net cash used in investing activities for the year ended december 31 , 2018 was $ 1,421,000 compared with net cash used in investing activities of $ 16,000 for the year ended december 31 , 2017. the net cash used in investing activities for the year ended december 31 , 2018 was mainly from investment in short term deposits and restricted deposits compared to purchase of property and equipment during the year ended december 31 , 2017. we had positive cash flow from financing activities of $ 9,040,000 for the year ended december 31 , 2018 compared to $ 5,932,000 for the year ended december 31 , 2017. the cash flow from financing activities for the year ended december 31 , 2018 was due to a public offering of our securities , proceeds from the exercise of the warrants as described above and repayment of short-term loan compared to repayment of a short-term loan and proceeds from the public offering of our securities during the year ended december 31 , 2017. we do not have any material commitments for capital expenditures during the next twelve months . based on our projected cash flows and the cash balances as of the date of this annual report on form 10-k , we believe we have sufficient cash to fund our obligations for a period which is longer than 12 months from the date of this annual report on form 10-k. however , in order to meet our business objectives in the future , we will need to raise additional capital , which may not be available on reasonable terms or at all . additional capital would be used to accomplish the following : ● finance our current operating expenses ; ● pursue growth opportunities ; ● hire and retain qualified management and key employees ; ● respond to competitive pressures ; ● comply with regulatory requirements ; and ● maintain compliance with applicable laws . 33 current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only on unfavorable terms . our ability to raise additional capital , if needed , will depend on conditions in the capital markets , economic conditions and a number of other factors , many of which are outside our control , and on our financial performance . accordingly , we can not assure you that we will be able to successfully raise additional capital at all or on terms that are acceptable to us . if we can not raise additional capital when needed , it may have a material adverse effect on our business , results of operations and financial condition . to the extent that we raise additional capital through the sale of equity or convertible debt securities , the issuance of such securities could result in substantial dilution for our current stockholders . story_separator_special_tag the terms of any securities issued by us in future capital transactions may be more favorable to new investors , and may include preferences , superior voting rights and the issuance of warrants or other derivative securities , which may have a further dilutive effect on the holders of any of our securities then-outstanding . we may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with hiring or retaining personnel , option or warrant exercises , future acquisitions or future placements of our securities for capital-raising or other business purposes . the issuance of additional securities , whether equity or debt , by us , or the possibility of such issuance , may cause the market price of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings . in addition , we may incur substantial costs in pursuing future capital financing , including investment banking fees , legal fees , accounting fees , securities law compliance fees , printing and distribution expenses and other costs . we may also be required to recognize non-cash expenses in connection with certain securities we issue , such as convertible notes and warrants , which may adversely impact our financial condition . furthermore , any additional debt or equity financing that we may need may not be available on terms favorable to us , or at all . if we are unable to obtain such additional financing on a timely basis , we may have to curtail our development activities and growth plans and or be forced to sell assets , perhaps on unfavorable terms , or we may have to cease our operations , which would have a material adverse effect on our business , results of operations and financial condition . recently issued accounting pronouncements certain recently issued accounting pronouncements are discussed in note 2 , significant accounting policies , to the consolidated financial statements included in “ item 8. financial statements and supplementary data ” of this annual report on form 10-k. off-balance sheet arrangements we have not entered into any transactions with unconsolidated entities in which 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 . application of critical accounting policies and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our financial statements , which we have prepared in accordance with u.s. generally accepted accounting principles issued by the financial accounting standards board , or fasb . the preparation of these financial statements requires us 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 , as well as the reported expenses during the reporting periods . actual results may differ from these estimates under different assumptions or conditions . while our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this annual report on form 10-k , we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance , as these policies relate to the more significant areas involving management 's estimates and assumptions . we consider an accounting estimate to be critical if : ( 1 ) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate ; and ( 2 ) changes in the estimate could have a material impact on our financial condition or results of operations . we recognized a liability on behalf of warrants that are exercisable into shares of common stock . these warrants were issued to investors in public offerings and in private placements and were measured at fair value based on asc 820. changes in fair value were recorded in the statements of comprehensive loss . we estimate the share option value using the monte carlo option pricing model . the expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected future trends . the risk-free interest rate for grants with exercise price denominated in nis is based on the yield from israel treasury zero-coupon bonds with an equivalent term . the risk-free interest rate for grants with exercise price denominated in usd is based on the yield from us treasury zero-coupon bonds with an equivalent term . we have historically not paid dividends and have no foreseeable plans to pay dividends . 34 research and development expenses research expenses are recognized as expenses when incurred . costs incurred on development projects are recognized as intangible assets as of the date at which it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility . this is generally the case when regulatory approval for commercialization is achieved and costs can be measured reliably . given the current stage of the development of our products , no development expenditures have yet been capitalized . intellectual property-related costs for patents are part of the expenditure for the research and development projects . therefore , registration costs for patents are expensed when incurred as long as the research and development project concerned does not meet the criteria for capitalization . equity-based compensation we account for our employees ' share-based compensation as an expense in the financial statements based on asc 718. all awards are equity classified and therefore the cost is measured
| offset by income from exchange rate differences and income from fair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation of warrants which were offset by financial expenses for revaluation of derivatives , loss for marketable securities and interest on short term loan . net loss as a result of the foregoing , research and development , marketing general and administrative expenses , and lack of revenues , our net loss for the year ended december 31 , 2018 was $ 5,969,000 compared to net loss of $ 5,404,000 for the year ended december 31 , 2017. the increase in net loss was mainly due to the expenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses . the increase in net loss is offset by a decrease in the share-based payments and public and investor relations services expenses , income with respect to the exchange rate differences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period . liquidity and capital resources since our inception , we have funded our operations primarily through public and private offerings of debt and equity in israel and in the u.s. as of december 31 , 2018 , we had cash , cash equivalents and restricted cash of $ 5,230,000 and short-term deposit and short-term restricted deposit of $ 1,390,000 compared to $ 1,872,000 cash , cash equivalents , restricted cash and no deposits as of december 31 , 2017. this increase primarily resulted from the public offering that we completed in february 2018 and from proceeds generated from the exercise of warrants , both of which are further described below . during the year ended december 31 , 2018 , we received $ 2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of common stock
| 11,592 |
the balances of our trade receivables are as follows : june 30 , 2020 june 30 , 2019 accounts receivable $ 15,973,537 $ 4,138,469 the balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended june 30 , 2020 and june 30 , 2019. our contract liabilities , which are included in accrued liabilities on our balance sheet , are as follows : june 30 , 2020 june 30 , 2019 undelivered products $ 140,000 $ 140,000 performance obligations a performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of measurement in topic 606. at contract inception , we assess the products and services promised in our contracts with customers . we then identify performance obligations to transfer distinct products or services to the customer . to identify performance obligations , we consider all the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices . our performance obligations are satisfied at a point in time . revenue from products transferred to customers at a single point in time accounted for 99 % of net sales for the year ended june 30 , 2020. revenue for non-recurring engineering projects is based on the percentage completion of a project and accounted for 1 % of net sales for the year ended june 30 , 2020. most of our revenue that is recognized at a point in time is for the sale of hot-spot router products . revenue from these contracts is recognized when the customer can direct the use of and obtain substantially all of the benefits from the product , which generally coincides with title transfer at completion of the shipping process . 10 as of june 30 , 2020 , our contracts do not contain any unsatisfied performance obligations , except for undelivered products . capitalized product development costs asc topic 350 , “ intangibles - goodwill and other ” includes software that is part of a product or process to be sold to a customer and shall be accounted for under subtopic 985-20. our products contain embedded software internally developed by fti which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding . the costs of product development that are capitalized once technological feasibility is determined ( noted as technology in progress in the intangible assets table , in note 2 to notes to consolidated financial statements ) include certifications , licenses , payroll , employee benefits , and other headcount-related expenses associated with product development . we determine that technological feasibility for our products is reached after all high-risk development issues have been resolved . once the products are available for general release to our customers , we cease capitalizing the product development costs and any additional costs , if any , are expensed . the capitalized product development costs are amortized on a product-by-product basis using the straight-line amortization . the amortization begins when the products are available for general release to our customers . as of june 30 , 2020 , and june 30 , 2019 , capitalized product development costs in progress were $ 140,193 and $ 465,352 , respectively , and these amounts are included in intangible assets in our consolidated balance sheets . during the year ended june 30 , 2020 , we incurred $ 343,360 in capitalized product development costs , and such amounts are primarily comprised of certifications and licenses . all costs incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive income ( loss ) . income taxes deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income . valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized . as of june 30 , 2020 , we have federal and state net operating loss carryforwards of approximately $ 1.2 million and no state net operating loss carryforwards . under the tax cuts and jobs act ( the “ act ” ) , which was signed into law on december 22 , 2017 , the federal net operating loss recognized on or after january 1 , 2018 will carry forward indefinitely . the federal net operating loss of $ 1.2 million , which was recognized on or before december 31 , 2017 , will expire through 2035 , and the federal net operating loss recognized on or after january 1 , 2018 , which will carry forward indefinitely , is 0. the utilization of net operating loss carryforwards may be subject to limitations under provisions of the internal revenue code section 382 and similar state provisions . under the provision of asc 740 “ application of the uncertain tax position provisions ” related to accounting for uncertain tax positions , which prescribes a recognition threshold and measurement process for recording in the financial statements , uncertain tax positions taken or expected to be taken in a tax return , the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority . tax benefits of an uncertain tax position will not be recognized if it has less than a 50 % likelihood of being sustained based on technical merits . story_separator_special_tag recently issued accounting pronouncements refer to note 2 - summary of significant accounting policies in the consolidated financial statements . 11 story_separator_special_tag times new roman , times , serif ; margin : 0pt 0 ; text-align : justify ; text-indent : 0.5in '' > gross profit - gross profit increased by $ 547,775 , or 10.6 % , to $ 5,739,489 for the year ended june 30 , 2019 , from $ 5,191,714 for the corresponding period of 2018. the gross profit in terms of net sales percentage was 15.7 % for the year ended june 30 , 2019 , compared to 17.3 % for the corresponding period of 2018. the increase in gross profit was primarily due to the change in net sales as described above . the decrease in gross profit in terms of net sales percentage was primarily due to variations in customer and product mix , competitive selling prices and product costs which generally vary from period to period and region to region . operating expenses - operating expenses decreased by $ 36,638 , or 0.5 % , to $ 7,846,946 for the year ended june 30 , 2019 , from $ 7,883,584 for the corresponding period of 2018. for the year ended june 30 , 2019 , operating expenses consisted of selling , general , and administrative costs of $ 4,891,365 and research and development costs of $ 2,955,581 , respectively . selling , general , and administrative costs increased by $ 379,797 , or 8.4 % , to $ 4,891,365 for the year ended june 30 , 2019 , from $ 4,511,568 for the corresponding period of 2018. the increase in selling , general , and administrative costs was primarily due to the increase in delivery charges by $ 325,303 due to the increased sales . research and development costs decreased by $ 416,435 , or 12.3 % , to $ 2,955,581 for the year ended june 30 , 2019 , from $ 3,372,016 for the corresponding period of 2018. the decrease in research and development costs was primarily due to the decrease in research and development payroll expense and the related expenses from a cost reduction effort especially for the early portion of fiscal 2019 , as well as increased capitalized product development cost . 13 other income , net - other income , net decreased by $ 127,368 , or 38.33 % , to $ 204,954 for the year ended june 30 , 2019 , from $ 332,322 for the corresponding period of 2018. the decrease was primarily due to the decreased product development funding received by fti from a government entity as the periods of the associated projects expired , which is partially offset by the increased interest income earned from the newly opened money market accounts and the certificates of deposit . liquidity and capital resources our historical operating results , capital resources and financial position , in combination with current projections and estimates , were considered in management 's plan and intentions to fund our operations over a reasonable period of time , which we define as the twelve-month period ending june 30 , 2020. for purposes of liquidity disclosures , we assess the likelihood that we have sufficient available working capital and other principal sources of liquidity to fund our operating activities and obligations as they become due . our principal source of liquidity as of june 30 , 2020 consisted of cash and cash equivalents as well as short-term investments of $ 33,543,562. we believe we have sufficient available capital to cover our existing operations and obligations through at least june 30 , 2020. our long-term future cash requirements will depend on numerous factors , including our revenue base , profit margins , product development activities , market acceptance of our products , future expansion plans and ability to control costs . if we are unable to achieve our current business plan or secure additional funding that may be required , we would need to curtail our operations or take other similar actions outside the ordinary course of business in order to continue to operate as a going concern . operating activities – net cash provided by operating activities for year ended june 30 , 2020 and 2019 was $ 22,004,304 and $ 775,090 , respectively . the $ 22,004,304 in net cash provided by operating activities for the year ended june 30 , 2020 was primarily due to the increase in accounts payable of $ 36,410,741 , caused by a sudden increase in wi-fi hotspot production , as well as our operating results ( net loss adjusted for depreciation , amortization and other non-cash charges ) , which were partially offset by an increase in accounts receivable of $ 11,855,351 as well as the increase in inventory of $ 10,730,663. the $ 775,090 in net cash provided by operating activities for the year ended june 30 , 2019 was primarily due to the decrease in accounts receivable of $ 3,852,985 as well as the decrease in inventory of $ 304,813 , which was partially offset by the decrease in accounts payable of $ 1,937,071. investing activities – net cash used in investing activities for the years ended june 30 , 2020 and 2019 was $ 794,969 and $ 6,250,710 , respectively . the $ 794,969 in net cash used in investing activities for the year ended june 30 , 2020 was primarily due to the purchases of capitalized product development , intangible asset , and property and equipment of $ 343,360 , $ 193,171 and $ 181,746 , respectively , as well as the payments for additional shares of a subsidiary of $ 75,000. the $ 6,250,710 in net cash used in investing activities for the year ended june 30 , 2019 was primarily due to the payments for purchase of short-term investments of $ 5,380,226 and additional shares of the subsidiary of $ 234,330 as well as the purchases of capitalized product development , intangible
| ( 46 % of our consolidated net sales for the year ended june 30 , 2020 ) . net sales in emea decreased by $ 224,427 , or 100.0 % , to $ 0 for the year ended june 30 , 2020 , from $ 224,427 for the corresponding period of 2019. the decrease in net sales was due to the discontinued orders for a product placed by a carrier customer in africa compared to the corresponding period of 2019. net sales in asia increased by $ 205,434 , or 105.9 % , to $ 232,520 for the year ended june 30 , 2020 , from $ 27,086 for the corresponding period of 2019. the increase in net sales was primarily due to product development service revenue generated by fti , which typically varies from period to period . gross profit - gross profit increased by $ 8,784,996 , or 153.1 % , to $ 14,524,485 for the year ended june 30 , 2020 , from $ 5,739,489 for the corresponding period of 2019. the gross profit in terms of net sales percentage was 19.3 % for the year ended june 30 , 2020 , compared to 15.7 % for the corresponding period of 2019. the increase in gross profit was primarily due to the change in net sales as described above . the increase in gross profit and gross profit in terms of net sales percentage was primarily due to a newly launched product , with a higher selling price , as well as the product development service revenues generated by franklin and fti , which involve lower costs of goods sold . 12 operating expenses - operating expenses decreased by $ 400,585 , or 5.1 % , to $ 7,446,361 for the year ended june 30 , 2020 , from $ 7,846,946 for the corresponding period of 2019. selling , general , and administrative decreased by $ 1,191,506 to $ 3,699,859 for the year ended june 30 , 2020 , from $ 4,891,365. the decrease in selling , general , and administrative was primarily due to the decreased payroll expense for employees involved in selling , general , and administrative
| 11,593 |
as such , we are exposed to changes in cost of goods sold resulting from currency movements and may not be able to adjust our selling prices to offset such movements . in addition , we incur selling and administrative expenses in various currencies and are exposed to changes in such expenses resulting from currency movements . because our financial statements are reported in u.s. dollars , changes in currency exchange rates between the u.s. dollar and other currencies have had , and will continue to have , an impact on our results of operations . climate the animal health industry and demand for many of our animal health products in a particular region are affected by changing disease pressures and by weather conditions , as usage of our products follows varying weather patterns and weather-related pressures from diseases . as a result , we may experience regional and seasonal fluctuations in our results of operations . in addition , livestock producers depend on the availability of natural resources , including abundant rainfall to sustain large supplies of drinking water , grasslands and grain production . their animals ' health and their ability to operate could be adversely affected if they experience a shortage of fresh water due to human population growth or floods , droughts or other weather conditions . in the event of adverse weather conditions or a shortage of fresh water , livestock producers may purchase less of our products . product development initiatives our future success depends on both our existing product portfolio , including our ability to obtain cross-clearances enabling the use of our medicated products in conjunction with other products , approval 56 for use of our products with new species , approval for new claims for our products , approval of our products in new markets , and our pipeline of new products , including new products that we may develop through joint ventures and products that we are able to obtain through license or acquisition . the majority of our r & d programs focus on product lifecycle development , which is defined as r & d programs that leverage existing animal health products by adding new species or claims , achieving approvals in new markets or creating new combinations and reformulations . we commit substantial effort , funds and other resources to expanding our product approvals and r & d , both through our own dedicated resources and through collaborations with third parties . recent developments mjb transactions in january 2015 , we entered into a collaboration and distribution agreement ( the “ collaboration agreement ” ) with mjb , pursuant to which we and mjb will collaborate on the development of certain animal vaccines and mjb granted us an exclusive license to manufacture and distribute , in north america , any vaccine product currently being developed or sold by mjb or any other product that is developed under the collaboration agreement . we will reimburse mjb 's cost of goods , make certain minimum base payments of $ 0.2 million per month to mjb during the term of the collaboration agreement , subject to certain offset provisions , and pay 50 % of all gross margins over $ 0.4 million per month to mjb . we also entered into a technology license agreement ( the “ license agreement ” ) with mjb , pursuant to which mjb granted us an exclusive license to develop , manufacture and commercialize , outside of north america , vaccine products using mjb 's patents and know-how . we will make quarterly royalty payments to mjb in an amount equal to a specified percentage of net sales outside of north america . we also entered into an intellectual property purchase agreement ( the “ purchase agreement ” ) with mjb , pursuant to which we will acquire the intellectual property and certain other assets comprising mjb 's business relating to animal vaccines . the closing date of the acquisition ( the “ closing ” or the “ closing date ” ) is anticipated to occur on or before january 1 , 2021 , subject to certain closing conditions . upon the occurrence of certain events , the closing of the purchase agreement will occur prior to the scheduled closing date . under the terms of the purchase agreement , we made an upfront payment to mjb of $ 5.0 million and agreed to pay mjb a “ closing payment ” at closing in an amount to be calculated based on the worldwide net sales of mjb 's vaccines for the twelve months immediately prior to the closing date . the closing payment will not be less than $ 10.0 million , subject to offset in certain limited circumstances . in addition , mjb will be entitled to receive earn-out payments , from the closing date through december 31 , 2030 , based on ( i ) a single-digit percentage of the net sales of any “ royalty product ” ( as defined in the license agreement ) that we sell commercially in north america , and ( ii ) a single-digit percentage of the net sales of any royalty product that we sell commercially outside of north america , at the time of or after the closing . in connection with this transaction , we also made a loan of $ 5.0 million to mjb 's sole shareholder , which matures on the closing date . the loan bears interest at a variable rate equal to libor plus 300 basis points , and accrued interest shall be paid semi-annually on each july 1 and january 1. the unpaid principal amount of the loan , together with all outstanding and unpaid interest , will be due and payable at closing or over a period ending january 2025 in the event of a termination of the purchase agreement by us or upon the occurrence of certain customary events of default . we have accounted for the mjb transaction as a business combination in accordance with asc 805 , business combinations . story_separator_special_tag we have recorded intangible assets of $ 9.2 million , which includes $ 7.6 million of technology-related assets and $ 1.6 million of in-process research and development , and a long-term liability of $ 4.2 million , net of the upfront payment , payable at the closing date and during the earn-out period . we may further refine the determination of the intangible assets during the measurement period . the closing payment will also include $ 5.0 million ( pro-rated on a monthly basis ) , conditional upon continuing service of a key employee through january 2018 ; this amount will be recognized as compensation expense over the service period . as of june 30 , 2015 , $ 0.7 million of accrued compensation was recognized and included in the long-term liability . 57 analysis of the consolidated statements of operations story_separator_special_tag style= '' padding:0pt ; width:7.5pt ; '' > 747 * — * loss on insurance claim — 5,350 — ( 5,350 ) * 5,350 * foreign currency ( gains ) losses , net ( 5,400 ) 1,753 3,103 ( 7,153 ) * ( 1,350 ) ( 44 ) % loss on extinguishment of debt — 22,771 — ( 22,771 ) * 22,771 * other ( income ) expense , net — — 151 — * ( 151 ) * adjusted ebitda $ 110,019 $ 90,597 $ 75,754 $ 19,422 21 % $ 14,843 20 % adjusted net income we report adjusted net income to portray the results of our operations prior to considering certain income statement elements . see “ —general description of non-gaap financial measures ” for more information . a reconciliation of net income ( loss ) , as reported under gaap , to adjusted net income : replace_table_token_6_th ( 1 ) adjustments to selling , general and administrative expense include acquisition-related accrued compensation of $ 747 in 2015 ; loss on insurance claim of $ 5,350 in 2014 ; acquisition intangible 60 amortization of $ 4,560 , $ 4,897 , and $ 4,106 , and stock-based compensation expense of $ 0 , $ 73 and $ 215 for the years ended june 30 , 2015 , 2014 and 2013 , respectively . ( 2 ) adjustments to interest expense , net include acquisition-related accrued interest of $ 613 for the year ended june 30 , 2015 . ( 3 ) we adjust the provision ( benefit ) for income taxes to reflect cash income taxes paid in the period . comparison of fiscal years ended june 30 , 2015 and 2014 net sales net sales of $ 748.6 million increased $ 56.7 million , or 8 % , for the year ended june 30 , 2015 , as compared to the year ended june 30 , 2014 , due to growth in animal health and mineral nutrition of $ 39.7 million and $ 25.5 million , respectively , offset by declines in performance products of $ 8.6 million . the consolidated statement of operations for the year ended june 30 , 2015 included $ 8.0 million of revenue and gross profit related to milestone payments under a license agreement with a global animal health company to share in the use of our proprietary vaccine delivery technology . we recognized the revenue and profit during the period because certain contractual and regulatory milestones were achieved by the licensee , and we had no remaining performance obligations under the agreement . excluding the $ 8.0 million in vaccine licensing milestone revenue , net sales growth was $ 48.7 million , or 7 % . animal health net sales of $ 470.8 million grew $ 39.7 million , or 9 % , for the year ended june 30 , 2015 , primarily due to volume growth across all product groups . excluding the $ 8.0 million in vaccine licensing milestone revenue , net sales growth was $ 31.7 million , or 7 % . mfas and other grew $ 9.2 million , or 3 % , primarily due to volume growth in international markets . nutritional specialty products grew $ 18.6 million , or 30 % , for the year ended june 30 , 2015 , primarily due to u.s. volume growth of our products for the dairy industry and their introduction in select european countries . excluding the effect of the $ 8.0 million in vaccine licensing milestone revenue , vaccines grew $ 3.9 million , or 10 % , for the year ended june 30 , 2015 , principally from volume growth , including sales of mjb products from the january 2015 date of our collaboration and distribution agreement with mjb which was entered into as part of the mjb transactions .
| this enables us to monitor changes in net sales , costs and other actionable operating metrics at the segment level . see “ —general description of non-gaap financial measures ” for descriptions of ebitda and adjusted ebitda . segment net sales and adjusted ebitda : replace_table_token_5_th ( 1 ) reflects ratio to total net sales 59 a reconciliation of net income , as reported under gaap , to adjusted ebitda : change for the years ended june 30 2015 2014 2013 2015 / 2014 2014 / 2013 ( in thousands ) net income ( loss ) $ 60,280 $ ( 3,127 ) $ 24,891 $ 63,407 * $ ( 28,018 ) * interest expense , net 14,305 32,962 35,629 ( 18,657 ) ( 57 ) % ( 2,667 ) ( 7 ) % provision for income taxes 18,483 9,435 ( 7,043 ) 9,048 96 % 16,478 * depreciation and amortization 21,604 21,453 19,023 151 1 % 2,430 13 % ebitda 114,672
| 11,594 |
given the uncertainty that prevails , we can not fully assess or estimate the ultimate impact of covid-19 on the mortgage insurance market , our business performance or our financial position including our new business production , default and claims experience , and investment portfolio results . potential impact on the u.s. housing market and mortgage insurance industry the u.s. housing market has demonstrated notable resiliency amidst the broader economic dislocation caused by the outbreak of covid-19 . low interest rates are helping to support housing affordability , medical concerns and lifestyle preferences are driving people to move from densely populated urban areas to suburban communities where social distancing is more easily achieved , and shelter-in-place directives are reinforcing the value of homeownership – all of which are contributing to an influx of new home buyers , record levels of purchase demand , and generally stable to rising house prices nationally . while the possibility remains that the housing market will soften , we believe the general strength of the market coming into the covid-19 crisis will help to mitigate the risk of a severe pullback . we observe several favorable differences in the current environment compared to the period leading up to and through the 2008 financial crisis – the last period of significant economic volatility in the u.s. and one noted for its significant housing market dislocation . such differences include : ( i ) the generally higher quality borrower base ( as measured by weighted average fico scores and ltv ratios ) and tighter underwriting standards ( with , among other items , full-documentation required to verify borrower income and asset positions ) that prevail in the current market ; ( ii ) the lower concentration of higher risk loan structures , such as negative amortizing , interest-only or short-termed option adjustable-rate mortgages being originated and outstanding in the current market ; ( iii ) the meaningfully higher proportion of loans used for lower risk purposes , such as the purchase of a primary residence or rate-term refinancing in the current market , as opposed to cash-out refinancings , investment properties or second home purchases , which prevailed to a far greater degree in the lead up to the 2008 financial crisis ; ( iv ) the availability and immediate application by the government , regulators , lenders , loan servicers and others of a broad toolkit of resources designed to aid distressed borrowers , including forbearance , foreclosure moratoriums and other assistance programs codified under the cares act , enacted on march 27 , 2020 ; and ( v ) the broader and equally immediate application of significant fiscal and monetary stimulus by the federal government under the cares act , and more recently under the consolidated appropriations act , enacted on december 27 , 2020 , as well as across a range of other programs designed to assist unemployed individuals and distressed businesses , and support the smooth functioning of various capital and risk markets . we also perceive the house price environment in the period leading up to the covid-crisis to be anchored by more balanced market fundamentals than that in the period leading up to the 2008 financial crisis . we believe the 2008 financial crisis was directly precipitated by irresponsible behavior in the housing market that drove home prices to unsustainable heights ( a so-called `` bubble '' ) . we see a causal link between the housing market and the 2008 financial crisis that we do not see in the covid-19 outbreak , and we believe this will further contribute to housing market stability through the covid-19 pandemic . purchase mortgage origination volume has increased significantly as factors related to the covid-19 crisis have spurred significant incremental demand for homeownership . refinancing origination volume has also grown dramatically as declining mortgage rates have created refinancing opportunities for a large number of existing borrowers . growth in total mortgage origination volume increases the addressable market for the u.s. mortgage insurance industry , while accelerated refinancing activity increases prepayment speed on outstanding insured mortgages . in this context , total u.s. mortgage insurance industry niw volume has increased to record levels , while the persistency of existing in-force insured risk across the industry has declined meaningfully . while we currently observe broad resiliency in the housing and high-ltv mortgage markets and , for the reasons discussed above , expect this trend to continue in the near term , the ultimate impact of covid-19 remains highly uncertain . see 57 item 1a , `` risk factors - the covid-19 outbreak may continue to materially adversely affect our business , results of operations and financial condition . '' potential impact on nmi 's business performance and financial position operations we had 262 employees at december 31 , 2020 , including 113 who typically work at our corporate headquarters in emeryville , ca and 149 who typically work from home in locations across the country . in response to the covid-19 outbreak , we activated our business continuity program and instituted additional work-from-home practices for our 113 emeryville-based staff . we have transitioned our operations seamlessly and continue to positively engage with customers on a re mote basis . our it environment , underwriting capabilities , policy servicing platform and risk architecture have continued without interruption , and our internal control environment and internal controls over financial reporting are unchanged . we have achieved this transition without incurring additional capital expenditures or operating expenses and we believe our current operating platform can continue to support our newly distributed needs for an extended period without further investment beyond that planned in the ordinary course . new business production our niw volume increased significantly following the onset of the covid-19 pandemic driven by the broad resiliency of the housing market , growth in total mortgage origination volume and increasing size of the u.s. mortgage insurance market , as well as the continued expansion of our customer franchise . story_separator_special_tag we wrote $ 62.7 billion of niw during the year ended december 31 , 2020 , up 39 % compared to the year ended december 31 , 2019 and 130 % compared to the year ended december 31 , 2018. while we currently expect our new business production will remain elevated , the potential onset of a new viral wave and rising case counts , reintroduction of broad-based shelter in place directives , increased unemployment or other potential outcomes related to covid-19 could drive a moderation or decline in our volume going forward . we have broadly defined underwriting standards and loan-level eligibility criteria that are designed to limit our exposure to higher risk loans , and have used rate gps to actively shape the mix of our new business production and insured portfolio by , among other risk factors , borrower fico score , dti ratio and ltv ratio . in the weeks following the outbreak of covid-19 , we adopted changes to our underwriting guidelines , including changes to our loan documentation requirements , asset reserve requirements , employment verification process and income continuance determinations , that have further strengthened the credit risk profile of our niw volume and iif . at december 31 , 2020 , the weighted average fico score of our rif was 755 and we had a 3 % mix of below 680 fico score risk . similarly , at december 31 , 2020 , the weighted average ltv ratio ( at origination ) of our insured portfolio was 92.4 % and we had a 10 % mix of 97 % ltv risk . we set our premium rates based on a broad range of individual and market variables , including property type , type of loan product , borrower credit characteristics , and lender profile . given the significant economic dislocation caused thus far by the covid-19 outbreak , the uncertain duration and ultimate global impact of this crisis , and the continued potential that it will have a deleterious effect on the residential housing market , we have taken action to increase the premium rates we charge on all new business production , in accordance with our filed rates and applicable rating rules . delinquency trends and claims expense we had 12,209 defaulted loans in our primary insured portfolio at december 31 , 2020 , which represented a 3.06 % default rate against our 399,429 total policies in-force . our default population has increased significantly since the outbreak of the pandemic as borrowers have faced increasing challenges related to covid-19 and chosen to access the forbearance program for federally backed loans codified under the cares act or other similar assistance programs made available by the gses and private lenders . at december 31 , 2020 , 19,464 or 4.9 % of the loans we insured in our primary portfolio were enrolled in a forbearance program , including 11,232 of the loans in our default population , 1,108 loans that had missed at least one payment , but not progressed into default status and 7,124 additional loans that were fully performing without any missed payments . as of january 31 , 2021 , our default population had decreased to 11,905 , representing a 2.9 % default rate and identified 17,820 loans in forbearance programs . the table below highlights default and forbearance activity in our primary portfolio as of the dates indicated . 58 replace_table_token_4_th ( 1 ) default rate is calculated as the number of loans in default divided by total polices in force ( 2 ) forbearance rate is calculated as the number of loans in forbearance divided by total polices in force . while we are encouraged by the decline in our forbearance and default populations , and the rising level of cure activity amongst covid impacted borrowers , the continued social and economic dislocation caused by the pandemic may contribute to an increase in our forbearance and default counts in future periods . we establish reserves for claims and allocated claim expenses when we are notified that a borrower is in default . the size of the reserve we establish for each defaulted loan ( and by extension our aggregate reserve and claims expense ) reflects our best estimate of the future claim payment to be made under each individual policy . our future claims exposure is a function of the number of delinquent loans that progress to claim payment ( which we refer to as frequency ) and the amount to be paid to settle such claims ( which we refer to as severity ) . our estimates of claims frequency and severity are not formulaic , rather they are broadly synthesized based on historical observed experience for similarly situated loans and assumptions about future macroeconomic fact ors . we generally observe that forbearance programs are an effective tool to bridge dislocated borrowers from a time of acute stress to a future date when they can resume timely payment of their mortgage obligations . the effectiveness of forbearance programs is enhanced by the availability of various repayment and loan modification options , which allow borrowers to amortize , or in certain instances fully defer the payments otherwise due during the forbearance period , over an extended length of time . in response to the onset of the covid-19 outbreak , the gses have introduced new repayment and loan modification options to further assist borrowers with their transition out of forbearance and back into performing status . our reserve setting process considers the beneficial impact of forbearance , foreclosure moratorium and other assistance programs available to defaulted borrowers . at december 31 , 2020 , we established lower reserves for defaults that we consider to be connected to the covid-19 outbreak given our expectation that forbearance , repayment and modification , and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs .
| the sequential growth in other revenues in 2019 and 2020 relates to increases in nmis ' outsourced loan review volume . amounts recognized in other revenues generally correspond with amounts incurred as service expenses for outsourced loan review activities in the same periods . expenses we recognize insurance claims and claim expenses in connection with the loss experience of our insured portfolio and incur other underwriting and operating expenses , including employee compensation and benefits , policy acquisition costs , and technology , professional services and facilities expenses , in connection with the development and operation of our business . we also incur service expenses in connection with nmis ' outsourced loan review activities . insurance claims and claim expenses were $ 59.2 million , $ 12.5 million and $ 5.5 million for the years ended december 31 , 2020 , 2019 and 2018 , respectively . insurance claims and claim expenses increased $ 46.7 million during the year ended december 31 , 2020 , primarily due to the outbreak of the covid pandemic and resulting increase in our default population , partially offset by the release of certain prior period reserves upon the cure of their related defaults . insurance claims and claim expenses increased $ 7.1 million during the year ended december 31 , 2019 , primarily due to an increase in our default population tied to the growth in the number of policies in force and aging of our earlier book years . underwriting and operating expenses were $ 131.6 million , $ 126.6 million and $ 117.0 million for the years ended december 31 , 2020 , 2019 and 2018 , respectively . the increase for the year ended december 31 , 2020 primarily relates to the recognition of previously deferred policy acquisition costs ( dac ) taken in connection with in-force portfolio run-off and an increase in issuance expenses incurred in connection with capital market reinsurance transaction activity , partially offset by reductions in travel and entertainment , and office administration expenses as a result of the covid-19 outbreak . the increase for the year ended december 31 ,
| 11,595 |
key factors that affect the company 's business and financial results include the following : the general economic climate ; the occupancy rates of the properties ; rental rates on new or renewed leases ; tenant improvement and leasing costs incurred to obtain and retain tenants ; the extent of early lease terminations ; the value of our office properties and the cash flow from the sale of such properties ; 40 operating expenses ; anticipated acquisition and development costs for office and multi-family rental properties and the revenues and earnings from these properties ; cost of capital ; and the extent of acquisitions , development and sales of real estate , including the execution of the company 's current strategic initiative . any negative effects of the above key factors could potentially cause a continued deterioration in the company 's revenue and or earnings . such negative effects could include : ( 1 ) failure to renew or execute new leases as current leases expire ; ( 2 ) failure to renew or execute new leases with rental terms at or above the terms of in-place leases ; and ( 3 ) tenant defaults . the company 's ability to renew or execute new leases as current leases expire or to execute new leases with rental terms at or above the terms of in-place leases may be affected by several factors such as : ( 1 ) the local economic climate , which may be adversely impacted by business layoffs or downsizing , industry slowdowns , changing demographics and other factors ; and ( 2 ) local real estate conditions , such as oversupply of the company 's product types or competition within the market . in addition , the covid-19 pandemic could potentially cause deterioration in the financial condition or liquidity of the company 's tenants , which could impair their ability to pay rents . a number of the company 's tenants have requested rent relief during this pandemic . the covid-19 pandemic could also potentially cause reduced demand for space at the company 's office properties and or units at its multi-family residential properties , parking facilities and hotel properties , which could have a negative impact on the company 's prospects for leasing current or additional space and or renewing leases with existing tenants . of the company 's core office markets , most continue to show signs of rental rate improvement , while the lease percentage has declined or stabilized . the percentage leased in the company 's stabilized core operating commercial properties included in its consolidated properties aggregating 7.9 million , 10.3 million and 14.1 million square feet at december 31 , 2020 , 2019 and 2018 , respectively , was 78.7 percent leased at december 31 , 2020 , as compared to 80.7 percent leased at december 31 , 2019 and 83.2 percent leased at december 31 , 2018 ( after adjusting for properties identified as non-core at the time ) . percentage leased includes all leases in effect as of the period end date , some of which have commencement dates in the future and leases that expire at the period end date . leases that expired as of december 31 , 2020 , 2019 and 2018 aggregate 145,404 , 31,982 and 10,108 square feet , respectively , or 1.8 , 0.3 and 0.1 percentage of the net rentable square footage , respectively . rental rates ( including escalations ) on the company 's core commercial space that was renewed ( based on first rents payable ) during the year ended december 31 , 2020 ( on 489,280 square feet of renewals ) increased an average of 7.9 percent compared to rates that were in effect under the prior leases , as compared to a 16.9 percent increase during 2019 ( on 229,429 square feet of renewals ) and a 21.7 percent increase in 2018 ( on 950,548 square feet of renewals ) . estimated lease costs for the renewed leases in 2020 averaged $ 8.61 per square foot per year for a weighted average lease term of 5.7 years , estimated lease costs for the renewed leases in 2019 averaged $ 4.34 per square foot per year for a weighted average lease term of 3.9 years and estimated lease costs for the renewed leases in 2018 averaged $ 3.46 per square foot per year for a weighted average lease term of 4.7 years . the company believes , although there can be no assurance , that vacancy rates at most of its commercial properties have begun to bottom as the majority of the known move-outs at its waterfront portfolio have already occurred . as of december 31 , 2020 , commercial leases which comprise approximately 9.7 and 5.2 percent of the company 's annualized base rent are scheduled to expire during the years ending december 31 , 2021 and 2022 , respectively . with the positive rental rate results the company has achieved in most of its markets recently , the company believes , although there can be no assurance , that rental rates on new leases will generally be , on average , not lower than rates currently being paid . if these recent leasing results do not prove to be sustaining in 2021 , the company may receive less revenue from the same space . during 2017 , moody 's downgraded its investment grade rating on the company 's senior unsecured debt to sub-investment grade and during 2018 , standard & poor 's lowered its investment grade rating on the company 's senior unsecured debt to sub-investment grade ( current ratings are b1 and b+ by moody 's and s & p , respectively ) . story_separator_special_tag amongst other things , such downgrade would have increased the interest rate on outstanding borrowings under the company 's current $ 600 million unsecured revolving credit facility ( which was amended in january 2017 ) from the london inter-bank offered rate ( “ libor ” ) plus 120 basis points to libor plus 155 basis points and the annual credit facility fee it pays would have increased from 25 to 30 basis points . additionally , any such downgrade would have increased the current interest rate on each of the company 's 2016 term loan and 2017 term loan from libor plus 140 basis points to libor plus 185 points . effective march 6 , 2018 , the company elected to utilize the leverage grid pricing available under the unsecured revolving credit facility and both unsecured term loans . this resulted in an interest rate of libor plus 130 basis points for the company 's unsecured revolving credit facility and 25 basis points for the facility fee and libor plus 155 basis points for both unsecured term loans at the company 's then total leverage ratio . in addition , the downgrade in its ratings to sub-investment grade could 41 result in higher interest rates on senior unsecured debt that the company may issue in the future as compared to issuing such debt with investment grade ratings . the remaining portion of this management 's discussion and analysis of financial condition and results of operations should help the reader understand our : recent transactions ; critical accounting policies and estimates ; results of operations for the year ended december 31 , 2020 as compared to the year ended december 31 , 2019 ; results of operations for the year ended december 31 , 2019 as compared to the year ended december 31 , 2018 ; and liquidity and capital resources . recent transactions properties commencing initial operations the following property commenced initial operations during the year ended december 31 , 2020 ( dollars in thousands ) : total in service property # of development date property location type apartment units costs incurred 03/01/20 emery at overlook ridge malden , ma multi-family 326 $ 103,993 totals 326 $ 103,993 consolidations on march 12 , 2020 , the company , acquired its equity partner 's 80 percent interest in port imperial north retail l.l.c . a ground floor retail space totaling 30,745 square feet located at port imperial , west new york , new jersey for $ 13.3 million in cash ( funded through borrowing under the company 's unsecured credit facility . ) the results of the transaction increased the company 's interest to 100 percent . upon the acquisition , the company consolidated the joint venture , a voting interest entity . as an acquisition of the remaining interests in the venture which owns the port imperial north retail l.l.c. , the company accounted for the transaction as an asset acquisition under a cost accumulation model , and as such no gain on change of control of interest was recognized in consolidation , resulting in total consolidated net assets of $ 15.0 million , which are allocated as follows : port imperial north retail l.l.c . land and leasehold interests $ 4,305 buildings and improvements and other assets , net 8,912 in-place lease values ( a ) 1,503 above/below market lease value , net ( a ) 313 net assets recorded upon consolidation $ 15,033 ( a ) in-place and below market lease values are being amortized over a weighted-average term of 7.5 years . real estate held for sale/discontinued operations/dispositions the company identified 16 office properties ( comprised of six disposal groups ) totaling 3.0 million square feet ( see note 7 : discontinued operations – to the financial statements ) , a retail pad leased to others and several developable land parcels as held for sale as of december 31 , 2020. the total estimated sales proceeds , net of expected selling costs , from the sales of all the remaining assets held for sale are expected to be approximately $ 743.5 million , however there can be no assurance of the amount and timing of any such sales proceeds . as a result of recent sales contract amendments and after considering the current market conditions as a result of the challenging economic climate with the current worldwide covid-19 pandemic the company determined that the carrying value of six of the remaining held for sale properties ( comprised of three disposal groups ) , and several land parcels held for sale was not expected to be recovered from estimated net sales proceeds , and accordingly , during the year ended december 31 , 2020 , recognized an unrealized held-for-sale loss allowance of $ 15.7 million for the properties ( $ 14 million of which are from discontinued operations ) and also recorded 42 land and other impairments of $ 9.5 million . as of december 31 , 2020 , the company determined that two developable land parcels located in parsippany , new jersey were no longer being held for sale . the properties had originally been classified as held for sale as of december 31 , 2019. the reclassified properties had an aggregate book value of $ 11.3 million . the company disposed of the following rental properties during the year ended december 31 , 2020 ( dollars in thousands ) : replace_table_token_13_th ( a ) the company recorded valuation allowances of $ 2.0 million on the held for sale property during the year ended december 31 , 2020 and of $ 16.7 million during the year ended december 31 , 2019 . ( b ) the company recorded valuation allowances of $ 21.6 million on the held for sale properties during the year ended december 31 , 2020 and of $ 32.5 million during the year ended december 31 , 2019 . ( c ) the company recorded a valuation allowance of $ 3.5 million on this property during the year ended december 31 , 2019 .
| percent , for 2020 as compared to 2019 , due primarily to a decrease in average same store percent leased from 93.9 to 89.4 percent at the multifamily residential portfolio in 2020 , as compared to 2019 , primarily as a result of the impacts from the covid-19 pandemic in 2020. parking income . parking income for the same-store properties decreased $ 6.7 million , or 30.5 percent for 2020 as compared to 2019 due primarily to a decrease in usage at the commercial properties , due to the covid-19 pandemic in 2020. hotel income . hotel income for the same-store properties decreased $ 3.1 million , or 31.8 percent , for 2020 as compared to 2019 due to the partial shutdown of hotel operations due to the covid-19 pandemic in 2020. other income . other income for the same-store properties increased $ 2.0 million , or 21.3 percent for 2020 as compared to 2019 due primarily to an increase in lease breakage fees for both , multi-family and commercial properties recognized in 2020 , as compared to 2019. real estate taxes . real estate taxes on the same-store properties increased $ 1.4 million , or 3.1 percent , for 2020 as compared to 2019 due primarily to a decrease in tax appeal proceeds received 2020 as compared to 2019. utilities . utilities for the same-store properties decreased $ 1.2 million , or 6.9 percent , for 2020 as compared to 2019 , due primarily to decreased usage in 2020 as compared to 2019 as a result of decreased occupancy . operating services . operating services for the same-store properties decreased $ 4.8 million , or 6.8 percent , for 2020 as compared to 2019 , due primarily to a decrease in property maintenance and other services expense in 2020 as compared to 2019. real estate services revenue . real estate services revenue ( primarily reimbursement of property personnel costs ) decreased $ 2.5 million , or 17.9 percent , for 2020 as compared to 2019 , due primarily to decreased third party development and property management activity in multi-family services in 2020
| 11,596 |
this study is being conducted under a u.s. food and drug administration , or fda , investigational new drug application , or ind , with uthealth as the study sponsor and is currently enrolling patients . in january of 2021 , uthealth announced that it had been awarded $ 5.1 million in funding from the u.s. department of defense , or dod , to expand this clinical trial at its facilities . auryxia ® ( ferric citrate ) is approved and marketed in the united states for two indications : ( 1 ) the control of serum phosphorus levels in adult patients with dd-ckd , or the hyperphosphatemia indication , and ( 2 ) the treatment of iron deficiency anemia , or ida , in adult patients with ndd-ckd , or the ida indication . ferric citrate is also approved and marketed in japan as an oral treatment for the improvement of hyperphosphatemia in patients with ckd , including dd-ckd and ndd-ckd , under the trade name riona ( ferric citrate hydrate ) . vadadustat top-line results from global phase 3 inno 2 vate program within dd-ckd adult patients the two inno 2 vate studies ( correction/conversion and conversion ) , which collectively enrolled 3,923 patients , evaluated the efficacy and safety of vadadustat versus darbepoetin alfa for the treatment of anemia due to ckd in dd-ckd adult patients . vadadustat achieved the primary and key secondary efficacy endpoint in each of the two inno 2 vate studies , demonstrating non-inferiority to darbepoetin alfa as measured by a mean change in hemoglobin , or hb , between baseline and the primary evaluation period ( weeks 24 to 36 ) and secondary evaluation period ( weeks 40 to 52 ) . vadadustat also achieved the primary safety endpoint of the inno 2 vate program , defined as non-inferiority of vadadustat versus darbepoetin alfa in time to first occurrence of mace across both inno 2 vate studies . primary and key secondary efficacy endpoint results vadadustat achieved each of the inno 2 vate studies ' primary efficacy endpoints of mean change in hb between baseline and the primary evaluation period compared to darbepoetin alfa , in dd-ckd adult patients , demonstrating non-inferiority to darbepoetin alfa based on using a non-inferiority margin of -0.75 g/dl . in inno 2 vate 's correction/conversion study of incident dialysis patients ( n=369 ) : story_separator_special_tag roman ' , sans-serif ; font-size:10pt ; font-style : italic ; font-weight:700 ; line-height:120 % ; padding-left:13.8pt '' > key secondary efficacy endpoint result : vadadustat sustained efficacy in the conversion study demonstrating non-inferiority to darbepoetin with a least square mean difference in hb of 0.00 g/dl ( 95 % ci : -0.10 , 0.09 ) . the mean ( sd ) hb level at week 40 to week 52 was 10.80 ( 1.04 ) g/dl in the vadadustat-treated patients compared to 10.79 ( 1.05 ) g/dl for darbepoetin alpha-treated patients . primary safety major adverse cardiovascular events ( mace ) endpoint result the pro 2 tect program ( correction and conversion studies ) ( n=3,471 ) : primary safety mace endpoint result : vadadustat did not meet the pro 2 tect program 's primary safety endpoint of non-inferiority for mace . the upper bound of the 95 % confidence interval of the hazard ratio ( hr ) was above the pre-specified ni margin of 1.25 for primary mace analysis ( hr 1.17 , 95 % ci : 1.01 , 1.36 ) . analysis of mace events conducted by akebia in the pro 2 tect program revealed that the greater number of mace events observed among vadadustat patients as compared to the active comparator was primarily related to an excess of non-cardiovascular death and death-of-unknown-cause in regions outside of the united states where significant differences in treatment patterns for ndd-ckd patients were observed . the pro 2 tect analysis plan was prospectively designed to analyze the effect of regional differences , most notably , well-known differences in hb treatment targets . within pro 2 tect , u.s. patients were treated to a target hb range of 10 to 11 g/dl and non-u.s. patients were treated to a target hb range of 10 to 12 g/dl . in october of 2020 , we presented a pre-specified regional analysis using age as a dichotomous variable , that showed vadadustat was not associated with a clinically meaningful increase in cardiovascular risk compared to darbepoetin alfa in u.s. patients treated to a target hb range of 10 to 11 g/dl , in an analysis of mace ( hr 1.06 , 95 % ci : 0.87 , 1.29 ) . in october 2020 , we announced that based on these analyses and the totality of the data from our phase 3 program , we plan to pursue regulatory approval in the united states for vadadustat for the treatment of anemia in adult ndd-ckd patients . however , a s vadadustat did not meet the pro 2 tect program 's primary safety endpoint , we are remaining cautious in our outlook for potential approval of vadadustat in adult ndd-ckd patients and we look forward to working with the fda in their review of these data . the incidence of treatment emergent adverse events during the correction study in the vadadustat-treated patients was 90.9 % , and 91.6 % in darbepoetin alfa-treated patients . during the study , the most common treatment emergent adverse events reported in vadadustat/darbepoetin alfa-treated patients were end-stage renal disease ( 34.7 % / 35.2 % ) , hypertension ( 17.7 % / 22.1. % ) , hyperkalemia ( 12.3. % / 15.6 % ) , urinary tract infection ( 12.9 % / 12.0 % ) , diarrhea ( 13.9 % / 10.0 % ) , peripheral oedema ( 12.5 % / 10.5 % ) , fall ( 9.6 % / 10 % ) and nausea ( 10 % / 8.2 % ) . serious treatment emergent adverse events were 65.3 % for vadadustat-treated patients and 64.5 % for darbepoetin alfa-treated patients . story_separator_special_tag the incidence of treatment emergent adverse events during the conversion study in vadadustat treated patients was 89.1 % and 87.7 % in darbepoetin alfa-treated patients . during the study , the most common treatment emergent adverse events reported in vadadustat/darbepoetin alfa-treated patients were end-stage renal disease ( 27.5 % / 28.4 % ) , hypertension ( 14.4 % / 14.8 % ) , urinary tract infection ( 12.2 % / 14.5 % ) , diarrhea ( 13.8. % / 8.8. % ) , peripheral oedema ( 9.9 % / 10.1 % ) and pneumonia ( 10.0 % / 9.7 % ) . serious treatment emergent adverse events were 58.5 % for vadadustat-treated patients and 56.6 % for darbepoetin alfa-treated patients . 107 regulatory and commercialization strategy based on t he strength of the inno 2 vate data , the additional analyses of data from pro 2 tect conducted by akebia and the totality of the data from our phase 3 program , following our october 2020 pre-nda meeting with the fda , we plan to proceed with the submission of an nda for vadadustat by the middle of the second quarter of 2021 for the treatment of anemia due to ckd in both dd-ckd and ndd-ckd adult patients . we are also working in close collaboration with otsuka pharmaceutical co. ltd. , to prepare a marketing authorization application , or maa , for vadadustat for the treatment of anemia due to ckd in both dd-ckd and ndd-ckd adult patients for submission to the european medicines agency , or ema , expected in 2021. however , a s vadadustat did not meet the pro 2 tect program 's primary safety endpoint , we are remaining cautious in our outlook for potential approval of vadadustat in ndd-ckd adult patients in the united states and europe . we are in the process of supporting mtpc 's commercial launch of vadadustat in japan , preparing for a potential commercial launch of vadadustat in the united states and supporting potential commercial launches of vadadustat in certain other markets . our ability to launch vadadustat in the united states is dependent on the successful filing and defense of an nda , and approval by the fda . we plan to commercialize vadadustat , subject to fda approval , in the united states with our well-established , nephrology-focused commercial organization , while leveraging our collaboration with otsuka and its u.s. nephrology commercial organization . we granted otsuka exclusive rights to commercialize vadadustat in europe , china and certain other markets , subject to marketing approvals . we granted mtpc exclusive rights to commercialize vadadustat in japan , where mtpc commenced commercial sales of vadadustat under the trade name , vafseo tm , in august 2020 , and in certain other countries in asia , subject to marketing approvals . in addition , we granted vifor ( international ) ltd. , or vifor pharma , an exclusive license to sell vadadustat to fkc and third party dialysis organizations , which combined manage up to approximately 60 % of the dialysis patients in the united states , which would be effective upon fda approval of vadadustat , the earlier of vadadustat 's reimbursement under a bundled reimbursement model or using the tdapa , and a milestone payment by vifor pharma . during the term of the license agreement , vifor pharma is not permitted to sell any hif product that competes with vadadustat in the united states to fkc or its affiliates or to any third party dialysis organization , and we may not directly supply vadadustat to fkc or any other affiliate of fresenius medical care north america , or fmcna , or any third party dialysis organization . for more information about our license , collaboration and strategic agreements relating to vadadustat , see part i , item 1. business – license , collaboration and other strategic agreements – vadadustat . we entered into a letter agreement on february 14 , 2020 , or the letter agreement , with vifor pharma , relating to vifor pharma 's agreement with a third party to purchase a priority review voucher , or the prv , issued by the fda subject to satisfaction of customary closing conditions , or the prv purchase . a prv entitles the holder to priority review of an nda , or a biologics license application , or bla , for a new drug , which reduces the target fda review time to six months after official acceptance of the submission , and could lead to expedited approval . pursuant to the letter agreement , we paid vifor pharma $ 10.0 million in connection with the closing of the prv purchase . vifor pharma is obligated to retain all rights to , and maintain the validity of , the prv until we and vifor pharma ( a ) enter into a definitive agreement setting forth the financial and other terms by which vifor pharma will assign the prv to us for use with our planned nda for vadadustat for the treatment of anemia due to ckd in both dd-ckd and ndd-ckd adult patients , or ( b ) make a mutual decision to sell the prv and share the proceeds based on certain terms . japan approval and launch in june 2020 , we announced the first regulatory approval of vadadustat for the treatment of anemia due to ckd in dd-ckd and ndd-ckd patients in japan . our collaboration partner , mtpc , commenced commercial sales of vadadustat in japan under the trade name , vafseo tm , in august 2020. the regulatory approval triggered a $ 15.0 million regulatory milestone payment from mtpc to akebia . study in covid-19-related indication in july 2020 , we announced the initiation of an investigator-sponsored clinical study by the university of texas health science center at houston , or uthealth , in houston , texas , evaluating the use of vadadustat as a potential therapy to prevent and lessen the severity of acute respiratory distress syndrome , or ards , a complication of severe acute respiratory syndrome coronavirus 2 ( sars-cov-2 ) , or covid-19 , infection .
| in the primary analysis of time to first mace event , vadadustat demonstrated non-inferiority to darbepoetin alfa using a non-inferiority margin of 1.25 prospectively agreed to by fda and a non-inferiority margin of 1.3 prospectively agreed to by ema . the inno 2 vate program ( correction/conversion and conversion studies ) of dialysis patients ( n=3,902 ) : vadadustat was non-inferior to darbepoetin alfa . the upper bound of the 95 % confidence interval ( ci ) of the hazard ratio ( hr ) was below the pre-specified non-inferiority margin of 1.25 for primary mace analysis ( hr 0.96 , 95 % ci : 0.83 , 1.11. ) . the incidence of treatment emergent adverse events during the correction/conversion study in vadadustat treated patients was 83.8 % and 85.5 % in darbepoetin alfa treated patients . during the study , the most common treatment emergent adverse events reported in vadadustat/darbepoetin alfa treated patients were hypertension ( 16.2 % / 12.9 % ) and diarrhea ( 10.1 % / 9.7 % ) . serious treatment emergent adverse events were lower in vadadustat treated patients at 49.7 % compared to 56.5 % for darbepoetin alfa treated patients . the incidence of treatment emergent adverse events during the conversion study in the vadadustat treated patients was 88.3 % , and 89.3 % in darbepoetin alfa treated patients . during the study , the most common treatment emergent adverse events reported in vadadustat/darbepoetin alfa treated patients were diarrhea ( 13.0 % / 10.1 % ) , pneumonia ( 11.0 % / 9.7 % ) , hypertension ( 10.6 % / 13.8 % ) , and hyperkalemia ( 9.0 % / 10.8 % ) . serious treatment emergent adverse events were slightly lower for vadadustat treated patients at 55.0 % and 58.3 % for darbepoetin alfa-treated patients . inno 2 vate results on key secondary safety endpoints showed that vadadustat also demonstrated non-inferiority to darbepoetin alfa in analyses of expanded mace , cardiovascular mace , cardiovascular mortality , and all-cause mortality . top-line results from global phase 3 pro 2 tect program within ndd-ckd adult patients the two pro 2 tect studies ( correction and conversion ) , which collectively enrolled 3,476 patients , evaluated the efficacy and safety of vadadustat for the treatment of anemia due to ckd in ndd-ckd adult patients . vadadustat achieved the primary and key secondary
| 11,597 |
our goal is to increase net restaurant growth through all avenues : domestic , international and nontraditional . domestic growth will focus on markets in which we have modest penetration . 21 balancing the use of cash we are focused on balancing the use of cash between reinvesting in our base of company restaurants , growing and strengthening the brand and returning cash to shareholders . during 2016 , cash capital expenditures were $ 34.0 million , comprised of $ 19.7 million in capital expenditures and restaurants acquisition costs of $ 14.3 million . the capital expenditures included approximately $ 6.4 million allocated towards the remodel of 27 company restaurants . the restaurant acquisition costs include $ 13.7 million for ten high-volume franchised restaurants and $ 0.6 million related to a franchised restaurant that was acquired during 2015. in november 2016 , as part of our previously authorized share repurchase programs , we entered into a variable term , capped accelerated share repurchase ( the “ 2016 asr ” ) agreement with mufg securities emea plc ( “ mufg ” ) , to repurchase an aggregate of $ 25 million of our common stock . pursuant to the terms of the 2016 asr agreement , we paid $ 25 million in cash , received approximately 1.5 million shares of our common stock ( which represents the minimum shares to be delivered based on the cap price ) and recorded $ 18.1 million of treasury stock related to these shares . the remaining balance of $ 6.9 million is included as additional paid-in capital in shareholders ' equity as of december 28 , 2016 as an equity forward contract . the total aggregate number of shares of our common stock repurchased pursuant to the asr agreement will be based generally on the average of the daily volume-weighted average prices of our common stock , less a fixed discount , over the term of the 2016 asr agreement , subject to a minimum number of shares . subsequent to the year ended december 28 , 2016 , we settled the 2016 asr agreement . see note 19 to our consolidated financial statements . during 2016 , including shares repurchased under the 2016 asr , we repurchased a total of 4.6 million shares for $ 51.8 million . in addition , we recorded 1.5 million shares and $ 13.1 million in treasury stock as a result of settling the 2015 asr . since initiating our share repurchase programs in november 2010 , we have repurchased a total of 35.8 million shares of our common stock for $ 265.9 million . as of december 28 , 2016 , there was $ 79.2 million remaining under the current repurchase program . factors impacting comparability for 2016 , 2015 and 2014 , the following items impacted the comparability of our results : company restaurant sales have increased from $ 334.7 million in 2014 to $ 367.3 million in 2016 , primarily as a result of the increase in same-store sales and acquisitions of restaurants from franchisees . royalty income , which is included as a component of franchise and license revenue , has increased from $ 90.8 million in 2014 to $ 98.4 million in 2016 , primarily as a result of the increase in same-store sales and a higher royalty rate . 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 restaurant 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 . when restaurants are sold and leased or subleased to franchisees , the occupancy costs related to these restaurants move from costs of company restaurant sales to costs of franchise and license revenue to match the related occupancy revenue . as leases or subleases with franchisees expire , franchise occupancy revenue and costs could decrease if franchisees enter into direct leases with landlords . at the end of 2016 , we had 294 franchise restaurants that are leased or subleased from denny 's . our fiscal year ends on the last wednesday in december . as a result , a fifty-third week is added to a fiscal year every five or six years . we had a 52 week year in 2016 and 2015 and a 53 week year in 2014 , which impacts the comparison of our financial information . we estimate that the additional 2014 operating week added approximately $ 8.3 million of company restaurant sales and $ 2.4 million of franchise and license revenue and resulted in approximately $ 0.6 million of additional general and administrative expenses , $ 3.6 million of additional operating income and $ 2.2 million of additional net income . 22 statements of income replace_table_token_9_th ( a ) costs of company restaurant sales percentages are as a percentage of company restaurant sales . costs of franchise and license revenue percentages are as a percentage of franchise and license revenue . all other percentages are as a percentage of total operating revenue . ( b ) equivalent units are calculated as the weighted average number of units outstanding during a defined time period . ( c ) same-store sales include sales from restaurants that were open the same period in the prior year . ( d ) prior year amounts have not been restated for 2016 comparable restaurants . 23 unit activity replace_table_token_10_th company restaurant operations company same-store sales increase d 1.1 % in 2016 and 6.5 % in 2015 compared with the respective prior year . story_separator_special_tag company restaurant sales for 2016 increased $ 14.2 million , or 4.0 % , primarily resulting from the increase in same-store sales and a 4 equivalent unit increase in company restaurants . company restaurant sales for 2015 increased $ 18.4 million , or 5.5 % , primarily resulting from the increase in same-store sales and from the november 2014 reopening of our highest volume restaurant in las vegas , nevada . total costs of company restaurant sales as a percentage of company restaurant sales were 82.2 % in 2016 , 83.4 % in 2015 and 86.3 % in 2014 . product costs were 24.6 % in 2016 , 25.4 % in 2015 and 25.9 % in 2014 . the decrease in 2016 was primarily due to lower commodity costs . the decrease in 2015 was primarily due to the favorable impact of product mix and the leveraging effect of higher sales , partially offset by the increased cost of eggs . payroll and benefits were 38.9 % in 2016 , 38.7 % in 2015 and 39.8 % in 2014 . the increase in 2016 was primarily due to a 0.8 percentage point increase in labor costs , a 0.3 percentage point increase in group insurance and a 0.2 percentage point increase in workers ' compensation costs , partially offset by a 1.1 percentage point decrease in incentive compensation costs . contributing to the increase in labor costs was the impact of the california paid sick leave law , which became effective in july 2015. the decrease in 2015 was primarily due to a 1.0 percentage point decrease in labor costs , a 0.7 percentage point decrease in workers ' compensation costs and a 0.2 percentage point decrease in group insurance , partially offset by a 0.8 percentage point increase in incentive compensation costs . occupancy costs were 5.3 % in 2016 , 5.8 % in 2015 and 6.2 % in 2014 . the 2016 decrease is primarily related to a 0.3 percentage point decrease in general liability costs and a 0.2 percentage point decrease in rent and property taxes due to an increase in capital leases during the year . the 2015 decrease is primarily related to a 0.4 percentage point decrease in general liability costs . 24 other operating expenses were comprised of the following amounts and percentages of company restaurant sales : replace_table_token_11_th franchise operations franchise and license revenue and costs of franchise and license revenue were comprised of the following amounts and percentages of franchise and license revenue for the periods indicated : replace_table_token_12_th royalties increase d by $ 3.7 million , or 3.9 % , in 2016 primarily resulting from a 18 equivalent unit increase in franchised and licensed restaurants , a 0.8 % increase in domestic same-store sales and a higher average royalty rate as compared to 2015 . royalties increased by $ 3.9 million , or 4.3 % , in 2015 primarily resulting from a 5.7 % increase in domestic same-store sales and a higher average royalty rate as compared to 2014 . the higher average royalty rates for both periods resulted as certain restaurants transitioned to a higher rate structure . initial fees increase d by $ 0.2 million , or 9.6 % , in 2016 as a higher number of restaurants were opened by franchisees and sold to franchisees during the current year period . initial fees increased by $ 0.6 million , or 30.9 % , in 2015 as a higher number of restaurants were opened by franchisees and a higher number of successor franchise agreements were signed compared to the prior year period . occupancy revenue decrease d by $ 2.5 million , or 6.1 % , in 2016 and by $ 3.9 million , or 8.7 % , in 2015 primarily resulting from lease expirations . occupancy costs decrease d by $ 2.4 million , or 7.7 % , in 2016 and by $ 2.7 million , or 8.2 % , in 2015 primarily resulting from lease expirations . other direct costs were essentially flat in 2016 and increased by $ 1.3 million , or 11.2 % , in 2015 due to increased franchise administrative costs . as a result , costs of franchise and license revenue decrease d by $ 2.5 million , or 5.9 % , in 2016 and by $ 1.4 million , or 3.2 % , in 2015 . 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 . 25 general and administrative expenses are comprised of the following : replace_table_token_13_th general and administrative expenses increase d by $ 1.4 million in 2016 . the increase in share-based compensation is primarily the result of forfeitures during 2015. the increase in other general and administrative expenses is comprised of $ 2.3 million in investments in personnel and technology and $ 0.8 million related to market valuation changes in our deferred compensation plan liabilities , partially offset by a $ 2.7 million decrease in incentive compensation . general and administrative expenses increased by $ 7.7 million in 2015 primarily resulting from increases of $ 3.2 million in incentive compensation , $ 1.9 million in payroll and benefits and $ 0.8 million in share-based compensation . depreciation and amortization is comprised of the following : replace_table_token_14_th the increase in depreciation and amortization expense is primarily the result of our investments in company unit remodels during the past two years . operating ( gains ) , losses and other charges , net are comprised of the following : replace_table_token_15_th 26 the pre-tax pension settlement loss of $ 24.3 million related to the completion of the pension plan liquidation during the year ended december 28 , 2016 . see note 11 to our consolidated financial statements for details on the pension plan liquidation . restructuring charges and exit costs were comprised of the following : replace_table_token_16_th impairment charges for 2016 and 2015 resulted primarily from the impairment of restaurants identified as assets held for sale .
| cash flows used in financing activities were $ 37.6 million for the year ended december 28 , 2016 , which included stock repurchases of $ 51.6 million and the purchase of a $ 6.9 million equity forward contract related to the 2016 asr agreement , partially offset by net long-term debt borrowings of $ 20.3 million . our working capital deficit was $ 57.5 million at december 28 , 2016 compared with $ 65.1 million at december 30 , 2015 . the decrease in working capital deficit is primarily related to the 2016 funding of our pension liability and the timing of payments impacting payable balances . we are able to operate with a substantial working capital deficit because ( 1 ) restaurant operations and most food service operations are conducted primarily on a cash ( and cash equivalent ) basis with a low level of accounts receivable , ( 2 ) rapid turnover allows a limited investment in inventories and ( 3 ) accounts payable for food , beverages and supplies usually become due after the receipt of cash from the related sales . credit facility as of december 28 , 2016 , we had outstanding revolver loans of $ 218.5 million and outstanding letters of credit under the senior secured revolver of $ 22.4 million . these balances resulted in availability of $ 84.1 million under the credit facility . prior to considering the impact of our interest rate swaps , described below , the weighted-average interest rate on outstanding revolver loans was 2.45 % and 1.76 % as of december 28 , 2016 and december 30 , 2015 , respectively . taking into consideration the interest rate swaps , the weighted-average interest rate of outstanding revolver loans was 2.74 % and 2.31 % as of december 28 , 2016 and december 30 , 2015 , respectively . a commitment fee of 0.25 % is paid on the unused portion of the revolving credit facility . borrowings under the credit facility bear a tiered interest rate , which is based on the company 's consolidated leverage ratio and was set at libor plus 175 basis points as of december 28 , 2016 . the maturity date for the
| 11,598 |
21 story_separator_special_tag sales resulted from increased activity on several edc programs and from new edc programs awarded during the year . for fiscal 2013 and 2012 , the company recognized revenue of $ 4.8 million and $ 2.4 million , respectively , related to certain contracts for which , at the time of recognition , either zero margins are expected to be earned or a zero margin approach to applying the percentage of completion method is used in accordance with the guidance of financial accounting standards board ( fasb ) accounting standards codification ( asc ) topic 605-35 , construction-type and production-type contracts ( asc topic 605-35 ) . cost of sales . cost of sales increased $ 4.9 million , or 34.7 % , to $ 18.9 million , or 60.0 % of net sales , for fiscal 2013 from $ 14.0 million , or 57.2 % of net sales , for fiscal 2012. the increase in cost of sales resulted primarily from the change in sales mix and the increase in product sales volume in fiscal 2013 as compared to fiscal 2012. in addition , edc margins include the negative impact of net cumulative catch-up adjustments of $ 444,000 and $ 8,000 resulting from changes in estimated cost to complete on certain edc programs for fiscal 2013 and 2012 , respectively . an increased proportion of higher margin revenues generated from product sales was offset by the impact of an increase in zero margin or negative margin edc revenues resulting in a lower gross profit percentage of 40.0 % for the year ended september 30 , 2013 compared to 42.8 % for the year ended september 30 , 2012. research and development . r & d expense decreased $ 0.1 million , or 4.3 % , to $ 2.6 million , or 8.2 % of net sales , for fiscal 2013 , from $ 2.7 million , or 11.0 % of net sales , for fiscal 2012. the decrease in r & d expense for the year ended september 30 , 2013 resulted from an increase in edc revenues which required the company to allocate more engineering resources to support new edc programs compared to the prior fiscal year . selling , general , and administrative . selling , general and administrative expenses increased $ 0.7 million , or 9.7 % , to $ 8.1 million , or 25.7 % of net sales , for fiscal 2013 from $ 7.4 million or 30.1 % of net sales , for fiscal 2012. the increase in selling , general , and administrative expense for the year ended september 30 , 2013 was caused by the non-recurring expense of $ 657,000 recorded for a previously disclosed legal matter . ( see note 14 contingencies in notes to consolidated financial statements attached ) . the 23 decrease as a percentage of net sales for the year ended september 30 , 2013 , compared to the prior year ended september 30 , 2012 , is attributable primarily to the increase in net sales . interest income , net . net interest income decreased by $ 59,000 to $ 41,000 , or 0.1 % of net sales , for fiscal 2013 from $ 100,000 , or 0.4 % of net sales , for fiscal 2012. the decrease in interest income was primarily the result of lower cash balances in the last nine months compared to the same prior year period as a result of the special cash dividend paid to shareholders in late december 2012. other income . other miscellaneous income decreased marginally by $ 27,000 in fiscal 2013 compared to fiscal 2012. income taxes . the income tax expense for fiscal year ended september 30 , 2013 was $ 0.1 million compared to an income tax benefit of $ 2.4 million for the fiscal year ended september 30 , 2012. the tax expense for the fiscal year ended september 30 , 2013 was attributable to the pretax income offset in part by federal research and development tax credits ( federal r & d tax credit ) . on january 1 , 2013 , congress enacted the american taxpayer relief act of 2012 which retroactively reinstated and extended the federal r & d tax credit from january 1 , 2012 to december 31 , 2013. the 2013 fiscal year income tax provision reflects the benefit of the retroactive application of the federal r & d tax credit for nine months from the 2012 fiscal year plus a full year benefit for the current fiscal year in accordance with fasb asc topic 740 income taxes ( asc topic 740 ) . the effective tax rate for the year ended september 30 , 2013 was 6.0 % . the effective tax rate differs from the statutory rate for the year ended september 30 , 2013 primarily because of the favorable impact of the federal r & d tax credit for the fiscal year discussed above . the effective tax benefit rate for the year ended september 30 , 2012 was ( 411.9 % ) . the effective tax benefit rate differs from the statutory rate for the year ended september 30 , 2012 primarily because of the reversal of valuation allowances of $ 2.4 million related to federal net deferred tax assets in accordance with asc topic 740 , resulting from the recent history of income before income taxes , together with projections of profitability in future years . the current balance of the deferred income tax valuation allowance relates principally to net operating losses ( nol ) of certain state taxing jurisdictions . the company believes that its estimate of future taxable income is inherently uncertain , and if its current or future operations generate losses , further adjustments to the valuation allowance are possible . there is currently no assurance of such future income before income taxes . net income . as a result of the factors described above , the company 's net income for fiscal 2013 was $ 1.9 million compared to net income of $ 3.0 million for fiscal 2012. story_separator_special_tag net income for fiscal 2012 includes the tax benefit of $ 2.4 million related to the reversal of valuation allowances related to federal net deferred tax assets discussed above . on a fully diluted basis , the net income per share was $ 0.11 for fiscal 2013 compared to $ 0.18 for fiscal 2012 . 24 liquidity and capital resources the following table highlights key financial measurements of the company : replace_table_token_7_th replace_table_token_8_th ( 1 ) excludes deferred revenue ( 2 ) calculated as : the sum of cash and cash equivalents plus accounts receivable , net , divided by current liabilities ( 3 ) calculated as : current assets divided by current liabilities the company 's principal source of liquidity has been cash flows from current year operations and cash accumulated from prior years ' operations . cash is used principally to finance inventory , accounts receivable , unbilled receivables , and payroll . operating activities the company used $ 0.7 million of cash in operating activities during fiscal 2014 compared to a $ 2.2 million use of cash in fiscal 2013. the cash used in operating activities for the year ended september 30 , 2014 resulted primarily from an increase in net unbilled receivables of $ 0.9 million , inventory of $ 1.3 million and deferred income taxes of $ 0.6 million , partially offset by cash provided from increase in accrued expenses of $ 0.6 million , share-based compensation of $ 0.6 million and depreciation and amortization of $ 0.6 million . unbilled receivables represent principally sales recorded under the percentage-of-completion method of accounting that have not been billed to customers in accordance with applicable contract terms on engineering development projects . the increases in both unbilled receivables and inventory reflect increased sales in the engineering development contract and product sales in fiscal 2014. the company used $ 2.2 million of cash in operating activities during fiscal 2013 compared to operating activities providing cash of $ 1.4 million during fiscal 2012. the cash used in operating activities for the year ended september 30 , 2013 resulted primarily from an increase in unbilled receivables of $ 4.9 million , partially offset by cash provided from increases in accounts payable and accrued expenses of $ 2.0 million . the company expects to recover the cash invested in funding the edc programs from customers as it completes project milestones . during fiscal 2012 , the company generated $ 1.4 million in cash from operating activities . cash generated from operations was attributable primarily to increases in accounts payable , accrued expenses and deferred revenues resulting from advance billings to customers as scheduled by the respective edc programs , offset partially by increases in inventory and unbilled receivables , which funded materials , inventory and third party service providers to fulfill the company 's obligations under the edc programs . 25 investing activities cash used in investing activities was $ 0.7 million , $ 0.6 million and $ 0.2 million for fiscal years 2014 , 2013 and 2012 respectively , and consisted of spending for production equipment and laboratory test equipment . the company plans to continue investing in capital equipment to support engineering development efforts and operations . financing activities cash provided by financing activities was $ 0.3 million for fiscal year 2014 and consisted of the proceeds from the exercise of stock options by employees . on december 7 , 2012 , the company 's board of directors declared a special cash dividend in the amount of $ 1.50 per share which was paid to shareholders on december 27 , 2012. the aggregate amount of the dividend payment was approximately $ 25 million . for the fiscal year ended september 30 , 2013 , the company received $ 1.2 million from the exercise of options to acquire shares of common stock . the company used $ 696 to purchase 175 shares of the company 's common stock under the share repurchase program on the first day of fiscal 2013. cash used in financing activities was $ 0.8 million for fiscal year 2012 and was used primarily for the repurchase of 211,722 shares of the company 's common stock . summary future capital requirements depend upon numerous factors , including market acceptance of the company 's products , the timing and rate of expansion of business , acquisitions , joint ventures , and other factors . is & s has experienced increases in expenditures since its inception and anticipates that expenditures will return to levels experienced prior to fiscal 2014 in the foreseeable future . the company believes that its cash and cash equivalents will provide sufficient capital to fund operations for at least the next twelve months . further , is & s may need to develop and introduce new or enhanced products , to respond to competitive pressures , to invest in or acquire businesses or technologies , or to respond to unanticipated requirements or developments . if additional funds are raised through the issuance of equity securities , dilution to existing shareholders may result . if insufficient funds are available , the company may not be able to introduce new products or to compete effectively . contractual obligations the company 's contractual obligations as of september 30 , 2014 mature as follows : replace_table_token_9_th ( 1 ) a purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on the company and that specifies all significant terms , including fixed or minimum quantities to be purchased ; fixed , minimum or variable price provisions ; and the approximate timing of the transaction . these amounts are primarily comprised of open purchase order commitments entered in the ordinary course of business with vendors and subcontractors pertaining to fulfillment of the company 's current order backlog . off-balance sheet arrangements the company has no off-balance sheet arrangements .
| 22 research and development . r & d expense was $ 2.6 million for fiscal 2014 and fiscal 2013. r & d expense declined to 5.9 % of net sales in fiscal 2014 compared to 8.2 % in fiscal 2013 reflecting the increase in fiscal 2014 net sales . selling , general , and administrative . selling , general and administrative expenses increased $ 3.0 million , or 36.9 % , to $ 11.1 million or 25.2 % , of net sales for fiscal 2014 from $ 8.1 million or 25.7 % of net sales , for fiscal 2013. the increase in selling , general and administrative expenses for the year ended september 30 , 2014 reflects the bad debt expense of $ 3.7 million related to the delta contract , ( see item 3. legal proceedings . ) , partially offset by the expense of $ 657,000 recorded in the year ended september 30 , 2013 related to a previously disclosed legal matter . ( see the description of the daghigh matter in note 14-contingencies in notes to consolidated financial statements attached ) . interest income , net . net interest income decreased by $ 19,000 to $ 22,000 for fiscal 2014 from $ 41,000 for fiscal 2013. the decrease in interest was primarily the result of lower cash balances throughout the year ended september 30 , 2014 versus the year ended september 30 , 2013. a special cash dividend of $ 25 million was paid to shareholders in late december 2012. other income . other miscellaneous income remained unchanged in fiscal 2014 compared to fiscal 2013. income taxes . the income tax benefit for fiscal year ended september 30 , 2014 was $ 0.3 million compared to an income tax expense of $ 0.1 million or for the fiscal year ended september 30 , 2013. the tax benefit for the fiscal year ended september 30 , 2014 resulted from a pretax loss of $ 0.1 million and the favorable impact of the
| 11,599 |
as of the end of december 2014 , aggregate search traffic had increased by 70 % , with mobile traffic growing over 150 % , compared to the end of 2013. in the fourth quarter of 2014 , aggregate paid clicks and cost-per-click continued to grow , which improved mobile monetization . for our online games business conducted by changyou , tlbb , a pc mmog which we developed and currently operate in china , continues to account for a majority of our online game revenues . our two primary web games , wartune and ddtank , have entered into a mature phase and their revenues are trending down . our recently launched mobile game , tlbb 3d , was well received initially , but may become less popular among mobile game players over time . for the three months ended december 31 , 2014 , the online games that we operate had approximately 25 million total average monthly active accounts and approximately 3.4 million total average monthly active paying accounts . to reach more user communities and conduct cross-promotions of its games and services , changyou has invested heavily in the development and marketing of its platform channel business . such investment has led to a decline in changyou 's profitability . in november 2014 , mr. tao wang resigned as changyou 's chief executive officer . changyou 's board of directors appointed ms. carol yu , president and chief financial officer of sohu.com inc. , and mr. dewen chen , formerly changyou 's president , to be co-chief executive officers . ms. yu maintains her position as president and chief financial officer of sohu in addition to her new role with changyou . critical accounting policies and management estimates our discussion and analysis of our financial condition and results of operations relates to our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america ( 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 , costs and expenses , and related disclosures . on an on-going basis , we evaluate our estimates 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 . identified below are the accounting policies that reflect our more significant estimates and judgments , and those that we believe are the most critical to fully understanding and evaluating our consolidated financial statements . basis of consolidation our consolidated financial statements include the accounts of sohu.com inc. and its direct and indirect wholly-owned and majority-owned subsidiaries and consolidated vies . all intercompany transactions are eliminated . vie consolidation our vies are wholly or partially owned by certain of our employees as nominee shareholders . for our consolidated vies , management made evaluations of the relationships between us and our vies and the economic benefit flow of contractual arrangements with the vies . in connection with such evaluation , management also took into account the fact that , as a result of such contractual arrangements , we control the shareholders ' voting interests in these vies . as a result of such evaluation , management concluded that we are the primary beneficiary of our consolidated vies . our group has three vies that are not consolidated , since we are not the primary beneficiary . 94 noncontrolling interest recognition noncontrolling interests are recognized to reflect the portion of the equity of majority-owned subsidiaries and vies which is not attributable , directly or indirectly , to the controlling shareholder . currently , the noncontrolling interests in our consolidated financial statements primarily consist of noncontrolling interests for sogou and changyou . noncontrolling interest for sogou as sohu controls the election of the board of directors of sogou , sohu is sogou 's controlling shareholder . accordingly , we consolidate sogou in the sohu group 's consolidated financial statements , and recognize noncontrolling interest reflecting economic interests in sogou held by shareholders other than sohu . to reflect the economic interest in sogou held by shareholders other than sohu ( the sogou noncontrolling shareholders ) , sogou 's net income / ( loss ) attributable to the sogou noncontrolling shareholders is recorded as noncontrolling interest in the sohu group 's consolidated statements of comprehensive income . sogou 's cumulative results of operations attributable to the sogou noncontrolling shareholders , along with changes in shareholders ' equity / ( deficit ) and adjustment for share-based compensation expense in relation to those share-based awards which are unvested and vested but not yet settled and the sogou noncontrolling shareholders ' investments in sogou preferred shares and ordinary shares are accounted for as a noncontrolling interest classified as permanent equity in the sohu group 's consolidated balance sheets , as sohu has the right to reject a redemption requested by the noncontrolling interest . these treatments are based on the terms governing investment , and on the terms of the classes of sogou shares held , by the noncontrolling shareholders in sogou . by virtue of these terms , sogou 's losses have been and will be allocated in the following order : ( i ) net losses were allocated to holders of sogou class a ordinary shares and the holder of sogou class b ordinary shares until their basis in sogou decreased to zero ; ( ii ) additional net losses were allocated to holders of sogou series a preferred shares until their basis in sogou decreased to zero ; ( iii ) additional net losses will be allocated to the holder of sogou series b preferred shares until its basis in sogou decreases to zero ; and ( iv ) further net losses will be allocated between sohu and noncontrolling shareholders based on their story_separator_special_tag shareholding percentage in sogou . net income from sogou has been , and future net income from sogou will be , allocated in the following order : ( i ) net income will be allocated between sohu and noncontrolling shareholders based on their shareholding percentage in sogou until their basis in sogou increases to zero ; ( ii ) additional net income will be allocated to the holder of sogou series b preferred shares to bring its basis back ; ( iii ) additional net income will be allocated to holders of sogou series a preferred shares to bring their basis back ; ( iv ) further net income will be allocated to holders of sogou class a ordinary shares and the holder of sogou class b ordinary shares to bring their basis back ; and ( v ) further net income will be allocated between sohu and noncontrolling shareholders based on their shareholding percentage in sogou . noncontrolling interest for changyou as of the date of this report , we held approximately 68 % of the combined total of changyou 's outstanding ordinary shares , and controlled approximately 95.4 % of the total voting power in changyou . as sohu is changyou 's controlling shareholder , we consolidate changyou in our consolidated financial statements , but recognize noncontrolling interest reflecting the economic interest in changyou held by shareholders other than sohu . to reflect the economic interest in changyou held by shareholders other than sohu ( changyou noncontrolling shareholders ) , changyou 's net income / ( loss ) attributable to the changyou noncontrolling shareholders is recorded as noncontrolling interest in sohu 's consolidated statements of comprehensive income , based on their share of the economic interest in changyou . changyou 's cumulative results of operations attributable to the changyou noncontrolling shareholders , along with changes in shareholders ' equity , adjustment for share-based compensation expense in relation to those share-based awards which are unvested and vested but not yet settled and adjustment for changes in sohu 's ownership in changyou , are recorded as noncontrolling interest in our consolidated balance sheets . 95 segment reporting our group 's segments are business units that offer different services and are reviewed separately by the codm , or the decision making group , in deciding how to allocate resources and in assessing performance . the codm is sohu.com inc. 's chief executive officer . revenue recognition we recognize revenue when persuasive evidence of an arrangement exists , delivery has occurred , the sales price is fixed or determinable , and collectability is reasonably assured . the recognition of revenues involves certain management judgments . the amount and timing of our revenues could be materially different for any period if management made different judgments or utilized different estimates . barter trade transactions in which physical goods or services ( other than advertising services ) are received in exchange for advertising services are recorded based on the fair values of the goods and services received . for online advertising-for-online advertising barter transactions , no revenue or expense is recognized because the fair value of neither the advertising surrendered nor the advertising received is determinable . online advertising revenues online advertising revenues include revenues from brand advertising services as well as search and web directory services . we recognize revenue for the amount of fees we receive from our advertisers , after deducting agent rebates and net of value-added tax ( vat ) and related surcharges . brand advertising revenues business model through pcs and mobile devices , we provide advertisement placements to our advertisers on different website channels and in different formats , which include banners , links , logos , buttons , full screen , pre-roll , mid-roll , post-roll video screens , and pause video screens , as well as loading page ads and news feed ads . currently we have three main types of pricing models , consisting of the fixed price model , the cost per impression ( cpm ) model , and the e-commerce model . fixed price model under the fixed price model , a contract is signed to establish a fixed price for the advertising services to be provided . cpm model under the cpm model , the unit price for each qualifying display is fixed , but there is no overall fixed price for the advertising services stated in the contract with the advertiser . a qualifying display is defined as the appearance of an advertisement , where the advertisement meets criteria specified in the contract . advertising fees are charged to the advertisers based on the unit prices and the number of qualifying displays . e-commerce model under the e-commerce model , focus sells membership cards which allow potential home buyers to purchase specified properties from real estate developers at a discount greater than the price that focus charges for the card . membership fees are refundable until the potential home buyer uses the discounts to purchase properties . focus recognizes such revenues upon obtaining confirmation that the membership card has been redeemed to purchase a property . revenue recognition for brand advertising revenue recognition , prior to entering into contracts , we make a credit assessment of the advertiser . for contracts for which collectability is determined to be reasonably assured , we recognize revenue when all revenue recognition criteria are met . in other cases , we only recognize revenue when the cash is received and all other revenue recognition criteria are met . 96 in accordance with asu no . 2009-13 , we treat advertising contracts with multiple deliverable elements as separate units of accounting for revenue recognition purposes and to recognize revenue on a periodic basis during the contract when each deliverable service is provided . since the contract price is for all deliverables , we allocate the arrangement consideration to all deliverables at the inception of the arrangement on the basis of their relative selling prices .
| increase in sohu video revenues : revenues from sohu video were $ 175.8 million for 2014 , compared to $ 109.3 million and $ 48.6 million , respectively , for 2013 and 2012 , representing year-on-year growth rates of 61 % and 125 % , respectively , for 2014 and 2013. the increase was driven by our strategy of providing high-quality and differentiated content and increasing the base of daily unique visitors and daily video views , which in turn resulted in higher revenues and also attracted larger numbers of advertisers . for the month of december 2014 compared to the month of december 2013 , the average daily unique visitors and average daily video views for sohu video increased 99 % and 143 % , respectively . for the month of december 2013 compared to the month of december 2012 , the average daily unique visitors and average daily video views for sohu video increased 67 % and 87 % , respectively . the pricing for online video has generally been stable . the number of advertisers on sohu video sites were 318 , 257 and 133 , respectively , as of the end of 2014 , 2013 and 2012 . 109 increase in focus revenues : revenues from focus were $ 108.8 million for 2014 , compared to $ 87.1 million and $ 46.6 million , respectively , for 2013 and 2012 , representing year-on-year growth rates of 25 % and 87 % , respectively , for 2014 and 2013. this increase was mainly driven by our subscription membership services offered to prospective purchasers of real estate as a result of the expansion of the focus business through our establishment of more partnerships with property developers . revenues from these subscription membership services were $ 44.6 million for 2014 , compared to $ 29.5 million and $ 2.4 million , respectively , for 2013 and 2012. the number of developers with which we had cooperation arrangements was 808 , 375 and 40 , respectively , as of the end of 2014 , 2013 and 2012. the number of paying subscribers for the membership services was 79,403 , 38,423
| 11,600 |
we believe that our ability to increase our user base is an indicator of our market penetration and growth of our business as we continue to expand and innovate our arlo platform . we define our registered users at the end of a particular period as the number of unique registered accounts on the arlo app as of the end of such particular period . the number of registered users does not necessarily reflect the number of end-users on the arlo platform , as one registered account may be used by multiple people . paid subscribers . paid subscribers worldwide measured as subscribers to any paid service subscription plan , excluding prepaid service subscribers . devices shipped . devices shipped represents the number of arlo cameras , lights , and doorbells that are shipped to our customers during a period . devices shipped does not include shipments of arlo accessories and arlo base stations , nor does it take into account returns of arlo cameras , lights , and doorbells . the growth rate of our revenue is not necessarily correlated with our growth rate of devices shipped , as our revenue is affected by a number of other variables , including but not limited to returns from customers , end-user customer rebates and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance for revenue recognition , sales of accessories , and premium services , the types of arlo products sold during the relevant period and the introduction of new product offerings that have different u.s. manufacturer 's suggested retail prices ( “ msrps ” ) . service revenue . service revenue represents revenue recognized relating to prepaid services and paid service subscriptions . our prepaid services pertain to devices which are sold with our arlo prepaid services offering , providing users with the ability to store and access data for up to five cameras for a rolling seven-day period . our paid subscription services relate to sales of subscription plans to our registered users . 53 story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > revenue our gross revenue consists primarily of sales of devices , and to a much lesser extent , prepaid and paid subscription service revenue . we generally recognize revenue from product sales at the time the product is shipped . our prepaid services primarily pertain to devices which are sold with our arlo prepaid services offering , providing users with the ability to store and access data for up to five cameras for a rolling seven-day period . upon device shipment , we attribute a portion of the sales price to the prepaid service , deferring this revenue at the outset and subsequently recognizing it ratably over the estimated useful life of the device . our paid subscription services relate to sales of subscription plans to our registered users . our revenue consists of gross revenue , less end-user customer rebates and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance for revenue recognition , allowances for estimated sales returns , price protection , and net changes in deferred revenue . a significant portion of our marketing expenditure is with customers and is deemed to be a reduction of revenue under authoritative guidance for revenue recognition . our revenue can vary based on a number of factors , including changes in average selling prices , end-user customer rebates and other channel sales incentives , uncertainties surrounding demand for our products and allowances for estimated sales returns , including future pricing and or potential discounts as a result of competition or in response to fluctuations of the u.s. dollar in our international markets , and related production level variances ; changes in technology ; and market adoption of our current and future paid subscription service offerings . we continue to experience user demand across all regions for our arlo products . we believe this demand will lead to an increase in absolute dollars in prepaid and paid subscription service revenues as our number of registered users continues to grow . furthermore , we expect that as we introduce more features in our subscription services , the rate of adoption of our paid subscription services will increase , which we expect to increase revenue . while we expect prepaid and paid subscription service revenue to grow , we anticipate revenue from device sales will continue to generate the majority of our revenue for the foreseeable future . cost of revenue cost of revenue consists of both product costs and costs of service . product costs primarily consist of : the cost of finished products from our third-party manufacturers ; overhead costs , including purchasing , product planning , inventory control , warehousing and distribution logistics , third-party software licensing fees , inbound freight , warranty costs associated with returned goods , write-downs for excess and obsolete inventory , royalties to third parties ; and amortization expense of certain acquired intangibles . cost of service consists of costs attributable to the provision and maintenance of our cloud-based platform , including personnel , storage , security , and computing . our cost of revenue as a percentage of revenue can vary based upon a number of factors , including those that may affect our revenue set forth above and factors that may affect our cost of revenue , including , without limitation : product mix , sales channel mix , registered user acceptance of paid subscription service offerings , fluctuation in foreign exchange rates and changes in our cost of goods sold due to fluctuations in prices paid for components , net of vendor rebates , cloud platform costs , warranty and overhead costs , inbound freight and duty product conversion costs , charges for excess or obsolete 55 inventory , and amortization of acquired intangibles . we outsource our manufacturing , warehousing , and distribution logistics . we also outsource certain components of the required infrastructure to support our cloud-based back-end it infrastructure . story_separator_special_tag we believe this outsourcing strategy allows us to better manage our product and services costs and gross margin . we expect that revenue derived from paid subscription service plans will increase as a percentage of our revenue in the future , which may have a positive impact on our gross margin . from time to time , however , we may experience fluctuations in our gross margin as a result of the factors discussed above . research and development research and development expense consists primarily of personnel-related expense , safety , security , regulatory testing , other consulting fees , and it and facility overhead . we recognize research and development expense as it is incurred . we have invested in and expanded our research and development organization to enhance our ability to introduce innovative products and services . we believe that innovation and technological leadership are critical to our future success , and we are committed to continuing a significant level of research and development to develop new technologies , products , and services , including our hardware devices , cloud-based software , ai-based algorithms , and machine learning capabilities . we expect research and development expense to grow in absolute dollars as we continue to develop new product and service offerings to support the connected lifestyle market . we expect research and development expense to fluctuate depending on the timing and number of development activities in any given period , and such expense could vary significantly as a percentage of revenue , depending on actual revenue achieved in any given period . sales and marketing sales and marketing expense consists primarily of personnel expense for sales and marketing staff ; technical support expense ; advertising ; trade shows ; corporate communications and other marketing expense ; product marketing expense ; it and facilities overhead ; outbound freight costs ; and amortization of certain intangibles . we expect our sales and marketing expense to increase in absolute dollars for the foreseeable future as we continue to invest in brand marketing to strengthen our competitive position , to accelerate growth and to raise brand awareness . general and administrative general and administrative expense consists primarily of personnel-related expense for certain executives , finance and accounting , investor relations , human resources , legal , information technology , professional fees , it and facility overhead , and other general corporate expense . we expect our general and administrative expense to increase in absolute dollars , primarily as a result of the increased costs associated with being a standalone public company . however , we also expect our general and administrative expense to fluctuate as a percentage of our revenue in future periods based on fluctuations in our revenue and the timing of such expense . separation expense separation expense consists primarily of costs associated with our separation from netgear , including third-party advisory , consulting , legal and professional services , it-related expenses directly related to our separation from netgear , and other items that are incremental and one-time in nature . to operate as a standalone company , we have incurred separation costs of $ 27.3 million during the year ended december 31 , 2018 to replicate certain services previously provided by netgear . we expect a significant reduction in our separation expense in the fiscal year ending december 31 , 2019 as we completed our separation from netgear on december 31 , 2018. interest income interest income represents interest earned on our cash , cash equivalents and short-term investments . 56 other income ( expense ) , net other income ( expense ) , net primarily represents gains and losses on transactions denominated in foreign currencies , foreign currency contract gain ( loss ) , net , and other miscellaneous income and expense . income taxes our business has historically been included in netgear 's consolidated u.s. federal income tax return . we have adopted the separate return approach for the purpose of the arlo financial statements . the income tax provisions and related deferred tax assets and liabilities that have been reflected in our historical consolidated financial statements have been estimated as if we were a separate taxpayer . the historical operations of the arlo business reflect a separate return approach for each jurisdiction in which arlo had presence and netgear filed a tax return . we record a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method . under this method , we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities , as well as for operating loss and tax credit carryforwards . deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled . we record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized . as a result of the separation of the arlo business from netgear 's other businesses , there were changes to the organizational structure of the business , which did not impact our historical financial statements . as a result of the spin-off of arlo from netgear on december 31 , 2018 , all net operating losses , with the exception of acquired net operating losses , and tax credit carryforwards determined under the separate return approach that were utilized by netgear or will be retained by netgear were eliminated on december 31 , 2018 , with an offsetting reduction to our valuation allowance . we recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position .
| the amount of these allocations from netgear reflected within operating expenses in the consolidated statements of operations was $ 30.6 million from january 1 , 2018 to the date of the completion of the ipo , which included $ 9.4 million for research and development , $ 10.0 million for sales and marketing , and $ 11.2 million for general and administrative expense . for the year ended december 31 , 2017 , allocations amounted to $ 40.0 million , which included $ 11.8 million for research and development , $ 13.1 million for sales and marketing and $ 15.1 million for general and administrative expense . for the year ended december 31 , 2016 , allocations amounted to $ 20.6 million , which included $ 5.9 million for research and development , $ 6.4 million for sales and marketing and $ 8.3 million for general and administrative expense . the management of arlo believes the assumptions underlying the consolidated financial statements , including the assumptions regarding the allocated expenses , reasonably reflect the utilization of services provided , or the benefit received by arlo during the periods presented . nevertheless , the consolidated financial statements may not be indicative of arlo 's future performance and do not necessarily reflect arlo 's results of operations , financial position , and cash flows had arlo been a standalone company during the periods presented . our relationship with netgear netgear has agreed to continue to provide certain of the services described above on a transitional basis following the distribution pursuant to the transition services agreement . we generally expect to use the vast majority of these services for less than a year following the completion of the ipo , depending on the type of the service and the location at which such service is provided . however , we may agree with netgear to extend the service periods for a limited amount of time ( which period will not extend past the first anniversary of the distribution ) or may terminate such service periods by providing prior written notice . pursuant to the transition services agreement , netgear will charge a fee that is consistent with our historical allocation for such services . during the year ended december 31 , 2018 , we incurred $ 6.3 million in transition services agreement-related
| 11,601 |
for the year ended december 31 , 2016 , food , merchandise and other revenue accounted for approximately 39 % of our total revenue . over the same time period , we reported $ 23.93 of in-park per capita spending , representing an increase of 2.6 % from $ 23.32 for the year ended december 31 , 2015. in-park per capita spending is driven by pricing changes , penetration levels ( percentage of guests purchasing ) , new product offerings , the mix of guests ( such as local , passholders , domestic or international guests ) and the mix of in-park spending . as an example , international guests tend to drive higher in-park per capita spending when compared to other guests . see further discussion in the “ results of operations ” section which follows . trends affecting our results of operations our ability to attract and retain customers depends , in part , upon the external perceptions of our brands and reputation . adverse publicity concerning our business generally could harm our brands , reputation and results of operations . the considerable expansion in the use of social media over recent years has amplified the impact of negative publicity . our seaworld-branded parks have been the target of negative media attention concerning the orcas in our care , particularly in the state of california , and we believe we experienced demand pressures in 2014 and 2015 in california due to such media attention . we introduced a number of initiatives , including new marketing and reputation campaigns to address public perceptions , share facts and correct misinformation . we believe that these efforts , among others , have had a positive impact on public perception and on our reputation as we have seen improvement in our attendance and revenue trends in california in 2016. on march 17 , 2016 , we announced that we have ended all orca breeding and the orcas currently in our care will be the last generation of orcas at seaworld ( the “ orca announcement ” ) . we also announced that we will introduce new , inspiring , natural orca encounters and phase out our current theatrical shows , as part of our ongoing commitment to education , marine science research , and rescue of marine animals . these programs will focus on orca enrichment , exercise , and overall health . this change will start in our seaworld san diego park in 2017 , and is expected to be at all three seaworld parks by 2019. in conjunction with the orca announcement , the orca habitat expansion we previously disclosed ( the “ blue world project ” ) , as originally designed and planned , will not move forward and we will spend significantly less capital than the originally proposed blue world project . the “ new ” seaworld will maintain our unique value proposition of providing experiences that matter , and inspiring guests to protect animals and the wild wonders of our world . we have implemented an integrated marketing plan designed to attract new and repeat guests to the “ new ” seaworld with its unique blend of compelling animal experiences and new rides and attractions for the whole family . 42 attendance declined in 2016 by approximate ly 471,000 guests , or 2.1 % , primarily due to weakness at our florida park locations , and to a lesser extent , a decline in attendance at our northeast park locations , partially offset by an increase of 333,000 in attendance at our texas park locations , whic h mainly benefited from the new gate at its water park in 2016. the weakness in florida , a decline of approximately 547,000 guests when compared to 2015 , can be attributed to the following factors : ( i ) a decline in international attendance , particularly f rom latin america which decreased by approximately 383,000 guests , or 32 % ; ( ii ) an overall softness in the orlando market as evidenced by reduced hotel occupancy at orlando-area hotels , along with competitive pressures in orlando early in 2016 ; and , to a l esser extent , ( iii ) the adverse effects of tropical storm colin , hurricane matthew and hurricane hermine at our florida park locations . passholder attendance for seaworld orlando in 2016 also declined , and we believe this decline resulted from less discou nting on season pass products early in 2016 when compared to the same period of 2015. to address this issue , we introduced new strategic season pass promotions later in 2016. passholder attendance for seaworld orlando declined by 18 % in the first half of 2016 compared to the first half of 2015 ; however , passholder attendance improved later in the year and increased by 4 % in the second half of 2016 when compared to the second half of 2015. the decline in attendance at our northeast park locations for 2016 was primarily due to the effects of hurricane matthew and hurricane hermine . we believe the decline in international attendance results from the strengthening of the u.s. dollar against a variety of foreign currencies . our internal indicators show the majority of the international shortfall is coming from brazil , which has recently faced political instability and an economic recession . in 2016 , the decline from latin america that we experienced in the first quarter ( down 32 % ) accelerated during the second quarter ( down 47 % ) but abated in the third quarter ( down 28 % ) and the fourth quarter ( down 23 % ) . fluctuations in foreign currency exchange rates impact our business due to the effect a strong dollar has on international tourist spending . to manage this impact going forward , we modified our international marketing to reflect more appropriate ticket offers in light of the foreign currency exchange rate pressures and we shifted portions of our marketing spend from latin america to domestic markets . story_separator_special_tag the june 2016 announcement of the referendum of the united kingdom 's membership of the european union ( referred to as brexit ) has introduced additional volatility and uncertainty in global stock markets and currency exchange rates which could also have an impact on our future international attendance from the united kingdom in particular . historically , attendance from the united kingdom represents approximately 5 % of our total annual attendance . looking ahead to 2017 , we have introduced strategic season pass promotions and other ticket offers , expanded on our special events and announced an extensive 2017 new line-up of attractions , shows and events . we expect 2017 to be one of the largest new attraction years in our more than 50 year history . we have also begun working with a leading consulting firm in an effort to enhance our pricing capabilities and capitalize on what we believe are meaningful total revenue per capita opportunities . we plan to work together on revenue enhancement and pricing with a goal of increasing our total revenue per capita . our success depends on our ability to grow our business , in part through targeted capital investments to improve our existing theme parks , rides , attractions and shows . our growth and innovation strategies require significant commitments of management resources and capital investments designed to improve guest satisfaction and generate returns . as a result , we make annual investments to support and improve our existing theme park facilities and attractions . maintaining and improving our theme parks , as well as opening new attractions , is critical to remain competitive , grow revenue , and increase our guests ' length of stay . as mentioned above , we expect to invest in capital spending on new attractions for 2017 , which will include a virtual reality experience in orlando , a new realm and orca presentation in san diego and new roller coasters in both williamsburg and san antonio . our success also depends to some extent on discretionary consumer spending , which is heavily influenced by general economic conditions and the availability of discretionary income . high volatility and uncertainty as to the future global economic landscape continues to have an adverse effect on consumers ' discretionary income and consumer confidence . difficult economic conditions and recessionary periods may adversely impact attendance figures , the frequency with which guests choose to visit our theme parks and guest spending patterns at our theme parks . generally , our revenue and attendance growth have been correlated with domestic economic growth , as reflected in the gross domestic product ( “ gdp ” ) and the overall level of growth in domestic consumer spending . both attendance and total revenue per capita at our theme parks are key drivers of our revenue and profitability , and reductions in either can materially adversely affect our business , financial condition , results of operations and cash flows . 43 regulatory developments on july 16 , 2015 , senator dianne feinstein ( d-ca ) offered an amendment to the fiscal year 2016 agriculture , rural development , food and drug administration , and related agencies spending bill during consideration of the bill by the full committee on appropriations . the amendment directed the u.s. department of agriculture 's animal and plant health inspection service ( “ aphis ” ) to issue updated regulations for the display of marine mammals in domestic zoos and aquaria within six months of enactment . while that amendment was not included in the final fiscal year 2016 omnibus appropriations bill , aphis released a proposed rule on february 3 , 2016 to amend the animal welfare act regulations concerning the humane handling , care and treatment of marine mammals in captivity ( the “ proposed aphis regulations ” ) . the proposed aphis regulations were subject to public comment which ended on may 4 , 2016. we submitted a comment letter to aphis on the final date for comments , expressing our views on the proposed aphis regulations . the full impact of the proposed aphis regulations on our business will not be known until the proposed aphis regulations are finalized . on october 8 , 2015 , the california coastal commission approved the blue world project in san diego , but attached certain conditions to its approval . those conditions included , among other things , a prohibition against breeding orcas or transporting orcas to or from the habitat . on december 29 , 2015 , we filed a lawsuit against the california coastal commission on the grounds that the california coastal commission decision was outside the scope of its authority in imposing such conditions because it does not have jurisdiction over orcas , which are regulated under federal law . as a result of the orca announcement , on april 18 , 2016 , we sent a letter to the california coastal commission requesting to formally withdraw our coastal development permit application for the blue world project habitat and discuss dismissal of the pending litigation since our legal challenge to the proposed conditions is no longer warranted . on july 27 , 2016 , we filed a request for dismissal to dismiss our lawsuit against the california coastal commission . on october 17 , 2016 , we sent a letter to the california coastal commission objecting to the approval of the proposed revised findings for the blue world project . we stated that the adoption of revised findings was not warranted or needed because of the orca announcement and recent changes in california law . on november 4 , 2016 the california coastal commission voted in the affirmative to reverse findings on the blue world project . on november 16 , 2015 , representative adam schiff ( d-ca ) introduced the orca responsibility and care advancement act ( the “ orca act ” ) . the bill has been referred to the natural resources and agriculture committees .
| passholder attendance for seaworld orlando in 2016 also declined , and we believe this decline resulted from less discounting on season pass products early in 2016 when compared to the same period of 2015. to address this issue , we introduced new strategic season pass promotions later in 2016. passholder attendance for seaworld orlando declined by 18 % in the first half of 2016 compared to the first half of 2015 ; however , passholder attendance improved later in the year and increased by 4 % in the second half of 2016 when compared to the second half of 2015. the decline in attendance at our northeast park locations for 2016 was primarily due to the effects of hurricane matthew and hurricane hermine . the decline in admission per capita results primarily from an unfavorable park attendance mix , resulting from more guest concentration at our water parks in 2016 and the new gate for aquatica san antonio , along with the impact of fewer international guests when compared to 2015. these factors were partially offset by an increase in admissions per capita due to additional revenue from barter transactions , which are offset in expenses . 47 food , merchandise and other revenue . food , merchandise and other revenue for the year ended december 31 , 2016 increased $ 2.4 million , or 0.5 % to $ 526.5 million as comp ared to $ 524.1 million for the year ended december 31 , 2015. this increase was primarily a result of a 2.6 % increase in in-park per capita spending to $ 23.93 in 2016 from $ 23.32 in 2015 , which was largely offset by the decline in attendance . in-park per c apita spending improved primarily due to increased sales of in-park products , such as front of the line “ quick queue ” access . costs of food , merchandise and other revenues . costs of food , merchandise and other revenues for the year ended december 31 , 2016 decreased $ 3.3
| 11,602 |
we generated cash flow from operations of approximately $ 3.3 billion in 2011 compared to $ 2.7 billion in 2010. some key operating metrics that members of our senior management regularly review to evaluate our financial results include net promoter score ( nps ) , market share , gmv , gmv excluding vehicles , number of sold items , net tpv , merchant 58 services net tpv ( as defined below ) , on ebay net tpv ( as defined below ) , net number of payments , penetration rates , active registered accounts , funding mix ( the mix of payments vehicles , such as credit cards , debit cards , bank accounts and paypal accounts , used by customers to make payments through our payments networks ) , global ecommerce ( gec ) merchandise sales ( as defined below ) , same store sales , free cash flow ( a non-gaap measure , which we define as net cash provided by operating activities less purchases of property and equipment , net ) and revenue excluding acquisitions and foreign currency impact ( also a non-gaap measure ) . we define gmv as the total value of all successfully closed items between users on our ebay marketplaces trading platforms ( excluding ebay 's classifieds websites , brands4friends and shopping.com ) during the applicable period , regardless of whether the buyer and seller actually consummated the transaction . we define net tpv as the total dollar volume of payments , net of payment reversals , successfully completed through our payments networks , bill me later accounts and zong during the applicable period , excluding paypal 's payment gateway business . we define merchant services net tpv as the total dollar volume of payments , net of payment reversals , successfully completed through our payments networks , bill me later accounts and zong during the applicable period , excluding paypal 's payment gateway business and payments for transactions on ebay marketplaces and gsi platforms . we define on ebay net tpv as the total dollar volume of payments , net of payment reversals , successfully completed through our payments networks during the applicable period for transactions on ebay marketplaces and gsi platforms . we define gec merchandise sales as the retail value of all sales transactions , inclusive of freight charges and net of allowance for returns and discounts , which flow through the gsi ecommerce services platform during the applicable period , whether we record the full amount of such transaction as a product sale or a percentage of such transaction as a service fee . results of operations story_separator_special_tag 17 , 2011 ( the date the acquisition of gsi was completed ) . we expect transaction activity patterns on our websites to mirror general consumer buying patterns . our gsi segment is highly seasonal . the fourth calendar quarter typically accounts for a disproportionate amount of gsi 's total annual revenue because consumers increase their purchases and businesses increase their advertising to consumers during the fourth quarter holiday season . marketplaces net transaction revenues marketplaces net transaction revenues increased $ 647 million , or 12 % , in 2012 compared to 2011 , consistent with the increase in gmv excluding vehicles of 12 % in 2012 compared to 2011 . the increases in net transaction revenue and gmv excluding vehicles were due primarily to strong growth across all regions , partially offset by the negative impact of approximately $ 118 million in foreign currency movements relative to the u.s. dollar . marketplaces net transaction revenues increased $ 631 million , or 13 % , in 2011 compared to 2010 , consistent with the increase in gmv excluding vehicles of 13 % in 2011 compared to 2010. the increases in net transaction revenue and gmv excluding vehicles were due primarily to improvements in the shopping experience , foreign currency movements relative to the u.s. dollar and continued growth at stubhub . net transaction revenues and gmv excluding vehicles increased in the u.s. , europe and asia in 2011 compared to 2010. marketplaces net transaction revenues earned internationally totaled $ 3.4 billion , $ 3.1 billion and $ 2.7 billion in 2012 , 2011 and 2010 , respectively , representing 56 % of total marketplaces net transaction revenues in all three periods . the increase in the dollar amount of international net transaction revenues was due primarily to growth in our existing international markets . payments net transaction revenues payments net transaction revenues increased $ 1 billion , or 25 % , during 2012 compared to 2011 , due primarily to net tpv growth of 22 % and a higher take rate . the increase in net tpv was due primarily to growth in consumer and merchant adoption and use of paypal both on and off ebay . our merchant services net tpv increased 25 % during 2012 compared to 2011 , and represented 67 % of paypal 's net tpv in 2012 , compared with 65 % in 2011 . on ebay net tpv increased 16 % during 2012 compared to 2011 , and represented 33 % of paypal 's net tpv in 2012 . the increase in the take rate was driven primarily by foreign exchange income , gains from hedging activities and the full year impact from our acquisition of zong ( acquired in august 2011 ) . payments net transaction revenues increased $ 862 million , or 26 % , during 2011 compared to 2010 , due primarily to net tpv growth of 29 % . the increase in net tpv was due primarily to growth in consumer and merchant adoption of paypal . our merchant services net tpv increased 36 % during 2011 compared to 2010 , and represented 65 % of paypal 's net tpv in 2011 , compared with 62 % in 2010. the increase in our merchant services net tpv was due primarily to an increase in the number of online merchants offering paypal as a payment option . story_separator_special_tag 62 payments net transaction revenues earned internationally totaled $ 2.8 billion , $ 2.2 billion and $ 1.6 billion in 2012 , 2011 and 2010 , representing 55 % , 53 % and 49 % of total payments net transaction revenues , respectively . the increase in international net transaction revenues was due primarily to the growth of our merchant services business and increased penetration on ebay marketplaces platforms internationally . gsi net transaction revenues gsi net transaction revenues were $ 850 million in 2012 and $ 460 million in 2011 . net transaction revenues attributable to the gsi segment for 2011 are reflected from june 17 , 2011 ( the date the acquisition of gsi was completed ) . accordingly , comparisons of gsi 's net transaction revenues for 2012 to 2011 are not meaningful . marketing services and other revenues marketing services and other revenues increased $ 382 million , or 23 % , in 2012 compared to 2011 , and represented 14 % of total net revenues for both periods . the increase in marketing services and other revenues was due primarily to growth in our bill me later portfolio of receivables from loans , as well as increased revenue from our advertising business . marketing services and other revenues increased $ 543 million , or 50 % , in 2011 compared to 2010 , and represented 14 % and 12 % of total net revenues in 2011 and 2010 , respectively . the increase in marketing services and other revenues was primarily due to the acquisitions of gsi and brands4friends and an increase in revenues attributable to our classifieds business and advertising business , as well as interest earned on our bill me later portfolio of receivables from loans . summary of cost of net revenues the following table summarizes changes in cost of net revenues for the periods presented : replace_table_token_9_th ( 1 ) cost of net revenues attributable to the gsi segment for 2011 are reflected from june 17 , 2011 ( the date the acquisition of gsi was completed ) . accordingly , the percent changes in gsi 's cost of revenues between 2011 and 2012 are not meaningful . cost of net revenues consists primarily of costs associated with payment processing , interest expense on borrowings incurred to finance bill me later 's portfolio of loan receivables , customer support , site operations and fulfillment . significant components of these costs include bank transaction fees , credit card interchange and assessment fees , interest expense on indebtedness incurred to finance the purchase of consumer loan receivables related to bill me later accounts , employee compensation , contractor costs , facilities costs , depreciation of equipment and amortization expense . marketplaces marketplaces cost of net revenues increased $ 63 million , or 5 % , in 2012 compared to 2011 . the increase was due primarily to increases in our customer support costs and site operations associated with our gmv growth . marketplaces cost of net revenues as a percentage of marketplaces net revenues decreased during 2012 compared to the prior year due primarily to improved operating leverage in our site operations infrastructure , partially offset by investment in customer support programs . 63 marketplaces cost of net revenues increased $ 139 million , or 13 % , in 2011 compared to 2010. the increase during 2011 was due primarily to the impact of acquiring brands4friends during the first quarter of 2011 and increased customer support costs associated with our gmv growth . marketplaces cost of net revenues as a percentage of marketplaces net revenues decreased during 2011 compared to the prior year due primarily to improved operating leverage in our site operations infrastructure , partially offset by the impact of acquisitions . in addition , marketplaces cost of net revenues as a percentage of marketplaces net revenues in 2010 was adversely impacted by the settlement of a lawsuit and the establishment of a reserve related to certain indirect tax positions ( recorded as a reduction in revenue ) . payments payments cost of net revenues increased $ 343 million , or 18 % , in 2012 compared to 2011 due primarily to the impact of growth in net tpv . payments cost of net revenues as a percentage of payments net revenues decreased during 2012 compared to 2011 due primarily to a lower transaction expense rate driven largely by the impact of certain regulatory changes , primarily the durbin amendment of the dodd-frank wall street reform and consumer protection act . payments cost of net revenues increased $ 373 million , or 25 % , in 2011 compared to 2010 due primarily to the impact of growth in net tpv . payments cost of net revenues as a percentage of payments net revenues decreased during 2011 compared to 2010 due primarily to a lower transaction expense rate . the improvement in our transaction expense rate was driven primarily by the impact of certain regulatory changes , new payment processing arrangements , a favorable mix shift to lower cost international markets and a small improvement in funding mix . gsi gsi cost of net revenues were $ 696 million during 2012 and $ 374 million in 2011. cost of net revenues attributable to the gsi segment for 2011 are reflected from june 17 , 2011 ( the date the acquisition of gsi was completed ) . accordingly , comparisons with gsi 's cost of revenues for 2012 to 2011 are not meaningful . summary of operating expenses , non-operating items and provision for income taxes the following table summarizes changes in operating expenses , non-operating items and provision for income taxes for the periods presented : replace_table_token_10_th 64 the following table summarizes operating expenses , non-operating items and provision for income taxes as a percentage of net revenues for the periods presented : replace_table_token_11_th sales and marketing sales and marketing expenses consist primarily of advertising costs and marketing programs ( both online and offline ) , employee compensation , contractor costs , facilities costs and depreciation on equipment .
| we have a foreign exchange risk management program that is designed to reduce our exposure to fluctuations in foreign currencies ; however , the effectiveness of this program in mitigating the impact of foreign currency fluctuations on our results of operations varies from period to period , and in any given period , our operating results are usually affected , sometimes significantly , by changes in currency exchange rates . fluctuations in exchange rates also directly affect our cross-border revenue . we calculate the year-over-year impact of foreign currency movements on our business using prior period foreign currency rates applied to current year transactional currency amounts . for the year ended december 31 , 2012 , foreign currency movements relative to the u.s. dollar negatively impacted net revenues by approximately $ 206 million ( net of a $ 44 million positive impact from hedging activities relating to paypal 's net revenue ) compared to the prior year . foreign currency movements relative to the u.s. dollar for the year ended december 31 , 2012 negatively impacted marketplaces , payments , and gsi net revenues by approximately $ 172 million , $ 33 million and $ 1 million , respectively , compared to the prior year ( net of the impact of hedging activities , noted above , in the case of payments net revenues ) . for the year ended december 31 , 2011 , foreign currency movements relative to the u.s. dollar positively impacted net revenues by approximately $ 202 million ( net of $ 26 million negative impact from hedging activities relating to paypal 's net revenue ) compared to the prior year . foreign currency movements relative to the u.s. dollar for the year ended december 31 , 2011 , positively impacted marketplaces and payments net revenues by approximately $ 167 million and $ 36 million , respectively , compared to the prior year ( net of the impact of hedging activities , noted above , in the case of payments net revenues ) . 60 the following table sets forth , for the periods presented , certain key operating metrics that we believe are significant factors affecting our net revenues . replace_table_token_7_th ( 1 ) ebay 's classifieds websites , brands4friends and shopping.com are not
| 11,603 |
furthermore , analogous measures are used by industry analysts to evaluate the company 's operating performance . investors should be aware that our presentation of adjusted ebitdar may not be comparable to similarly titled measures used by other companies . the following table shows operating results of coal operations for the years ended december 31 , 2018 and 2017 . replace_table_token_11_th this table reflects numbers reported under a basis that differs from u.s. gaap . see the “ reconciliation of non-gaap measures ” below for explanation and reconciliation of these amounts to the nearest gaap figures . other companies may calculate these per ton amounts differently , and our calculation may not be comparable to other similarly titled measures . powder river basin — adjusted ebitdar for the year ended december 31 , 2018 , declined from the year ended december 31 , 2017 . pricing in the current year was negatively impacted by the annual roll off and replacement of a portion of our term contracts at the end of the prior year . some of these prior year contracts had been executed during stronger market environments . increased natural gas and wind generation and above normal generator coal stockpiles pressured powder river basin markets throughout the current year . volume decreased year over year reflecting the increase in electric generation from competing fuels and above normal generator stockpiles , offset to some degree by our ability to capitalize on shipping disruptions at other mines in the basin precipitated by excessive rainfall . cash cost per ton sold declined year over year despite inflationary pressure , particularly for diesel fuel . our efforts to “ right size ” our powder river basin operations coupled with lower sales sensitive costs , offset inflationary pressures , particularly diesel fuel . 59 metallurgical — adjusted ebitdar for the year ended december 31 , 2018 , increased from the year ended december 31 , 2017 due to significant pricing improvement , and pricing continues to be supported by strength in international and domestic steel markets . throughout the current year our pricing benefited from our decision to commit less of our planned production to north american annual fixed price contracts , leaving a greater portion exposed to stronger pricing in the international coking coal markets . our sales volume decline versus the prior year was effectively all related to the divestiture of lone mountain . lone mountain sold approximately 1.0 million tons in the prior year . tons sold from ongoing operations increased over 0.5 million tons versus the prior year . our cash cost per ton sold for the year ended december 31 , 2018 , increased versus the prior year due to increased operating tax and royalty costs , increased labor costs , and inflationary pressure on parts , supplies , and services , as well as the timing of some major repairs . inflationary pressure on labor , goods , and services utilized in our metallurgical segment has continued to build throughout the current year as the coking coal industry in the appalachian geographic region attempts to maximize production to take advantage of the currently strong coking coal markets . operating taxes and royalties are impacted by the increase in coal sales per ton sold and an increase in the severance tax rate at our beckley mine . our metallurgical segment sold 6.7 million tons of coking coal and 1.1 million tons of associated thermal coal in the year ended december 31 , 2018 , as compared to 6.4 million tons of coking coal , 0.5 million tons of pci coal , and 1.3 million tons of associated thermal coal in the prior year . longwall operations accounted for approximately 71 % of our shipment volume in the current year and 57 % of our shipment volume in the prior year . other thermal — adjusted ebitdar for the year ended december 31 , 2018 declined from the year ended december 31 , 2017 . the current year was pressured by lower sales and production volume at our west elk operation and increased costs at our west elk and coal-mac operations . west elk costs increased due to higher levels of continuous miner production as compared to the prior year , which was necessary to maintain adequate longwall development . inflationary pressure further impacted costs , particularly materials , supplies , and diesel fuel . period from october 2 through december 31 , 2016 revenues . our revenues include sales to customers of coal produced at our operations and coal purchased from third parties . transportation costs are included in cost of coal sales and amounts billed by us to our customers for transportation are included in revenues . coal sales . the following table summarizes information about our coal sales for the period from october 2 through december 31 , 2016 : successor october 2 through december 31 , 2016 ( in thousands ) coal sales $ 575,688 tons sold 26,812 coal sales for the period from october 2 through december 31 , 2016 by segment were approximately 48 % powder river basin , 35 % metallurgical , and 17 % other . tons sold for the period by segment were approximately 81 % powder river basin , 9 % metallurgical , and 10 % other . see discussion in “ operational performance ” below for further information about regional results . 60 costs , expenses and other . the following table summarizes costs , expenses and other components of operating income for the period from october 2 through december 31 , 2016 : successor october 2 through december 31 , 2016 cost of sales ( exclusive of items shown separately below ) $ 470,319 depreciation , depletion and amortization 32,604 accretion on asset retirement obligations 7,634 amortization of sales contracts , net 796 change in fair value of coal derivatives and coal trading activities , net 396 selling , general and administrative expenses 23,193 other operating income , net ( 5,340 ) total costs , expenses and other $ 529,602 cost of sales . story_separator_special_tag for the period from october 2 through december 31 , 2016 , our cost of sales consisted primarily of labor related costs ( approximately 25 % ) , repairs and supplies ( approximately 33 % ) , operating taxes and royalties ( approximately 22 % ) , and transportation costs ( approximately 12 % ) . see discussion in “ operational performance ” below for information about segment cost results . depreciation , depletion and amortization . for the period from october 2 through december 31 , 2016 our depreciation , depletion and amortization costs consist of depreciation of plant and equipment ( approximately 63 % ) , depletion of reserves ( approximately 20 % ) , and amortization of development costs ( approximately 17 % ) . this reflects the application of fresh start accounting . for further information on fresh start accounting , please see note 3 to the consolidated financial statements , “ emergence from bankruptcy and fresh start accounting . ” accretion on asset retirement obligation . for the period from october 2 through december 31 , 2016 approximately 66 % of the accretion on our asset retirement obligation is attributable to our large surface operations in the powder river basin . selling , general and administrative expenses . for the period from october 2 through december 31 , 2016 , selling , general and administrative expenses consist primarily of compensation costs of $ 15.7 million , and professional services and usage and maintenance agreements of $ 5.1 million . other operating income , net . for the period from october 2 through december 31 , 2016 other operating income , net consists primarily of miscellaneous revenues including royalties and net gains on asset sales of $ 5.0 million and net income from equity investments of $ 1.7 million , partially offset by miscellaneous expenses primarily related to our land company of $ 1.4 million . non-operating expense . the following table summarizes non-operating expense for the period from october 2 through december 31 , 2016 : successor october 2 through december 31 , 2016 ( in thousands ) non-service related pension and postretirement benefit costs $ 32 reorganization income ( loss ) , net ( 759 ) total nonoperating expense $ ( 727 ) nonoperating expenses for the period from october 2 through december 31 , 2016 are expenses associated with our chapter 11 reorganization . additionally , we adopted asu 2017-07 , “ compensation-retirement benefits ( topic 715 ) improving the presentation of net periodic pension cost and net periodic postretirement benefit cost , ” and now reflect these costs as nonoperating expenses . see further discussion in note 3 to the consolidated financial statements , “ emergence from bankruptcy and fresh start accounting ” . ” 61 provision for ( benefit from ) income taxes . the following table summarizes our provision for income taxes for the period from october 2 through december 31 , 2016 : successor october 2 through december 31 , 2016 ( in thousands ) provision for ( benefit from ) income taxes $ 1,156 see note 14 , to the consolidated financial statements “ taxes , ” for a reconciliation of the statutory federal income tax provision ( benefit ) at the statutory rate to the actual benefit from taxes . operational performance- successor period from october 2 through december 31 , 2016 our mining operations are evaluated based on adjusted ebitdar , per-ton cash operating costs ( defined as including all mining costs except depreciation , depletion , amortization , accretion on asset retirements obligations , and pass-through transportation expenses ) , and on other non-financial measures , such as safety and environmental performance . adjusted ebitdar is defined as net income attributable to the company before the effect of net interest expense , income taxes , depreciation , depletion and amortization , the amortization of sales contracts , the accretion on asset retirement obligations , and non-operating income ( expense ) including reorganization items , net . adjusted ebitdar may also be adjusted for items that may not reflect the trend of future results by excluding transactions that are not indicative of our core operating performance . adjusted ebitdar is not a measure of financial performance in accordance with generally accepted accounting principles , and items excluded from adjusted ebitdar are significant in understanding and assessing our financial condition . therefore , adjusted ebitdar should not be considered in isolation , nor as an alternative to net income , income from operations , cash flows from operations or as a measure of our profitability , liquidity or performance under generally accepted accounting principles . furthermore , analogous measures are used by industry analysts to evaluate the company 's operating performance . investors should be aware that our presentation of adjusted ebitdar may not be comparable to similarly titled measures used by other companies . the following table shows operating results of coal operations for the period from october 2 through december 31 , 2016 . replace_table_token_12_th 62 this table reflects numbers reported under a basis that differs from u.s. gaap . see the “ reconciliation of non-gaap measures ” below for explanation and reconciliation of these amounts to the nearest gaap figures . other companies may calculate these per ton amounts differently , and our calculation may not be comparable to other similarly titled measures . powder river basin — adjusted ebitdar for the period from october 2 through december 31 , 2016 benefited from cost control efforts and rebounding demand driven by rising natural gas prices that increased the competitiveness of powder river basin coal for electric generation versus the competing fuel . rising gas prices resulted from favorable summer heat , increased natural gas exports , both pipeline and liquefied natural gas , and flat to slightly declining natural gas production . cost control efforts included adjusting operations to align with current market volume expectations . metallurgical — adjusted ebitdar for the period from october 2 through december 31 , 2016 benefited from the significant increase in international pricing for metallurgical coal .
| powder river basin coal remained economically competitive for electric generation in many regions throughout the country during 2018. throughout the year , international thermal markets supported both atlantic and pacific export shipments from certain of our operations . we have continued to layer in forward positions in these markets at economically viable levels . in the third quarter of 2017 we sold our lone mountain operation , which had been part of our metallurgical segment . lone mountain 's results for the first nine months of 2017 are included in our full year 2017 results , and in all preceding periods ' results presented herein . 55 filing under chapter 11 of the united states bankruptcy code on january 11 , 2016 ( the “ petition date ” ) , arch coal and substantially all of its wholly owned domestic subsidiaries ( the “ filing subsidiaries ” and , together with arch coal , the “ debtors ” ; the debtors , solely following the effective date of the plan , the “ reorganized debtors ” ) filed voluntary petitions for reorganization ( collectively , the “ bankruptcy petitions ” ) under chapter 11 of title 11 of the u.s. code ( the “ bankruptcy code ” ) in the united states bankruptcy court for the eastern district of missouri ( the “ court ” ) . the debtors ' chapter 11 cases ( collectively , the “ chapter 11 cases ” ) were jointly administered under the caption in re arch coal , inc. , et al . case no . 16-40120 ( lead case ) . during the chapter 11 cases , each debtor operated its business as a “ debtor in possession ” under the jurisdiction of the court and in accordance with the applicable provisions of the bankruptcy code and the orders of the court . upon emergence from bankruptcy on october 5 , 2016 , arch coal applied the provisions of fresh start accounting effective october 1 , 2016 which resulted in arch becoming a new entity for financial reporting purposes . accordingly , the consolidated financial statements and accompanying footnotes on or after october 1 , 2016 are not comparable to the consolidated financial statements prior to
| 11,604 |
37 in november 2018 , we announced th e results of our fda-approved prospective multi-center feasibility study , “ stemi door to unloading with impella cp system in acute myocardial infarction ” ( stemi dtu ) . the trial focused on the feasibility and safety of unloading the left ventricle using th e impella cp heart pump prior to primary pci in patients presenting with st segment elevation myocardial infarction , or stemi , without cardiogenic shock with the hypothesis that this will potentially reduce infarct size . the study , which received fda inves tigational device approval to proceed in october 2016 , enrolled 50 patients at 10 sites . the hypothesis of this novel approach to treating stemi patients , based on extensive mechanistic research , is that unloading the left ventricle prior to pci reduces my ocardial work load , oxygen demand and initiates a cardio-protective effect at the myocardial cell level , which may alleviate myocardial damage caused by reperfusion injury at the time of revascularization . the intent of this study was to help refine the pr otocol and lay the groundwork for a future pivotal study with more sites and patients and will be designed for statistical significance . in april 2019 , the fda approved the initiation of the stemi dtu pivotal randomized controlled trial . the prospective , multi-center , two-arm trial plans to enroll 668 patients undergoing treatment for a stemi heart attack . half the patients will be randomized to receive delayed reperfusion after 30 minutes of left ventricular unloading with the impella cp . the other half will receive immediate reperfusion , the current standard of care . the trial will test the hypothesis that unloading the left ventricle for 30 minutes prior to reperfusion will reduce myocardial damage from a heart attack and lead to a reduction in future heart failure related events . we expect this trial to begin in october 2019 and we estimate that it will take three to four years to complete enrollment . the trial allows for an adaptive design , which permits adjustments to the study sample size after an interim analysis . in january 2019 , we proactively sent physicians who use impella rp post-approval study data that provides additional evidence of the benefits of following proper protocols for placement of impella rp such as early placement and following proper inclusion and exclusion criteria when selecting patients for impella rp . in february 2019 , the fda released a letter to health care providers on the impella rp heart pump reiterating to physicians to follow proper protocols for the use of impella rp . in march 2019 , we presented survival data from the 18-month post-approval study of 42 impella rp patients at the american college of cardiology 's annual scientific session . this interim post-approval study data showed an improved survival rate for cardiogenic shock patients who followed the recover right protocol , which are patients who met the inclusion and exclusion criteria of the recover right fda pma trial , when compared to salvage patients outside the recover right protocol ( > 48 hours in cardiogenic shock from right side failure ) . in may 2019 , the fda issued an update to its february 2019 letter to inform the health care community of these interim post-approval study results which validated that the impella rp heart pump is safe and effective for the treatment of right heart failure . the data showed a 64 % survival rate and 90 % heart recovery for the subgroup of pas patients who met the enrollment criteria of impella rp 's premarket clinical studies . impella rp is the most studied right-sided device and the only percutaneous technology with fda approval designating it as safe and effective for right heart support . in march 2019 , we received pmda approval from mhlw for our impella cp heart pump in japan . we expect to start selling the impella cp heart pump as an additional product offering in japan later in calendar year 2019. critical accounting policies and estimates we prepare our consolidated financial statements in accordance with accounting principles generally accepted in the united states . preparation of the consolidated financial statements requires us 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 consolidated financial statements , as well as the reported amounts of revenue and expenses during the reporting period . actual results could differ from these estimates . the accounting policies we believe are critical in the preparation of our consolidated financial statements relate to revenue recognition and income taxes . our significant accounting policies are more fully described in “ note 2. basis of preparation and summary of significant accounting policies ” to our consolidated financial statements in this report . 38 revenue recognition effective april 1 , 2018 we adopted asu 2014-09 ( “ topic 606 ” ) , “ revenue from contracts with customers ” . for a discussion on the impact of this accounting policy adoption , including key accounting policy elections , see “ note 3. revenue recognition ” to our consolidated financial statements in this report . revenue is recognized when , or as , obligations under the terms of a contract are satisfied , which occurs when control of the promised products or services is transferred to customers . revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer . product revenue is generally recognized when the customer obtains control of our product , which occurs at a point in time , and may be upon shipment or upon delivery based on the contractual shipping terms of a contract . service revenue is generally recognized over time as the services are rendered to the customer based on the extent of progress towards completion of the performance obligation . we recognize service revenue over the term of the service contract . story_separator_special_tag services are expected to be transferred to the customer throughout the term of the contract and we believe recognizing revenue ratably over the term of the contract best depicts the transfer of value to the customer . revenue generated from preventative maintenance calls is recognized at a point in time when the services are provided to the customer . revenue from the sale of products and services are evidenced by either a contract with the customer or a valid purchase order or an invoice which includes all relevant terms of sale . we perform a review of each specific customer 's credit worthiness and ability to pay prior to acceptance as a customer . further , we perform periodic reviews of customers ' creditworthiness . income taxes our provision for income taxes is composed of a current and a deferred portion . the current income tax provision is calculated as the estimated taxes payable or refundable on tax returns for the current year . the deferred income tax provision is calculated for the estimated future tax effects attributable to temporary differences and net operating loss carryforwards using expected tax rates in effect in the years during which the differences are expected to reverse . deferred income taxes are recognized for the tax consequences in future years as the differences between the tax bases of assets and liabilities and their financial reporting amounts at each fiscal year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to impact taxable income . we regularly assess our ability to realize our deferred tax assets . assessing the realization of deferred tax assets requires significant management judgment . we consider whether a valuation allowance is needed on our deferred tax assets by evaluating all positive and negative evidence relative to our ability to recover deferred tax assets , including future reversals of existing taxable temporary differences , projected future taxable income , tax planning strategies and recent financial results . we recognize and measure uncertain tax positions using a two-step approach . the first step is to evaluate the tax position for recognition by determining if , based on the technical merits , it is more likely than not that the position will be sustained upon audit , including resolution of related appeals or litigation processes , if any . the second step is to measure the tax benefit at the largest amount that is more likely than not of being realized upon ultimate settlement . we reevaluate these uncertain tax positions on an ongoing basis , when applicable . this evaluation is based on factors including , but not limited to , changes in facts or circumstances , new information and technical insights , and changes in tax laws . any changes in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision . when applicable , we accrue for the effects of uncertain tax positions and the related potential penalties and interest through income tax expense . effective april 1 , 2017 , we adopted asu 2016-09 , which simplifies several aspects of the accounting for share-based payment transactions , including income tax consequences , recognition of stock compensation award forfeitures , classification of awards as either equity or liabilities , the calculation of diluted shares outstanding and classification on the statement of cash flows . the effects of this impact will be hard to predict and variable moving forward as such effects are dependent upon actual stock option exercises . recent accounting pronouncements information regarding recent accounting pronouncements is included in “ note 2. basis of preparation and summary of significant accounting policies ” to our consolidated financial statements in this report . 39 story_separator_special_tag note 12. commitment and contingencies – contingencies ” to our consolidated financial statements in this report . other income other income increased by $ 35.2 million , to $ 38.5 million for fiscal 2019 , compared to $ 3.3 million for fiscal 2018. this increase was primarily due to the recognition of a $ 31.2 million gain from our investment in shockwave medical . income tax provision the income tax provision decreased by $ 44.0 million , or 91 % , to $ 4.3 million for fiscal 2019 , compared to $ 48.3 million for fiscal 2018. o ur effective income tax rate was 1.6 % in fiscal 2019 , and 30.1 % in fiscal 2018. the decrease in the income tax provision and the effective tax rate for fiscal 2019 were primarily driven by $ 69.3 million in excess tax benefits in fiscal 2019 , compared to $ 31.0 million in fiscal 2018. these excess tax benefits are related to the adoption of the new accounting standard for stock-based compensation on april 1 , 2017 , which requires restricted stock units that vested or stock options that were exercised during the year to be recorded in the statement of operations . the decrease in income tax provision was also due to the impact of the enactment of the tax reform act , which resulted in a decrease in the federal statutory income tax rate applied of 21 % in fiscal 2019 from a blended rate of 31.5 % in fiscal 2018. net income in fiscal 2019 , we recognized net income of $ 259.0 million , or $ 5.77 per basic share and $ 5.61 per diluted share . net income in fiscal 2019 included excess tax benefits related to stock-based awards of $ 69.3 million , or $ 1.54 per basic share and $ 1.50 per diluted share , and a $ 23.6 million gain , net of tax , related to our investment in shockwave medical . 41 in fiscal 2018 , we recognized net income of $ 112.2 million , or $ 2.54 per basic share and $ 2.45 per diluted share .
| 40 costs and expenses cost of revenue cost of revenue for fiscal 2019 increased by $ 31.0 million , or 31 % , to $ 129.6 million from $ 98.6 million for fiscal 2018. gross margin was 83 % for each of fiscal 2019 and fiscal 2018. the increase in cost of product revenue was related to higher demand for our impella devices and higher production volume and costs to support growing demand for our impella devices . there was a minimal difference in gross margin as the increased investment in manufacturing capacity was at a pace consistent with our revenue growth . research and development expenses research and development expenses for fiscal 2019 increased by $ 18.2 million , or 24 % , to $ 93.5 million from $ 75.3 million for fiscal 2018. the increase in research and development expenses was primarily due to product development initiatives relating to our existing products , such as optical sensor technology , the development of impella 5.5 tm and impella ecp tm devices and related product accessories , increased clinical spending primarily related to our cvad study and our continued focus on quality and regulatory initiatives for our impella devices . we expect research and development expenses to continue to increase as we continue to increase clinical spending related to our cvad study and launch the stemi pivotal study and incur additional costs as we continue to focus on engineering initiatives to improve our existing products and develop new technologies . selling , general and administrative expenses selling , general and administrative expenses for fiscal 2019 increased by $ 58.9 million , or 22 % , to $ 321.6 million from $ 262.7 million for fiscal 2018. the increase in selling , general and administrative expenses was primarily due to the hiring of additional field sales and clinical personnel in the u.s. and germany , the commercial launch in japan , increased spending on marketing initiatives as we continue to educate physicians on the benefits
| 11,605 |
our insulin pumps are compatible with the tandem device updater , a revolutionary tool that allows pump users to update their pumps ' software quickly and easily from a personal computer . this unique offering positions us to bring future innovations , including our next generation aid algorithms , to our in-warranty t : slim x2 customers independent of the typical four-year insurance pump reimbursement cycle , faster than the industry has been able to in the past . the tandem device updater launched in the united states in the first quarter of 2017 and outside of the united states in the third quarter of 2019. since its launch , we have offered in-warranty t : slim customers in the united states four different software updates for no-cost using the tandem device updater , including basal-iq technology and , most recently , control-iq technology . outside the united states we began offering no-cost software updates for basal-iq technology in the third quarter of 2019 and intend to begin offering control-iq technology updates in the second half of 2020 , subject to required regulatory and reimbursement approvals . for the years ended december 31 , 2019 , 2018 and 2017 , our consolidated sales were $ 362.3 million , $ 183.9 million , and $ 107.6 million , respectively . for the years ended december 31 , 2019 , 2018 and 2017 , our net loss was $ 24.8 million , $ 122.6 million , and $ 73.0 million , respectively . worldwide pump sales accounted for 68 % , 67 % , and 66 % of our total sales , respectively , for the years ended december 31 , 2019 , 2018 and 2017 , while pump-related supplies and accessories accounted for the remainder in each year . our accumulated deficit as of december 31 , 2019 and 2018 was $ 624.8 million and $ 600.1 million , respectively . these amounts included $ 216.6 million and $ 147.4 million of non-cash stock-based compensation charges and non-cash changes in the fair value of common stock warrants as of december 31 , 2019 and 2018 , respectively . in the united states , we have rapidly increased sales since the commercial launch of our first product by expanding our sales , clinical and marketing organization , by developing , commercializing and marketing multiple differentiated products that utilize our proprietary technology platform and consumer-focused approach , and by providing strong customer support . our sales have further increased following our scaled product launches in geographies outside of the united states . we believe that by demonstrating our product benefits and the shortcomings of existing insulin therapies , more people will choose our insulin pumps for their therapy needs , allowing us to further penetrate and expand the market worldwide . in addition , we believe publications , such as the results from the study using control-iq technology that was published in the new england journal of medicine in october 2019 , will be valuable in demonstrating the clinical outcome benefits derived from our system to healthcare providers and payors . we also believe we are positioned well to address consumers ' needs and preferences with our current products and products under development and by offering customers access to our future innovations through the tandem device updater , as they are approved by the local regulating bodies . at the same time , by innovating and offering new product features and benefits using our t : slim x2 platform , we are able to leverage a shared global manufacturing and supply chain infrastructure . in the united states , we are able to leverage a single sales , marketing , and clinical organization , as well as our domestic customer support services . in canada , we have a separate sales organization and our customer support infrastructure benefits from close collaboration with our united states organization . in other international geographies , we have contracted with experienced distribution partners to commercialize and support our t : slim x2 platform . products under development our products under development support our strategy of focusing on both consumer and clinical needs , and include aid system enhancements , a connected ( mobile ) health offerings and a next-generation hardware platform which we call the t : sport insulin delivery system ( t : sport ) . we intend to leverage our consumer-focused approach and proprietary technology platform to continue to develop products that have the features and functionality that will allow us to meet the needs of people in differentiated segments of the insulin-dependent diabetes market , including the following : t : sport insulin delivery system – approximately half the size of our t : slim x2 pump , the t : sport pump is being designed for people who seek even greater discretion and flexibility with the use of their insulin pump . we anticipate that t : sport will feature a 200-unit cartridge , an on-pump bolus button , a rechargeable battery , an aid algorithm , and a bluetooth radio . t : sport is being designed for use with leading u-100 insulins , and we are evaluating the use of insulin concentrates to provide to people with greater insulin needs . we anticipate that t : sport will be our first insulin pump to support full pump-control from our mobile application , subject to fda review and approval . a separate controller may be offered in addition to or in advance of full mobile control availability . 53 connected ( mobile ) health offerings – we are currently preparing for the launch of a mobile application that has been designed to utilize the capability of the bluetooth radio integrated with the t : slim x2 to wirelessly upload pump data to t : connect , receive notification of pump alerts and alarms , and provide a discrete , secondary display of glucose and insulin data . future updates of this app will integrate other health-related information from third party sources , and support future pump-control capabilities for our products under development . story_separator_special_tag ◦ the launch of the first generation of this mobile application in the united states follows the roll-out of our control-iq technology and , by allowing for the wireless upload of data to t : connect , is intended to reduce patient burden and increase healthcare provider office efficiency by reducing the manual steps historically required for data extraction . ◦ over time , we also intend to offer additional features and enhancements to the mobile application , including partial or full control of pump features . for additional information , see the section of this annual report under the caption “ business ” in part i , item 1. pump shipments from inception through june 2018 , we derived nearly all of our sales from the shipment of insulin pumps and associated supplies to customers in the united states . starting in the third quarter of 2018 , we commenced sales of our t : slim x2 insulin pump in select international geographies . we consider the number of insulin pump units shipped per quarter to be an important metric for managing our business . in the four-year period ended december 31 , 2019 , we shipped approximately 142,000 insulin pumps , of which approximately 118,000 were shipped to customers in the united states , and approximately 24,000 were shipped to international markets . in the year ended december 31 , 2019 , we shipped 73,431 insulin pumps worldwide , compared to 34,493 insulin pumps shipped in 2018 . pump shipments to customers in the united states by fiscal quarter were as follows : replace_table_token_6_th pump shipments to international customers by fiscal quarter were as follows : replace_table_token_7_th 54 technology upgrade program beginning in the third quarter of 2016 through the third quarter of 2017 , we offered a technology upgrade program under a variable pricing structure , as a pathway for certain existing customers to obtain the t : slim x2 . the accounting treatment for the program required us to defer up to 100 % of sales at the time of pump shipment and recognize them in a subsequent period , either when the upgrade was fulfilled or at the expiration of the program . we recognized the deferred amount of sales and cost of sales at the earlier of when the obligations under the program were satisfied or upon the expiration of the program . if a customer elected to participate in the program , we recognized any upgrade fees that we received and the associated costs at the time of fulfilling the given obligation . for the year ended december 31 , 2017 , we recorded incremental net sales of $ 5.0 million with a corresponding increase of $ 3.1 million in gross profit as a result of the technology upgrade program . the program expired on september 30 , 2017 and , therefore , had no impact on our 2018 and 2019 financial results . trends impacting financial results overall , we have experienced considerable sales growth since the commercial launch of our first product in the third quarter of 2012 , while incurring operating losses since our inception . our operating results have historically fluctuated on a quarterly or annual basis , particularly in periods surrounding anticipated regulatory approvals , the commercial launch of new products by us and our competitors , and the commercial launch of our products in geographies outside of the united states . we expect these periodic fluctuations in our operating results to continue . we believe that our financial condition and operating results , as well as the decision-making process of our current and potential customers , has been and will continue to be impacted by a number of general trends , including the following : market acceptance of our products and competitive products by people with insulin-dependent diabetes , their caregivers and healthcare providers ; the introduction of new products , treatment techniques or technologies for the treatment of diabetes , including the timing of the commercialization of new products by us and our competitors ; seasonality in the united states associated with annual insurance deductibles and coinsurance requirements associated with the medical insurance plans utilized by our customers and the customers of our distributors ; timing of holidays and summer vacations , which may vary by geography ; the buying patterns of our distributors and other customers , both domestically and internationally ; changes in the competitive landscape , including as a result of companies entering or exiting the diabetes therapy market ; access to adequate coverage and reimbursement for our current and future products by third-party payors , and reimbursement decisions by third-party payors ; the magnitude and timing of any changes to our facilities , manufacturing operations and other infrastructure ; anticipated and actual regulatory approvals of our products and competitive products ; and product recalls impacting , or the suspension or withdrawal of regulatory clearance or approval relating to , our products or the products of our competitors . in addition to these general trends , we believe the following specific factors have materially impacted , and could continue to materially impact our business going forward : continued increase in demand following the commercial launch of t : slim x2 and the demonstrated success of our tandem device updater ; anticipated new product launches ; increased opportunity to achieve customer renewals as customers become eligible for insurance reimbursement to purchase a new insulin pump at the end of the typical four-year reimbursement cycle ; benefit in 2018 and 2019 following the announcement by johnson & johnson that it discontinued the operations of animas corporation ( animas ) and discontinued availability of animas pump supplies in september 2019 ; 55 designation by unitedhealthcare of one of our competitors as its preferred , in-network durable medical equipment provider of insulin pumps for most customers age seven and above ; ability to enter into and maintain agreements with cgm partners for cgm integration ; expansion and new product launches in select international geographies ; accounting variability and complexity associated with certain commercial programs , such as the technology upgrade program
| domestic sales by product were as follows ( in thousands ) : replace_table_token_9_th 59 international sales by product were as follows ( in thousands ) : replace_table_token_10_th sales to distributors accounted for 73 % and 78 % of our total domestic sales for the years ended december 31 , 2019 and 2018 , respectively . our percentage of sales to distributors versus individual customers is principally determined by the mix of customers ordering our products within the period and whether or not we have a contractual arrangement with their underlying third-party insurance payor . sales to distributors accounted for 92 % and 100 % of our total international sales for the years ended december 31 , 2019 and 2018 , respectively . cost of sales and gross profit . our cost of sales in 2019 was $ 168.1 million , resulting in gross profit of $ 194.2 million , compared to $ 94.0 million of cost of sales in 2018 resulting in gross profit of $ 89.8 million . the gross margin for 2019 was 54 % , compared to 49 % in 2018 . the improvement in both gross profit and gross margin was primarily the result of the increase in insulin pump sales which have a higher gross margin than pump-related supplies . gross margin and gross profit also increased as a result of per-unit manufacturing cost improvements from higher production volumes and continued overall manufacturing efficiencies gained from our new manufacturing facility which became fully operational at the beginning of 2018. on an aggregate basis , other non-manufacturing costs , which primarily consist of warranty , freight and training costs , also reflected improvement on a per unit basis . non-cash stock-based compensation expense allocated to cost of sales increased to $ 6.4 million in 2019 compared to $ 2.6 million in 2018 , due primarily to the valuation of certain 2018 and 2019 employee stock option grants and the impact on the valuation of the significant increase in our stock price . selling , general and administrative expenses . sg & a expenses increase d 58 % to $ 165.7 million in 2019 from $ 105.2 million in 2018 . employee-related expenses for our sg & a functions comprise the majority of the
| 11,606 |
refer to `` mortgage insurance portfolio '' for additional discussion of changes in our niw mix during 2019. competition pmi . the private mortgage insurance industry is highly competitive and is expected to remain so . we believe that we currently compete with other private mortgage insurers based on premium rates , underwriting requirements , financial strength ( including based on credit or financial strength ratings ) , customer relationships , name recognition , reputation , strength of management teams and field organizations , the ancillary products and services provided to lenders and the effective use of technology and innovation in the delivery and servicing of our mortgage insurance products . pricing practices much of the competition in the industry in the last few years has centered on pricing practices which have included : ( i ) reductions in standard filed rates ; ( ii ) use of customized rate plans ( typically lower than standard rates ) that are made available to lenders that meet certain criteria ; and ( iii ) use of a spectrum of filed rates to allow for formulaic , risk-based pricing that may be quickly adjusted within certain parameters ( referred to as `` risk-based pricing systems '' ) . we expect premium rates to continue to decline . in 2019 , we introduced miq , our risk-based pricing system that establishes our premium rates based on more risk attributes than were considered in 2018. gse risk share transactions in 2018 , the gses initiated secondary mortgage market programs with loan level mortgage default coverage provided by various ( re ) insurers that are not mortgage insurers governed by pmiers , and that are not selected by the lenders . due to differences in policy terms , these mgic investment corporation 2019 form 10-k | 47 mgic investment corporation and subsidiaries management 's discussion and analysis | glossary of terms and acronyms programs may offer premium rates that are below prevalent single premium lpmi rates . while we view these programs as competing with traditional private mortgage insurance , we have participated in them and may participate in future gse or other programs . the gses ( and other investors ) have also used other forms of credit enhancement that did not involve traditional private mortgage insurance , such as engaging in credit-linked note transactions executed in the capital markets , or using other forms of debt issuances or securitizations that transfer credit risk directly to other investors , including competitors and an affiliate of mgic ; using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage ; or accepting credit risk without credit enhancement . government programs . pmi also competes against government mortgage insurance programs such as the fha , va , and usda , primarily for lower fico score business . while the combined market share of primary mortgage insurance written by government programs continued to exceed that written by pmi in 2019 , pmi recaptured some share from those programs . the strong refinance markets increased pmi 's share of refinances in 2019 , and pmi premium rate reductions , have contributed to a pmi market share at its highest level since the financial crisis . refer to `` mortgage insurance portfolio '' for additional discussion of the 2019 business environment and the impact it had on operating measures including niw , iif and rif . pmiers since december 31 , 2015 we have operated under the requirements of the pmiers of the gses in order to insure loans delivered to or purchased by them . the pmiers include financial requirements as well as business , quality control and certain transactional approval requirements . the financial requirements of the pmiers require a mortgage insurer 's `` available assets '' ( generally only the most liquid assets of an insurer ) to equal or exceed its `` minimum required assets '' ( which are based on an insurer 's book of insurance in force , calculated from tables of factors with several risk dimensions , reduced for credit given for risk ceded under reinsurance transactions , and subject to a floor amount ) . based on our application of the more restrictive pmiers , mgic 's available assets under pmiers totaled $ 4.6 billion , an excess of $ 1.2 billion over its minimum required assets at december 31 , 2019 . business outlook for 2020 our outlook for 2020 should be viewed against the backdrop of the business environment discussed above . niw our niw is affected by total mortgage originations , the percentage of total mortgage originations using private mortgage insurance ( the `` pmi penetration rate '' ) , and our market share within the pmi industry . as of late january 2020 , the total mortgage origination forecasts indicate mortgage originations of $ 2 trillion in 2020. the purchase originations are expected to increase in 2020 , compared to 2019. our niw from refinance originations is expected to be lower in 2020 compared to a strong 2019. in 2019 , the majority of the refinances were from recent books that experienced only a modest level of price appreciation . therefore , many of the refinanced loans in 2019 required mortgage insurance . as a result , we expect the pmi penetration rate to decline somewhat in 2020. the widespread use of loan level pricing systems by the pmi industry makes it more difficult to compare our rates to those offered by our competitors . we may not be aware of industry rate changes until we observe that our volume of niw has changed . in addition , business under customized rate plans is awarded by certain customers for only limited periods of time . as a result , our niw may fluctuate more than it had in the past . story_separator_special_tag iif and rif our iif increased 6.0 % in 2019 and we expect our iif to grow in 2020. our book of iif is an important driver of our future revenues , and its growth is driven by our ability to generate niw and retain existing policies in force , as measured by our persistency . interest rates influence both our niw and persistency . in a rising rate environment , total mortgage originations may decline , however , we would also expect policy cancellation rates to decline , and in turn increase persistency , although the impact generally lags the change in interest rates . results of operations premiums . despite an increase in iif , we expect our 2020 earned premiums ( on a direct basis ) to be lower than they were in 2019. overall , our premium rates have been trending down in recent years , including in 2019 , and the books of business written at lower rates represent an increasing percentage of our total iif . our 2020 direct premiums written and net premiums earned are expected to be lower than 2019. our net premiums earned will be impacted by the decrease in premium rates noted above and by the amount of premiums we cede under our quota share and excess of loss reinsurance transactions . the amount of profit commission we receive , which reduces the amount of premiums we cede , is variable year-to-year and is dependent on the amount of losses ceded . our profit commission in recent years has benefited from favorable loss reserve development associated with delinquency notices received in prior years . the actual amount of premiums we cede in 2020 will be affected mgic investment corporation 2019 form 10-k | 48 mgic investment corporation and subsidiaries management 's discussion and analysis | glossary of terms and acronyms by any changes in our reinsurance coverage , such as the addition of new excess of loss coverage . factors that affect the amount of premiums we earn from our iif are further discussed in our `` consolidated results of operations - premium yield . '' investment income . net investment income is a material contributor to our results of operations . we expect net investment income in 2020 to be comparable to 2019. we expect our invested assets will remain relatively flat as we return capital to our shareholders ( see `` capital '' below ) . the amount of investment income will be impacted by the change in the yield we can earn on investments . losses . we expect 2020 losses incurred with respect to delinquency notices received in 2020 to be lower than the comparable amount for 2019 as we expect to receive fewer new delinquency notices in 2020. income taxes . we expect our 2020 effective tax rate to be approximately 21 % . capital mgic dividend payments to our holding company in 2019 and 2018 , mgic paid a total of $ 280 million and $ 220 million , respectively , in dividends to our holding company . we have received the appropriate approvals for mgic to pay to our holding company , in the first quarter of 2020 , a special dividend of $ 320 million and a quarterly dividend of $ 70 million . we expect to use most of the proceeds of the special dividend to repurchase our common stock as discussed below . we expect mgic to pay quarterly dividends totaling at least $ 280 million per year , subject to approval by mgic 's board of directors . we ask the oci not to object before mgic pays dividends . share repurchase programs in 2019 and 2018 , we repurchased approximately 8.7 million and 16.0 million shares of our common stock , respectively , using approximately $ 114 million and $ 175 million , respectively , of holding company resources . we received approval to repurchase up to an additional $ 300 million of our common stock through the end of 2021. the following table shows details of our share repurchase programs . replace_table_token_13_th from january 1 , 2020 , through february 19 , 2020 , we repurchased approximately 2.5 million shares of our common stock for approximately $ 35 million . repurchases may be made from time to time on the open market ( including through 10b5-1 plans ) or through privately negotiated transactions . the repurchase programs may be suspended for periods or discontinued at any time . as of december 31 , 2019 , we had approximately 347 million shares of common stock outstanding . dividends to shareholders in 2019 , mgic paid dividends of $ 0.06 per common share to its shareholders in the third and fourth quarters totaling $ 42 million . on january 27 , 2020 , our board of directors declared a quarterly cash dividend of $ 0.06 per common share to shareholders of record on february 11 , 2020 , payable on february 28 , 2020. for additional information about how the payment of dividends by our holding company will result in an adjustment to the conversion rate and price of our convertible securities , see our risk factor titled “ your ownership in our company may be diluted by additional capital that we raise or if the holders of our outstanding convertible debt convert that debt into shares of our common stock ” in item 1a . gses we must comply with a gse 's pmiers to be eligible to insure loans delivered to or purchased by that gse . the pmiers include financial requirements , as well as business , quality control and certain transaction approval requirements .
| the average duration and embedded investment yield of our investment portfolio as of december 31 , 2019 , 2018 , and 2017 is shown in the following table . replace_table_token_41_th ( 1 ) embedded investment yield is calculated on a yield-to-worst basis . the credit risk of a security is evaluated through analysis of the security 's underlying fundamentals , including the issuer 's sector , scale , profitability , debt coverage , and ratings . the investment policy guidelines limit the amount of our credit exposure to any one issue , issuer and type of instrument . the following table shows the security ratings of our fixed income investments as of december 31 , 2019 and 2018 . replace_table_token_42_th ( 1 ) ratings are provided by one or more of : moody 's , standard & poor 's and fitch ratings . if three ratings are available , the middle rating is shown ; otherwise the lowest rating is shown . our investment portfolio mix was comparable for the years ended december 31 , 2019 and december 31 , 2018. see note 5 – “ investments ” to our consolidated financial statements for additional disclosure on our investment portfolio . mgic investment corporation 2019 form 10-k | 71 mgic investment corporation and subsidiaries management 's discussion and analysis | glossary of terms and acronyms investments outlook the u.s. economy continued to grow in 2019 and is expected to continue to grow at a slower rate in 2020. against this positive macroeconomic backdrop , which includes very low unemployment , the federal open market committee left its benchmark interest rate at a range of 150 to 175 basis points as of december 31 , 2019 and has signaled that it does not expect increases in 2020. our investment portfolio of fixed income securities is subject to interest rate risk and its fair value is likely to decline in a rising interest rate environment . we seek to manage our exposure to interest rate risk and volatility by maintaining
| 11,607 |
the increase in new homes delivered was a result of the higher backlog to start the year and a 16 % order growth during the year . due to the timing of our acquisition of a dallas based homebuilder in mid-december , the acquisition did not materially impact current year results . tri pointe homes reported a 16 % increase in home sales revenue as a result of a 12 % increase in new homes delivered and a 3 % increase in average sales price . the increase in new homes delivered was driven by a larger opening balance of backlog entering the current year compared to 2017. home sales revenue increased at winchester homes by 15 % largely due to a 10 % increase in new homes delivered as a result of a greater number of backlog units to start the year compared to the prior-year period and a 5 % increase in average sales price due to product mix . - 48 - homebuilding gross margins ( dollars in thousands ) replace_table_token_19_th ( 1 ) non-gaap financial measure ( as discussed below ) . our homebuilding gross margin percentage increased to 21.8 % for the year ended december 31 , 2018 , as compared to 20.5 % for the year ended december 31 , 2017 . the increase in gross margin percentage was due to the mix of deliveries , with a greater proportion of deliveries from our long-dated california communities , which produce gross margins above the company average . in addition , gross margin percentage increased due to the accounting changes resulting from the adoption of asc 606 on january 1 , 2018. for further details on asc 606 , see note 1 , organization and summary of significant accounting policies of the notes to our consolidated financial statements included elsewhere in this annual report on form 10-k. excluding interest and impairments and lot option abandonments in cost of home sales , adjusted homebuilding gross margin percentage was 24.5 % for the year ended december 31 , 2018 compared to 22.9 % for the prior year period . adjusted homebuilding gross margin is a non-gaap financial measure . we believe this information is meaningful as it isolates the impact that leverage and noncash charges have on homebuilding gross margin and permits investors to make better comparisons with our competitors , who adjust gross margins in a similar fashion . see the table above reconciling this non-gaap financial measure to homebuilding gross margin , the nearest gaap equivalent . land and lot gross margins ( dollars in thousands ) replace_table_token_20_th our land and lot negative gross margin percentage for the year ended december 31 , 2018 was impacted by a $ 17.5 million settlement payment in connection with the settlement of the scripps lawsuit , which is described in more detail in item 3 of this annual report on form 10-k. during the year ended december 31 , 2017 , pardee homes sold a parcel consisting of 69 homebuilding lots , located in the pacific highlands ranch community in san diego , california , representing $ 66.8 million in land and lot sales revenue and $ 56.1 million in land and lot gross margin . this sale resulted in significant gross margin due to the low land basis of the pacific highlands ranch community , which was acquired in 1981. land and lot sales gross margin percentage can vary significantly due to the type of land and its related cost basis . additionally , we expect land and lot sales revenue to vary significantly between reporting periods based on our business decisions to maintain or decrease our land ownership in various markets . our land and lot sale decisions will be based on a variety of factors , including , without limitation , prevailing market conditions . - 49 - sales and marketing , general and administrative expense ( dollars in thousands ) replace_table_token_21_th sales and marketing expense as a percentage of home sales revenue increased to 5.8 % for the year ended december 31 , 2018 from 5.0 % for the year ended december 31 , 2017 . the increase was due primarily to advertising costs impacted by the timing of future community openings . this was offset by the higher operating leverage on the fixed components of sales and marketing expenses as a result of the 19 % increase in homes sales revenue . sales and marketing expense increased to $ 187.3 million compared to $ 137.1 million in the prior-year period due to higher advertising costs and the variable cost associated with higher home sales revenue , in addition to the accounting changes resulting from the adoption of asc 606 on january 1 , 2018. for further details on asc 606 , see note 1 , organization and summary of significant accounting policies of the notes to our consolidated financial statements included elsewhere in this annual report on form 10-k. general and administrative expense as a percentage of home sales revenue decreased to 4.8 % for the year ended december 31 , 2018 from 5.1 % in the prior year . the decrease was primarily the result of higher operating leverage as a result of the 19 % increase in homes sales revenue during the year . general and administrative expense increased by $ 17.3 million to $ 155.0 million for the year ended december 31 , 2018 from $ 137.8 million for the prior year ended december 31 , 2017. the increase in general and administrative expenses is primarily related to incremental costs associated with the additional headcount to support future growth in our newer markets of los angeles and sacramento , california , austin and dallas–fort worth , texas and our new division in the carolinas . total sales and marketing and g & a ( “ sg & a ” ) expense increased $ 67.5 million , or 25 % , to $ 342.3 million for the year ended december 31 , 2018 from $ 274.8 million in the prior year period . story_separator_special_tag sg & a increased to 10.6 % of home sales revenue from 10.1 % for the years ended december 31 , 2018 and 2017 , respectively . interest interest , which was incurred principally to finance land acquisitions , land development and home construction , totaled $ 91.6 million and $ 84.3 million for the years ended december 31 , 2018 and 2017 , respectively . all interest incurred in both periods was capitalized . the increase in interest incurred during the year ended december 31 , 2018 as compared to the prior year was primarily attributable to an increase in our debt balance and weighted average interest rate , as a result of the issuance of our $ 300.0 million aggregate principal amount of 5.250 % senior notes due 2027 ( the “ 2027 notes ” ) in june 2017. income tax for the year ended december 31 , 2018 , we have recorded a tax provision of $ 90.6 million based on an effective tax rate of 25.0 % . for the year ended december 31 , 2017 , we recorded a tax provision of $ 152.3 million based on an effective tax rate of 44.8 % . the decrease in the current year income tax rate was due to the lower federal tax rate resulting from the tax cuts and jobs act that was signed into law in december 2017. in addition to the lower rate resulting from this legislation , we recorded a prior year charge of $ 22.0 million as a result of the re-measurement of our deferred tax assets . financial services segment income from our financial services operations increased to $ 9.7 million for the year ended december 31 , 2018 compared to income of $ 7.5 million in the prior year . the increase in financial services income for the year ended december 31 , 2018 compared to the prior year primarily relates to the growth of our mortgage financing and title services operations . both our mortgage financing and title service operations were started in late 2014 and have experienced steady year over year growth from inception . in early 2018 , we further expanded our suite of financial services operations to include homeowners insurance services . investments in unconsolidated entities - 50 - total equity in income ( loss ) from unconsolidated entities was $ 8.1 million for the year ended december 31 , 2018 compared to a loss of $ 5.0 million for the year ended december 31 , 2017. included in total equity in income ( loss ) from unconsolidated entities is activity from our financial services segment of $ 8.5 million and $ 6.4 million for the years ended december 31 , 2018 and 2017 , respectively . the change in income for the current year compared to the loss in the prior year is primarily driven by a $ 13.2 million impairment charge during the fourth quarter of 2017 related to a joint venture formed as a limited liability company in 1999 for the entitlement and development of land located in los angeles county , california . this impairment charge in 2017 is included in equity in ( loss ) income of unconsolidated entities under our homebuilding operations on the consolidated statements of operations . lots owned or controlled by segment excluded from lots owned or controlled are those related to note 6 , investments in unconsolidated entities , of the notes to our consolidated financial statements included elsewhere in this annual report on form 10-k. the table below summarizes our lots owned or controlled by segment as of the dates presented : replace_table_token_22_th ( 1 ) as of december 31 , 2018 and 2017 , lots controlled included lots that were under land option contracts or purchase contracts . - 51 - year ended december 31 , 2017 compared to year ended december 31 , 2016 net new home orders , average selling communities and monthly absorption rates by segment replace_table_token_23_th net new home orders for the year ended december 31 , 2017 increased 19 % to 5,075 , compared to 4,248 for the prior year . the increase in net new home orders was due to an overall 10 % increase in monthly absorption rates and an 8 % increase in average selling communities . overall , the markets in which we operate continued to have strong demand , which is demonstrated by increased absorption rates in all but one of our reportable segments for the year ended december 31 , 2017. maracay reported an 11 % decrease in net new home orders driven by an 18 % decrease in average selling communities offset by a 10 % increase in monthly absorption rate . the increase in monthly absorption rate was the result of strong market fundamentals in our arizona markets and successful new product offerings during the year . the decrease in average selling communities was due to the timing of community openings and closings compared to the prior year . pardee homes increased net new home orders by 31 % mainly due to a 27 % increase in average selling communities along with a 2 % increase in monthly absorption rate . demand remained strong in all of the markets in which pardee homes operated . net new home orders increased by 16 % at quadrant homes largely due to the 22 % increase in monthly absorption rate . the increase in monthly absorption rate was the result of our well-located communities and continued strong market fundamentals . trendmaker homes increased net new home orders by 3 % due to a 9 % increase in average selling communities offset by a 7 % decrease in monthly absorption rate , partly due to the loss of two weeks of selling due to the impact of hurricane harvey . the houston market continued to experience softer market conditions due to the volatility in oil prices in recent years and the related impact on job growth .
| even though overall housing market fundamentals remain strong , we believe home buyer demand will remain slow compared to the exceptional market experienced in the first quarter of 2018. we remain optimistic about the long-term outlook for our industry and our company due to the strength of the u.s. economy , overall job growth and healthy consumer confidence , which , along with pent-up demand from young adults , we believe will lead to growing household formations . in addition , the overall supply of new and existing homes on the market remains at low levels , and finished lot availability in most of the markets in which we build remains constrained . - 45 - consolidated financial data ( in thousands , except share and per share amounts ) : replace_table_token_15_th year ended december 31 , 2018 compared to year ended december 31 , 2017 net new home orders , average selling communities and monthly absorption rates by segment replace_table_token_16_th - 46 - net new home orders for the year ended december 31 , 2018 decreased 8 % to 4,686 , compared to 5,075 for the prior year . the decrease in net new home orders was due to an overall 9 % decrease in monthly absorption rates slightly offset by a 2 % increase in average selling communities . overall , the markets in which we operate demonstrated very strong demand through the first half of the year with a slower monthly absorption pace throughout the second half of the year . the decline in monthly absorption rates in the second half of the year was due to reduced overall demand resulting from rising mortgage interest rates and affordability concerns in certain markets , most notably in northern california communities at our tri pointe homes brand and in the seattle area communities at our quadrant homes brand . maracay reported a 21 % decrease in net new home orders driven by an 19 % decrease in average selling communities and a 3 % decrease in monthly absorption rate . the 3.3 monthly absorption rate was the result of strong market fundamentals in our arizona markets and successful new product offerings during the year . the
| 11,608 |
as a result of the settlement , we recognized litigation cost , net of recovery from an indemnification escrow from smartsynch shareholders , of $ 14.7 million , inclusive of attorney 's fees incurred , reflected in our results of operations for the year ended december 31 , 2014 within general and administrative expense . on march 8 , 2013 , our board authorized a 12-month repurchase program of up to $ 50 million in shares of our common stock . the march 8 , 2013 authorization expired on march 7 , 2014. from january 1 , 2014 through march 7 , 2014 , we repurchased 75,203 shares of our common stock , totaling $ 2.9 million . on february 7 , 2014 , our board authorized a 12-month repurchase program of up to $ 50 million in shares of our common stock , to begin on march 8 , 2014 , upon the expiration of the previous stock repurchase program . from march 8 , 2014 through december 31 , 2014 , we repurchased 910,990 shares of our common stock , totaling $ 36.7 million . subsequent to december 31 , 2014 we repurchased 335,251 shares of our common stock . the average price paid per share was $ 39.62 . these subsequent repurchases fully utilized the remaining $ 13.3 million authorized under the program . repurchases are made in the open market or in privately negotiated transactions and in accordance with applicable securities laws . on february 19 , 2015 , itron 's board of directors authorized a new repurchase program of up to $ 50 million of our common stock over a 12-month period , beginning february 19 , 2015. refer to part ii , item 5 : `` market for registrant 's common equity , related stockholder matters and issuer purchases of equity securities '' for additional information related to our current share repurchase program . total company revenues , gross profit and margin , and unit shipments replace_table_token_6_th replace_table_token_7_th 20 meter and module summary we classify meters into three categories : standard metering – no built-in remote reading communication technology advanced metering – one-way communication of meter data smart metering – two-way communication including remote meter configuration and upgrade ( consisting primarily of our openway technology ) in addition , advanced and smart meter communication modules can be sold separately from the meter . our revenue is driven significantly by sales of meters and communication modules . a summary of our meter and communication module shipments is as follows : replace_table_token_8_th revenues revenues increased 1 % , or $ 22.0 million , in 2014 , compared with 2013 . revenues in 2014 were higher , primarily driven by growth in the gas and water segments of 5 % and 7 % , respectively , partially offset by a decline of 5 % in the electricity segment . changes in currency exchange rates unfavorably impacted revenues by $ 31.9 million across all segments . revenues decreased 11 % , or $ 229.5 million , in 2013 , compared with 2012 . revenues in 2013 were lower , primarily driven by the substantial completion of four of our five largest openway projects in the electricity segment in 2012 and by $ 14.6 million in the unfavorable net translation impact of operations denominated in foreign currencies , partially offset by an increase in water revenues during the year . a more detailed analysis of these fluctuations is provided in story_separator_special_tag > gas : revenues - 2014 vs. 2013 gas revenues increased by $ 28.8 million , or 5 % , in 2014 , compared with 2013 . the increase was driven by $ 27.6 million in increased sales in north america and $ 9.2 million and $ 3.7 million in increased product sales in emea and latin america , partially offset by lower professional services revenue in emea of $ 2.2 million . foreign currency translation had an unfavorable impact of $ 9.1 million in 2014. no single customer represented more than 10 % of the gas operating segment revenues in 2014 , 2013 , and 2012 . revenues - 2013 vs. 2012 gas revenues decreased by $ 56.9 million , or 9 % , in 2013 , compared with 2012. the decrease was driven by $ 54.2 million in lower product sales in emea and $ 18.7 million in lower communication module shipments and lower service revenue in north america , the effect of which was partially offset by $ 21.3 million in increased north america gas meter shipments , particularly smart meters . gross margin - 2014 vs. 2013 gross margin was 35.4 % in 2014 , compared with 36.5 % in 2013. the 110 basis point decline in gross margin was primarily the result of less favorable product mix in emea . 23 gross margin - 2013 vs. 2012 gross margin was 36.5 % in 2013 , compared with 37.5 % in 2012 . the 100 basis point decline in gross margin was primarily the result of less favorable product mix and higher warranty costs . operating expenses - 2014 vs. 2013 gas operating expenses increased by $ 12.2 million , or 10 % , in 2014. the increase resulted from an increase in restructuring expense of $ 5.7 million and an increase in product development costs of $ 7.5 million . operating expenses for sales and marketing , product development , general and administrative , and amortization of intangible assets as a percentage of revenues , were 21 % in 2014 and 2013. operating expenses - 2013 vs. 2012 gas operating expenses decreased by $ 801,000 , or 1 % in 2013. lower sales and marketing and product development expenses were partially offset by higher general and administrative expenses . story_separator_special_tag operating expenses for sales and marketing , product development , general and administrative , and amortization of intangible assets as a percentage of revenues , were 21 % in 2013 and 20 % in 2012. water : revenues - 2014 vs. 2013 the increase in revenues of $ 35.6 million , or 7 % , in 2014 was driven primarily by growth in product sales in emea of $ 35.2 million , in north america of $ 3.3 million , and in asia/pacific of $ 2.8 million . latin america experienced growth of $ 2.3 million , which included an unfavorable impact from foreign currency translation of $ 5.9 million . services revenue declined $ 7.9 million during 2014 , with north america contributing $ 6.7 million of the total decline due to the completion of a significant project in 2013. no single customer represented more than 10 % of the water operating segment revenues in 2014 , 2013 , and 2012 . revenues - 2013 vs. 2012 revenues increased $ 15.2 million , or 3 % , in 2013 . this increase was driven primarily by growth in projects in north america of $ 10.2 million . latin america experienced growth of $ 7.0 million , but was negatively impacted by foreign currency translation of $ 4.3 million . gross margin - 2014 vs. 2013 water gross margin increased to 35.1 % in 2014 , compared with 34.6 % in 2013 , due to decreases in manufacturing costs globally , as well as lower service revenue in north america , which carries a lower margin . gross margin - 2013 vs. 2012 water gross margin decreased to 34.6 % in 2013 , compared with 35.1 % in 2012 , driven predominantly by higher service revenues in north america , which have a lower margin , and partially offset by favorable product mix in emea . operating expenses - 2014 vs. 2013 in 2014 , water operating expenses were $ 131.8 million compared with $ 124.5 million in 2013 . the increase was a result of a $ 5.0 million increase in sales and marketing expense , primarily higher compensation expense related to increased revenues , and a $ 3.4 million increase in general and administrative expenses . the overall increase was partially offset by a decrease in intangible asset amortization expense of $ 2.2 million . operating expenses for sales and marketing , product development , general and administrative , and amortization of intangible assets as percentages of revenues were 22 % in 2014 and 2013 . operating expenses - 2013 vs. 2012 in 2013 , water operating expenses were $ 124.5 million , compared with $ 125.5 million in 2012 . decreases of $ 5.9 million in sales and marketing expense and $ 2.1 million in lower amortization of intangible expense were partially offset by increases in product development , general and administrative , and restructuring expenses . operating expenses for sales and marketing , product development , general and administrative , and amortization of intangible assets as percentages of revenues were 22 % in 2013 , compared with 24 % in 2012 . corporate unallocated : operating expenses not directly associated with an operating segment are classified as “ corporate unallocated. ” these expenses increased 51 % to $ 70.3 million in 2014 , compared with 2013 , primarily due to $ 14.5 million in increased restructuring expenses 24 in 2014 , as well as $ 8.9 million in general and administrative expenses - due to increased variable compensation expense and costs associated with our shared services center in ireland , which was established late in 2013. corporate unallocated expenses increased 7 % to $ 46.4 million in 2013 , compared with 2012 , primarily due to $ 2.7 million in increased restructuring expenses in 2013 , as well as $ 3.8 million in sales and marketing costs , which are no longer allocated to the operating segments . these increases were partially offset by a decline in general and administrative expenses , including $ 3.0 million in acquisition-related expenses incurred in 2012 that did not recur in 2013. operating expenses the following table details our total operating expenses in dollars and as a percentage of revenues : replace_table_token_10_th 2014 vs. 2013 operating expenses decreased $ 130.4 million in 2014 , compared with 2013. the 2013 operating expenses included $ 173.2 million in goodwill impairment charges associated with the electricity reporting unit compared with $ 1.0 million in 2014. the decline in goodwill impairment was partially offset by a $ 15.4 million increase in restructuring expense following the approval of the 2014 projects . in addition , general and administrative expenses increased by $ 20.5 million due to litigation costs and higher variable compensation . operating expenses for sales and marketing , product development , general and administrative , and amortization of intangible assets represented 29 % of revenues in 2014 , compared with 28 % in 2013 . 2013 vs. 2012 operating expenses increased $ 185.7 million in 2013 , compared with 2012 . the 2013 operating expenses included $ 173.2 million in goodwill impairment charges associated with the electricity reporting unit , as well as $ 35.5 million in restructuring expenses , which represented the majority of total expected expenses under our 2013 projects initiated in the third quarter of 2013. operating expenses for sales and marketing , product development , general and administrative , and amortization of intangible assets represented 28 % of revenues in 2013 , compared with 26 % in 2012. sales and marketing and product development expenses decreased in 2013 compared with 2012 , primarily due to our restructuring activities under the 2011 projects that were completed in june 2013. in addition , scheduled decreases in intangible asset amortization resulted in $ 5.8 million in lower operating expenses . these decreases were partially offset by an increase in general and administrative expenses of $ 4.3 million , primarily as a result of higher litigation expense .
| 21 operating segment results for a description of our operating segments , refer to item 8 : “ financial statements and supplementary data , note 16 : segment information ” in this annual report on form 10-k. the following tables and discussion highlight significant changes in trends or components of each operating segment . replace_table_token_9_th electricity : revenues - 2014 vs. 2013 electricity revenues for 2014 decreased by $ 42.4 million , or 5 % , compared with 2013 revenues . the decrease was primarily driven by lower product volumes and services in emea , resulting in a $ 40.8 million decline in revenue . in addition , latin america had a decline in product revenue of $ 12.1 million primarily due to our decision to reduce the manufacture and sale of standard meters in the region as part of our restructuring projects . these decreases were partially offset by $ 27.6 million in increased product sales and professional services in north america . the net translation effect of our operations in foreign currencies negatively impacted 2014 revenues by $ 14.9 million . no customer represented more than 10 % of the electricity operating segment revenues in 2014 . 22 revenues - 2013 vs. 2012 electricity revenues for 2013 decreased by $ 187.8 million , or 18 % , compared with 2012 revenues . the decrease was primarily driven by $ 246.3 million in lower revenue of our five largest openway projects in north america , as four of these projects were substantially completed during 2013. lower prepayment meter shipments drove a decrease of $ 24.8 million in our asia/pacific region . these decreases were partially offset by $ 81.5 million in increased products and services in north america , apart from the five largest openway projects , as well as by $ 27.3 million in increased product shipments and services in emea . the net translation effect of our operations in foreign currencies negatively impacted 2013 revenues by $ 18.1 million . no customer represented more than 10 % of the electricity operating segment revenues in 2013 , while one customer individually represented 17 % of the electricity operating segment revenues in 2012. gross margin -
| 11,609 |
on may 9 , 2020 , our board authorized the modification of the stock repurchase plans to provide for the repurchase , from time to time , of up to an aggregate of $ 50 million in shares of its class a common stock , 8.250 % series a cumulative redeemable preferred stock , $ 0.01 par value per share ( “ series a preferred stock ” ) , 7.625 % series c cumulative redeemable preferred stock , $ 0.01 par value per share ( “ series c preferred stock ” ) , and or 7.125 % series d cumulative preferred stock , $ 0.01 par value per share ( “ series d preferred stock ” ) . on october 29 , 2020 , our board authorized new stock repurchase plans for the repurchase , from time to time , of up to an aggregate of $ 75 million in shares of the company 's class a common stock , series a preferred stock , series c preferred stock and or series d preferred stock to be conducted in accordance with rules 10b5-1 and 10b-18 of the securities exchange act of 1934 , as amended ( the “ exchange act ” ) . on february 9 , 2021 , our board authorized the modification of the stock repurchase plans to provide for the repurchase , from time to time , of up to an aggregate of $ 150 million in shares of our class a common stock , series c preferred stock and or series d preferred stock . the repurchase plans will terminate at the close of the nyse american trading day on which we file our form 10-q with the sec for the quarter ended september 30 , 2021. the extent to which we repurchase shares of our class a common stock , series a preferred stock , series c preferred stock , and or series d preferred stock under the repurchase plans , and the timing of any such repurchases , depends on a variety of factors including general business and market conditions and other corporate considerations . stock repurchases under the repurchase plans may be made in the open market or through privately negotiated transactions , subject to certain price limitations and other conditions established under the plans . open market repurchases will be structured to occur in conformity with the method , timing , price and volume requirements of rule 10b-18 of the exchange act . during the year ended december 31 , 2020 , we repurchased shares under the repurchase plans as follows : 3,983,842 shares of class a common stock , 163,068 shares of series a preferred stock , 27,905 shares of series c preferred stock and 76,264 shares of series d preferred stock for a total purchase price of approximately $ 46.4 million . during the year ended december 31 , 2019 , we repurchased 1,313,328 shares of class a common stock under the repurchase plans for a total purchase price of approximately $ 14.1 59 million . during the life of all repurchase plans , the total purchase price of shares repurchased by us is approximately $ 69.5 million , and as of december 31 , 2020 , the value of shares that may yet be purchased under the repurchase plans is $ 56.1 million . covid-19 we continue to monitor the impact of the covid-19 pandemic on all aspects of our business and apartment communities , including how it will impact our tenants and business partners . while we collected 97 % of rents from our multifamily properties for the three months ended december 31 , 2020 , going forward we can not predict the impact that the covid-19 pandemic will have on our financial condition , results of operations and cash flows due to numerous uncertainties . these uncertainties include the scope , severity and duration of the pandemic , the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures , among others . the outbreak of covid-19 across the globe , including the united states , has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets . the global impact of the outbreak has been rapidly evolving and , as cases of covid-19 , including mutating variants of covid-19 , have continued to be identified in additional countries , many countries , including the united states , have reacted by instituting quarantines , mandating business and school closures and restricting travel . certain states and cities , including where we own communities , have developments and where our company has places of business located , have also reacted by instituting quarantines , restrictions on travel , “ stay-at-home ” orders , restrictions on types of business that may continue to operate , and or restrictions on the types of construction projects that may continue . we can not predict if additional states and cities will implement similar restrictions or when restrictions currently in place will expire . as a result , the covid-19 pandemic is negatively impacting almost every industry directly or indirectly , including industries in which our tenants are employed . further , the impacts of a potential worsening of global economic conditions and the continued disruptions to , and volatility in , the credit and financial markets , consumer spending as well as other unanticipated consequences remain unknown . we also are unable to predict the impact that covid-19 will have on our tenants , business partners within our network , and our service providers ; and therefore , any material effect on these parties could adversely impact us . as of december 31 , 2020 , we collected 97 % of rents from our multifamily properties for the three months ended december 31 , 2020. as of january 31 , 2021 , we collected 97 % of january rents from our multifamily properties . story_separator_special_tag in addition , we have provided rent deferral payment plans as a result of hardships certain tenants experienced due to the impact of covid-19 decreasing from 1 % in the quarter ended june 30 , 2020 , to 0.2 % in the quarter ended december 31 , 2020. although we expect to continue to receive tenant requests for rent deferrals in the coming months , we do not expect to waive our contractual rights under our lease agreements . further , while occupancy remains strong at 95.4 % and 95.6 % as of december 31 , 2020 and january 31 , 2021 , respectively , in future periods , we may experience reduced levels of tenant retention as well as reduced foot traffic and lease applications from prospective tenants as a result of covid-19 impact . during the fourth quarter , we recorded a provision for credit losses of $ 16.4 million on our preferred equity , mezzanine loan and ground lease investments , of which $ 15.9 million relates to our alexan southside place preferred equity investment . consistent with the overall houston — medical center submarket , alexan southside place lost significant value since the onset of the covid-19 pandemic given the pandemic 's impact on demand within the submarket . the provision for credit loss recorded on our alexan southside place investment is a result of this change in the submarket , its impact on the underlying operations of the alexan southside place preferred equity investment , and the likelihood that the joint venture will sell before recovery . the impact of the covid-19 pandemic on our rental revenue for 2021 and thereafter can not be determined at present . the situation surrounding the covid-19 pandemic remains uncertain , and we are actively managing our response in collaboration with business partners in our network and service providers and assessing potential impacts to our financial position and operating results , as well as potential adverse developments in our business . for further information regarding the impact of covid-19 on the company , see part ii , item 1a titled “ risk factors. ” while we expect covid-19 to adversely impact our tenants in the short term , we believe the knowledge economy renter by choice targeted by our class a affordable rent strategy should be less impacted by covid-19 related job loss , which should provide a downside buffer in the interim and allow us to reaccelerate rent growth more quickly once more economic certainty exists around the covid-19 pandemic . since the beginning of the covid-19 pandemic , we have taken actions to prioritize the health and well-being of our tenants and our employees , while maintaining our high standard of service . as of december 31 , 2020 , all our properties are open and are complying with federal , state and local government orders . in keeping with such orders , we have implemented , and will continue to implement , operational changes , including the adoption of social distancing practices , additional use of ppe equipment and a virtual leasing/virtual office structure . our property offices are now open to the public and to residents by appointment and with strict social distancing protocols in place . work orders are now being completed , also with strict safety protocols in place including ppe 60 equipment and a safety questionnaire of each resident at time of request . generally , the outdoor amenity areas at our communities , including pools , pet parks , and outdoor social areas , have re-opened with strict social distancing protocols , limited capacity and cleaning protocols implemented . our properties continue the cleaning protocols for the sanitization of all community common areas ( including handrails , doors and elevators ) . in response to shelter-in-place orders , our corporate offices have also transitioned to a remote work environment . there can be no assurances that the continuation of such remote work arrangements for an extended period of time will not strain our business continuity plans , introduce operational risk , including but not limited to cybersecurity risks , or impair our ability to manage our business . industry outlook we believe that the apartment sector will continue to deliver attractive performance for the foreseeable future due to favorable underlying demographics and supply and demand fundamentals . large demographic trends , including the millennial generation of 90 million entering prime rental age through 2030 , followed by the gen-z generation of 82 million , are projected to form more households than the baby boomer and the gen-x generations , which should drive significant renter demand over the coming decades . as one data point , new research from the national multifamily housing council ( the “ nmhc ” ) indicates that approximately 4.6 million new rental units will be needed to meet projected demand by 2030 , and that current construction trends indicate that only 3 million new units will be delivered . we believe that a significant amount of institutional capital and public reits are primarily focused on investing in the big six gateway markets of boston , new york , washington , d.c. , seattle , san francisco , and los angeles , and that many other primary markets are underinvested by institutional/public capital . as a result , we believe that our target “ next generation , knowledge economy ” markets , which are primary markets below the “ big six , ” provide the opportunity to source investments at cap rates that have the potential to provide not only significant current income , but also attractive capital appreciation . further , given that a significant portion of the nation 's apartment stock was built prior to 1980 , we believe that a number of our target markets are underserved by institutional quality highly amenitized live/work/play apartment properties desired by millennials as they continue to move into their prime rental years .
| interest income from mezzanine loan and ground lease investments decreased $ 1.3 million , or 5 % , to $ 23.3 million for the year ended december 31 , 2020 as compared to $ 24.6 million for the same prior year period primarily due to the consolidation of cade boca raton and a decreased interest rate at domain at the one forty , partially offset by increases in the average balance of mezzanine loans outstanding . expenses property operating expenses increased $ 1.9 million , or 2 % , to $ 76.3 million for the year ended december 31 , 2020 as compared to $ 74.4 million for the same prior year period . this was due to a $ 13.2 million increase from the acquisition of properties in 2020 and 2019 , and a $ 1.1 million increase from same store properties , partially offset by a $ 12.4 million decrease driven by the sales of properties in 2020 and 2019. property noi margins increased to 61.2 % of total revenues for the year ended december 31 , 2020 , from 59.8 % in the prior year period . property noi margins are computed as total property revenues less property operating expenses , divided by total property revenues . property management fees expense increased $ 0.1 million , or 2 % , to $ 5.0 million for the year ended december 31 , 2020 as compared to $ 4.9 million in the same prior year period . property management fees incurred are based on property level revenues ; an increase in property management fees was due to the increase in rental and other property revenues . general and administrative expenses increased $ 1.5 million , or 7 % , to $ 24.1 million for the year ended december 31 , 2020 as compared to $ 22.6 million for the same prior year period . acquisition and pursuit costs amounted to $ 4.2 million for the year ended december 31 , 2020 as compared to $ 0.6 million for the same prior year period . acquisition and pursuit costs incurred for the year ended december 31 , 2020 were primarily related to the write-off of pre-acquisition
| 11,610 |
the company may purchase put options , which reduce the company 's exposure to decreases in oil and natural gas prices while allowing realization of the full benefit from any increases in oil and natural gas prices . if the price falls below the floor , the counterparty pays the difference to the company . the company enters into these various agreements from time to time to reduce the effects of volatile oil and natural gas prices and does not enter into derivative transactions for speculative purposes . presently , none of the company 's derivative positions are designated as hedges for accounting purposes . interest rate risk on december 31 , 2015 , the company 's debt consisted of $ 300 mi llion of outstanding principal related to its second lien loan and $ 40.0 million related to its credit facility . the company is subject to market risk exposure related to changes in interest rates on our indebtedness under the second lien loan and credit facility . as of december 31 , 2015 , the weighted average interest rate on our credit facility borrowings was 2.07 % and the interest rate on our second lien loan borrowings was 8.50 % . an increase or decrease of 1 % in the interest rate would have a corresponding increase or decrease in our annual net income of approximately $ 3.4 million based on the $ 340 million outstanding in the aggregate under the two facilities on december 31 , 2015 . the company is also subject to 61 market risk exposure related to changes in the underlying libor-based interest rate used for the term loan to the extent that available libor election options exceed the 1.0 % floor rate . see note 5 to the consolidated financial statements for more information on the company 's interest rates on debt . counterparty and customer credit risk the company 's principal exposures to credit risk are through receivables from the sale of our oil and natural gas production , joint interest receivables and receivables resulting from derivative financial contracts . the company markets its oil and natural gas production to energy marketing companies . we are subject to credit risk due to the concentration of our oil and natural gas receivables with several significant customers . for the year en ded december 31 , 2015 , t hree purchasers accounted for more than 10 % of our revenue : enterprise crude oil , llc ( 42 % ) ; plains marketing , l.p. ( 19 % ) ; and permian transport and trading ( 15 % ) . we do not require any of our customers to post collateral , and the inability of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results . at december 31 , 2015 our total receivables from the sale of our oil and natural gas production were approximately $ 16.0 million . joint interest receivables arise from billings to entities that own partial interests in the wells we operate . these entities participate in our wells primarily based on their ownership in leases on which we have or intend to drill . we have little ability to control whether these entities will participate in our wells . at december 31 , 2015 our joint interest receivables were approximately $ 19.3 million . at december 31 , 2015 our receivables resulting from derivative contracts were approximately $ 3.9 million . our oil and natural gas derivative arrangements expose us to credit risk in the event of nonperformance by counterparties . most of the counterparties on our derivative instruments currently in place are lenders under our credit facility . we are likely to enter into additional derivative instruments with these or other lenders under our credit facility , representing institutions with an investment grade ratings . we have existing international swap dealers association master agreements ( “ isda agreements ” ) with our derivative counterparties . the terms of the isda agreements provide us and the counterparties with rights of offset upon the occurrence of defined acts of default by either us or a counterparty to a derivative , whereby the party not in default may offset all derivative liabilities owed to the defaulting party against all derivative asset receivables from the defaulting party . at december 31 , 2015 we had a net derivative asset position of $ 19.9 million . 62 item 8. finan cial statements and supplementary data page report of independent registered public accounting firm 63 consolidated balance sheets as of december 31 , 2015 and 2014 64 consolidated statements of operations for each of the three years in the period ended december 31 , 201 5 65 consolidated statements of stockholders ' equity for each of the three years in the period ended december 31 , 2015 66 consolidated statements of cash flows for each of the three years in the period ended december 31 , 2015 67 notes to consolidated financial statements 68 63 report of indepe ndent registered public accounting firm the board of directors and stockholders of callon petroleum company we have audited the accompanying consolidated balance sheets of callon petroleum company as of december 31 , 2015 and 2014 , and the related consolidated statements of operations , stockholders ' equity and cash flows for each of the three years in the period ended december 31 , 2015 . these financial statements are the responsibility of the company 's management . our responsibility is to express an opinion on these financial statements based on our audits . we conducted our audits in accordance with the standards of the public company accounting oversight board ( united states ) . those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement . an audit includes examining , on a test basis , evidence supporting the amounts and disclosures in the financial statements . story_separator_special_tag an audit also includes assessing the accounting principles used and significant estimates made by management , as well as evaluating the overall financial statement presentation . we believe that our audits provide a reasonable basis for our opinion . in our opinion , the financial statements referred to above present fairly , in all material respects , the consolidated financial position of callon petroleum company as of december 31 , 2015 and 2014 , and the consolidated results of its operations and its cash flows for each of the three years in the period ended december 31 , 2015 , in conformity with u.s. generally accepted accounting principles . we also have audited , in accordance with the standards of the public company accounting oversight board ( united states ) , callon petroleum company 's internal control over financial reporting as of december 31 , 2015 , based on criteria established in internal control—integrated framework issued by the committee of sponsoring organizations of the treadway commission ( 2013 framework ) and our report dated march 2 , 2016 , expressed an unqualified opinion thereon . ernst & young llp new orleans , louisiana march 2 , 2016 64 part i. financial information item i. financial statements callon petroleum company consolidated bal ance sheets ( in thousands , except par and per share values and share data ) replace_table_token_34_th the accompanying notes are an integral part of these consolidated financial statements . 65 callon petroleum company consolidated sta tements of operations ( in thousands , except per share data ) replace_table_token_35_th the accompanying notes are an integral part of these consolidated financial statements . 66 callon petroleum company consolidated statem ents of stockholders ' equity ( in thousands ) replace_table_token_36_th the accompanying notes are an integral part of these consolidated financial statements . 67 callon petroleum company consolidated statem ents of cash flows ( in thousands ) replace_table_token_37_th the accompanying notes are an integral part of these consolidated financial statements . 68 callon petroleum company notes to the consolidated financial statements ( all dollar amounts in thousands , except per unit data ) ind ex to the notes to cons olidated financial statements replace_table_token_38_th note 1 - description of busi ness and basis of presentation description of business callon petroleum company is an independent oil and natural gas company established in 1950. the company was incorporated under the laws of the state of delaware in 1994 and succeeded to the business of a publicly traded limited partnership , a joint venture with a consortium of european investors and an independent energy company partially owned by a member of current management . as used herein , the “ company , ” “ callon , ” “ we , ” “ us , ” and “ our ” refer to callon petroleum company and its predecessors and subsidiaries unless the context requires otherwise . callon is focused on the acquisition , development , exploration and exploitation of unconventional , onshore , oil and natural gas reserves in the permian basin in west texas , and more specifically , the midland basin . the company 's operations to date have been predominantly focused on horizontal drilling of several prospective intervals , including multiple levels of the wolfcamp formation and , more recently , the lower spraberry shale . callon has assembled a multi-year inventory of potential horizontal well locations and intends to add to this inventory through delineation drilling of emerging zones on our existing acreage and acquisition of additional locations through acreage purchases , joint ventures and asset swaps . basis of presentation unless otherwise indicated , all dollar amounts included within the f ootnotes to the financial s tatements are presented in thousands , except for per share and per unit data . the consolidated financial statements include the accounts of the company , and its subsidiary , callon petroleum operating company ( “ cpoc ” ) . cpoc also includes the subsidiaries callon offshore production , inc. and mississippi marketing , inc. all intercompany accounts and transactions have been eliminated . in the opinion of management , the accompanying audited consolidated financial statements reflect all adjustments , including normal recurring adjustments and all intercompany account and transaction eliminations , necessary to present fairly the company 's financial position , the results of its operations and its cash flows for the periods indicated . certain prior year amounts have been reclassified to conform to current year presentation . note 2 – summary of significant accounting policies a. use of estimates the preparation of financial statements in conformity with 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 revenues and expenses during the reporting period . actual results could differ from those estimates . b. cash and cash equivalents the company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents . 69 callon petroleum company notes to the consolidated financial statements ( all dollar amounts in thousands , except per unit data ) c. accounts receivable accounts receivable consists primarily of accrued oil and natural gas production receivables and joint interest receivables from outside working interest owners . d. revenue recognition and natural gas balancing the company recognizes revenue under the entitlement s method of accounting . under this method , revenue is deferred for deliveries in excess of the company 's net revenue interest , while revenue is accrued for the undelivered volumes . the revenue we receive from the sale of ngls is included in natural gas sales . natural gas balancing receivables and payables were immaterial as of december 31 , 2015 and 2014 . in may 2014 , the financial accounting standards board ( “ fasb ” ) issued accounting standards update ( “ asu ” ) no . 2014-09 , story_separator_special_tag roman ; font-size:10pt ; ; '' > h. capitalized interest the company capitalizes interest on unevaluated oil and gas properties .
| such amounts include the cost of drilling and equipping productive wells , dry hole costs , lease acquisition costs , delay rentals , interest capitalized on unevaluated leases , other costs related to exploration and development activities , and site restoration , dismantlement and abandonment costs capitalized in accordance with asset retirement obligation accounting guidance . costs capitalized also include any internal costs that are directly related to exploration and development activities , including salaries and benefits , but do not include any costs related to production , general corporate overhead or similar activities . when applicable , proceeds from the sale or disposition of oil and natural gas properties are accounted for as a reduction to capitalized costs unless the sale would significantly alter the relationship between capitalized costs and proved reserves , in which ca se a gain or loss is recognized . 70 callon petroleum company notes to the consolidated financial statements ( all dollar amounts in thousands , except per unit data ) historical and estimated future development costs of oil and natural gas properties , which have been evaluated and contain proved reserves , as well as the historical cost of properties that have been determined to have no future economic value , are depleted using the unit-of-production method based on proved reserves . excluded from this amortization are costs associated with unevaluated properties , including capitalized interest on such costs . unevaluated property costs are transferred to evaluated property costs at such time as wells are completed on the properties or the company determines that these costs have been impaired . under full cost accounting rules , the company reviews the carrying value of its proved oil and natural gas properties each quarter . under these rules , capitalized costs of oil and natural gas properties , net of accumulated depreciation , depletion and amortization and deferred income taxes , may not exceed the present value of estimated future net cash flows from proved oil and natural gas reserves , discounted at 10 % , plus the lower of cost or fair value of unevaluated properties , net o f related tax effects ( the full cost ceiling amount ) . these rules generally
| 11,611 |
as a result of the covid-19 pandemic , and in order to protect the safety and health of our workforce and our customers , we have expanded certain employee benefit programs and will incur additional operating costs such as sanitizing our facilities , providing personal protective equipment for our employees and providing it infrastructure to allow many office , clerical , sales and customer service employees to work from home . at this time , we expect the annual cost of these undertakings to be at least $ 2.0 million . in certain markets more heavily impacted by the pandemic , we ceased making non-emergency service calls that would have been performed in the third quarter of fiscal 2020 under normal conditions . to a certain extent , our service activity in the fourth quarter of fiscal 2020 reflected a return to somewhat normal conditions . at this time , we expect to experience a modest increase in service costs in future quarters as a result of non-emergency service calls being pushed to the peak heating oil season . in the third quarter of fiscal 2020 , we believe that some of our customers deferred non-emergency services , including the installation of new equipment , which caused a decline in equipment installation sales of $ 2.8 million , or 11.5 % , versus the prior-year period . however , in the fourth quarter of fiscal 2020 , our installation sales rebounded and increased by $ 2.4 million , or 9.0 % , versus the fourth quarter of fiscal 2019. also , in the third quarter of fiscal 2020 , we experienced a decline in motor fuel sales volume of 10.1 million gallons , or 23.7 % versus the prior year 's period due to a significant reduction in economic activity . this trend continued into the fourth quarter of fiscal 2020 , albeit not as great as the third quarter of fiscal 2020 as motor fuel sales decreased by 4.7 million gallons , or 10.6 % . if we continue to see declines in equipment and motor fuel sales , our financial results may suffer accordingly . as of september 30 , 2020 , we had accounts receivable of $ 83.6 million , of which $ 57.0 million was due from residential customers and $ 26.6 million due from commercial customers . our ability to borrow from our bank group is based in part on the aging of these accounts receivable . if past due balances that do not meet the eligibility tests as found in our fifth amended and restated credit agreement increase from historic levels , our future ability to borrow would be reduced . the company has taken advantage of certain tax and legislative actions which permitted the company to defer its april 2020 and june 2020 federal and state income tax payments to july 2020 and to defer certain payroll tax withholdings relating to calendar 2020 to calendar 2021 and 2022. we believe covid-19 's impact on our business , operating results , cash flows ( including the collection of current and future accounts receivable ) and or financial condition primarily will be driven by the severity and duration of the pandemic , the pandemic 's impact on the u.s. and global economies , the price of petroleum products , and the timing , scope and effectiveness of federal , state and local governmental responses to the pandemic . we continue to monitor the effects of the pandemic on our business ; however , the primary drivers are beyond our knowledge and control and , as a result , at this time we can not reasonably estimate the ultimate adverse impact covid-19 will have on our business , operating results , cash flows and or financial condition going forward . impact on liquidity of increases and decreases in wholesale product cost our liquidity is adversely impacted in times of increasing wholesale product costs , as we must use more cash to fund our hedging requirements as well as the increased levels of accounts receivable and inventory . this may result in higher interest expense as a result of increased working capital borrowing to finance higher receivables and or inventory balances . we may also incur higher bad debt expense and credit card processing costs as a result of higher selling prices as well as higher vehicle fuel costs due to the increase in energy costs . while our liquidity is impacted by initial margin requirements for new future positions used to hedge our inventory , it can also be adversely impacted by sudden and sharp decreases in wholesale product costs , due to the increased margin requirements for futures contracts . likewise , our liquidity and collateral requirements are impacted by the fluctuating cost of options and swaps used to manage the market risks associated with our inventory and protected price customers . 32 liquid product price volatility volatility , which is reflected in the wholesale price of liquid products , including home heating oil , propane and motor fuels , has a larger impact on our business when prices rise . consumers are price sensitive to heating cost increases , which can lead to increased gross customer losses . as a commodity , the price of home heating oil is generally impacted by many factors , including economic and geopolitical forces , and , most recently , the covid-19 pandemic , and is closely linked to the price of diesel fuel . story_separator_special_tag the volatility in the wholesale cost of diesel fuel as measured by the new york mercantile exchange ( “ nymex ” ) , for the fiscal years ending september 30 , 2016 , through 2020 , on a quarterly basis , is illustrated in the following chart ( price per gallon ) : replace_table_token_9_th a ) on november 30 , 2020 , the nymex ultra low sulfur diesel contract closed at $ 1.37 per gallon or $ 0.02 per gallon lower than the average of $ 1.39 in fiscal 2020. income taxes book versus tax deductions the amount of cash flow generated in any given year depends upon a variety of factors including the amount of cash income taxes required , which will increase as depreciation and amortization decreases . the amount of depreciation and amortization that we deduct for book ( i.e. , financial reporting ) purposes will differ from the amount that the company can deduct for federal tax purposes . the table below compares the estimated depreciation and amortization for book purposes to the amount that we expect to deduct for federal tax purposes , based on currently owned assets . while we file our tax returns based on a calendar year , the amounts below are based on our september 30 fiscal year , and the tax amounts include any 100 % bonus depreciation available for fixed assets purchased . however , this table does not include any forecast of future annual capital purchases . estimated depreciation and amortization expense replace_table_token_10_th weather hedge contracts weather conditions have a significant impact on the demand for home heating oil and propane because certain customers depend on these products principally for space heating purposes . actual weather conditions may vary substantially from year to year , significantly affecting the company 's financial performance . to partially mitigate the adverse effect of warm weather on cash flow , we have used weather hedging contracts for a number of years with several providers . under these contracts , we are entitled to a payment if the total number of degree days within the hedge period is less than the ten-year average . the “ payment thresholds , ” or strikes , are set at various levels . in fiscal 2021 , we are obligated to make a payment capped at $ 5.0 million if degree days exceed the ten year average . the hedge period runs from november 1 through march 31 , taken as a whole , for each respective fiscal year . for fiscal 2020 we recorded a $ 10.1 million benefit , and for fiscal 2019 we recorded a charge of $ 2.1 million . 33 per gallon gross profit margins we believe home heating oil and propane margins should be evaluated on a cents per gallon basis ( before the effects of increases or decreases in the fair value of derivative instruments ) , as we believe that such per gallon margins are best at showing profit trends in the underlying business , without the impact of non-cash changes in the market value of hedges before the settlement of the underlying transaction . a significant portion of our home heating oil volume is sold to individual customers under an arrangement pre-establishing a ceiling price or fixed price for home heating oil over a set period of time , generally twelve to twenty-four months ( “ price-protected ” customers ) . when these price-protected customers agree to purchase home heating oil from us for the next heating season , we purchase option contracts , swaps and futures contracts for a substantial majority of the heating oil that we expect to sell to these customers . the amount of home heating oil volume that we hedge per price-protected customer is based upon the estimated fuel consumption per average customer per month . in the event that the actual usage exceeds the amount of the hedged volume on a monthly basis , we may be required to obtain additional volume at unfavorable costs . in addition , should actual usage in any month be less than the hedged volume , our hedging costs and losses could be greater , thus reducing expected margins . derivatives fasb asc 815-10-05 derivatives and hedging requires that derivative instruments be recorded at fair value and included in the consolidated balance sheet as assets or liabilities . to the extent our interest rate derivative instruments designated as cash flow hedges are effective , as defined under this guidance , changes in fair value are recognized in other comprehensive income until the forecasted hedged item is recognized in earnings . we have elected not to designate our commodity derivative instruments as hedging instruments under this guidance and , as a result , the changes in fair value of the derivative instruments are recognized in our statement of operations . therefore , we experience volatility in earnings as outstanding derivative instruments are marked to market and non-cash gains and losses are recorded prior to the sale of the commodity to the customer . the volatility in any given period related to unrealized non-cash gains or losses on derivative instruments can be significant to our overall results . however , we ultimately expect those gains and losses to be offset by the cost of product when purchased . customer attrition we measure net customer attrition on an ongoing basis for our full service residential and commercial home heating oil and propane customers . net customer attrition is the difference between gross customer losses and customers added through marketing efforts . customers added through acquisitions are not included in the calculation of gross customer gains . however , additional customers that are obtained through marketing efforts or lost at newly acquired businesses are included in these calculations . customer attrition percentage calculations include customers added through acquisitions in the denominators of the calculations on a weighted average basis . gross customer losses are the result of a number of factors , including price competition , move-outs , credit losses , conversions to natural gas and service disruptions .
| the following chart sets forth the percentage by volume of total home heating oil sold to residential variable-price customers , residential price-protected customers , and commercial/industrial/other customers for fiscal 2020 compared to fiscal 2019 : replace_table_token_17_th volume of motor fuel and other petroleum products sold decreased by 15.6 million gallons , or 9.3 % , to 151.8 million gallons for fiscal 2020 , compared to 167.4 million gallons for fiscal 2019 , as the additional volume provided by acquisitions of 9.2 million gallons was reduced by lower wholesale volume sales ( 2.1 million gallons ) due to the warmer weather and lower volume sales of motor fuels ( 22.7 million gallons ) resulting from covid-19 's impact on economic activity and the loss of certain accounts . we believe that the decline in motor fuel sales may continue in the near term . product sales for fiscal 2020 , product sales decreased $ 0.3 billion , or 19.1 % , to $ 1.2 billion , compared to $ 1.5 billion in fiscal 2019 , reflecting a decrease in in wholesale product cost of $ 0.3597 per gallon , or 18.5 % , and a decrease in total volume sold of 9.3 % . installations and services sales for fiscal 2020 , installation and service sales decreased $ 6.4 million , or 2.2 % , to $ 281.4 million , compared to $ 287.8 million for fiscal 2019 as the additional revenue provided from acquisitions of $ 10.3 million was reduced by lower revenue in the base business of $ 16.7 million . in the base business , service and installation sales declined due to net customer attrition and the impact of warmer weather experienced during 2019-2020 heating season , which reduced billable service revenue and the need for the installation of new equipment . during the third quarter of fiscal 2020 we ceased making non-emergency service calls that would have been performed under normal 37 conditions due to covid-19 and a portion of these service calls were completed in the fourth quarter of fiscal 2020 . in addition , w e believe that some of our customers have deferr ed non-emergency services , including the installation of new equipment due to covid-19 , which has caused a decline in equipment installation sales
| 11,612 |
selling , general and administrative expenses for fiscal 2017 were $ 49.7 million , or 20 % of sales , compared to $ 50.8 million , or 22 % of sales , in fiscal 2016 , and included a favorable currency impact of $ 0.2 million when translating foreign expenses to u.s. dollars for financial reporting purposes . operating income . operating income for fiscal 2017 was $ 20.9 million , or 9 % of sales , compared to $ 19.6 million , or 9 % of sales , in fiscal 2016. the year-over-year increase in operating income was primarily attributable to a reduction in operating expenses associated with trade show expenses for the international manufacturing technology show ( “ imts ” ) held in september 2016. other expense , net . other expense , net for fiscal 2017 decreased by $ 0.5 million from fiscal 2016 due mainly to lower foreign currency losses experienced in 2017. provision for income taxes . our effective tax rate for fiscal 2017 was 27 % in comparison to 30 % for fiscal 2016. the decrease in the effective tax rate year-over-year was primarily due to changes in the geographic mix of income and loss among tax jurisdictions . net income . net income for fiscal 2017 was $ 15.1 million , or $ 2.25 per diluted share , an increase of $ 1.8 million , or 14 % , from fiscal 2016 net income of $ 13.3 million , or $ 1.99 per diluted share . fiscal 2016 compared to fiscal 2015 sales and service fees . sales and service fees for fiscal 2016 were $ 227.3 million , an increase of $ 7.9 million , or 4 % , compared to fiscal 2015 and included a negative currency impact of $ 6.4 million , or 3 % , when translating foreign sales to u.s. dollars for financial reporting purposes . net sales and service fees by geographic region the following table sets forth net sales and service fees by geographic region for the fiscal year ended october 31 , 2016 and 2015 ( in thousands ) : replace_table_token_9_th sales in the americas for fiscal 2016 increased by 6 % compared to fiscal 2015 , as a result of year-end promotional activities following the imts in september 2016 , as well as the impact of twelve months of milltronics sales in fiscal 2016 compared to only three months of sales activity from the acquisition of the milltronics product line in july 2015 until the end of fiscal 2015. sales in the americas for fiscal 2016 included $ 17.9 million of sales from the milltronics product line , compared to $ 6.7 million in fiscal 2015. european sales for fiscal 2016 decreased by 4 % compared to fiscal 2015 and included a negative currency impact of 5 % when translating foreign sales to u.s. dollars for financial reporting purposes . the slight year-over-year growth in european sales for fiscal 2016 , excluding the effect of the negative currency impact , was driven by increased shipments of higher-performance machines in germany , france and italy . asian pacific sales for fiscal 2016 increased by 45 % compared to fiscal 2015 and included a negative currency impact of 3 % when translating foreign sales to u.s. dollars for financial reporting purposes . the year-over-year increase in asian pacific sales for fiscal 2016 was primarily attributable to twelve months of takumi sales included in fiscal 2016 compared to only three months of sales activity from the acquisition of the takumi product line in july 2015 until the end of fiscal 2015. asian pacific sales for fiscal 2016 included $ 14.6 million of sales from the takumi product line , compared to $ 3.3 million for fiscal 2015 . 26 net sales and service fees by product category the following table sets forth net sales and service fees by product group and services for the fiscal years ended october 31 , 2016 and 2015 ( in thousands ) : replace_table_token_10_th * amounts shown include sales of milltronics and takumi computerized machine tools to third parties since the respective dates of those acquisitions . † amounts shown do not include computer control systems and software sold as an integrated component of computerized machine systems . sales of computerized machine tools and service parts increased during fiscal 2016 by 3 % and 13 % , respectively , compared to fiscal 2015 primarily due to the impact of twelve months of milltronics and takumi sales in fiscal 2016 compared to only three months of sales activity from the acquisitions of the milltronics and takumi product lines in july 2015 until the end of fiscal 2015 , as well as year-end promotional activities following the imts in september 2016. sales of computer control systems and software decreased by 33 % during fiscal 2016 compared to fiscal 2015 as a result of a reduction in sales for the autobend ® product line in the americas and the united kingdom . service fees revenue increased during fiscal 2016 by 7 % compared to fiscal 2015 primarily due to increased repair needs from customers in the americas , the united kingdom and france . orders and backlog . orders for fiscal 2016 were $ 219.2 million , a decrease of $ 4.0 million , or 2 % , compared to fiscal 2015 and included a negative currency impact of $ 6.5 million , or 3 % , when translating foreign orders to u.s. dollars for financial reporting purposes . story_separator_special_tag the following table sets forth new orders booked by geographic region for fiscal years ended 2016 and 2015 ( dollars in thousands ) : replace_table_token_11_th orders in the americas for fiscal 2016 were $ 70.9 million , a decrease of $ 1.1 million , or 1 % , compared to fiscal 2015 , reflecting an overall softer market and the impact of pricing pressures in this region , partially offset by the impact of twelve months of milltronics sales in fiscal 2016 compared to only three months in fiscal 2015. orders in the americas for fiscal 2016 included $ 15.7 million of orders from the milltronics product line , compared to $ 10.1 million in fiscal 2015 , of which approximately $ 3.9 million of orders were existing backlog orders acquired with the milltronics product line in july 2015. european orders for fiscal 2016 were $ 121.5 million , a decrease of $ 5.0 million , or 4 % , compared to fiscal 2015 , primarily due to the negative impact of currency when translating foreign orders to u.s. dollars for financial reporting purposes . asian pacific orders for fiscal 2016 were $ 26.8 million , an increase of $ 2.1 million , or 9 % , compared to fiscal 2015 and included a negative currency impact of $ 1.1 million , or 5 % , when translating foreign orders to u.s. dollars for financial reporting purposes . the year-over-year increase in asian pacific orders were due primarily to increased customer demand for the takumi product line in china . asian pacific orders for fiscal 2016 included $ 12.7 million of orders from the takumi product line , compared to $ 10.6 million in fiscal 2015 , of which approximately $ 8.6 million of orders were existing backlog orders acquired with the takumi product line in july 2015 . 27 backlog was $ 32.3 million at october 31 , 2016 compared to $ 41.2 million at october 31 , 2015. we do not believe backlog is a useful measure of past performance or indicative of future performance . backlog orders as of october 31 , 2016 are expected to be fulfilled in fiscal 2017. gross profit . gross profit for fiscal 2016 was $ 70.4 million , or 31 % of sales , which was consistent with gross profit for fiscal 2015 of $ 69.1 million , or 31 % of sales . operating expenses . selling , general and administrative expenses for fiscal 2016 were $ 50.8 million , or 22 % of sales , compared to $ 45.3 million , or 21 % of sales , for fiscal 2015. the year-over-year increase in operating expenses for fiscal 2016 was primarily due to increased trade show expenses , increased employee support costs for global sales operations , and incremental annualized operating expenses associated with the acquisitions of the milltronics and takumi product lines since july 2015. operating income . operating income for fiscal 2016 was $ 19.6 million , or 9 % of sales , compared to $ 23.8 million , or 11 % of sales , in fiscal 2015. the year-over-year reduction in operating income was primarily attributable to increased operating expenses associated with increased trade show expenses , increased employee support costs for global sales operations , and incremental operating expenses associated with the acquisitions of the milltronics and takumi product lines since july 2015. other expense , net . other expense , net for fiscal 2016 increased by $ 0.5 million from fiscal 2015 due mainly to higher foreign currency losses experienced in 2016 and the elimination of a one-time out-of-period income adjustment recorded in fiscal 2015. provision for income taxes . our effective tax rate for fiscal 2016 was 30 % in comparison to 31 % for fiscal 2015. the decrease in the effective income tax rate for fiscal 2016 was due primarily to changes in the geographic mix of income or loss among tax jurisdictions . net income . net income for fiscal 2016 was $ 13.3 million , or $ 1.99 per diluted share , a decrease of $ 2.9 million , or 18 % , from fiscal 2015 net income of $ 16.2 million , or $ 2.44 per diluted share . liquidity and capital resources at october 31 , 2017 , we had cash and cash equivalents of $ 66.3 million compared to $ 41.2 million at october 31 , 2016. the increase in cash and cash equivalents was primarily a result of a reduction in inventories and accounts receivable year-over-year when excluding the negative impact of foreign currency of $ 7.0 million when translating foreign assets into u.s. dollars for financial reporting purposes . approximately 64 % of our $ 66.3 million of cash and cash equivalents is held in the u.s. the balance is attributable to our foreign operations and is held in the local currencies of our various foreign entities , subject to fluctuations in currency exchange rates . we do not believe that the indefinite reinvestment of these funds offshore impairs our ability to meet our domestic working capital needs . working capital ( including cash and cash equivalents ) was $ 175.5 million at october 31 , 2017 compared to $ 160.4 million at october 31 , 2016. the increase in working capital was primarily due to the increase in cash , inventories , and accounts receivable . inventories were $ 119.9 million at october 31 , 2017 , compared to $ 117.0 million at october 31 , 2016. inventory turns at october 31 , 2017 were 1.5 compared to 1.4 turns at october 31 , 2016 . 28 capital expenditures were $ 4.4 million in fiscal 2017 compared to $ 4.2 million in fiscal 2016. capital expenditures for fiscal 2017 were primarily for software development costs , purchases of factory equipment for production facilities , and purchases of general software and equipment for selling facilities . we funded these expenditures with cash flows from operations .
| 24 net sales and service fees by product category the following table sets forth net sales and service fees by product group and services for the fiscal years ended october 31 , 2017 and 2016 ( in thousands ) : replace_table_token_7_th † amounts shown do not include computer control systems and software sold as an integrated component of computerized machine systems . sales of computerized machine tools and computer control systems and software for fiscal 2017 increased by 7 % and 12 % , respectively , compared to fiscal 2016 , driven primarily by an increase in sales volume of hurco machines in europe , particularly the united kingdom and germany . sales of service parts and service fees for fiscal 2017 increased by 11 % and 1 % , respectively , compared to fiscal 2016 , due primarily to an increase in aftermarket sales of hurco components in germany . orders and backlog . orders for fiscal 2017 were $ 260.6 million , an increase of $ 41.4 million , or 19 % , compared to fiscal 2016 , and included a negative currency impact of $ 2.6 million , or 1 % , when translating foreign orders to u.s. dollars . the following table sets forth new orders booked by geographic region for fiscal years ended 2017 and 2016 ( dollars in thousands ) : replace_table_token_8_th orders in the americas for fiscal 2017 increased by 20 % compared to fiscal 2016 and reflected improved u.s. market conditions and demand from customers for all product lines ( hurco , takumi and milltronics ) and in all regions of the country where our customers are located . european orders for fiscal 2017 increased by 13 % , compared to fiscal 2016 , driven primarily by increased demand for hurco and takumi vertical milling machines in germany , the united kingdom , and italy . european orders for fiscal 2017 included a negative currency impact of 2 % , when translating foreign orders to u.s. dollars . asian pacific orders for fiscal 2017 increased
| 11,613 |
the patient received daily doses of our oral endoxifen for approximately three weeks prior to surgery . there were no safety or tolerability issues and her surgery was successfully completed . the cancer cell biological activity was reduced , based on the estrogen receptor activity of the tumor cells and a 50 % reduction in ki-67 . the fda has also permitted use of our endoxifen for this patient following her surgery , under the fda expanded access ind program , as part of her long-term breast cancer treatment regimen . the use of our proprietary oral endoxifen is restricted solely to this patient . in june 2019 , we reported preliminary analysis from our phase 2 study of proprietary daily topical endoxifen to reduce mbd , showing significant ( p=0.02 ) and rapid reduction in mbd at the 20mg daily dose level . mbd was reduced by an average of 14.3 % in the group applying 20mg daily topical endoxifen , which was statistically significant ( p = 0.02 ) . in the lower dose group ( 10mg ) , mbd was reduced by an average of 9.0 % , but was not statistically significant . approximately 70 % of participants receiving 20mg topical endoxifen experienced a reduction in mbd , and of those , the mean reduction in mbd was 27 % . we plan to reevaluate our development strategy for the topical form of endoxifen , as well as the opportunity to treat gynecomastia with endoxifen , once we complete the phase 2 study of oral endoxifen to reduce mbd . in february 2020 , we applied to the institutional review board and medical products authority to commence our phase 2 study to reduce mbd , which we anticipate will be open for enrollment in the second quarter 2020. we are regulated by the fda under the federal drug and cosmetics act , as well as by other federal , state and local agencies . 38 research and development phase we are in the research and development phase and are not currently marketing any products . we do not anticipate generating revenue unless and until we develop and launch our pharmaceutical programs . commercial lease agreements on november 1 , 2018 , the company entered into an operating lease to pay $ 3,660 monthly rent for a term of 22 months with ww 107 spring street llc to lease office space at 107 spring street , seattle , washington . critical accounting policies and estimates our management 's discussion and analysis of our 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 , or gaap . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities and expenses . on an ongoing basis , we evaluate these estimates and judgments , including those described below . we base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances . these estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results and experiences may differ materially from these estimates . while our significant accounting policies are more fully described in note 3 to our consolidated financial statements , we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements . 39 share-based payments we follow the provisions of asc 718 , compensation – stock compensation , which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees , non-employee directors , and consultants , including employee stock options . stock compensation expense based on the grant date 's fair value was estimated in accordance with the provisions of asc 718 and is recognized as an expense over the requisite service period with forfeitures recognized when they occur . the fair value of each option grant is estimated using the black-scholes option-pricing model , which requires assumptions regarding the expected volatility of our stock options , the expected life of the options , an expectation regarding future dividends on our common stock , and estimation of an appropriate risk-free interest rate . our expected common stock price volatility assumption is based upon the volatility of our stock price . the expected life assumption for stock option grants was based upon the simplified method provided for under asc 718-10 , which averages the contractual term of the options of ten years with the average vesting term of one to four years . the dividend yield assumption of zero is based upon the fact that we have never paid cash dividends and presently have no intention of paying cash dividends in the future . the risk-free interest rate used for each grant was based upon prevailing short-term interest rates over the expected life of the options . 40 story_separator_special_tag on clinical trial activities of approximately $ 250,000. net cash flows from investing activities : net cash used in investing activities was $ 8,000 for the year ended december 31 , 2019 a decrease of $ 103,000 or 93 % , compared to net cash used in investing activities for the year ended december 31 , 2018 of $ 111,000. the decrease year over year is due to purchases of fixed asset equipment for specific r & d activities and investments in our company website during 2018 whereas there were no purchases of r & d equipment or investments in our company website during the same period in 2019. net cash flows from financing activities : net cash provided story_separator_special_tag by financing activities was $ 11,337,000 for the year ended december 31 , 2019 , a decrease of $ 954,000 , or 8 % , compared to net cash provided by financing activities of $ 12,291,000 , for the year ended december 31 , 2018. the 2019 financing activity of $ 11.3 million was cash received from the exercise of approximately 2.8 million of the warrants issued in the may 2018 financing . in may 2018 , we completed a rights offering with net proceeds of $ 12.3 million . 42 funding requirements we expect to incur ongoing operating losses for the foreseeable future as we continue to develop our planned therapeutic programs including related clinical studies and other programs in the pipeline . we expect that our existing resources will only be sufficient to fund our planned operations for the next six to nine months from the date of this report . if we meet certain requirements , we may sell securities that are registered on our form s-3 registration statement ( file no . 333-220572 ) , and by raising capital through sales of securities to third parties and existing stockholders , including for example , pursuant to our $ 5 million atm financing program we entered into in february 2020 with oppenheimer & co. if we are unable to raise additional capital when needed , however , we could be forced to curtail or cease operations . our future capital uses and requirements will depend on the time and expenses needed to begin and continue clinical trials for our new drug developments . as mentioned earlier , the covid-19 outbreak could adversely impact the timing and enrollment of our clinical trials . additional funding may not be available to us on acceptable terms or at all . the continued spread of covid-19 and uncertain market conditions may limit our ability to access capital . in addition , the terms of any financing may adversely affect the holdings or the rights of our stockholders . for example , if we raise additional funds by issuing equity securities or by selling debt securities , if convertible , further dilution to our existing stockholders would result . to the extent our capital resources are insufficient to meet our future capital requirements , we will need to finance our future cash needs through public or private equity offerings , collaboration agreements , debt financings or licensing arrangements . if adequate funds are not available , we may be required to terminate , significantly modify or delay our development programs , reduce our planned commercialization efforts , or obtain funds through collaborators that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently . further , we may elect to raise additional funds even before we need them if we believe the conditions for raising capital are favorable . 43 off-balance sheet arrangements we do not currently have , nor have we ever had , any relationships with unconsolidated entities or financial partnerships , such as entities often referred to as structured finance or special purpose entities , established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes . in addition , we do not engage in trading activities involving non-exchange traded contracts . recently adopted accounting pronouncements : in the first quarter of 2019 , we adopted accounting standards update ( “ asu ” ) no . 2016-02 , lease accounting : topic 842 ( `` topic 842 `` ) and recognized on our consolidated balance sheet $ 101,000 of lease liabilities with corresponding right-of-use assets for operating leases . the new lease standard requires a lessee to measure its operating lease liabilities at the present value of the remaining minimum lease payments with a discounted cash flow model using the interest rate implicit in the lease . if the implicit interest rate can not be readily determined , the lessee must use its incremental borrowing rate ( “ ibr ” ) . if the lessee does not have an ibr , the lessee must use a rate that approximates the rate of interest that the lessee would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment . the implicit interest rate was readily determinable for our copier lease ; however , we used an ibr to measure our adoption date operating lease liability related to our office space which represents our estimated borrowing rate on a secured loan collateralized by similar assets for a similar term . the adoption did not have a material impact on the company 's consolidated financial statements . as permitted under the standard , we elected prospective application of the new guidance and prior periods continue to be presented in accordance with accounting standards codification ( `` asc '' ) topic 840. the new standard provides a number of optional practical expedients in transition . we elected the practical expedients to not reassess our prior conclusions about lease identification under the new standard , to not reassess lease classification , to not separate lease and non lease components and to not reassess initial direct costs . we did not elect the practical expedient allowing the use-of-hindsight which would require us to reassess the lease term of our leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to our current contract portfolio . see note 13 , commitments and contingencies , of the notes to our consolidated financial statements for additional discussion of our leases and the amounts recognized in these consolidated financial statements . on january 1 , 2019 , we adopted asu 2018-08 , not-for-profit entities ( topic 958 ) : clarifying the scope and the accounting guidance for contributions received
| there were no liability option cancellations or in-the-money option grants in the comparable period of 2018. clinical trial expenses also increased by approximately $ 250,000 over the same period in 2018. general and administrative expenses : g & a expenses were $ 10,620,000 for the year ended december 31 , 2019 , an increase of $ 3,396,000 , or 47 % from the total g & a expenses for the year ended december 31 , 2018 , of $ 7,224,000. g & a expenses consist primarily of personnel and related benefit costs , facilities , professional services , insurance , and public company related expenses . the increase in g & a expenses for year ended december 31 , 2019 , is attributed to non-cash stock-based compensation . g & a stock-based compensation expense , which is a non-cash charge , increased approximately $ 4.0 million during 2019 resulting from the cancellation of the 2018 liability options and the 2019 replacement grant of options that were 75 % vested and that were granted at fair market value on the date of board of directors approval but were in-the-money on the date they were subsequently approved by the stockholders . there were no liability option cancellations or in-the-money option grants in the comparable period of 2018. the increase in 2019 expense g & a expense was offset by a reduction in bonus compensation expense of approximately $ 350,000 as a one-time 2018 bonus was not paid in 2019. income taxes : we have incurred net operating losses from inception ; we did not record an income tax benefit for our incurred losses for the years ended december 31 , 2019 and 2018 , due to uncertainty regarding utilization of our net operating carryforwards and due to our history of losses . 41 liquidity and capital resources the company has incurred net losses and negative operating cash flows since inception . for the year ended december 31 , 2019 , the company recorded a net loss of approximately $ 17.2 million and used approximately $ 9.1 million of cash in operating activities . as of december 31 , 2019 , the company had approximately $ 12.6 million in cash and cash equivalents and working capital of approximately $ 13.0 million . management believes the currently available funding will only be sufficient to finance the company 's operations for six to nine months from
| 11,614 |
while the available-for-sale securities are generally expected to be held to maturity , they are classified as available-for-sale and are sold periodically to manage risk . although a majority of the investment portfolio is classified as available-for-sale , the company has the ability and intent to hold the securities until maturity . see note 2 – investments in the notes to the consolidated financial statements for detailed disclosures regarding the company 's investment portfolio . as a result of asu no . 2016-01 , financial instruments ( topic 825 ) : recognition and measurement of financial assets and financial liabilities , changes in the fair value of equity securities are now recognized in net income rather than other comprehensive income . on january 1 , 2018 , cumulative net unrealized gains on equity securities of $ 18.3 million , net of deferred taxes of $ 4.9 million , were reclassified from accumulated other comprehensive income ( loss ) into retained earnings . impairment of investments – the company continually monitors the investment portfolio for investments that have become impaired in value ; where fair value has declined below carrying value . while the value of the investments in the company 's portfolio continuously fluctuate due to market conditions , an other-than-temporary impairment charge is recorded only when a security has experienced a decline in fair market value which is deemed to be other than temporary . the policies and procedures the company uses to evaluate and account for impairments of investments are disclosed in note 1 – summary of significant accounting policies and note 2 – investments in the notes to the consolidated financial statements . the company makes every effort to appropriately assess the status and value of the securities with the information available regarding an other-than-temporary impairment . however , it is difficult to predict the future prospects of a distressed or impaired security . deferred income taxes – the provision for deferred income taxes is based on the asset and liability method of accounting for income taxes . under this method , deferred income taxes are recognized by applying enacted statutory tax rates to temporary differences between amounts reported in the consolidated financial statements and the tax basis of existing assets and liabilities . a valuation allowance is recognized for the portion of deferred tax assets that , in management 's judgment , is not likely to be realized . the effect on deferred income taxes of a change in tax rates or laws is recognized in income tax expense in the period that includes the enactment date . the tax cuts & jobs act ( `` tcja '' ) , signed into law on december 22 , 2017 , reduces the corporate federal income tax rate from 35 % to 21 % , effective for years beginning after december 31 , 2017. refer to note 1 – summary of significant accounting policies and note 6 – income taxes in the notes to the consolidated financial statements for further disclosure regarding the tcja . story_separator_special_tag details regarding the components of net investments gains ( losses ) and the change in net unrealized gains ( losses ) from investments . the company has seen significant unrealized gains on its equity investments during 2018. a significant portion of these gains are from two equity holdings , both in the area of oil and gas . while the company has had very strong unrealized gains during 2018 , a pull back in the stock market , particularly in the oil and gas arena , could slow these gains or even result in future period unrealized losses . management believes these equity investments continue to be solid investments for the company and have further growth potential ; however , changes in market conditions could cause volatility in market prices . the reclassification of the change in the fair value of equity securities to a component of net income , as a result of asu 2016-01 , resulted in several larger variances when comparing current and prior year numbers . as a result of asu 2016-01 , approximately $ 10.4 million of unralized gains from the change in the fair value of equity securities was reported as a component of net income in 2018 rather than as a component of accumulated other comprehensive income . if you excluded the change in the fair value of equity securities from the calculations , the revenues and expenses , as a percentage of the total , are comparable from the current and prior year . in summary , the company 's basis for future revenue is expected to come from the following primary sources : conservation of business currently in-force , the maximization of investment earnings and the acquisition of other companies or policy blocks in the life insurance business . management has placed a significant emphasis on the development of these revenue sources to enhance these opportunities . expenses the company reported total benefits and other expenses of $ 24.8 million and $ 25.4 million for the twelve-month periods ended december 31 , 2018 and 2017 , respectively . benefits , claims and settlement expenses represented approximately 63 % and 66 % of the company 's total expenses for 2018 and 2017 , respectively . the other major expense category of the company is operating expenses , which represented 34 % and 31 % of the company 's total expenses for 2018 and 2017 , respectively . benefits , claims and settlement expenses , net of reinsurance benefits , decreased approximately 8 % in 2018 compared to 2017. the decrease primarily relates to changes in the company 's death claim experience . story_separator_special_tag policy claims vary from year to year and therefore , fluctuations in mortality are to be expected and are not considered unusual by management . changes in policyholder reserves , or future policy benefits , also impact this line item . reserves are calculated on an individual policy basis and generally increase over the life of the policy as a result of additional premium payments and acknowledgment of increased risk as the insured continues to age . the short-term impact of policy surrenders is negligible since a reserve for future policy benefits payable is held which is , at a minimum , equal to and generally greater than the cash surrender value of a policy . the benefit of fewer policy surrenders is primarily received over a longer time period through the retention of the company 's asset base . operating expenses increased approximately 9 % in 2018 as compared to 2017. when analyzing 2018 and 2017 results , the operating expenses in two of the major expense categories , salaries and charitable contributions , were higher in 2018 and driving the variance from the prior year to the current year . the increase in salary expense is the result of increased bonuses paid to employees and officers of the company . bonuses are not contractual or dependent upon meeting certain financial goals . they are not necessarily paid each year , and when they are paid , the amounts will vary depending on the decision of management , the compensation committee , and the board of directors . charitable contributions are a function of the company 's earnings . expenses in all of the other categories were comparable for the current and prior year . effective january 1 , 2017 , the company and fsnb began sharing certain services . the shared services focuses on departments commonly utilized by both organizations such as financial accounting , human resources and information technology . the shared services did not initially make a noticeable difference in operating expenses , but provides a larger team , which enhances capabilities and quality . as mentioned above in the overview section of the management discussion and analysis , utg has a strong philanthropic program . the company generally allocates a portion of its earnings to be used for its philanthropic efforts primarily targeted to christ-centered organizations or organizations that help the weak or poor . charitable contributions made by the company are expected to vary from year to year depending on the earnings of the company . net amortization of cost of insurance acquired decreased approximately 4 % when comparing current and prior year activity . cost of insurance acquired is established when an insurance company is acquired or when the company acquires a block of in-force business . the company assigns a portion of its cost to the right to receive future profits from insurance contracts existing at the date of the acquisition . cost of insurance acquired is amortized with interest in relation to expected future profits , including direct charge-offs for any excess of the unamortized asset over the projected future profits . the interest rates may vary due to risk analysis performed at the time of acquisition on the business acquired . the company utilizes a 12 % discount rate on the remaining unamortized business . the amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised . amortization of cost of insurance acquired is particularly sensitive to changes in interest rate spreads and persistency of certain blocks of insurance in-force . this expense is expected to decrease , unless the company acquires a new block of business . management continues to place significant emphasis on expense monitoring and cost containment . maintaining administrative efficiencies directly impacts net income . financial condition investment information investments are the largest asset group of the company . the company 's insurance subsidiary is regulated by insurance statutes and regulations as to the type of investments they are permitted to make , and the amount of funds that may be used for any one type of investment . the following table reflects , by investment category , the investments held by the company as of december 31 : replace_table_token_8_th replace_table_token_9_th the company 's investments are generally managed to match related insurance and policyholder liabilities . the comparison of investment return with insurance or investment product crediting rates establishes an interest spread . interest crediting rates on adjustable rate policies have been reduced to their guaranteed minimum rates , and as such , can not be lowered any further . policy interest crediting rate changes and expense load changes become effective on an individual policy basis on the next policy anniversary . therefore , it takes a full year from the time the change was determined for the full impact of such change to be realized . if interest rates decline in the future , the company will not be able to lower rates and both net investment income and net income will be impacted negatively . the company 's total investments represented 85 % and 82 % of the company 's total assets as of december 31 , 2018 and 2017 , respectively . fixed maturities consistently represented a substantial portion , 48 % and 53 % , respectively , of the total investments during 2018 and 2017. the overall investment mix , as a percentage of total investments , remained fairly consistent when comparing the investments held as of december 31 , 2018 and 2017. as of december 31 , 2018 , the carrying value of fixed maturity securities in default as to principal or interest was immaterial in the context of consolidated assets , shareholders ' equity orresults from operations .
| revenues premiums and policy fee revenues , net of reinsurance premiums and policy fees , were comparable for 2018 to 2017. the company writes very little new business . unless the company acquires a new company or a block of in-force business , management expects premium revenue to continue to decline on the existing block of business at a rate consistent with prior experience . the company 's average persistency rate for all policies in-force for 2018 and 2017 was approximately 96.1 % and 96.7 % , respectively . persistency is a measure of insurance in-force retained in relation to the previous year . the following table summarizes the company 's investment performance for the years ended december 31 : replace_table_token_5_th ( 1 ) effective january 1 , 2018 , the company adopted asu no . 2016-01 and equity securities are no longer classified as available-for-sale with unrealized gains and losses recognized in other comprehensive income , rather , changes in fair value of equity securities are now recognized in net income . prior periods have not been restated to conform to the current presentation . see note 1 of the notes to consolidated financial statements . the following table reflects net investment income of the company for the years ended december 31 : replace_table_token_6_th net investment income represented approximately 27 % and 41 % of the company 's total revenues as of december 31 , 2018 and 2017 , respectively . when comparing current and prior year results , net investment income was comparable in the majority of the investment categories , with the largest vairance being found in the fixed maturities and real estate investment categories . income from the fixed maturities investment portfolio is down approximately 16 % when comparing 2018 and 2017 results . the decrease is attributable to the company holding fewer bonds combined with upgrading credit quality . during 2017 and 2018 , the company sold some lower rated , higher yielding securities and
| 11,615 |
patients who tolerated this open-label treatment for one week were randomized to receive 12 weeks of double-blind treatment with twice-daily oral ascending doses of tirasemtiv or placebo , beginning at 125 mg twice daily and increasing weekly up to 250 mg twice daily ( or a dummy dose titration with placebo ) . clinical assessments occurred every four weeks during double-blind treatment ; patients also returned for follow-up evaluations at one and four weeks after their final dose of double-blind study medication . the primary efficacy analysis of benefit-als compared the mean change from baseline in the als functional rating scale in its revised form ( alsfrs-r ) , a clinically validated instrument designed to measure disease progression and changes in functional status , to the average of the scores obtained after 8 and 12 weeks of double-blind treatment on tirasemtiv versus placebo . in april 2014 , benefit-als results were presented at the 66 th annual meeting of the american academy of neurology . 711 patients were enrolled into the open-label phase of the trial ; subsequently , 605 patients were randomized 1:1 to double-blind treatment with either tirasemtiv or placebo . benefit-als did not achieve its primary efficacy endpoint , the mean change from baseline in the alsfrs-r ( -2.98 points in the tirasemtiv group versus -2.40 points in the placebo group ; p = 0.11 ) . treatment with tirasemtiv resulted in a statistically significant and potentially clinically meaningful reduction in the decline of slow vital capacity ( svc ) , a measure of the strength of the skeletal muscles responsible for breathing . svc has been shown to be an important predictor of disease progression and survival in prior trials of patients with als . at week 12 , the decline in svc from baseline was -3.12 for patients receiving tirasemtiv versus -8.66 for those receiving placebo ( p < 0.0001 ) . from week 0 to week 12 , the slope of decline in svc measured as percentage points per day was -0.0394 for patients receiving tirasemtiv versus -0.0905 for those receiving placebo ( p = 0.0006 ) . the analyses of other pre-specified secondary efficacy endpoints in benefit-als produced mixed results . the muscle strength mega-score , a measure of strength combining the data from several muscle groups in each patient , declined more slowly on tirasemtiv versus placebo . the difference in the rate of decline for sniff nasal inspiratory pressure ( snip ) was not statistically significant ) ; however , snip decreased more on tirasemtiv compared with placebo in a statistically significant manner at 4 and 12 weeks . no differences in maximum voluntary ventilation and hand grip fatigue were observed on tirasemtiv versus placebo . serious adverse events ( saes ) during double-blind treatment were more frequent on tirasemtiv than on placebo ( 9.0 % vs. 5.4 % ) . the most common sae was respiratory failure which occurred in 1 patient on tirasemtiv and 3 patients on placebo . confusional state and delirium occurred in 2 patients on tirasemtiv and no patients on placebo . more patients on tirasemtiv withdrew from the trial following randomization than on placebo ( 99 vs. 33 patients , respectively ) . adverse events more common on tirasemtiv than on placebo ( > 10 % difference ) were dizziness , fatigue , and nausea . 55 throughout the remainder of 2014 , we presented further results from benefit-als . these results indicated that : differences in the decline in svc on tirasemtiv versus placebo observed after 12 weeks of double-blind treatment were maintained for up to 4 weeks after discontinuation of treatment ; the reduced decline in svc on tirasemtiv versus placebo was observed consistently across all subgroups of patients in benefit-als that were examined ; the effects of tirasemtiv on svc were observed at all doses studied and the concentration-response relationship was flat ; and riluzole did not increase plasma concentrations nor impact the tolerability of tirasemtiv . planned phase iii clinical development : in october 2014 , we announced that we had completed our review of results from benefit-als and concluded that effects observed on svc in patients treated with tirasemtiv were robust and potentially clinically meaningful . we have engaged with regulatory authorities in the u.s. and europe regarding results from benefit-als and plan to advance tirasemtiv into phase iii clinical development . while regulatory interactions are ongoing , we believe that current feedback from these regulatory authorities informs advancement of tirasemtiv to a phase iii clinical development program that is intended to potentially confirm and extend results from benefit-als . key clinical endpoints in the phase iii program will include measures of respiratory function after longer durations of treatment in patients with als , including effects on svc . we have initiated non-clinical and clinical development planning activities for the phase iii program , and anticipate initiating the program in the second quarter of 2015. tirasemtiv strategic and commercial planning . during 2014 , we made preparations for the potential commercialization of tirasemtiv . these activities included interactions with manufacturers , and corporate development and commercial planning activities to support various scenarios . we expect to continue to engage extensively with als experts , both neuromuscular and pulmonary , and with payors , regulatory authorities and patient advocacy groups as we develop plans for the commercialization of tirasemtiv as a potential treatment for patients living with als . these commercialization plans will include market assessment and corporate development activities to support the launch of tirasemtiv in the u.s. and europe , if appropriate . the clinical trials program for tirasemtiv may proceed for several years , and we will not be in a position to generate any revenues or material net cash flows from sales of this drug candidate until the program is successfully completed , regulatory approval is achieved , and the drug is commercialized . tirasemtiv is at too early a stage of development for us to predict if or when this may occur . story_separator_special_tag our expenditures will increase if and as we move tirasemtiv into later stage development . ck-2127107 and other skeletal muscle activators astellas strategic alliance . ck-2127107 is being developed jointly by cytokinetics and astellas . in december 2014 , we entered into an amended and restated license and collaboration agreement with astellas ( the amended astellas agreement ) . this agreement superseded the license and collaboration agreement between cytokinetics and astellas of june 2013 ( the original astellas agreement ) . the amended astellas agreement expanded the objective of the collaboration of advancing novel therapies for diseases and medical conditions associated with muscle weakness to include sma and potentially other neuromuscular indications , in addition to the non-neuromuscular indications provided for in the original astellas agreement . under the amended astellas agreement , we expanded the exclusive license previously granted astellas under the original astellas agreement to co-develop and commercialize ck-2127107 for potential application in non-neuromuscular indications worldwide to include certain neuromuscular indications as well . concurrent with the expanded collaboration , the companies agreed to advance ck-2127107 into phase ii clinical development . cytokinetics will conduct the initial phase ii clinical trial in patients with sma . we anticipate initiating this trial 56 in the second half of 2015. the development program may include other neuromuscular indications as the companies may agree . cytokinetics and astellas will jointly develop and may jointly commercialize ck-2127107 and other fast skeletal troponin activators in neuromuscular indications . astellas will be responsible for the costs associated with the development of all collaboration products , including ck-2127107 , subject to cytokinetics ' option to co-fund certain development costs as described below . under the amended astellas agreement , the parties extended through 2016 their joint research program to identify next-generation skeletal muscle activators to be nominated as potential drug candidates . this research will be conducted at astellas ' expense . under the amended astellas agreement , astellas has exclusive rights to co-develop and commercialize ck-2127107 and other fast skeletal troponin activators in sma and potentially other indications and other novel mechanism skeletal muscle activators in all indications , subject to certain cytokinetics ' development and commercialization rights . cytokinetics may co-promote and conduct certain commercial activities in the u.s. , canada and europe under agreed scenarios . cytokinetics retains an option to conduct early-stage development for certain agreed indications at its initial expense , subject to reimbursement if development continues under the collaboration . under the amended astellas agreement , cytokinetics also retains an option to co-promote collaboration products containing fast skeletal muscle activators for neuromuscular indications in the u.s. , canada and europe , in addition to its option to co-promote other collaboration products in the u.s. and canada as provided for in the original astellas agreement . astellas will reimburse cytokinetics for certain expenses associated with its co-promotion activities . the amended astellas agreement also provides for cytokinetics to lead certain activities relating to the commercialization of collaboration products for neuromuscular indications in the u.s. , canada and europe under particular scenarios . cytokinetics received an upfront payment of $ 30.0 million in connection with the execution of the amended astellas agreement . also , in conjunction with the execution of the amended astellas agreement , we also entered into a common stock purchase agreement which provided for the sale of 2,040,816 shares of our common stock to astellas at a price per share of $ 4.90 and an aggregate purchase price of $ 10.0 million , which was received in december 2014. pursuant to this agreement , astellas agreed to certain trading and other restrictions with respect to our common stock . concurrently , cytokinetics earned a $ 15.0 million milestone payment relating to astellas ' decision to advance ck-2127107 into phase ii clinical development . cytokinetics is also eligible to potentially receive over $ 20.0 million in reimbursement of sponsored research and development activities during the next two years of the collaboration . based on the achievement of pre-specified criteria , cytokinetics may receive over $ 600.0 million in milestone payments relating to the development and commercial launch of collaboration products , including up to $ 112.0 million ( of which cytokinetics has now received $ 17.0 million ) relating to early development of ck-2127107 and for later-stage development and commercial launch milestones for ck-2127107 in non-neuromuscular indications , and over $ 100.0 million in development and commercial launch milestones for ck-2127107 in each of sma and other neuromuscular indications . cytokinetics may also receive up to $ 200.0 million in payments for achievement of pre-specified sales milestones related to net sales of all collaboration products under the amended astellas agreement . if astellas commercializes any collaboration products , cytokinetics will also receive royalties on sales of such collaboration products , including royalties ranging from the high single digits to the high teens on sales of products containing ck-2127107 . cytokinetics also holds an option to co-fund certain development costs for ck-2127107 and other compounds in exchange for increased milestone payments and royalties ; such royalties may increase under certain scenarios to exceed twenty percent . in addition to the foregoing development , commercial and sales milestones , cytokinetics may also receive payments for the achievement of pre-specified milestones relating to the joint research program . cytokinetics retains the exclusive right to develop and commercialize tirasemtiv for the potential treatment of als and certain other neuromuscular disorders independently from the amended astellas agreement . 57 ck-2127107 clinical development phase i clinical trials program : in october 2014 , we announced the completion of five phase i clinical trials evaluating ck-2127107 in healthy volunteers , and certain other phase ii readiness activities , all in connection with the agreed development plan under our collaboration with astellas . these phase i clinical trials demonstrated that ck-2127107 appeared well-tolerated in healthy volunteers and that exposures generally increased across dose ranges studied . ck-2127107 increased the response of muscle to neuromuscular input in a dose and plasma concentration related fashion in healthy volunteers consistent with preclinical observations .
| revenues from amgen of $ 17.2 million in 2013 included recognition of an upfront license fee of $ 15.0 million , along with additional license revenues of $ 2.2 million , resulting from the allocation of a portion of the excess of the cash received over the fair value of the common stock issued contemporaneously to amgen . in conjunction with the amgen agreement amendment , we sold 1,404,100 shares of our common stock to amgen for $ 10.0 million . we determined the fair value of the stock issued to amgen to be $ 7.5 million . a portion of the excess of cash received over fair value of $ 2.5 million was also allocated to the services performed and was deferred and was recognized as revenue as services were performed . license revenues refers to license revenues from our collaboration with astellas , prior to it becoming a related party in december 2014. license revenues included $ 9.8 and $ 3.9 million in 2014 and 2013 , respectively , of the $ 16.0 million upfront license fee received from astellas in july 2013 in connection with the execution of the original astellas agreement . we are recognizing this revenue over the term of the research and development services using the proportional performance model . 67 research and development expenses replace_table_token_7_th research and development expenses were $ 44.4 million and $ 49.5 million in 2014 and 2013 , respectively . the decrease of $ 5.1 million in research and development expenses in 2014 was primarily due to decreased spending of $ 8.2 million for outsourced clinical and preclinical costs mainly due to the completion of the benefit-als clinical trial earlier in 2014 , partially offset by increased spending of $ 2.6 million personnel-related costs due to increased headcount . the increase of $ 13.9 million in research and development expenses in 2013 was primarily due to increased spending for outsourced clinical costs and laboratory costs totaling $ 14.0 million related to the
| 11,616 |
on september 1 , 2013 , we purchased a 99 % interest in a limited liability company that has ownership interests in four limited liability companies that own five clean coal production plants . on march 1 , 2014 , we purchased an additional ownership interest in seven of the 2009 era plants and five of the 2011 era plants from a co-investor . for all seven of the 2009 era plants , our ownership increased from 49.5 % to 100.0 % . for the 2011 era plants , our ownership increased from 48.8 % to 90.0 % for one of the plants , from 49.0 % to 100.0 % for three of the plants and from 98.0 % to 100.0 % for one of the plants . we believe these operations produce refined coal that qualifies for tax credits under irc section 45. the law that provides for irc section 45 tax credits expires in december 2019 for the fourteen plants we built and placed in service in 2009 ( 2009 era plants ) and in december 2021 for the fifteen plants we built and placed in service in 2011 , plus the five plants we purchased interests in that were placed in service in 2011 ( 2011 era plants ) . twenty-six plants are under long-term production contracts with several utilities . the remaining eight plants are in various stages of seeking and negotiating long-term production contracts . several of the remaining eight plants could be in production starting in late 2015. we also own a 46.54 % controlling interest in chem-mod , which has been marketing the chem-mod solution proprietary technologies principally to refined fuel plants that sell refined fuel to coal-fired power plants owned by utility companies , including those plants in which we hold interests . based on current production estimates provided by licensees , chem-mod could generate for us approximately $ 4.0 million of net after-tax earnings per quarter . our current estimate of the 2015 annual after-tax earnings that could be generated from all of our clean energy investments in 2015 is between $ 90.0 million to $ 110.0 million . if we continue to have success entering into additional long-term production contracts , we estimate that we could generate more after-tax earnings in 2016 and beyond . all estimates set forth above regarding the future results of our clean energy investments are subject to significant risks , including those set forth in the risk factors regarding our irc section 45 investments under item 1a , risk factors. 26 critical accounting policies our consolidated financial statements are prepared in accordance with u.s. generally accepted accounting principles ( which we refer to as gaap ) , which require management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes . we believe the following significant accounting policies may involve a higher degree of judgment and complexity . see note 1 to our consolidated financial statements for other significant accounting policies . revenue recognition - we recognize commission revenues at the later of the billing or the effective date of the related insurance policies , net of an allowance for estimated policy cancellations . we recognize commission revenues related to installment premiums as the installments are billed . we recognize supplemental commission revenues using internal data and information received from insurance carriers that allows us to reasonably estimate the supplemental commissions earned in the period . a supplemental commission is a commission paid by an insurance carrier that is above the base commission paid , is determined by the insurance carrier based on historical performance criteria and is established annually in advance of the contractual period . we recognize contingent commissions and commissions on premiums directly billed by insurance carriers as revenue when we have obtained the data necessary to reasonably determine such amounts . typically , we can not reasonably determine these types of commission revenues until we have received the cash or the related policy detail or other carrier specific information from the insurance carrier . a contingent commission is a commission paid by an insurance carrier based on the overall profit and or volume of the business placed with that insurance carrier during a particular calendar year and is determined after the contractual period . commissions on premiums billed directly by insurance carriers to the insureds generally relate to a large number of property/casualty insurance policy transactions , each with small premiums , and comprise a substantial portion of the revenues generated by our employee benefit brokerage operations . under these direct bill arrangements , the insurance carrier controls the entire billing and policy issuance process . we record the income effects of subsequent premium adjustments when the adjustments become known . fee revenues generated from the brokerage segment primarily relate to fees negotiated in lieu of commissions that we recognize in the same manner as commission revenues . fee revenues generated from the risk management segment relate to third party claims administration , loss control and other risk management consulting services that we provide over a period of time , typically one year . we recognize these fee revenues ratably as the services are rendered and record the income effects of subsequent fee adjustments when the adjustments become known . premiums and fees receivable in our consolidated balance sheet are net of allowances for estimated policy cancellations and doubtful accounts . we establish the allowance for estimated policy cancellations through a charge to revenues and the allowance for doubtful accounts through a charge to other operating expenses . both of these allowances are based on estimates and assumptions using historical data to project future experience . such estimates and assumptions could change in the future as more information becomes known which could impact the amounts reported and disclosed herein . we periodically review the adequacy of these allowances and make adjustments as necessary . income taxes - our tax rate reflects the statutory tax rates applicable to our taxable earnings and tax planning in the various jurisdictions in which we operate . story_separator_special_tag significant judgment is required in determining the annual effective tax rate and in evaluating uncertain tax positions . we report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in our tax return . we evaluate our tax positions using a two-step process . the first step involves recognition . we determine whether it is more likely than not that a tax position will be sustained upon tax examination based solely on the technical merits of the position . the technical merits of a tax position are derived from both statutory and judicial authority ( legislation and statutes , legislative intent , regulations , rulings and case law ) and their applicability to the facts and circumstances of the position . if a tax position does not meet the more likely than not recognition threshold , we do not recognize the benefit of that position in the financial statements . the second step is measurement . a tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements . the tax position is measured as the largest amount of benefit that has a likelihood of greater than 50 % of being realized upon ultimate resolution with a taxing authority . uncertain tax positions are measured based upon the facts and circumstances that exist at each reporting period and involve significant management judgment . subsequent changes in judgment based upon new information may lead to changes in recognition , derecognition and measurement . adjustments may result , for example , upon resolution of an issue with the taxing authorities , or expiration of a statute of limitations barring an assessment for an issue . we recognize interest and penalties , if any , related to unrecognized tax benefits in our provision for income taxes . see note 15 to our consolidated financial statements for a discussion regarding the possibility that our gross unrecognized tax benefits balance may change within the next twelve months . tax law requires certain items to be included in our tax returns at different times than such items are reflected in the financial statements . as a result , the annual tax expense reflected in our consolidated statements of earnings is different than that reported in the tax returns . some of these differences are permanent , such as expenses that are not deductible in the returns , and some differences are temporary and reverse over time , such as depreciation expense and amortization expense deductible for income tax purposes . temporary differences create deferred tax assets and liabilities . deferred tax liabilities generally represent tax expense recognized in the financial statements for which a tax payment has been deferred , or expense which has been deducted in the tax return but has not yet been recognized in the financial statements . deferred tax assets generally represent items that can be used as a tax deduction or credit in tax returns in future years for which a benefit has already been recorded in the financial statements . 27 we establish or adjust valuation allowances for deferred tax assets when we estimate that it is more likely than not that future taxable income will be insufficient to fully use a deduction or credit in a specific jurisdiction . in assessing the need for the recognition of a valuation allowance for deferred tax assets , we consider whether it is more likely than not that some portion , or all , of the deferred tax assets will not be realized and adjust the valuation allowance accordingly . we evaluate all significant available positive and negative evidence as part of our analysis . negative evidence includes the existence of losses in recent years . positive evidence includes the forecast of future taxable income by jurisdiction , tax-planning strategies that would result in the realization of deferred tax assets and the presence of taxable income in prior carryback years . the underlying assumptions we use in forecasting future taxable income require significant judgment and take into account our recent performance . the ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which temporary differences are deductible or creditable . intangible assets/earnout obligations - intangible assets represent the excess of cost over the estimated fair value of net tangible assets of acquired businesses . our primary intangible assets are classified as either goodwill , expiration lists , non-compete agreements or trade names . expiration lists , non-compete agreements and trade names are amortized using the straight-line method over their estimated useful lives ( three to fifteen years for expiration lists , three to five years for non-compete agreements and five to fifteen years for trade names ) , while goodwill is not subject to amortization . the establishment of goodwill , expiration lists , non-compete agreements and trade names and the determination of estimated useful lives are primarily based on valuations we receive from qualified independent appraisers . the calculations of these amounts are based on estimates and assumptions using historical and pro forma data and recognized valuation methods . different estimates or assumptions could produce different results . we carry intangible assets at cost , less accumulated amortization in our consolidated balance sheet . we review all of our intangible assets for impairment at least annually and whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable . we perform these impairment reviews at the reporting unit level with respect to goodwill and at the business unit level for amortizable intangible assets . in reviewing intangible assets , if the fair value were less than the carrying amount of the respective ( or underlying ) asset , an indicator of impairment would exist and further analysis would be required to determine whether or not a loss would need to be charged against current period earnings .
| in our risk management segment , total revenues and adjusted total revenues were up 9 % and 10 % , respectively , organic fees were up 9.5 % , net earnings were down 11 % , adjusted ebitdac was up 16 % and adjusted ebitdac margins were up 90 basis points . in our combined brokerage and risk management segments , total revenues and adjusted total revenues were both up 30 % , organic commissions and fee revenues were up 5.3 % , net earnings were up 22 % , adjusted ebitdac was up 39 % and adjusted ebitdac margins increased by 163 basis points . our acquisition program and our integration efforts are meeting our expectations . during the fourth quarter of 2014 , the brokerage segment completed 15 acquisitions with annualized revenues of $ 67.6 million , bringing the total for 2014 to 60 acquisitions with annualized revenues of $ 761.2 million . in our corporate segment , earnings from our clean energy investments contributed $ 104.6 million to net earnings in 2014. on march 1 , 2014 , we acquired additional ownership interests in seven of the 2009 era plants and five of the 2011 era plants from a co-investor . these transactions resulted in a non-cash after-tax gain of $ 14.1 million , which resulted from the fair value as of the transaction date . all but one of our investments in these plants had been accounted for under the equity method of accounting . for all plants where our ownership is over 50 % , as of march 1 , 2014 we consolidated the operations of the limited liability companies that own these plants . we anticipate our clean energy investments to generate between $ 90.0 million and $ 110.0 million to net earnings in 2015. we expect to use these additional earnings to continue our mergers and acquisition strategy in our core brokerage and risk management operations . on april 1 , 2014 , we acquired the oval group of companies ( which we refer to as oval ) . under the acquisition agreement , we agreed to purchase all of the outstanding equity of oval for net cash consideration of approximately $ 338.0 million . oval
| 11,617 |
stock-based compensation expense has been , and will continue to be for the foreseeable future , a significant recurring expense in our business and an important part of our compensation strategy . specifically , our stock-based compensation expense for the year ended december 31 , 2018 and december 31 , 2017 was $ 3.4 million and $ 3.7. million , respectively , which represented 28.6 % and 30.0 % , respectively , of our total operating expenses for those periods . story_separator_special_tag pageno -- > 25 since our inception , we have not recorded any u.s. federal or state income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits , due to our uncertainty of realizing a benefit from those items . at december 31 , 2018 , the company has federal and state net operating loss carryforwards of approximately $ 51.1 million and $ 37.6 million , respectively , not considering the irc section 382 annual limitation discussed below . the federal loss carryforwards begin to expire in 2023 , unless previously utilized . additionally , the utilization of the net operating loss carryforwards are subject to an annual limitation under section 382 and 383 of the internal revenue code od 1986 , and similar state tax provisions due to ownership change limitations that have occurred previously or that could occur in the future . these ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax , respectively . in general , an ownership change , as defined by section 382 and 383. results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period . the company has not conducted an analysis of an ownership change under section 382. to the extent that a study is completed and an ownership change is deemed to occur , the company 's net operating losses could be limited comparison of the years december 31 , 2018 to 2017 the following table summarizes our results of operations for the years ended december 31 , 2018 and 2017 : senestech , inc. statements of operations and comprehensive loss ( in thousands , except shares and per share data ) replace_table_token_1_th net sales 26 net sales , shown net of sales discounts and promotions , were $ 297,000 for the year ended december 31 , 2018 , compared to $ 52,000 for year ended december 31 , 2017. the increase in our net product sales of $ 245,000 was a result of increased sales of contrapest to our distributors as a result of increased marketing efforts and sales promotions . we expect net product sales to continue to increase year over year for the foreseeable future . cost of goods sold cost of goods sold was $ 241,000 , or 81.1 % of net sales , for the year ended december 31 , 2018 , compared to $ 45,000 , or 86.5 % of net sales for year ended december 31 , 2017. the increase in cost of goods sold of $ 196,000 , was driven by the cost of increased sales , increased sales discounts and promotions as well as increased scrap related to product manufactured during scale up activities that were ultimately deemed unsellable . the decrease as a percentage of sales was a result of process improvement efficiencies . we anticipate cost of goods sold as a percentage of sales will improve for the foreseeable future due to manufacturing efficiencies as a result of the scale up activities . gross profit gross profit for the year ended december 31 , 2018 was $ 56,000 or 18.9 % of net sales , compared to a gross profit of $ 7,000 or 13.5 % of net sales , for the year ended december 31 , 2017. the increase in gross profit was a direct result of increased sales volume as described above , partially offset by increased sales discounts and promotions as well as increased scrap related to scale up activities . research and development expenses replace_table_token_2_th research and development expenses were $ 2.4 million for the year ended december 31 , 2018 , compared to $ 3.2 million for the year ended december 31 , 2017. the $ 800,000 decrease in research and development expenses was primarily due to decreases in consulting and legal expenses , primarily related to regulatory affairs , of $ 384,000 , stock compensation expenses of $ 271,000 , rent and facilities of $ 60,000 and a reduction of manufacturing equipment maintenance of $ 134,000 , offset by increases in travel related to customer support expense of $ 30,000 and depreciation expense of $ 290,000 due to equipment adds during 2018. we continue to investigate other applications of our core technology to other product candidates , which includes laboratory tests and academic collaborations . we also continue to develop our supply chain , particularly identifying and improving our sourcing of triptolide and other ingredients for our product and product candidates . selling , general and administrative expenses selling , general and administrative expenses were $ 9.5 million for the year ended december 31 , 2018 , compared to $ 9.1 million for the year ended december 31 , 2017. the increase of $ 0.4 million in selling , general and administrative expenses was primarily due to an increase of $ 307,000 in recruiting and other benefit expenses and an increase of $ 125,000 in legal expenses as a result of ongoing litigation , offset by a decrease of $ 32,000 in stock-based compensation expense . story_separator_special_tag interest expense net we recorded $ 49,000 of interest expense , net for the year ended december 31 , 2018 , compared to $ 57,000 for the year ended december 31 , 2017. the decrease in interest expense , net of $ 8,000 was the result of decreased debt in the form of notes payable due primarily to the sale of a vehicle and related debt reduction in april 2018. other income ( expense ) , net we recorded $ 21,000 of other income , net for the year ended december 31 , 2018 , compared to $ 87,000 of other income for the year ended december 31 , 2017. the $ 66,000 net decrease in other income was primarily due to lower income recognized for year-over-year fair market value adjustment of our convertible promissory notes and a $ 10,000 loss on the early extinguishment of a note payable during 2018 . 27 liquidity and capital resources since our inception , we have sustained significant operating losses in the course of our research and development activities and commercialization efforts and expect such losses to continue for the near future . we have generated limited revenue to date from product sales , research grants and licensing fees received under our former license agreement with neogen . in 2017 , we began full scale marketing of our first product , contrapest , and we continue to develop other product candidates , which are in various phases of development . we have funded our operations to date through the sale of equity securities , including convertible preferred stock , common stock and warrants to purchase common stock , debt financing , consisting primarily of convertible notes ; and , to a lesser extent , payments received in connection with product sales , research grants and licensing fees . through december 31 , 2018 , we had received net proceeds of $ 61.7 million from our sales of common stock , preferred stock and warrant exercises and issuance of convertible and other promissory notes , and an aggregate of $ 1.7 million from licensing fees and an aggregate of $ 0.4 million from product sales . at december 31 , 2018 , we had an accumulated deficit of $ 85.8 million and cash and cash equivalents of $ 4.9 million . our ultimate success depends upon the outcome of a combination of factors , including : ( i ) successful commercialization of contrapest and ongoing regulatory approval of our other product candidates ; ( ii ) market acceptance , commercial viability and profitability of contrapest and other products ; ( iii ) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue ; ( iv ) the success of our research and development ; ( v ) the ability to retain and attract key personnel to develop , operate and grow our business ; and ( vi ) our ability to meet our working capital needs . based upon our current operating plan , we expect that cash and cash equivalents and highly liquid , short term investments at december 31 , 2018 , in combination with anticipated revenue and additional sales of our equity securities , will be sufficient to fund our current operations for at least the next 12 months . however , if anticipated revenue targets and margin targets are not achieved and we are unable to raise necessary capital through the sale of our securities , we may seek to reduce operating expenses , and take other measures that could impair our ability to be successful and operate as a going concern . in any event , we are likely to require additional capital in order to fund our operating losses and research and development activities until we become profitable . we may never achieve profitability or generate positive cash flows , and unless and until we do , we will continue to need to raise capital through equity or debt financing . if such equity or debt financing is not available at adequate levels or on acceptable terms , we may need to delay , limit or terminate commercialization and development efforts . additional funding requirements we expect our expenses to increase in connection with our ongoing activities , particularly as we market and focus on sales of contrapest , and as we advance field studies of our product candidates in development . in addition , we will continue to incur costs associated with operating as a public company . as a result , we anticipate requiring additional funding during 2019. in particular , we expect to incur substantial and increased expenses as we : ● work to maximize market acceptance for , and generate sales of , our products ; ● manage the infrastructure for the sales , marketing and distribution of contrapest and any other product candidates for which we may receive regulatory approval ; ● continue the development of contrapest and our other product candidates , including engaging in any necessary field studies ; ● seek additional regulatory approvals for contrapest and our other product candidates ; ● scale up manufacturing processes and quantities to meet future demand of contrapest and any other product candidates for which we receive regulatory approval ; ● continue product development of contrapest and advance our research and development activities and advance the research and development programs for other product candidates ; ● maintain , expand and protect our intellectual property portfolio ; and ● add operational , financial and management information systems and personnel , including personnel to support our product development and commercialization efforts and operations as a public company . 28 cash flows the following table summarizes our sources and uses of cash for each of the years presented : replace_table_token_3_th operating activities .
| we plan to continue to hire employees to support our research and development efforts and anticipate that we will continue to utilize various forms of stock-based compensation awards in order to attract and retain employees for our research and development efforts . as a result , we anticipate that stock-based compensation expense will continue to represent a significant portion of our research and development expenses for the foreseeable future . selling , general and administrative expenses selling , general and administrative expenses consist primarily of salaries and related costs , including stock-based compensation , for personnel in executive , finance , sales , marketing and administrative functions . selling , general and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal , consulting , accounting and audit services . we anticipate that our selling , general and administrative expenses may increase in the future as we increase our headcount to support commercialization of contrapest and further development of our product candidates . we also anticipate that we will incur increased accounting , audit , legal , regulatory , compliance , director and officer insurance costs as well as investor and public relations expenses associated with being a public company . we plan to continue to hire employees to support our commercialization of contrapest and further development of our product candidates and anticipate that we will continue to utilize various forms of stock-based compensation awards in order to attract and retain qualified employees . as a result , we anticipate that stock-based compensation expense will continue to represent a significant portion of our selling , general and administrative expenses for the foreseeable future . interest income . interest income consists primarily of interest income earned on cash and cash equivalents . prior to 2017 , our interest income has not been significant due to nominal cash and investment balances and low interest earned on invested balances . interest expense . interest expense consists primarily of interest accrued on our capital lease and note commitments . other income ( expense ) , net . other income ( expense ) , net ,
| 11,618 |
to maintain and accelerate our revenue and operating income growth , we have significantly invested in and expanded our operating functions and infrastructure , including additional product management , sales and client support staff and facilities in locations around the world and additional staff and supporting technology for our research and our data operations and technology functions ( the enhanced investment program ) . the purpose of this enhanced investment program is to maximize our medium-term revenue and operating income growth , while at the same time ensuring that msci will remain a leading provider of investment decision support tools into the future . as a result , the rate of growth of our investments have , in recent years , exceeded that of our revenues , which has slowed the growth of , or even reduced , our operating profit . for example , for the year ended december 31 , 2014 , our revenues grew by 9.1 % but our operating income decreased by 0.9 % compared to the year ended december 31 , 2013 due , in part , to increased investment in our business . we have largely completed our enhanced investment program and , as a result , we expect margin expansion to begin in the second half of 2015 , exclusive of any non-recurring charges we may incur . changes in presentation prior to march 31 , 2014 , we reported financial results for two segments : the performance and risk business and the governance business . on march 17 , 2014 , we entered into a definitive agreement to sell institutional shareholder services inc. which , together with the cfra product line disposed of in march 2013 , made up our governance segment . as a result , beginning in the first quarter of 2014 , we began operating and reporting as a single reportable segment , and the operating results of iss and the cfra product line were reported as discontinued operations for all periods presented . we completed the sale of iss on april 30 , 2014. in addition , for periods prior to march 31 , 2014 , we reported energy and commodity analytics products separately as its own product category for disclosures related to operating revenues , run rate and aggregate and core retention rates . beginning with the three month period ended march 31 , 2014 , we reported the results of energy and commodity analytics products as part of the risk management analytics product category , as we view the product offerings and customer base of the energy and commodities analytics products to be similar in nature to those in the risk management analytics product category . prior periods have also been presented to reflect this change in categorization . key financial metrics and drivers revenues our revenues are grouped into the following three product and or service categories : index , real estate and esg products our index , real estate and esg products category includes subscription fees from msci equity index data and ipd and esg research and analytics products , fees based on assets in investment products linked to our equity indexes , fees from non-recurring licenses of our equity index historical data and fees from real estate products . we also generate a limited amount of revenues based on the trading volume of futures and options contracts linked to our indexes . 51 clients typically subscribe to equity index data modules for use by a specified number of users at a particular location . clients may select delivery from us or delivery via a third-party vendor . we are able to grow our revenues for data subscriptions by expanding the number of client users and their locations and the number of third-party vendors the client uses for delivery of our data modules . the increasing scope and complexity of a client 's data requirements beyond standard data modules , such as requests for historical data or customized indexes , also provide opportunities for further revenue growth from an existing client . clients who utilize our esg research and analytics products and services pay an annual subscription fee and access these products and services via a web-based application , data feed or third-party vendor . revenues from our index-linked investment product licenses , such as etfs , increase or decrease as a result of changes in value of the assets in the investment products . these changes in the value of the assets in the investment products can result from equity market price changes , investment inflows and outflows and changes in foreign currency exchange rates . in most cases , fees for these licenses are paid quarterly in arrears and are calculated by multiplying a negotiated basis point fee ( which in some cases may be based on a product provider 's total expense ratio ) times the average daily assets in the investment product for the most recent period . additionally , revenues from our index-linked futures and options contracts vary based on the volume of trading . risk management analytics products our risk management analytics product category includes revenues from annual , recurring subscriptions to our risk management analytics products , including our two major products , riskmanager and barraone . we also recognize recurring subscriptions related to our managed services offering in which our staff oversees the production of risk and performance reports on behalf of our clients . other products in this category include hedgeplatform , wealthbench , credit manager and investorforce . the products offer a consistent risk assessment framework for managing and monitoring investments in a variety of asset classes across an organization . we are able to grow our revenues by licensing additional users and locations as well as selling additional products and services . riskmanager is used by clients for daily analysis , measuring and monitoring of market risk at fund and firm levels , for sensitivity and stress testing , and interactive what-if analysis . story_separator_special_tag riskmanager is a highly scalable platform accessed by clients via a license to a secure , interactive web-based application service , as a fully outsourced risk reporting service or as a web service in which a client 's systems access riskmetrics core risk elements by connecting directly to our systems . barraone , powered by the barra integrated model , provides clients with global , multi-asset class risk analysis using barra fundamental factors . the product is accessed by clients via a secure , interactive web-based session , web services or on an outsourced basis . clients generally subscribe to the other products in this category on an annual recurring basis . portfolio management analytics products our portfolio management analytics product category includes revenues from annual , recurring subscriptions to barra aegis and our proprietary risk data in barra aegis and barra portfolio manager ; equity models direct products ; and our proprietary equity risk data incorporated in third-party software application offerings ( e.g. , barra on vendors ) . this category also includes a limited amount of revenues from annual , recurring subscriptions to our fixed income portfolio analytics products . barra aegis is a sophisticated software application for equity risk management and portfolio analysis that is powered by our proprietary equity risk data . it is an integrated suite of equity investment analytics modules , specifically designed to help clients actively manage their equity risk against their expected returns , identify returns attributable to stock selection skills and back-test portfolio construction strategies over time . a base subscription for use in portfolio analysis typically involves a subscription to barra aegis and various risk data modules . a client 52 may add portfolio performance attribution , optimization tools , process automation tools or other features to its barra aegis subscription . by licensing the client to receive additional software modules and risk data , or increasing the number of permitted client users or client locations , we can increase our revenues per client further . barra portfolio manager is an integrated risk and performance platform that is designed to help fund managers and their teams gain additional portfolio insight , manage a more systematic investment process and make faster , more informed investment decisions . the hosted interactive user interface allows users to construct portfolios and back-test their strategies using the barra optimizer . it also allows users to decompose the risk and attribute the return of their portfolios according to barra models . the platform supports optional data management services that allow users to outsource the loading and reconciliation of their portfolio and other proprietary data . our barra equity models direct risk data is distributed directly to clients who then integrate it into their own software applications or upload the risk data onto third-party applications . the proprietary risk data in barra equity models direct is also available via third-party vendors . a base subscription to our equity models direct product provides equity risk data for a set fee that authorizes one to two users . by licensing the client to receive equity risk model data for additional countries , or increasing the number of permitted client users or client locations , we can further increase our revenues per client . the barra on vendors product makes our proprietary risk data from our equity models direct product available to clients via third party providers , such as factset research systems , inc. see item 1. businessbusiness segments , products and services above for additional details of the products and services that we offer . operating metrics run rate at the end of any period , we generally have subscription and investment product license agreements in place for a large portion of total revenues for the following 12 months . we measure the fees related to these agreements and refer to this as run rate. the run rate at a particular point in time represents the forward-looking revenues for the next 12 months from then-current subscriptions and investment product licenses we provide to our clients under renewable contracts or agreements assuming all contracts or agreements that come up for renewal are renewed and assuming then-current currency exchange rates . for any license where fees are linked to an investment product 's assets or trading volume , the run rate calculation reflects , for etf fees , the market value on the last trading day of the period , and for non-etf funds and futures and options , the most recent periodic fee earned under such license or subscription . the run rate does not include fees associated with one-time and other non-recurring transactions . in addition , we remove from the run rate the fees associated with any subscription or investment product license agreement with respect to which we have received a notice of termination or non-renewal during the period and determined that such notice evidences the client 's final decision to terminate or not renew the applicable subscription or agreement , even though such notice is not effective until a later date . because the run rate represents potential future revenues , there is typically a delayed impact on our operating revenues from changes in our run rate . in addition , the actual amount of revenues we will realize over the following 12 months will differ from the run rate because of : revenues associated with new subscriptions and non-recurring sales ; modifications , cancellations and non-renewals of existing agreements , subject to specified notice requirements ; fluctuations in asset-based fees , which may result from changes in certain investment products ' total expense ratios , market movements , including foreign currency exchange rate changes , or from investment inflows into and outflows from investment products linked to our indexes ; 53 fluctuations in fees based on trading volumes of futures and options contracts linked to our indexes ; fluctuations in the number of hedge funds for which we provide investment information and risk analysis to hedge fund investors ; price changes ; revenue recognition differences under u.s. gaap , including timing of implementation and report deliveries ; fluctuations
| asset-based fee revenues attributable to the index , real estate and esg products increased $ 8.6 million , or 6.1 % to $ 149.5 million for the year ended december 31 , 2013 compared to $ 140.9 million for the year ended december 31 , 2012. the year-over-year difference resulted from higher revenues from non-etf passive funds and a change in the mix of etfs linked to msci indexes , which more than offset a decline of $ 24.1 billion , or 6.9 % , in the average value of assets in etfs linked to msci indexes primarily related to the loss of the vanguard etfs . included in the year ended december 31 , 2013 were asset-based fees of $ 3.3 million related to the vanguard etfs , compared to $ 21.8 million included in the year ended december 31 , 2012. the average value of assets in etfs linked to msci equity indexes in the aggregate decreased 6.9 % to $ 325.0 billion for the year ended december 31 , 2013 compared to $ 349.1 billion for the year ended december 31 , 2012. the switching of the vanguard etfs was completed by the end of june 2013. the average value of assets related to the vanguard etfs was $ 122.1 billion for the year ended december 31 , 2012 . 67 as of december 31 , 2013 , the value of assets in etfs linked to msci equity indexes was $ 332.9 billion , representing a decrease of 17.3 % from $ 402.3 billion as of december 31 , 2012. of the $ 332.9 billion of assets in etfs linked to msci equity indexes as of december 31 , 2013 , 53.0 % were linked to indexes related to developed markets outside of the u.s. , 27.7 % were linked to emerging market indexes , 14.4 % were linked to u.s. market indexes and 4.9 % were linked to other global indexes . the following table sets forth the value of assets in etfs linked to msci indexes and the sequential change of such assets as of the end of each of
| 11,619 |
during the year ended june 30 , 2013 , our net cost of investments increased by $ 2,156,465 , or 102.7 % , as a result of 68 new investments , 25 follow-on investments and several revolver advances of $ 3,043,531 , accrued of payment-in-kind interest of $ 10,947 , structuring fees of $ 52,699 and amortization of discounts and premiums of $ 11,016 , while we received full repayment on 23 investments , sold ten investments , impaired one investment , and received several partial prepayments , amortization payments and a revolver repayment , totaling $ 931,534. compared to the end of last fiscal year ( ended june 30 , 2012 ) , net assets increased by $ 1,144,520 , or 75.7 % during the year ended june 30 , 2013 , from $ 1,511,974 to $ 2,656,494. this increase resulted from the issuance of new shares of our common stock ( less offering costs ) in the amount of $ 1,179,084 , dividend reinvestments of $ 16,087 , and $ 220,856 from operations . these increases , in turn , were offset by $ 271,507 in dividend distributions to our stockholders . the $ 220,856 increase in net assets resulting from operations is net of the following : net investment income of $ 324,924 , net realized loss on investments of $ 26,234 , and a decrease in net assets due to changes in net unrealized depreciation of investments of $ 77,834. the preparation of financial statements in conformity with gaap requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period . changes in the economic environment , financial markets and any other parameters used in determining these estimates could cause actual results to differ , and these differences could be material . 72 story_separator_special_tag style= '' font-family : times ; page-break-before : always '' > pembroke pines , florida . we invested $ 13,533 of equity and $ 63,000 of debt in aph . the senior secured note bears interest in cash at the greater of 6.0 % or libor plus 4.0 % and interest payment in kind of 5.50 % and has a final maturity of october 24 , 2020. on june 25 , 2013 , we made an investment of $ 26,500 to purchase 84.13 % of the subordinated notes in lcm xiv clo ltd. ( `` lcm xiv '' ) . on june 27 , 2013 , we provided $ 11,000 of secured second lien financing to blue coat systems , inc. ( `` blue coat '' ) , a leading provider of web security and wide area network ( wan ) optimization solutions . the second lien note bears interest in cash at the greater of 9.5 % or libor plus 8.5 % and has a final maturity of june 28 , 2020. on june 27 , 2013 , we made a follow-on secured debt investment of $ 87,500 to support the recapitalization of progrexion holdings , inc. ( `` progrexion '' ) . after the financing , we now hold $ 241,033 of senior secured debt of progrexion . the senior secured first lien note bears interest in cash at the greater of 10.5 % or libor plus 8.5 % and has a final maturity of september 14 , 2017. on june 28 , 2013 , sandow repaid $ 30,100 of the $ 55,000 loan receivable to us . after the repayment , we now hold $ 24,900 of senior secured debt of sandow . on june 28 , 2013 , we made a $ 1,000 follow-on investment in ajax . the subordinated unsecured term loan bears interest in cash at the greater of 11.5 % or libor plus 8.5 % and interest payment in kind of 6.0 % and has a final maturity of march 30 , 2018. on june 28 , 2013 , we made an $ 18,000 secured debt follow-on investment in new star metals , inc. ( `` new star '' ) , a provider of specialized processing services to the steel industry . the senior subordinated term loan bears interest in cash at 11.5 % and interest payment in kind of 1.0 % and has a final maturity of february 2 , 2018. in june 2013 , we determined that the impairment of manx was other-than-temporary and recorded a realized loss of $ 9,397 for the amount that the amortized cost exceeded the fair market value . equity issuance during the period from april 1 , 2013 to may 31 , 2013 , we sold 8,836,237 shares of our common stock at an average price of $ 10.92 per share , and raised $ 96,476 of gross proceeds , under the atm program . net proceeds were $ 95,474 after commissions to the broker-dealer on shares sold and offering costs . no additional shares were sold from june 1 , 2013 to june 30 , 2013. on april 18 , 2013 , may 23 , 2013 and june 20 , 2013 , we issued 138,087 , 117,497 and 117,107 shares of our common stock in connection with the dividend reinvestment plan , respectively . dividend on may 6 , 2013 , we announced the declaration of monthly dividends in the following amounts and with the following dates : $ 0.110125 per share for may 2013 to holders of record on may 31 , 2013 with a payment date of june 20 , 2013 ; $ 0.110150 per share for june 2013 to holders of record on june 28 , 2013 with a payment date of july 18 , 2013 ; $ 0.110175 per share for july 2013 to holders of record on july 31 , 2013 with a payment date of august 22 , 2013 ; and $ 0.110200 per share for august 2013 to holders of record on august 30 , 2013 with a payment date of september 19 , 2013 . story_separator_special_tag 75 on june 17 , 2013 , we announced the declaration of monthly dividends in the following amounts and with the following dates : $ 0.110225 per share for september 2013 to holders of record on september 30 , 2013 with a payment date of october 24 , 2013 ; $ 0.110250 per share for october 2013 to holders of record on october 31 , 2013 with a payment date of november 21 , 2013 ; $ 0.110275 per share for november 2013 to holders of record on november 29 , 2013 with a payment date of december 19 , 2013 ; and $ 0.110300 per share for december 2013 to holders of record on december 31 , 2013 with a payment date of january 23 , 2014. debt issuance during the quarter ended june 30 , 2013 , we issued $ 164,376 in aggregate principal amount of our prospect capital internotes® for net proceeds of approximately $ 159,983 , as follows : replace_table_token_6_th investment holdings as of june 30 , 2013 , we continue to pursue our diversified investment strategy . at june 30 , 2013 , approximately $ 4,172,852 or 157.1 % of our net assets are invested in 124 long-term portfolio investments and clos and 5.4 % of our net assets are invested in money market funds . during the year ended june 30 , 2013 , we originated $ 3,103,217 of new investments . our origination efforts are focused primarily on secured lending , to reduce the risk in the portfolio , investing primarily in first lien loans , and subordinated notes in clos , though we also continue to close select junior debt and equity investments . in addition to targeting investments senior in corporate capital structures with our new originations , we have also increased our origination business mix of third party private equity sponsor owned companies , which tend to have more third party equity capital supporting our debt investments than non-sponsor transactions . our annualized current yield was 13.9 % and 13.6 % as of june 30 , 2012 and june 30 , 2013 , respectively , across all performing interest bearing investments . the decrease in our current yield is primarily due to recent originations being at lower yields than the existing portfolio . monetization of equity positions that we hold and loans on non-accrual status are not included in this yield calculation . in many of our portfolio companies we hold equity positions , ranging from minority interests to majority stakes , which we expect over time to 76 contribute to our investment returns . some of these equity positions include features such as contractual minimum internal rates of returns , preferred distributions , flip structures and other features expected to generate additional investment returns , as well as contractual protections and preferences over junior equity , in addition to the yield and security offered by our cash flow and collateral debt protections . we classify our investments by level of control . as defined in the 1940 act , control investments are those where there is the ability or power to exercise a controlling influence over the management or policies of a company . control is generally deemed to exist when a company or individual possesses or has the right to acquire within 60 days or less , a beneficial ownership of more than 25 % of the voting securities of an investee company . affiliated investments and affiliated companies are defined by a lesser degree of influence and are deemed to exist through the possession outright or via the right to acquire within 60 days or less , beneficial ownership of 5 % or more of the outstanding voting securities of the investee company . as of june 30 , 2013 , we own controlling interests in airmall usa , inc. ( `` airmall '' ) , ajax , aph , awcnc , llc , borga , inc. , ccpi holdings , inc. ( `` ccpi '' ) , credit central holdings of delaware , llc ( `` credit central '' ) , energy solutions holdings , inc. ( f/k/a gas solutions holdings , inc. ) ( `` energy solutions '' ) , first tower holdings of delaware , llc ( `` first tower delaware '' ) , manx energy , inc. ( `` manx '' ) , nationwide acceptance holdings , llc ( `` nationwide '' ) , nmmb holdings , inc. ( `` nmmb '' ) , r-v industries , inc. ( `` r-v '' ) , the healing staff , inc. ( `` ths '' ) , valley electric holdings i , inc. ( `` valley electric '' ) and wolf energy holdings , inc. ( `` wolf '' ) . we also own an affiliated interest in bnn holdings corp. ( f/k/a biotronic neuronetwork ) ( `` biotronic '' ) , boxercraft incorporated ( `` boxercraft '' ) and smart , llc . the following is a summary of our investment portfolio by level of control at june 30 , 2013 and june 30 , 2012 , respectively : replace_table_token_7_th 77 the following is our investment portfolio presented by type of investment at june 30 , 2013 and june 30 , 2012 , respectively : replace_table_token_8_th the following is our investments in interest bearing securities presented by type of security at june 30 , 2013 and june 30 , 2012 , respectively : replace_table_token_9_th 78 the following is our investment portfolio presented by geographic location of the investment at june 30 , 2013 and june 30 , 2012 , respectively : replace_table_token_10_th 79 the following is our investment portfolio presented by industry sector of the investment at june 30 , 2013 and june 30 , 2012 , respectively : replace_table_token_11_th 80 portfolio investment activity during the year ended june 30 , 2013 , we acquired $ 2,574,755 of new investments , completed follow-on investments in existing portfolio companies , totaling approximately $ 496,371 , funded $ 21,143 of revolver advances , and recorded pik interest of $ 10,947 , resulting in gross investment originations of $ 3,103,217. the more significant of these investments are described briefly in
| on april 22 , 2013 , we provided $ 34,375 of senior secured financing , of which $ 31,875 was funded at closing , to support the acquisition of pegasus business intelligence , lp ( `` pegasus '' ) , the world 's largest processor of commissions paid by hotels to travel agencies for room booking services . the $ 15,938 term loan a note bears interest in cash at the greater of 6.75 % or libor plus 5.5 % and has a final maturity of april 18 , 2018. the $ 15,938 term loan b note bears interest in cash at the greater of 13.75 % or libor plus 12.5 % and has a final maturity of april 18 , 2018. the $ 2,500 senior secured revolver , which was unfunded at closing , bears interest in cash at the greater of 9.0 % or libor plus 7.75 % and has a final maturity of april 18 , 2014. on april 25 , 2013 , we made an investment of $ 26,000 to purchase 50.9 % of the subordinated notes in brookside mill clo ltd. ( `` brookside '' ) . on april 30 , 2013 , we made a $ 21,247 follow-on investment in aph , to acquire lofton place apartments and vista at palma sola , multi-family residential properties located in florida . we invested $ 3,247 of equity and $ 18,000 of debt in aph . the senior secured note bears interest in cash at the greater of 6.0 % or libor plus 4.0 % and interest payment in kind of 5.50 % and has a final maturity of october 24 , 2020. on april 30 , 2013 , we sold our investment in fischbein , llc ( `` fischbein '' ) for net proceeds of $ 3,168 , recognizing a realized gain of $ 2,293 on the sale . in addition , there is $ 310 being held in escrow which will be recognized as additional gain if and when received . on may 8 , 2013 , we made a $ 6,119 follow-on investment in aph , to acquire arlington park , a multi-family residential
| 11,620 |
includes consolidated outlet centers owned as of current period end date . excludes unconsolidated outlet centers . ( 2 ) net average straight-line base rent is calculated by dividing the average tenant allowance costs per square foot by the average initial term and subtracting this calculated number from the average straight-line base rent per year amount . the average annual straight-line base rent disclosed in the table above includes all concessions , abatements and reimbursements of rent to tenants . the average tenant allowance disclosed in the table above includes landlord costs . 36 story_separator_special_tag 39 in july 2017 , we completed an underwritten public offering of $ 300.0 million of 3.875 % senior notes due 2027 ( the `` 2027 notes '' ) . in august 2017 , we used the net proceeds from the sale of the 2027 notes , together with borrowings under our unsecured lines of credit , to redeem all of our 6.125 % senior notes due 2020 ( the `` 2020 notes '' ) ( approximately $ 300.0 million in aggregate principal amount outstanding ) . the 2020 notes were redeemed at par plus a make-whole premium of approximately $ 34.1 million . the loss on early extinguishment of debt includes the make-whole premium and the write off of approximately $ 1.5 million of unamortized debt discount and debt origination costs related to the 2020 notes . gain on sale of assets and interests in unconsolidated entities in may 2017 , we sold our westbrook outlet center for approximately $ 40.0 million , which resulted in a gain of $ 6.9 million . in september 2016 , we sold an outparcel at our outlet center in myrtle beach , south carolina located on highway 501 for approximately $ 2.9 million and recognized a gain of approximately $ 1.4 million . also , in the first quarter of 2016 , we sold our fort myers outlet center for approximately $ 25.8 million , which resulted in a gain of $ 4.9 million . gain on previously held interest in acquired joint venture on june 30 , 2016 , we completed the purchase of our venture partner 's interest in the westgate joint venture , which owned the outlet center in glendale , arizona , for a total cash price of approximately $ 40.9 million . the purchase was funded with borrowings under our unsecured lines of credit . prior to the transaction , we owned a 58 % interest in the westgate joint venture since its formation in 2012 and accounted for it under the equity method of accounting . the joint venture is now wholly-owned by us and is consolidated in our financial results as of june 30 , 2016. as a result of acquiring the remaining interest in the westgate joint venture , we recorded a gain of $ 49.3 million , which represented the difference between the carrying book value and the fair value of our previously held equity method investment in the joint venture , as a result of the significant appreciation in the property 's value since the completion of its original development and opening . in august 2016 , the savannah joint venture , which owned the outlet center in pooler , georgia distributed all outparcels along with $ 15.0 million in cash consideration to our joint venture partner in exchange for the partner 's ownership interest . we contributed the $ 15.0 million in cash consideration to the joint venture , which we funded with borrowings under our unsecured lines of credit . the joint venture is now wholly-owned by us and has been consolidated in our financial results since the acquisition date . as a result of acquiring the remaining interest in the savannah joint venture , we recorded a gain of $ 46.3 million , which represented the difference between the carrying book value and the fair value of our previously held equity method investment in the savannah joint venture , as a result of the significant appreciation in the property 's value since the completion of its original development and opening in april 2015. equity in earnings of unconsolidated joint ventures equity in earnings of unconsolidated joint ventures decreased approximately $ 8.9 million or 82 % in the 2017 period compared to the 2016 period . the following table sets forth the changes in various components of equity in earnings of unconsolidated joint ventures ( in thousands ) : replace_table_token_26_th equity in earnings from existing properties includes our share of impairment charges totaling $ 9.0 million in the 2017 period related to the bromont and saint-sauveur outlet centers in canada , and totaling $ 2.9 million in the 2016 period related to the bromont outlet center . the increase in equity in earnings of unconsolidated joint ventures from new development is due to the incremental earnings from the columbus outlet center , which opened in june 2016. the decrease in equity in earnings from properties previously held in unconsolidated joint ventures in 2016 is related to the westgate and savannah joint ventures . we acquired our venture partners ' interest in each of these joint ventures in june 2016 and august 2016 , respectively , and have consolidated the results of operations of these centers since the respective acquisition date . 40 2016 compared to 2015 net income net income decreased $ 17.8 million in 2016 compared to 2015. in 2016 , we recorded a $ 95.5 million gain on the acquisitions of our venture partners ' equity interests in the westgate and savannah joint ventures , a $ 4.9 million gain on the sale of our outlet center in fort myers , florida and $ 1.4 million gain on the sale of an outparcel at our hwy 501 outlet center in myrtle beach , south carolina . in 2015 , we recorded gains totaling $ 120.4 million related to the sale of our equity interest in the wisconsin dells joint venture , and the sales of our kittery i & ii , tuscola , west branch and barstow outlet centers . story_separator_special_tag in addition , net income in 2016 was impacted by : an increase in operating income due to the opening of one new outlet center , the acquisitions of our partners ' interest in two joint ventures , and the full year impact of the addition of three new consolidated centers in 2015 ; offset by a decrease in operating income due to the properties disposed of in early 2016 and 2015 ; and an increase in interest expense due to higher average borrowing levels and an increase in interest rates . in the tables below , information set forth for new developments includes our foxwoods , grand rapids , southaven and daytona beach outlet centers , which opened in may 2015 , july 2015 , november 2015 and november 2016 , respectively . acquisitions include our westgate and savannah centers , which were previously held in unconsolidated joint ventures prior to our acquisitions of our venture partners ' interest in each venture in june 2016 and august 2016 , respectively . properties disposed includes the kittery i & ii , tuscola , and west branch outlet centers sold in september 2015 , the barstow outlet center sold in october 2015 and the fort myers outlet center sold in january 2016. base rentals base rentals increased $ 18.7 million , or 6 % , in the 2016 period compared to the 2015 period . the following table sets forth the changes in various components of base rentals ( in thousands ) : replace_table_token_27_th base rental income generated from existing properties in our portfolio increased due to increases in rental rates on lease renewals , incremental rents from re-tenanting vacant spaces and multiple tenant rental step-ups . fees received from the early termination of leases , which are generally based on the lease term remaining at the time of termination , decreased as a result of fewer store closures throughout the portfolio in the 2016 period compared to the 2015 period . 41 percentage rentals percentage rentals increased $ 1.1 million , or 10 % , in the 2016 period compared to the 2015 period . the following table sets forth the changes in various components of percentage rentals ( in thousands ) : replace_table_token_28_th percentage rentals represents revenues based on a percentage of tenants ' sales volume above their contractual break points . the increase in percentage rentals from existing properties is due to higher sales volume for certain existing tenants and also due to certain new tenants added to the existing properties whose sales exceeded their contractual break point . expense reimbursements expense reimbursements increased $ 7.4 million , or 6 % , in the 2016 period compared to the 2015 period . the following table sets forth the changes in various components of expense reimbursements ( in thousands ) : replace_table_token_29_th expense reimbursements represent the contractual recovery from tenants of certain common area maintenance , insurance , property tax , promotional , advertising and management expenses . for certain tenants , we receive a fixed payment for cam with annual escalations . while certain expense reimbursements generally fluctuate consistently with the related expenses , our expense recoveries for cam as a percentage of expenses were higher in 2016 compared to 2015 due to leases with fixed-cam escalations . when not reimbursed by the fixed-cam component , cam expense reimbursements are based on the tenant 's proportionate share of the allocable operating expenses for the property . see `` property operating expenses '' below for a discussion of the increase in operating expenses from our existing properties . most , but not all , leases contain provisions requiring tenants to reimburse a share of our operating expenses as additional rent . however , substantially all of the leases for our new foxwoods outlet center , which opened in may 2015 , require tenants to pay a single minimum contractual gross rent and , in certain cases , percentage rent ; thus , all minimum rents received for the foxwoods outlet center are recorded as base rent and none are recorded to expense reimbursements . management , leasing and other services management , leasing and other services decreased $ 1.6 million , or 29 % , in the 2016 period compared to the 2015 period . the following table sets forth the changes in various components of management , leasing and other services ( in thousands ) : replace_table_token_30_th 42 the decrease in management , leasing and other services is primarily due to the 2016 consolidation of both our westgate and savannah outlet centers due to the acquisitions of our venture partners ' equity interests . this decrease was partially offset by development and leasing fees earned in 2016 from services provided to the columbus joint venture which opened in june 2016. other income other income increased $ 965,000 , or 13 % , in the 2016 period compared to the 2015 period . the following table sets forth the changes in various components of other income ( in thousands ) : replace_table_token_31_th property operating expenses property operating expenses increased $ 5.5 million , or 4 % , in the 2016 period compared to the 2015 period . the following table sets forth the changes in various components of property operating expenses ( in thousands ) : replace_table_token_32_th general and administrative expenses general and administrative expenses in the 2016 period increased $ 2.2 million , or 5 % compared to the 2015 period . the 2015 period included the reversal of $ 731,000 of share-based compensation expense related to the october 2015 announcement that the company 's then chief financial officer would retire in may 2016. in addition , the 2016 period included increased legal , consulting and other professional fees compared to the 2015 period . in addition , the 2016 period included compensation related to executive officer and director terminations of approximately $ 1.2 million . depreciation and amortization depreciation and amortization increased $ 11.4 million , or 11 % , in the 2016 period compared to the 2015 period .
| 37 expense reimbursements expense reimbursements increased $ 9.0 million , or 7 % , in the 2017 period compared to the 2016 period . the following table sets forth the changes in various components of expense reimbursements ( in thousands ) : replace_table_token_21_th expense reimbursements represent the contractual recovery from tenants of certain common area maintenance ( `` cam '' ) , insurance , property tax , promotional , advertising and management expenses . certain expense reimbursements are based on the tenant 's proportionate share of the allocable operating expenses for the property , and thus generally fluctuate consistently with the related expenses . other expense reimbursements , such as promotional , advertising and certain cam payments , represent contractual fixed rents and may escalate each year . see `` property operating expenses '' below for a discussion of the decrease in operating expenses from our existing properties . management , leasing and other services management , leasing and other services decreased $ 1.4 million , or 36 % , in the 2017 period compared to the 2016 period . the following table sets forth the changes in various components of management , leasing and other services ( in thousands ) : replace_table_token_22_th the decrease in management , leasing and other services is primarily due to having two fewer outlet centers in our unconsolidated joint ventures in the 2017 period compared to the 2016 period prior to our acquisition of our venture partners ' equity interests in the westgate and savannah outlet centers during 2016. in connection with such acquisitions , we received no fees subsequent to the acquisition dates . offsetting the impact of the acquisitions was the addition of one new center in an unconsolidated joint venture , the columbus outlet center , which opened in june 2016. other income other income increased $ 532,000 , or 6 % , in the 2017 period compared to the 2016 period . the following table sets forth the changes in various components of other income ( in thousands ) : replace_table_token_23_th
| 11,621 |
see the regulation g reconciliation below for details of ppg 's adjusted effective tax rate from continuing operations . diluted earnings-per-share for 2013 were $ 22.27 per-share , comprised of net income from continuing operations of $ 7.13 per-share and discontinued operations , net of tax of $ 15.14 per-share . the increase in diluted earnings-per-share resulted from higher net income and a reduction in the number of shares outstanding as a result of the 10.8 million ppg shares tendered to the company in the exchange offer in connection with the separation and merger of the company 's former commodity chemicals business as well as the approximately 5.7 million shares repurchased during 2013. for more information about the separation and merger of the company 's former commodity chemicals business , see note 22 , “ separation and merger transaction , ” under item 8 of this form 10-k. regulation g reconciliation - results from operations ppg industries believes investors ' understanding of the company 's operating performance is enhanced by the disclosure of income before income taxes , ppg 's effective tax rate , tax expense , net income from continuing operations and earnings per diluted share adjusted for nonrecurring charges . ppg 's management considers this information useful in providing insight into the company 's ongoing operating performance because it excludes the impact of items that can not reasonably be expected to recur on an ongoing basis . income before income taxes , the effective tax rate , tax expense , net income from continuing operations and earnings per diluted share adjusted for these items are not recognized financial measures determined in accordance with u.s. generally accepted accounting principles ( `` gaap '' ) and should not be considered a substitute for income before income taxes , the effective tax rate , tax expense , net income from continuing operations or earnings per diluted share or other financial measures as computed in accordance with u.s. gaap . in addition , adjusted income before income taxes , adjusted effective tax rate , adjusted tax expense , adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations may not be comparable to similarly titled measures as reported by other companies . 2013 ppg annual report and form 10-k 19 income before income taxes is reconciled to adjusted income before income taxes below : replace_table_token_3_th the effective tax rate from continuing operations is reconciled to the adjusted effective tax rate from continuing operations below : replace_table_token_4_th replace_table_token_5_th net income ( attributable to ppg ) and earnings per share – assuming dilution ( attributable to ppg ) are reconciled to adjusted net income ( attributable to ppg ) and adjusted earnings per share – assuming dilution below : replace_table_token_6_th replace_table_token_7_th results of reportable business segments replace_table_token_8_th performance of reportable business segments performance coatings net sales increased $ 1,120 million , or 24 % from the prior year , to $ 5,872 million primarily due to net sales from businesses acquired ( 25 % ) and modestly higher pricing partially offset by lower sales volumes ( 4 % ) . sales volumes remained varied by region and business . volume growth continued in the aerospace coatings business where industry demand remains strong . automotive refinish volumes were level with the prior year as growth in the asia pacific and latin american regions offset volume declines in europe , while the north american refinish volumes were consistent with 2012. offsetting the segment sales volume gains was a decline in volume in the protective and marine coatings business due to further , notable weakness in the asian marine new-build market reflecting lower global demand . u.s. and canada architectural coatings sales volume declined by low-single-digit percentages with mid-to-high single digit percentage same store growth in company-owned stores , lower sales in national retail accounts 20 2013 ppg annual report and form 10-k and lower sales in the independent dealer channel . the lower sales volume in the national account channel was due to a previously disclosed change in products sold to a large retail customer . segment income was $ 858 million for 2013 , an increase of $ 114 million , or 15 % , compared to the prior year primarily due to the income from acquired businesses , lower overhead and manufacturing costs stemming from prior restructuring actions and ongoing cost management , offset partially by the negative impact on segment income from the lower sales volumes . looking ahead to the first quarter of 2014 , we expect aerospace growth to continue , despite more difficult comparisons following several consecutive years of solid growth . we also anticipate global refinish continued growth , as initial european demand recovery supplements growth in emerging regions . we expect marine new-build demand to remain weak , but less negative year-over-year than in 2013 as marine new-build demand levels off . north american architectural coatings industry market conditions are expected to remain solid , and we expect growth to occur in all three distribution channels . at the beginning of 2014 , ppg implemented mid-single-digit percentage price increases in company-owned stores . we anticipate normal architectural coatings seasonality to result in higher first quarter sales versus the recently completed fourth quarter . we expect first quarter 2014 segment results to benefit from the acquired-business sales and income from continuing operations , including a higher level of cost synergies . industrial coatings net sales increased $ 466 million , or 11 % from the prior year , to $ 4,845 million primarily due to volume growth ( 6 % ) and net sales from acquired businesses ( 4 % ) . in 2013 , ppg 's global automotive oem coatings sales volumes grew 10 % , outpacing global industry auto production growth of about 3 % year-over-year . the industrial coatings business experienced varied sales volume results by region compared with the prior year , as strong improvements across emerging regions and modestly higher volumes in north america were offset by weak demand in europe . story_separator_special_tag packaging coatings sales volumes grew modestly in asia pacific and latin america , were down low-single-digits year-over-year in europe and essentially flat in north america . segment income increased $ 134 million , or 23 % from the prior year , to $ 724 million primarily due to the impact from the higher sales coupled with ongoing cost management initiatives and the benefits from the company 's restructuring actions initiated in 2012. looking ahead to the first quarter of 2014 , we expect global growth in general industrial activity to continue , including solid north american growth , continuing growth in emerging regions and improved european demand . similarly , we expect growth in global automotive oem production to be consistent with recent quarters , with forecasted growth in all major regions . we expect our automotive oem business to deliver above-market growth . architectural coatings – emea net sales decreased $ 85 million , or 4 % from the prior year , to $ 2,062 million primarily due to lower sales volumes ( 7 % ) as economic conditions worsened in most european countries . however , market demand improved somewhat in the second half of the year but remained negative overall and mixed across the region . poor weather conditions in the first half of 2013 were also a contributor to the decline in sales volumes . the decline in sales volumes was partially offset by the impacts of favorable pricing and foreign currency translation ( 2 % ) . despite the year-over-year volume decline , segment income was $ 184 million in 2013 , an increase of $ 39 million , or 27 % from the prior year , primarily due to lower costs , including discretionary cost management coupled with the structural cost improvements stemming from the restructuring actions initiated in 2012 , partially offset by the impact of lower net sales on income from continuing operations . looking ahead , year-over-year segment income for 2013 was greatly aided by cost savings stemming from restructuring actions that are substantially completed . accordingly , 2014 results will be more dependent on the pace of regional volume demand . we anticipate normal seasonal architectural coatings sales growth in the first quarter of 2014. we expect demand in the region to continue to stabilize in comparison to negative year-over-year market results in 2013 , and results will likely remain mixed by end-use market . based on current exchange rates , currency translation will aid first quarter net sales but remain inconsequential to segment income . optical and specialty materials net sales increased $ 60 million , or 5 % from the prior year , to $ 1,262 million primarily due to an increase in sales volumes ( 3 % ) and higher pricing ( 2 % ) . the increase in sales was driven by strong demand at the end of 2013 as volumes were aided by initial customer inventory stocking ahead of the january 2014 north american introduction of transitions generation vii . this brought year-to-date sales above prior year levels as sales in this segment had been lower versus a strong first half of 2012 that was aided by the optical industry recovery from the fourth quarter 2011 thailand flooding and related inventory restocking . the silicas business achieved higher year over year volumes in both the u.s. and europe as a result of solid demand growth . segment income was $ 368 million , an increase of $ 20 million , or 6 % from the prior year , primarily due to an increase in sales and lower full-year selling and marketing costs . looking ahead , optical demand is typically higher seasonally during the first quarter versus the fourth quarter . the transitions new product was launched last year in europe , and the launch is now underway in north america . the first quarter of 2014 will likely include modestly higher selling costs , including support for the product launch . we expect silica demand growth to continue . glass segment net sales increased $ 35 million , or 3 % from the prior year , to $ 1,067 million primarily due to higher fiber glass sales volumes . sales volumes in fiber glass increased modestly , reflecting higher global demand in various end-use markets . segment income was $ 56 million , a decrease of $ 7 million , or 11 % from the prior year , primarily due to input cost inflation , including higher natural gas costs , lower licensing income and lower fiber glass equity earnings stemming from weaker personal computer production activity in asia . these negative factors more than offset reductions in manufacturing costs . looking ahead to the first quarter of 2014 , market demand for the fiber glass and flat glass businesses is expected to improve versus weak prior year results . increased flat glass 2013 ppg annual report and form 10-k 21 pricing has been announced and varies based on product , geography and end-use market . a significant , scheduled flat glass tank maintenance project is underway , with an anticipated first quarter negative impact on segment income of about $ 10 million and a modest impact to the second quarter of 2014. also , we expect natural gas unit costs and transportation costs to be higher year-over-year , based on current market pricing . review and outlook during 2013 , overall economic conditions remained mixed among the main global economies , with major coatings end-use markets also experiencing similar variations . these economic trends were an important factor in ppg 's aggregate sales volume being flat compared to the previous year . ppg increased volumes in north america in 2013 , with volume growth adding to strong prior year gains and broad-based improvements across most end-use markets . north america remains ppg 's largest region representing 46 % of sales .
| the industrial coatings segment 's net sales increased $ 221 million , or 5 % from the prior year , to $ 4,379 million primarily due to higher pricing ( 3 % ) , higher sales volumes ( 4 % ) and net sales from acquired businesses ( 1 % ) partially offset by unfavorable foreign currency translation ( 3 % ) . the segment sales volume growth of 4 % was driven by automotive oem coatings growth especially in north america , due in part to the recovery from the 2011 japanese tsunami as well as continued strength in china , offset by european economic weakness . the current year volume gains by our automotive oem coatings business outpaced industry growth . industrial and packaging coatings volumes were mixed by region . europe was weaker in both businesses . u.s. industrial coatings improved while emerging region demand varied by end-use with markets aligned with construction activity being down in asia and argentina being impacted by import restrictions . the consumer electronics market in asia was slower , but packaging volumes in asia improved . emerging region sales were supplemented by sales from acquired businesses and the reorganization of our joint venture in india . segment income of $ 590 million increased $ 152 million , or 35 % from the prior year , as the impact of higher pricing , sales volume growth and manufacturing cost savings overcame the adverse impact of inflation and higher overhead costs incurred to support growth . restructuring related cost savings also aided segment income in 2012. architectural coatings – emea segment net sales increased $ 43 million , or 2 % from the prior year , to $ 2,147 million primarily due to the acquisition of dyrup in january 2012 ( 8 % ) partially offset by the unfavorable impact of foreign currency translation ( 7 % ) . pricing increased net sales mid-single digit percents which was substantially offset by volume declines due to market weakness throughout the region . segment income increased $ 22 million , or 18 % from the prior year , to $ 145 million primarily due to lower costs stemming from aggressive ongoing cost management and supplemented by the cost benefits from ppg 's restructuring actions and higher pricing . these income improvements were reduced by the
| 11,622 |
the most significant accounting policies followed by fnb are presented in note 1 , “ summary of significant accounting policies ” in the notes to consolidated financial statements , which is included in item 8 of this report . these policies , along with the disclosures presented in the notes to consolidated financial statements , provide information on how we value significant assets and liabilities in the consolidated financial statements , how we determine those values and how we record transactions in the consolidated financial statements . management views critical accounting policies to be those which are highly dependent on subjective or complex judgments , estimates and assumptions , and where changes in those estimates and assumptions could have a significant impact on the consolidated financial statements . management currently views the determination of the allowance for credit losses , accounting for loans acquired in a business combination , fair value of financial instruments , goodwill and other intangible assets , litigation , income taxes and deferred tax assets to be critical accounting policies . allowance for credit losses the allowance for credit losses addresses credit losses inherent in the existing loan portfolio and in unfunded loan commitments and standby letters of credit at the balance sheet date and is presented as a reserve against loans and other liabilities , respectively , on the consolidated balance sheets . management 's assessment of the appropriateness of the allowance for credit losses considers individual impaired loans , pools of homogeneous loans with similar risk characteristics and other risk factors concerning the economic environment . these analyses involve a high degree of judgment in estimating the amount of loss associated with specific impaired loans , including estimating the amount and timing of future cash flows , current fair value of the underlying collateral and other qualitative risk factors that may affect the loan , all of which may be susceptible to significant change . the evaluation of this component of the allowance for credit losses requires considerable judgment in order to reasonably estimate inherent loss exposures . loans with similar risk characteristics are categorized into pools based on loan type and by internal risk rating for commercial loans , or payment performance and credit score for consumer loans . there is considerable judgment involved in setting internal commercial risk ratings , including an evaluation of the borrower 's current financial condition and ability to repay the loan . transition matrices are generated on a monthly basis to determine probabilities of default , while historical loss experience is used to generate loss given default results for the pools . inherent but undetected losses may arise due to uncertainties in economic conditions , delays in obtaining information , including unfavorable information about a borrower 's financial condition , the difficulty in identifying triggering events that correlate to subsequent loss rates and risk factors that have not yet manifested themselves in loss allocation factors . uncertainty surrounding the strength and timing of economic cycles also affects estimates of loss . the historical loss experience used in the transition matrices and historical loss experience analysis may not be representative of actual unrealized losses inherent in the portfolio . management evaluates the impact of various qualitative factors which pose additional risks that may not be adequately addressed in the analyses described above . expected loss rates for each loan category may be adjusted for levels of and trends in loan volumes , net charge-offs , delinquency and non-performing loans . in addition , management takes into consideration the impact of changes to lending policies ; the experience and depth of lending management and staff ; the results of internal loan reviews ; concentrations of credit ; competition , legal and regulatory risk ; market uncertainty and collateral illiquidity ; national and local economic trends ; or any other common risk factor that might affect loss experience across one or more components of the portfolio . economic factors influencing management 's estimate of allowance for credit losses include , but are not limited to , uncertainty of the labor markets , industrial presence , commercial real estate activity and residential real estate values . the 39 determination of this qualitative component of the allowance for credit losses is particularly dependent on the judgment of management . to the extent actual outcomes differ from management estimates , additional provisions for credit losses could be required that may affect our earnings or financial position in future periods . the provision for credit losses section in the results of operations includes a discussion of the factors affecting changes in the allowance for credit losses during the current period . see note 1 , “ summary of significant accounting policies ” and note 6 , “ loans and leases ” in the notes to consolidated financial statements for further information on the allowance for credit losses . accounting for loans acquired in a business combination all loans acquired in a business combination are initially measured at fair value at the date of acquisition . the fair value of loans acquired in a business combination is based on a discounted cash flow methodology that involves assumptions and judgments as to credit risk , default rates , loss severity , collateral values , discount rates , prepayment speeds , prepayment risk and liquidity risk . the measurement of fair value on loans acquired in a business combination prohibits the carryover or establishment of an allowance for loan losses at acquisition date . loans acquired in a business combination are considered impaired if there is evidence of credit deterioration since origination and if it is probable at time of acquisition that all contractually required payments will not be collected . the present value of any decreases in expected cash flows after the acquisition date will generally result in an impairment charge recorded as a provision for credit losses . story_separator_special_tag for acquired non-impaired loans , including revolving loans ( lines of credit and credit card loans ) and leases that are excluded from acquired impaired loan accounting , the difference between the acquisition date fair value and the contractual amounts due at the acquisition date represents the fair value adjustment . fair value adjustments may be discounts ( or premiums ) to a loan 's cost basis and are accreted ( or amortized ) to interest income over the loan 's remaining life using the level yield method . subsequent to the acquisition date , the methods utilized to estimate the required allowance for credit losses for these loans is similar to originated loans ; however , we record a provision for credit losses only when the required allowance exceeds the remaining fair value adjustment . these estimates are inherently subjective and can result in significant changes in the cash flow estimates over the life of the loan . to the extent actual outcomes differ from management estimates , the outcome may affect our earnings or financial position in future periods . see note 1 , “ summary of significant accounting policies ” and note 6 , “ loans and leases ” in the notes to consolidated financial statements for further discussion of accounting for loans acquired in a business combination . fair value of financial instruments we use fair value measurements to record fair value adjustments to certain financial assets and liabilities and determine fair value disclosures . additionally , from time to time we may be required to record at fair value other assets on a non-recurring basis , such as loans held for sale , certain impaired loans , oreo and certain other assets . the accounting guidance for fair value measurements includes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value based on whether the inputs to the valuation methodology used for measurement are observable or unobservable . judgement is required to determine which level of the three-level hierarchy certain assets or liabilities measured at fair value are classified . fair value represents the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date . we use significant and complex estimates , assumptions and judgements when assets and liabilities are required to be recorded at , or adjusted to reflect , fair value . where available , fair value and information used to record valuation adjustments for certain assets or liabilities is based on either quoted market prices or are provided by independent third-party sources , including appraisers and valuation specialists . when such third-party information is not available , we may estimate fair value by using cash flow and other financial modeling techniques . our assumptions about what a market participant would use in pricing an asset or liability is developed based on the best information available in the circumstances . these estimates are inherently subjective and can result in significant changes in the fair value estimates over the life of the asset or liability . assets and liabilities carried at fair value inherently result in a higher degree of financial statement volatility . see note 1 , “ summary of significant accounting policies ” and note 24 , “ fair value measurements ” in the notes to consolidated financial statements for further discussion of accounting for financial instruments . 40 goodwill and other intangible assets as a result of acquisitions , we have recorded goodwill and other identifiable intangible assets on our consolidated balance sheets . goodwill represents the cost of acquired companies in excess of the fair value of net assets , including identifiable intangible assets , at the acquisition date . our recorded goodwill relates to value inherent in our community banking , wealth management and insurance segments . the value of goodwill and other identifiable intangibles is dependent upon our ability to provide quality , cost-effective services in the face of competition . as such , these values are supported ultimately by revenue that is driven by the volume of business transacted . a decline in earnings as a result of a lack of growth or our inability to deliver cost-effective services over sustained periods can lead to impairment in value which could result in additional expense and adversely impact earnings in future periods . goodwill and other intangibles are subject to impairment testing at the reporting unit level , which must be conducted at least annually . we perform impairment testing during the fourth quarter of each year , or more frequently if impairment indicators exist . we also continue to monitor other intangibles for impairment and to evaluate carrying amounts , as necessary . determining fair values of each reporting unit , of its individual assets and liabilities , and also of other identifiable intangible assets requires considering market information that is publicly available as well as the use of significant estimates and assumptions . these estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and also the magnitude of any such charge . inputs used in determining fair values where significant estimates and assumptions are necessary include discounted cash flow calculations , market comparisons and recent transactions , projected future cash flows , discount rates reflecting the risk inherent in future cash flows , long-term growth rates and determination and evaluation of appropriate market comparables . see note 1 , “ summary of significant accounting policies , ” note 2 , “ new accounting standards ” and note 10 , “ goodwill and other intangible assets ” in the notes to consolidated financial statements for further discussion of accounting for goodwill and other intangible assets . income taxes and deferred tax assets we are subject to the income tax laws of the u.s. , the states and other jurisdictions where we conduct business . the laws are complex and subject to different interpretations by the taxpayer and various taxing authorities .
| ( 2 ) the interest income amounts are reflected on an fte basis ( non-gaap ) , which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21 % in 2018 and 35 % in 2017 and 2016. the yield on earning assets and the net interest margin are presented on an fte basis . we believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts . ( 3 ) average balances include non-accrual loans . loans and leases consist of average total loans less average unearned income . 46 net interest income net interest income on an fte basis ( non-gaap ) of $ 945.8 million for 2018 increased $ 80.6 million , or 9.3 % , from $ 865.2 million for 2017 . average interest-earning assets increased $ 2.7 billion , or 10.7 % , and average interest-bearing liabilities increased $ 2.0 billion , or 10.0 % , from 2017 , due to organic growth in loans and deposits and our expanded banking footprint in our southeastern markets . our net interest margin fte ( non-gaap ) was 3.39 % for 2018 , compared to 3.43 % for 2017 , reflecting a lower fte adjustment due to the lower federal statutory tax rate . higher yields on earning assets and higher incremental purchase accounting accretion were offset by higher rates paid on deposits and borrowings . incremental purchase accounting accretion refers to the difference between total accretion and the estimated coupon interest income on loans acquired in a business combination . additionally , regency contributed $ 22.5 million of net interest income , or 0.08 % to net interest margin in 2018 , compared to $ 36.5 million or 0.14 % in 2017. the fomc has increased the target fed funds rate by 100 basis points between december 31 , 2017 and december 31 , 2018 . the following table
| 11,623 |
our long-term capital 37 requirements will also be dependent on the success of our sales efforts , competitive developments , the timing , costs and magnitude of our longer-term clinical trials and other development activities related to our platelet , plasma and red blood cell systems , market preparedness and product launch activities for any of our products in geographies where we do not currently sell our products , and regulatory factors . until we are able to generate a sufficient amount of product revenue and generate positive net cash flows from operations , which we may never do , meeting our long-term capital requirements is in large part subject to access to public and private equity and debt capital markets , as well as to collaborative arrangements with partners , augmented by cash generated from operations and interest income earned on the investment of our cash balances . we believe that cash received from product sales , our available cash balances and access to debt will be sufficient to meet our capital requirements for at least the next twelve months . if our assumptions prove to be incorrect , we could consume our available capital resources sooner than we currently expect . we have borrowed and in the future may borrow additional capital from institutional and commercial banking sources to fund future growth outside of our amended credit agreement with comerica bank , as described below , on terms that may include restrictive covenants , including covenants that restrict the operation of our business , liens on assets , high effective interest rates and repayment provisions that reduce cash resources and limit future access to capital markets . in addition , we expect to continue to opportunistically seek access to the equity capital markets to support our development efforts and operations , including pursuant to the cantor agreement discussed below or otherwise . to the extent that we raise additional capital by issuing equity securities , our stockholders may experience substantial dilution . to the extent that we raise additional funds through collaboration or partnering arrangements , we may be required to relinquish some of our rights to our technologies or rights to market and sell our products in certain geographies , grant licenses on terms that are not favorable to us , or issue equity that may be substantially dilutive to our stockholders . the disruptions to the global credit and financial markets as well as general economic uncertainty , including the continued instability of the eurozone , has generally made equity and debt financing more difficult to obtain and the terms less favorable to the companies seeking to raise financing . as a result of economic conditions , general global economic uncertainty and other factors , we do not know whether additional capital will be available when needed , or that , if available , we will be able to obtain additional capital on reasonable terms . if we are unable to raise additional capital due to disruptions to the global credit and financial markets , general economic uncertainty or other factors , we may need to curtail planned development or commercialization activities . in addition , we will need to obtain additional funds to complete development activities for the red blood cell system necessary for potential regulatory approval in europe . we do not plan on conducting any additional clinical trials of the red blood cell , platelet or plasma systems in the united states unless and until we can obtain sufficient additional funding or , at such time , our existing operations provide sufficient cash flow to conduct these trials . we recognize product revenues from the sale of our platelet and plasma systems in a number of countries around the world including those in europe , the cis and the middle east . although our revenues have grown over time and increased during the year ended december 31 , 2012 as compared to december 31 , 2011 , if we are unable to gain widespread commercial adoption in markets where our blood safety products are approved for commercialization , we will have difficulties achieving profitability . in order to commercialize all of our products and product candidates , we will be required to conduct significant research , development , preclinical and clinical evaluation , commercialization and regulatory compliance activities for our product candidates , which , together with anticipated selling , general and administrative expenses , are expected to result in substantial losses . accordingly , we may never achieve a profitable level of operations in the future . in addition to the product revenues from sales of our platelet and plasma systems , we have recognized revenue from government grants and cooperative agreements . historically , we have received significant awards in funding under cooperative agreements with the united states department of defense , or dod , for the intercept blood system . any such funding is subject to the authorization of funds and approval of our research plans by various organizations within the federal government , including the united states congress . in august 2011 , we were awarded a $ 2.1 million grant from the dod to support the development of our red blood 38 cell system . we have recognized revenue associated with this award as qualified costs were incurred for reimbursement over the performance period of one year from the date of issuance . we have exhausted the remaining availability under the grant and recognized $ 0.1 million during the year ended december 31 , 2012. the general economic environment , coupled with tight federal budgets , has led to a general decline in the amount available for government funding and we do not expect any revenue from government grants and cooperative agreements for the foreseeable future , if at all . in 2007 , we spun-off our immunotherapy business , and in 2009 , we entered into agreements to out-license certain immunotherapy technologies to aduro biotech , or aduro . in connection with those agreements , we received preferred shares of aduro . story_separator_special_tag pursuant to these license agreements , we are eligible to receive a 1 % royalty fee on any future sales resulting from the licensed technology . to date we have not received any royalty payments from aduro pursuant to this agreement . as of december 31 , 2012 , our ownership in aduro was less than 3 % on a fully diluted basis . since receiving preferred stock in aduro , we have carried our investment in aduro at zero on our consolidated balance sheet . we pay royalties to fresenius kabi ag , or fresenius , on intercept blood system product sales under certain agreements which arose from the sale of the transfusion therapies division of baxter international inc. , or baxter , in 2007 , to fenwal inc. , or fenwal ( fenwal was recently acquired by fresenius ) , at rates of 10 % of net sales for our platelet system , 3 % of net sales for our plasma system , 5 % of net sales for our red blood cell system , and 6.5 % on net sales of illumination devices , or illuminators . fresenius has assumed fenwal 's rights and obligations under these certain agreements , including our manufacturing and supply agreement . in this report , references to fresenius include references to its predecessors-in-interest fenwal and baxter . we also pay fresenius certain costs associated with the amended manufacturing and supply agreement we executed with fresenius in december 2008 for the manufacture of intercept finished disposable kits for our platelet and plasma systems through december 31 , 2013. under the amended manufacturing and supply agreement , we pay fresenius a set price per disposable kit , which is established annually , plus a fixed surcharge per disposable kit . in addition , volume driven manufacturing overhead is to be paid or refunded if actual manufacturing volumes are higher or lower than the annually estimated production volumes . we are also obligated to provide certain disposable kit components at no cost to fresenius under the amended manufacturing and supply agreement . this required us to enter into manufacturing and supply arrangements with certain other manufacturers for those components , some of which contain minimum purchase commitments . as a result , our supply chain for certain of these components , held as work-in-process on our consolidated balance sheets , may potentially take over one year to complete production before being utilized in finished intercept disposable kits . during the year ended december 31 , 2012 , we provided for and settled the claims for warranty obligations of $ 0.9 million related to replacement costs for certain of our products that we identified were defective or had the potential of being defective . in connection with the warranty claims incurred by us and remediation of those claims during the year ended december 31 , 2012 , we filed a warranty claim against fresenius . fresenius has accepted the warranty claim and will supply us with replacement product or credit notes . as a result , we recorded a current asset of $ 1.8 million on our consolidated balance sheets as of december 31 , 2012 representing the full amount of the warranty claim against fresenius . we also wrote-down the value of certain unsalable inventory of $ 1.7 million related to these products as an offsetting warranty claim against fresenius . in august 2010 , we completed an acquisition of certain assets of bioone corporation , or bioone , including the commercialization rights that both fresenius and we granted to bioone for both the platelet and plasma systems . concurrent with the acquisition , fresenius and we terminated the commercialization rights we and fresenius granted to bioone . as a consequence of the termination , and pursuant to a pre-existing agreement with fresenius , our commercialization rights to the platelet and plasma systems under our 2005 and 2006 agreements with fresenius became worldwide . as consideration for the acquired bioone assets , we relinquished all shares we held in bioone valued at approximately $ 0.3 million and issued approximately 1.2 million shares of our common stock to bioone valued at approximately $ 3.4 million , of which approximately 1.0 million shares were issued at the close of the acquisition on august 24 , 2010 and the remaining 0.2 million shares were issued on february 25 , 2011. accordingly , at the acquisition date , we recorded the fair value of the assets acquired , 39 consisting of commercialization rights in asia of $ 2.0 million and illuminators of $ 0.4 million , with the excess of the purchase price over the fair value of the asset acquired recorded as goodwill of $ 1.3 million . the recognition of goodwill was attributable to the buyer-specific value derived by us as a result of acquiring the commercialization rights in certain asian countries in order to complete the global commercialization rights for our platelet and plasma systems . we entered into an at-the-market issuance sales agreement in june 2011 , as amended in january 2012 and august 2012 , or collectively the mlv agreement , with mlv & co. llc , formerly mcnicoll , lewis & vlak llc , or mlv , that provides for the issuance and sale of shares of our common stock over the term of the mlv agreement having an aggregate offering price of up to $ 20.0 million from time to time through mlv as our sales agent . we also entered into a controlled equity offering sm sales agreement , or the cantor agreement , in august 2012 , with cantor fitzgerald & co. , or cantor , that provides for the issuance and sale of shares of our common stock over the term of the cantor agreement having an aggregate offering price of up to $ 30.0 million through cantor as our sales agent . during the year ended december 31 , 2011 , approximately 3.5 million shares of our common stock were sold under the mlv agreement for aggregate net proceeds of $ 9.7 million .
| revenue from government grants and cooperative agreements decreased by $ 2.4 million during the year ended december 31 , 2012 compared to the year ended december 31 , 2011. this decrease was attributable to the relatively low remaining award balance available under our dod grant at the beginning of 2012 , compared to the 44 availability at the beginning of 2011 , and the level of revenue generating activities under the award during the year ended december 31 , 2012. revenue from government grants and cooperative agreements for the year ended december 31 , 2011 increased by $ 1.0 million compared to year ended december 31 , 2010. the increase was partly attributable to higher reimbursable development efforts related to our red blood cell system during the year ended december 31 , 2011 compared to the corresponding period of 2010. in addition , in august 2011 , we were awarded a new grant by the dod totaling $ 2.1 million . we do not expect any revenue from government grants and cooperative agreements for the foreseeable future , if at all . cost of product revenue our cost of product revenue consists of the cost of the intercept blood system inventory sold , royalties payable to fresenius for product sales , provisions for obsolete , slow-moving and unsaleable product , certain order fulfillment costs , and to the extent applicable , costs for idle facilities . inventory is accounted for on a first-in , first-out basis . replace_table_token_7_th cost of product revenue increased by $ 2.1 million during the year ended december 31 , 2012 compared to the year ended december 31 , 2011 primarily due to a higher volume of intercept disposable kits sold during 2012 compared to 2011. this was offset by lower per unit carrying costs in 2012 as compared to 2011 as a result of improved overhead absorption . cost of product revenue increased by $ 6.5 million during the year ended december 31 , 2011 compared to the year ended december 31 , 2010 primarily due to a higher number of disposable kits sold and higher scrap rate for certain
| 11,624 |
drilling costs averaged $ 2.0 million per well for the seven wells drilled in artesia during the second and third quarters , a decrease of 38 % from our 2013 drilling program . likewise , the average completion cost per stage of $ 0.1 million decreased 33 % despite increasing proppant volumes by 62 % compared to our average completions in 2013. the company is currently leasing acreage in the northern portion of artesia to increase the amount of high quality inventory where future capital will be deployed . in awp , silverbow drilled and completed two gas wells in 2017 , the bracken 21h and 22h , which utilized 300 foot frac stage spacing and 1,500 pounds of proppant per foot of lateral . the company continues to optimize its development of the awp area to provide higher recovery efficiencies and enhanced economic returns . these objectives will be achieved through reservoir pressure management practices and optimized spacing and drilling sequencing between parent and child wells . during 2017 , the company acquired roughly 21,000 acres in awp . the company continues to acquire bolt-on acreage in this area to further enhance efficiencies and returns while leveraging existing infrastructure . the company plans on drilling seven net wells in this area in 2018 , including two net wells in the company 's oily acreage in northern awp . on november 6 , 2017 the company purchased the non-operating working interest of two joint interest partners in certain wells and leases in awp field . the value of these assets are concentrated in proved oil and gas reserves . this purchase constitutes a business combination . the acquisition cost of this interest was $ 9.4 million . additionally , the company assumed asset retirement obligations of $ 0.2 million . strategic dispositions : effective july 31 , 2017 , the company disposed of its wheeler assets in south texas . this package represented 117 wellbores in the company 's awp olmos area . we received net proceeds of $ 0.7 million and the buyer assumed approximately $ 0.5 million of plugging and abandonment liability . no gain or loss was recorded on the sale of this property . effective december 22 , 2017 , we closed the sale of the company 's wellbores and facilities of our bay de chene field located in louisiana . the contract price of $ 16.3 million will be paid by the company , as seller . the payments will be funded over time , through an escrow account , with funds being released as plugging and abandonment work is performed and certified to meet state requirements . the buyer assumed approximately $ 20.9 million of plugging and abandonment liability with no gain or loss recorded on the sale of this property . of the $ 16.3 million , during the first quarter of 2018 approximately $ 6.0 million was released in the first quarter of 2018 for completion of initial post-closing requirements . the remaining $ 10 million will be funded as the abandonment work is completed and certified . based on the available information , it is unlikely that more than half of the $ 10 million allocation will be funded before the end of 2018. accordingly , the initial allocation of the accrued liability will be $ 11.3 million as a current liability and $ 5 million as a non-current liability . additionally , subsequent to the year ended december 31 , 2017 , the company executed a definitive purchase and sale agreement to divest certain wells in its awp olmos field for $ 28.8 million plus the assumption by the buyer of $ 6.2 million of asset retirement obligations . this transaction closed on march 1 , 2018 and has an effective date of january 1 , 2018. these assets are located in mcmullen county , texas and include roughly 491 wells with total proved reserves of 28 bcfe ( 100 % proved developed ) as of december 31 , 2017. full year 2017 production from these properties was approximately 9.5 mmcfe/d ( 57 % natural gas ) . cash proceeds from the sale will be used to repay outstanding borrowings under the company 's credit facility . the company anticipates that its borrowing base will remain unchanged at $ 330 million after closing this transaction and will be reviewed as normal during its regularly scheduled spring redetermination . 2017 cost reduction initiatives : we continue to focus on cost efficient operations and took additional actions in 2017 to reduce operating and overhead costs . these initiatives include field staff reductions , intermittent production of marginal properties , 35 disposition of uneconomic and higher cost properties , full utilization of existing facilities , elimination of redundant equipment and replacement of rental equipment with company-owned equipment . we have also improved each step in the process of drilling and completing a well . our procurement team takes a diligent and systematic approach to reducing the total delivered costs of purchased services by examining costs at their most detailed level . services are commonly sourced directly from the suppliers . this has led to a significant reduction in our overall lease operating expenses at the field level . for example , our south texas lease operating expenses were $ 0.40 per million cubic feet of natural gas equivalent ( “ mcfe ” ) for the full year 2017 compared to $ 0.96 per mmcfe in 2013. additionally , our significant operational control , as well as our manageable leasehold obligations , provide us the flexibility to control our costs as we transition to a development mode across our portfolio . at the corporate level , we have also undergone additional staff reductions , reduced the square footage of leased office space and are taking additional steps to further reduce overhead costs . this has led to a decline in our net cash general and administrative costs of $ 23.2 million in 2017 compared to $ 35.3 million in 2015. we have continued to maintain a safe working environment while implementing these cost-reduction efforts . story_separator_special_tag our corporate total recordable incident rate ( “ trir ” ) declined from 1.8 incidents per 200,000 work hours in 2016 to 0.2 in 2017. management changes the company announced the appointment of sean woolverton as chief executive officer , effective march 1 , 2017. he also serves as a member of the board of directors . mr. woolverton succeeded the company 's interim chief executive officer , bob banks , who continued to serve at the company until his departure on november 3 , 2017. mr. woolverton was previously the chief operating officer of samson resources company , which he joined in november 2013. from 2007 to 2013 , mr. woolverton held a series of positions of increasing responsibility at chesapeake energy corporation , a public independent exploration and development oil and natural gas company , including vice president of its southern appalachia business unit . prior to joining chesapeake energy corporation , mr. woolverton worked for encana corporation , a north american oil and natural gas producer , where he oversaw its fort worth basin development and shale exploration teams in north texas . earlier in his career , mr. woolverton worked for burlington resources in multiple engineering and management roles . mr. woolverton received his bachelor of science degree in petroleum engineering from montana tech . the company announced the appointment of gleeson van riet as executive vice president and chief financial officer , effective march 20 , 2017. mr. van riet succeeded alton heckaman , who announced his retirement in august 2016. mr. van riet was previously the chief financial officer of sanchez energy corporation where he held a series of positions of increasing responsibility from april 2013 to march 2016. mr. van riet has over 20 years of finance experience and previously worked as an investment banker with credit suisse and donaldson , lufkin & jenrette in london and los angeles . mr. van riet earned a dual b.a . and b.s . from the university of pennsylvania and an mba from the harvard business school . the company announced the appointment of chris abundis as senior vice president and general counsel , effective march 22 , 2017. from april 2016 to march 2017 , mr. abundis was vice president , general counsel and secretary for the company . he has also served the board of directors as secretary of the company , a position that he has held since august 2012. from february 2007 to august 2012 , mr. abundis served as assistant secretary of the company and has provided legal consultation in corporate governance , securities law and other corporate related matters in progressive positions of responsibility including senior counsel , counsel and associate corporate counsel . mr. abundis received a bachelor of business administration and master of science in accounting from texas a & m university and a juris doctor from south texas college of law . the company announced the appointment of steven w. adam as executive vice president and chief operating officer , effective november 6 , 2017 , succeeding robert j. banks . steve adam was previously the senior vice president of operations of sanchez oil & gas where he held a series of positions of increasing responsibility from april 2013 to july 2017. mr. adam has over 40 years of upstream exploration and production and petroleum services experience with both major and independent companies . his unconventional resource management experiences have been with occidental petroleum and most recently with sanchez oil & gas . mr. adam received his bachelor of science degree in chemical engineering from montana state university , master of business administration from pepperdine university and advanced management certificate from the university of california - berkeley . 36 leasing activity the company expanded its eagle ford shale footprint by over 50 % in 2017 , through a combination of grassroots leasing and strategically acquiring bolt-on producing acreage . the company spent approximately $ 50 million on acquiring over 35,000 acres , primarily throughout the gas and rich gas windows of the eagle ford shale . specifically , the company added approximately 21,463 acres at awp in mcmullen county , 9,548 acres at uno mas in live oak county , 3,066 acres at artesia in la salle county , and 2,520 acres at fasken in webb county . 2017 liquidity and capital resources our primary use of cash flow has been to fund capital expenditures to develop our oil and gas properties . as of december 31 , 2017 , the company 's liquidity consisted of approximately $ 7.8 million of cash-on-hand and $ 253.6 million in available borrowings ( calculated as $ 257 million of borrowing availability less $ 3.4 million in letters of credit ) on our $ 330 million borrowing base . management believes the company has sufficient liquidity to meet its obligations for at least the next twelve months and execute our long-term development plans . revolving credit facility and prior first lien credit agreement . upon emergence from bankruptcy the company entered into a senior secured revolving credit agreement among the company as borrower , jpmorgan chase bank , national association as administrative agent , and certain lenders party thereto . on april 19 , 2017 , the company amended and restated the senior secured revolving credit agreement by entering into a first amended and restated senior secured revolving credit agreement ( the “ credit agreement ” ) among the company as borrower , jpmorgan chase bank , n.a . as administrative agent , and certain lenders that are a party thereto , which provides for revolving loans of up to the borrowing base then in effect ( the “ credit facility ” ) . the credit facility matures on april 19 , 2022. the maximum credit amount under the credit facility is currently $ 600 million with a borrowing base of $ 330 million .
| capital expenditures in the period of april 23 , 2016 through december 31 , 2016 ( successor ) were focused on drilling and completion activities in our fasken field . these expenditures were funded by operating cash flows and proceeds from property dispositions . expenditures for the period of january 1 , 2016 through april 22 , 2016 ( predecessor ) , were primarily devoted to completion of wells in south texas that were drilled in 2015. these expenditures were funded by cash flows and borrowings under our dip credit facility . working capital : the company had a working capital deficit of $ 32.9 million at december 31 , 2017 and a deficit of $ 57.6 million at december 31 , 2016 . the working capital computation does not include available liquidity through our credit facility . cash flows : for the year ended december 31 , 2017 ( successor ) the company generated cash from operating activities of $ 107.8 million , of which $ 0.7 million was attributable to changes in working capital . cash used for property additions was $ 193.0 million . this included $ 9.9 million attributable to a net increase of capital related payables and accrued costs . the company 's net payments on the revolving credit facility were $ 125.0 million which includes the pay down on credit facility borrowings with proceeds from the second lien . for the period of april 23 , 2016 through december 31 , 2016 ( successor ) the company generated cash from operating activities of $ 47.4 million , of which $ 11.2 million was attributable to changes in working capital . additionally , we realized $ 46.0 million in net proceeds from asset sales during this period . cash used for property additions was $ 45.7 million . this included $ 6.3 million attributable to net pay-down of capital related payables and accrued cost as the company paid a significant portion of the well completion costs from earlier in the year during this period . the company 's net payments on the revolving credit facility were $ 55.0 million
| 11,625 |
section 1350 , as adopted pursuant to section 906 of the sarbanes-oxley act of 2002 of chief executive officer and chief financial officer ( 2 ) 101 xbrl interactive data ( 2 ) , ( 3 ) ( 1 ) incorporated by reference to our form s-1 filed with the securities and exchange commission on april 14 , 2010 . ( 2 ) filed or furnished herewith . ( 3 ) in accordance with regulation s-t , the interactive data files in exhibit 101 to the annual report on form 10-k shall be deemed “ furnished ” and not “ filed . ” signatures pursuant to the requirements 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 . on the move systems corp. date : june 15 , 2015 by : robert wilson robert wilson president , chief executive officer , chief financial officer , principal accounting officer , treasurer and director - 35 - story_separator_special_tag this filing contains forward-looking statements . the words “ anticipated , ” “ believe , ” “ expect , ” “ plan , ” “ intend , ” “ seek , ” “ estimate , ” “ project , ” “ will , ” “ could , ” “ may , ” and similar expressions are intended to identify forward-looking statements . these statements include , among others , information regarding future operations , future capital expenditures , and future net cash flow . such statements reflect the company 's current views with respect to future events and financial performance and involve risks and uncertainties , including , without limitation , general economic and business conditions , changes in foreign , political , social , and economic conditions , regulatory initiatives and compliance with governmental regulations , the ability to achieve further market penetration and additional customers , and various other matters , many of which are beyond the company 's control . should one or more of these risks or uncertainties occur , or should underlying assumptions prove to be incorrect , actual results may vary materially and adversely from those anticipated , believed , estimated , or otherwise indicated . consequently , all of the forward-looking statements made in this filing are qualified by these cautionary statements and there can be no assurance of the actual results or developments . the following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein . this discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions , operations , plans , objectives , and performance that involve risk , uncertainties , and assumptions . the actual results may differ materially from those anticipated in such forward-looking statements . for example , when we indicate that we expect to increase our product sales and potentially establish additional license relationships , these are forward-looking statements . the words expect , anticipate , estimate or similar expressions are also used to indicate forward-looking statements . background of our company on the move systems corp. ( “ we ” , “ us ” , “ our ” , “ omvs ” , or the “ company ” ) was incorporated in nevada on march 25 , 2010. the company 's business focus was the mobile electronics market , but is it currently transitioning to the transportation and trucking market . the company 's year-end is february 28. the company is located at 701 n. green valley parkway , suite 200 , henderson , nv , 89074. our telephone number is ( 702 ) 990-3271. on march 25 , 2011 , crawford mobile installation corp. ( “ cmic ” ) , a wholly owned subsidiary of the company acquired all of the assets and assumed certain liabilities of crawford mobile install ( “ cmi ” ) . the assets of cmi included cash , inventory , a vehicle and installation equipment . on the date of the acquisition , a material relationship existed between the parties , because john crawford was the sole officer and director of both the company and cmic as well as being the sole proprietor of cmi . the purchase price for the assets and liabilities of cmi was $ 100,000. on september 1 , 2014 , we defaulted on a note payable to john crawford . pursuant to the terms of the note , 100 % of the shares of cmic were provided to mr. crawford . see note 4 for additional details on this transaction . on march 6 , 2015 we announced that the primary focus of the company will be an app-based nationwide trucking service . joint ventures on february 11 , 2014 , the company signed a joint venture agreement with the xperience to offer fantasy travel packages beginning with auto racing events . omvs has committed to fund up to $ 30,000 of the cash flow requirements of the joint venture at its discretion and to assist with creating the travel packages . omvs will be allocated 40 percent of the earnings ( losses ) from this joint venture . during the twelve months ended february 28 , 2015 , the company funded $ 45,000 to this joint venture for operating expenses . additionally , during the twelve months ended february 28 , 2015 , we spent $ 9,206 for expenses related to preparing our racecar for use at auto racing events in our xperience segment . in june 2014 , the xperience joint venture began generating revenue by selling advertising space on its racecar . - 8 - plan of operations we believe we do not have adequate funds to execute our business plan for the next twelve months unless we obtain additional funding . however , should we not raise this capital , we will allocate story_separator_special_tag section 1350 , as adopted pursuant to section 906 of the sarbanes-oxley act of 2002 of chief executive officer and chief financial officer ( 2 ) 101 xbrl interactive data ( 2 ) , ( 3 ) ( 1 ) incorporated by reference to our form s-1 filed with the securities and exchange commission on april 14 , 2010 . ( 2 ) filed or furnished herewith . ( 3 ) in accordance with regulation s-t , the interactive data files in exhibit 101 to the annual report on form 10-k shall be deemed “ furnished ” and not “ filed . ” signatures pursuant to the requirements 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 . on the move systems corp. date : june 15 , 2015 by : robert wilson robert wilson president , chief executive officer , chief financial officer , principal accounting officer , treasurer and director - 35 - story_separator_special_tag this filing contains forward-looking statements . the words “ anticipated , ” “ believe , ” “ expect , ” “ plan , ” “ intend , ” “ seek , ” “ estimate , ” “ project , ” “ will , ” “ could , ” “ may , ” and similar expressions are intended to identify forward-looking statements . these statements include , among others , information regarding future operations , future capital expenditures , and future net cash flow . such statements reflect the company 's current views with respect to future events and financial performance and involve risks and uncertainties , including , without limitation , general economic and business conditions , changes in foreign , political , social , and economic conditions , regulatory initiatives and compliance with governmental regulations , the ability to achieve further market penetration and additional customers , and various other matters , many of which are beyond the company 's control . should one or more of these risks or uncertainties occur , or should underlying assumptions prove to be incorrect , actual results may vary materially and adversely from those anticipated , believed , estimated , or otherwise indicated . consequently , all of the forward-looking statements made in this filing are qualified by these cautionary statements and there can be no assurance of the actual results or developments . the following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein . this discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions , operations , plans , objectives , and performance that involve risk , uncertainties , and assumptions . the actual results may differ materially from those anticipated in such forward-looking statements . for example , when we indicate that we expect to increase our product sales and potentially establish additional license relationships , these are forward-looking statements . the words expect , anticipate , estimate or similar expressions are also used to indicate forward-looking statements . background of our company on the move systems corp. ( “ we ” , “ us ” , “ our ” , “ omvs ” , or the “ company ” ) was incorporated in nevada on march 25 , 2010. the company 's business focus was the mobile electronics market , but is it currently transitioning to the transportation and trucking market . the company 's year-end is february 28. the company is located at 701 n. green valley parkway , suite 200 , henderson , nv , 89074. our telephone number is ( 702 ) 990-3271. on march 25 , 2011 , crawford mobile installation corp. ( “ cmic ” ) , a wholly owned subsidiary of the company acquired all of the assets and assumed certain liabilities of crawford mobile install ( “ cmi ” ) . the assets of cmi included cash , inventory , a vehicle and installation equipment . on the date of the acquisition , a material relationship existed between the parties , because john crawford was the sole officer and director of both the company and cmic as well as being the sole proprietor of cmi . the purchase price for the assets and liabilities of cmi was $ 100,000. on september 1 , 2014 , we defaulted on a note payable to john crawford . pursuant to the terms of the note , 100 % of the shares of cmic were provided to mr. crawford . see note 4 for additional details on this transaction . on march 6 , 2015 we announced that the primary focus of the company will be an app-based nationwide trucking service . joint ventures on february 11 , 2014 , the company signed a joint venture agreement with the xperience to offer fantasy travel packages beginning with auto racing events . omvs has committed to fund up to $ 30,000 of the cash flow requirements of the joint venture at its discretion and to assist with creating the travel packages . omvs will be allocated 40 percent of the earnings ( losses ) from this joint venture . during the twelve months ended february 28 , 2015 , the company funded $ 45,000 to this joint venture for operating expenses . additionally , during the twelve months ended february 28 , 2015 , we spent $ 9,206 for expenses related to preparing our racecar for use at auto racing events in our xperience segment . in june 2014 , the xperience joint venture began generating revenue by selling advertising space on its racecar . - 8 - plan of operations we believe we do not have adequate funds to execute our business plan for the next twelve months unless we obtain additional funding . however , should we not raise this capital , we will allocate
| the increase results from increased professional fees in fiscal year 2015. interest expense interest expense increased from $ 109,047 for the year ended february 28 , 2014 to $ 375,412 for the year ended february 28 , 2015. interest expense for the year ended february 28 , 2015 included amortization of discount on convertible notes payable in the amount of $ 256,695 , compared to $ 43,529 for the comparable period of 2014. the remaining increase is the result of the company entering into interest-bearing convertible notes payable . net loss we incurred a net loss of $ 1,049,428 for the year ended february 28 , 2015 as compared to $ 766,675 for the comparable period of 2014. the increase in the net loss was primarily the result of the aforementioned increased interest expense . liquidity and capital resources we anticipate needing approximately of $ 750,000 to fund our operations and to effectively execute our business plan over the next eighteen months . currently available cash is not sufficient to allow us to commence full execution of our business plan . our business expansion will require significant capital resources that may be funded through the issuance of common stock or of notes payable or other debt arrangements that may affect our debt structure . despite our current financial status , we believe that we may be able to issue notes payable or debt instruments in order to start executing our business plan . however , there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital . - 9 - we incurred a net loss of $ 1,049,428 for the year ended february 28 , 2015 and had net cash used by operating activities of $ 379,049 for the same period . we have negative working capital of $ 878,536 as of february 28 , 2015. we financed the cash amounts to be used in these activities from the sale of common stock and from convertible notes payable . as of february 28 , 2015 , we had $ 2,679 of cash on hand . this amount of cash will be adequate to fund our operations for less than one month . we have no known demands or commitments and are not aware of any events or uncertainties as of
| 11,626 |
we received an initial payment of $ 90.0 million , and were initially eligible to receive additional payments of up to $ 665.0 million based on the achievement of defined development , regulatory and commercialization milestones . in 2012 , we recognized a $ 50.0 million milestone under this agreement , and in 2010 , we received $ 49.0 million in milestone payments under this agreement . we also could receive tiered , double ‑digit royalty payments on future global net sales with rates ranging up to 20 % if the product is successfully commercialized . 50 we retained options to co ‑develop our jak1/jak2 inhibitors with lilly on a compound ‑by ‑compound and indication ‑by ‑indication basis . lilly is responsible for all costs relating to the development and commercialization of the compounds unless we elect to co ‑develop any compounds or indications . if we elect to co ‑develop any compounds and or indications , we would be responsible for funding 30 % of the associated future global development costs from the initiation of a phase iib trial through regulatory approval . we would receive an incremental royalty rate increase across all tiers resulting in effective royalty rates ranging up to the high twenties on potential future global net sales for compounds and or indications that we elect to co ‑develop . we also retained an option to co ‑promote products in the united states . in july 2010 , we elected to co ‑develop baricitinib with lilly in rheumatoid arthritis and we are responsible for funding 30 % of the associated future global development costs for this indication from the initiation of the phase iib trial through regulatory approval . baricitinib is also being developed in psoriasis and diabetic nephropathy . we have decided not to exercise our co ‑development option for psoriasis . the lilly agreement will continue until lilly no longer has any royalty payment obligations or , if earlier , the termination of the agreement in accordance with its terms . royalties are payable by lilly on a product ‑by ‑product and country ‑by ‑country basis until the latest to occur of ( 1 ) the expiration of the last valid claim of the licensed patent rights covering the licensed product in the relevant country , ( 2 ) the expiration of regulatory exclusivity for the licensed product in such country and ( 3 ) a specified period from first commercial sale in such country of the licensed product by lilly or its affiliates or sublicensees . the agreement may be terminated by lilly for convenience , and may also be terminated under certain other circumstances , including material breach . agenus in january 2015 , we entered into a license , development and commercialization agreement with agenus inc. and its wholly owned subsidiary , 4 antibody ag , which we collectively refer to as agenus . under this agreement , the parties have agreed to collaborate on the discovery of novel immuno therapeutics using agenus ' proprietary retrocyte display antibody discovery platform . the agreement became effective on february 18 , 2015 , upon the expiration of the waiting period under the hart scott rodino antitrust improvements act of 1976 ( “ hsr act ” ) . under the terms of this agreement , we received exclusive worldwide development and commercialization rights to four checkpoint modulators directed against gitr , ox40 , lag ‑3 and tim ‑3 . in addition to the initial four program targets , we and agenus have the option to jointly nominate and pursue additional targets within the framework of the collaboration . these targets may be designated profit ‑share programs , where all costs and profits are shared equally by us and agenus , or royalty ‑bearing programs , where we will be responsible for all costs associated with discovery , preclinical activities , clinical development and commercialization activities . the programs relating to gitr and ox40 are profit ‑share programs and the programs relating to lag ‑3 and tim ‑3 are royalty ‑bearing programs . for each royalty ‑bearing product , agenus will be eligible to receive up to $ 155.0 million in future contingent development , regulatory and commercialization milestones as well as tiered royalties on global net sales ranging from 6 % to 12 % . for each profit ‑share product , agenus will be eligible to receive up to $ 20.0 million in future contingent development milestones . additionally , agenus retains co ‑promotion participation rights in the united states on any profit ‑share product . for each royalty ‑bearing product , agenus has reserved the right to elect to co ‑fund 30 % of development costs for a commensurate increase in royalties . the agreement may be terminated by us for convenience and may also be terminated under certain other circumstances , including material breach . in january 2015 , w e also entered into a stock purchase agreement with agenus inc. , pursuant to which we agreed to purchase approximately 7.76 million shares of agenus inc. common stock for an aggregate purchase price of $ 35.0 million in cash , or approximately $ 4.51 per share . we completed the purchase of the shares on february 18 , 2015. on february 18 , 2015 the closing price of agenus inc. common shares on the nasdaq stock market was $ 5.13 per share and , therefore , the value of the 7.76 million shares acquired by us was $ 39.8 million . we agreed not to dispose of any of the shares of common stock for a period of 12 months and agenus inc. has agreed to certain registration rights with respect to the shares of common stock . story_separator_special_tag upon closing of the agenus transaction on february 18 , 2015 , we paid total consideration of $ 60.0 million to agenus inc. of the $ 60.0 million , $ 39.8 million was allocated to our stock purchase in agenus inc. and was recorded as a long term investment on the consolidated balance sheets and $ 20.2 million was allocated to research and development expense on the consolidated statement of operations . 51 pfizer in january 2006 , we entered into a collaborative research and license agreement with pfizer inc. for the pursuit of our ccr2 antagonist program . pfizer gained worldwide development and commercialization rights to our portfolio of ccr2 antagonist compounds . pfizer 's rights extend to the full scope of potential indications , with the exception of multiple sclerosis and autoimmune nephritides , where we retained worldwide rights , along with certain compounds . we do not have obligations to pfizer on pre ‑clinical development candidates we select for pursuit in these indications . the agreement will terminate upon the expiration of the last to expire of patent rights licensed under the agreement . prior to such expiration , either party can terminate the agreement for the uncured material breach of the agreement by the other party or for the insolvency of the other party . in addition , pfizer may terminate the agreement at any time upon 90 days ' notice . we received an upfront nonrefundable , non ‑creditable payment of $ 40.0 million in january 2006 and were initially eligible to receive up to $ 743.0 million of additional future development and commercialization milestone payments . we are also eligible to receive tiered royalties based upon net sales of any potential products ranging from the high single digits to the mid-teens . we received a $ 3.0 million milestone payment from pfizer in 2010. hengrui on september 1 , 2015 , we entered into a license and collaboration agreement with jiangsu hengrui medicine co. , ltd. ( “ hengrui ” ) . under this agreement , incyte received exclusive development and commercialization rights worldwide , with the exception of mainland china , hong kong , macau and taiwan , to shr-1210 ( now incshr1210 ) , an investigational pd-1 monoclonal antibody , and certain back-up compounds . incshr1210 is currently in clinical development . under the terms of this agreement , we paid hengrui an upfront payment of $ 25 .0 million in 2015 which was recorded in research and development expense on the consolidated statement of operations . hengrui is also eligible to receive potential milestone payments of up to $ 770 .0 million , consisting of $ 90 .0 million for regulatory approval milestones , $ 530 .0 million for commercial performance milestones , and $ 150 .0 million for a clinical superiority milestone . also , hengrui may be eligible to receive tiered royalties in the high-single digits to mid-double digits based on net sales in incyte territories . each company will be responsible for costs relating to the development and commercialization of the pd-1 monoclonal antibody in their respective territories . critical accounting policies and significant estimates the preparation of financial statements requires us to make estimates , assumptions and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosures of contingent assets and liabilities . on an on ‑going basis , we evaluate our estimates . we base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances , the results of which form our 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 those estimates under different assumptions or conditions . we believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements : · revenue recognition ; · research and development costs ; · stock compensation ; · investments ; · inventory ; 52 · convertible debt accounting ; and · income taxes revenue recognition . revenues are recognized when ( 1 ) persuasive evidence of an arrangement exists , ( 2 ) delivery has occurred or services have been rendered , ( 3 ) the price is fixed or determinable and ( 4 ) collectability is reasonably assured . revenues are deferred for fees received before earned or until no further obligations exist . we exercise judgment in determining that collectability is reasonably assured or that services have been delivered in accordance with the arrangement . we assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment . we assess collectability based primarily on the customer 's payment history and on the creditworthiness of the customer . product revenues our product revenues consist of u.s. sales of jakafi and are recognized once we meet all four revenue recognition criteria described above . in november 2011 , we began shipping jakafi to our customers , which include specialty pharmac ies and wholesalers . we recognize revenues for product received by our customers net of allowances for customer credits , including estimated rebates , chargebacks , discounts , returns , distribution service fees , patient assistance programs , and medicare part d coverage gap reimbursements . product shipping and handling costs are included in cost of product revenues . customer credits : our customers are offered various forms of consideration , including allowances , service fees and prompt payment discounts . we expect our customers will earn prompt payment discounts and , therefore , we deduct the full amount of these discounts from total product sales when revenues are recognized . service fees are also deducted from total product sales as they are earned . rebates : allowances for rebates include mandated discounts under the medicaid drug rebate program . rebate amounts are based upon contractual agreements or legal requirements with public sector ( e.g .
| cost of product revenues we began capitalizing inventory in mid ‑november 2011 once the fda approved jakafi as the related costs were expected to be recoverable through the commercialization of the product . costs incurred prior to fda approval of $ 9.6 million were recorded as research and development expenses in our statements of operations prior to commercialization of jakafi . at december 31 , 2015 , inventory with $ 1.5 million of product costs incurred prior to fda approval had not yet been sold . we expect to sell the pre ‑commercialization inventory over the next 9 to 12 months ; however , the time period over which this inventory is consumed will depend on a number of factors , including the amount of future jakafi sales , and the ability to utilize inventory prior to its expiration date . as a result , cost of product revenues for the next 9 to 12 months will reflect a lower average per unit cost of materials . commencing in october 2014 , we became obligated to pay tiered , low ‑single digit royalties to novartis on all sales of jakafi in the united states , which is included in cost of product revenues . 59 cost of product revenues was $ 27.0 million and $ 3.0 million for the years ended december 31 , 2015 and 2014 , respectively . cost of product revenues increased from 2014 to 2015 due to an increase of $ 22.3 million for our obligation that commenced in october 2014 to pay royalties to novartis on all jakafi sales in the united states and an increase of $ 1.7 million related to manufacturing costs for jakafi sales . we expect future cost of product revenues to range in the mid ‑single digits as a percentage of net product sales subsequent to the utilization of all of the remaining pre ‑launch inventory . operating expenses research and development expenses replace_table_token_5_th we currently account for research and development costs by natural expense line
| 11,627 |
liquidity and capital resources cel-sci has had only limited revenues from operations since its inception in march 1983. cel-sci has relied upon capital generated from the public and private offerings of its common stock and convertible notes . in addition , cel-sci has utilized short-term loans to meet its capital requirements . capital raised by cel-sci has been used to acquire an exclusive worldwide license to use , and later purchase , certain patented and unpatented proprietary technology and know-how relating to the human immunological defense system and for clinical trials . capital has also been used for patent applications , debt repayment , research and development , administrative costs , and the construction of cel-sci 's laboratory facilities . cel-sci does not anticipate realizing significant revenues until it enters into licensing arrangements regarding its technology and know-how or until it receives regulatory approval to sell its products ( which could take a number of years ) . as a result , cel-sci has been dependent upon the proceeds from the sale of its securities to meet all of its liquidity and capital requirements and anticipates having to do so in the future . during fiscal year 2016 and 2015 , cel-sci raised net proceeds of approximately $ 21.4 million and $ 21.1 million , respectively , through the sale of stock . cel-sci estimates the total cash cost of the phase 3 clinical trial , with the exception of the parts that will be paid by its licensees , teva pharmaceuticals and orient europharma , to be approximately 12.1 million going forward . in august 2007 , cel-sci leased a building near baltimore , maryland . the building , which consists of approximately 73,000 square feet , has been remodeled in accordance with cel-sci 's specifications so that it can be used by cel-sci to manufacture multikine for cel-sci 's phase iii clinical trials and sales of the drug if approved by the fda . the lease expires on october 31 , 2028 , and required annual base rent payments of approximately $ 1.6 million during the twelve months ended september 30 , 2016. see item 2 of this report for more information concerning the terms of this lease . in january 2014 , cel-sci offered to the investors to extend the outstanding series n warrants by one year and allow for cashless exercise in exchange for cancelling the reset provision in the warrant agreement . one of the investors accepted this offer . in march 2014 , 106,793 series n warrants were exercised . on october 28 , 2014 , the remaining series n warrants were transferred to the de clara trust , of which the company 's ceo , geert kersten , is the trustee and a beneficiary . on june 29 , 2015 , concurrently with the modification of the note payable held by the de clara trust , cel-sci extended the expiration date of the series n warrants to august 18 , 2017. as of september 30 , 2016 , the remaining 2,844,627 series n warrants entitle the holders to purchase one share of cel-sci 's common stock at a price of $ 0.52731 per share at any time prior to august 18 , 2017 . 52 on january 13 , 2016 , cel-sci repaid the note payable to the de clara trust , the balance of which was $ 1,105,989 , including principal and interest . at the same time the company sold 3,000,000 shares of its common stock and 3,000,000 series x warrants to the de clara trust for $ 1,110,000. each warrant allows the de clara trust to purchase one share of the company 's common stock at a price of $ 0.37 per share at any time on or before january 13 , 2021. in october 2013 , cel-sci sold 17,826,087 shares of its common stock , plus 20,475,000 series s warrants , in an underwritten offering . the net proceeds to cel-sci from the sale of the shares and warrants were approximately $ 16.4 million , after deducting the underwriting discount . the series s warrants may be exercised at any time on or before october 11 , 2018 at a price of $ 1.25 per share . in december 2013 , cel-sci sold 5,238,095 shares of its common stock and series s warrants , in an underwritten offering . the net proceeds to cel-sci from the sale of the shares and series s warrants were approximately $ 2.7 million , after deducting the underwriting discount . the series s warrants may be exercised at any time on or before october 11 , 2018 at a price of $ 1.25 per share . in february 2014 , the s warrants began trading on the nyse mkt under the ticker symbol “ cvm ws ” . as of september 30 , 2016 , 2,088,769 series s warrants had been exercised . the remaining 25,928,010 series s warrants entitle the holders to purchase one share of cel-sci 's common stock at a price of $ 1.25 per share . in april 2014 , cel-sci sold 7,128,229 shares of common stock , plus 1,782,057 series t warrants , in an underwritten offering . the net proceeds to cel-sci from the sale of the stock and warrants were approximately $ 9.23 million . the series t warrants had an exercise price of $ 1.58 and expired on october 17 , 2014. cel-sci also issued 445,514 series u warrants to the underwriters for this offering . the series u warrants may be exercised beginning october 17 , 2014 at a price of $ 1.75 per share and expire on october 17 , 2017. as of september 30 , 2016 , none of the series u warrants had been exercised . in october 2014 , cel-sci sold 7,894,737 shares of common stock , plus 1,973,684 series s warrants in an underwritten public offering . the net proceeds to cel-sci from the sale of the stock and warrants were approximately $ 5.5 million . story_separator_special_tag the warrants are immediately exercisable , expire october 11 , 2018 and have an exercise price of $ 1.25. additionally , in october 2014 , cel-sci sold 1,320,000 shares of common stock , plus 330,000 series s warrants in a registered direct offering . the net proceeds to cel-sci from the sale of the stock and warrants were approximately $ 941,000. the warrants are immediately exercisable , expire october 11 , 2018 and have an exercise price of $ 1.25. on may 28 , 2015 , cel-sci sold 20,253,164 shares of common stock , plus 20,253,164 series v warrants , in an underwritten public offering . the common stock and series v warrants were sold at a combined per unit price of $ 0.79 for net proceeds of approximately $ 14.7 million . the series v warrants are immediately exercisable at a price of $ 0.79 and expire on may 28 , 2020. as of september 30 , 2016 , none of the series v warrants had been exercised . on october 28 , 2015 , the company closed an underwritten public offering of 17,223,248 shares of common stock and 17,223,248 series w warrants to purchase shares of common stock . the common stock and warrants were sold at a combined per unit price of $ 0.67 for net proceeds of approximately $ 10.5 million , net of underwriting discounts and commissions and offering expenses . the series w warrants are immediately exercisable at a price of $ 0.67 and expire on october 28 , 2020. as of september 30 , 2016 , none of the series w warrants had been exercised . 53 in january 2016 , the company sold 3,000,000 shares of its common stock and 3,000,000 series x warrants to the de clara trust for approximately $ 1.1 million , as noted above . the de clara trust is controlled by geert kersten , the company 's chief executive officer and a director . each series x warrant allows the de clara trust to purchase one share of the company 's common stock at a price of $ 0.37 per share at any time on or before january 13 , 2021. as of september 30 , 2016 , none of the series x warrants had been exercised . in february 2016 , the company sold 1,300,000 shares of its common stock and 650,000 series y warrants to a private investor for $ 624,000. each series y warrant allows the holder to purchase one share of the company 's common stock at a price of $ 0.48 per share at any time on or before february 15 , 2021. as of september 30 , 2016 , none of the series y warrants had been exercised . on may 23 , 2016 , the company closed a registered direct offering of 10,000,000 shares of common stock and 6,600,000 series z warrants to purchase shares of common stock . the common stock and warrants were sold at a combined per unit price of $ 0.50 for net proceeds of approximately $ 4.6 million , net of placement agent 's commissions and offering expenses . the series z warrants may be exercised at any time on or after november 23 , 2016 and on or before november 23 , 2021 at a price of $ 0.55 per share . the company also issued 500,000 series zz warrants to the placement agent as part of its compensation . the series zz warrants may be exercised at any time on or after november 23 , 2016 and on or before may 18 , 2021 at a price of $ 0.55 per share . as of september 30 , 2016 , none of the series z and zz warrants had been exercised . on august 26 , 2016 , the company closed a registered direct offering of 10,000,000 shares of common stock and series aa warrants to purchase up to 5,000,000 shares of common stock . each share of common stock was sold together with a series aa warrant to purchase one-half of a share of common stock for the combined purchase price of $ 0.50. each warrant can be exercised at any time after february 22 , 2017 and on or before february 22 , 2022 at a price of $ 0.55 per share . the company also issued 400,000 series bb warrants to the placement agent as part of its compensation . the series bb warrants may be exercised at any time on or after february 22 , 2017 and on or before august 22 , 2021 at a price of $ 0.55 per share . the company received proceeds from the sale of series aa and series bb shares and warrants of approximately $ 4.5 million , net of placement agent 's commissions and offering expenses . as of september 30 , 2016 , none of the series aa and bb warrants had been exercised . on december 8 , 2016 , the company sold 34,024,000 shares of common stock and warrants to purchase common stock at a price of $ 0.125 in a public offering . the warrants consist of 17,012,000 series cc warrants to purchase 17,012,000 shares of common stock , 34,024,000 series dd warrants to purchase 34,024,000 shares of common stock and 34,024,000 series ee warrants to purchase 34,024,000 shares of common stock . the series cc warrants are immediately exercisable , expire in five-years and have an exercise price of $ 0.20 per share . the series dd warrants are immediately exercisable , expire in six-months and have an exercise price of $ 0.18 per share . the series ee warrants are immediately exercisable , expire in nine-months and have an exercise price of $ 0.18 per share . in addition , the company issued 1,701,000 series ff warrants to purchase 1,701,000 shares of common stock to the placement agent .
| net interest income ( expense ) decreased approximately $ 113,000 during the year ended september 30 , 2016 compared to the year ended september 30 , 2015 , primarily due to an approximate $ 124,000 reduction in interest expense on the related party loan , which was paid off in january 2016 , offset by an approximate $ 9,000 reduction in interest income due to lower cash balances . fiscal 2015 during the year ended september 30 , 2015 , grant and other income increased by approximately $ 393,000 compared to the year ended september 30 , 2014. the increase is primarily due to the timing of drug shipments to supply the company 's partner in taiwan and the grant income earned by the company 's small business innovation research ( sbir ) grant during fiscal year 2015 compared to fiscal year 2014. during the year ended september 30 , 2015 , research and development expenses increased by approximately $ 3.9 million compared to the year ended september 30 , 2014. cel-sci is continuing the phase 3 clinical trial and research and development fluctuates based on the activity level of the clinical trial . in fiscal year 2015 , cel-sci received clearance from seven new countries for the phase 3 clinical trial , and enrolled 305 patients in fiscal year 2015 vs 142 in fiscal year 2014. during the year ended september 30 , 2015 , general and administrative expenses increased by approximately $ 3.1 million , compared to the year ended september 30 , 2014. this increase is primarily due to an increase of approximately $ 2.0 million of equity based compensation costs for restricted stock granted , increased legal fees of approximately $ 1.8 million relating to arbitration with the company 's former cro , as discussed in item 3 above , and an increase of approximately $ 220,000 in fees for professional services . these increases were offset by a decrease of approximately $ 788,000 in employee compensation , primarily due to a decrease in the number of stock options issued and vested in 2015 compared to 2014 .
| 11,628 |
in addition , the venezuelan government continues to impose import authorization controls , currency exchange and payment controls and price controls . while cp venezuela continues to have limited access to u.s. dollars from the government ( cadivi ) , and currently only for imported goods , the timing of receipt of these funds has slowed and become increasingly unpredictable . cp venezuela funds its requirements for imported goods primarily through a combination of u.s. dollars obtained from cadivi , intercompany borrowings and the use of financial and other intermediaries and , to a lesser extent , with existing u.s. dollar cash balances , which were obtained previously through parallel market transactions and through the prior liquidation of its u.s. dollar-denominated bond portfolio . on april 1 , 2012 , additional price controls became effective , affecting most products in cp venezuela 's portfolio , thereby further restricting the company 's ability to implement price increases , which had been one of the key mechanisms to offset the effects of continuing high inflation . in the fourth quarter of 2012 , production at cp venezuela was negatively impacted by labor issues within the country . the company 's business in venezuela , and the company 's ability to repatriate its earnings , continue to be negatively affected by these difficult conditions and would be further negatively affected by additional devaluations or the imposition of additional or more stringent controls on foreign currency exchange , pricing or imports or other governmental actions or continued or increased labor unrest . following the february 2013 devaluation , cp venezuela 's local currency-denominated net monetary asset position , which would be subject to remeasurement in the event of a further devaluation , was reduced to approximately $ 390 as compared to approximately $ 520 at december 31 , 2012 , and it is expected that cp venezuela will represent less than 4 % of the company 's consolidated net sales in 2013. the company continues to actively manage its investment in and exposure to venezuela . in the fourth quarter of 2012 , the company commenced a four-year global growth and efficiency program ( the 2012 restructuring program ) for sustained growth . the program 's initiatives are expected to help colgate ensure continued solid worldwide growth in unit volume , organic sales and earnings per share and enhance its global leadership positions in its core businesses . implementation of the 2012 restructuring program , which is expected to be substantially completed by december 31 , 2016 , is projected to result in cumulative pretax charges , once all phases are approved and implemented , totaling between $ 1,100 and $ 1,250 ( $ 775 and $ 875 aftertax ) . savings are projected to be in the range of $ 365 to $ 435 pretax ( $ 275 to $ 325 aftertax ) annually by the fourth year of the program , substantially all of which are expected to increase future cash flows . for more information regarding the 2012 restructuring program , see “ restructuring and related implementation charges ” below . in 2012 , the company incurred aftertax costs of $ 14 associated with the business realignment and other cost-saving initiatives and aftertax costs of $ 18 related to the sale of land in mexico ( discussed below ) . on september 13 , 2011 , the company 's mexican subsidiary entered into an agreement to sell to the united states of america the mexico city site on which its commercial operations , technology center and soap production facility are located . the sale price is payable in three installments , with the final installment due upon the transfer of the property , which is expected to occur in 2014. the company is re-investing these payments to relocate its soap production to a new state-of-the-art facility to be constructed at its mission hills , mexico site , to relocate its commercial and technology operations within mexico city and to prepare the existing site for transfer . as a result , the company expects to make capital improvements and incur costs to exit the site through 2014. these exit costs will primarily be related to staff leaving indemnities , accelerated depreciation and demolition to make the site building-ready . 16 ( dollars in millions except per share amounts ) on july 29 , 2011 , in connection with the sanex acquisition ( discussed below ) , colgate sold its non-core laundry detergent business in colombia to unilever for $ 215 resulting in a pretax gain of $ 207 ( $ 135 aftertax ) . in 2011 , this gain was more than offset by pretax costs of $ 224 ( $ 177 aftertax ) associated with the implementation of business realignment and other cost-saving initiatives , the sale of land in mexico and a competition law matter in france related to a divested detergent business , as discussed in part i , item 3 `` legal proceedings '' and note 13 “ commitments and contingencies ” to the consolidated financial statements . the business realignment and other cost-saving initiatives include the integration of sanex , the right-sizing of the colombia business and the closing of an oral care facility in mississauga , canada , and a hill 's facility in los angeles , california . on june 20 , 2011 , the company , colgate-palmolive europe sàrl , unilever n.v. and unilever plc ( together with unilever n.v. , “ unilever ” ) finalized the company 's acquisition from unilever of the sanex personal care business in accordance with a business and share sale and purchase agreement for an aggregate purchase price of 676 ( $ 966 ) . the acquisition was financed with available cash , proceeds from the sale of the company 's euro-denominated investment portfolio and the issuance of commercial paper . looking forward , we expect global macroeconomic and market conditions to remain highly challenging . story_separator_special_tag while the global marketplace in which we operate has always been highly competitive , the company continues to experience heightened competitive activity in certain markets from other large multinational companies , some of which have greater resources than we do . such activities have included more aggressive product claims and marketing challenges , as well as increased promotional spending and geographic expansion . additionally , we continue to experience foreign currency fluctuations and high commodity costs . while the company has taken , and will continue to take , measures to mitigate the effect of these conditions , should they persist , they could adversely affect the company 's future results . the company believes it is well prepared to meet the challenges ahead due to its strong financial condition , experience operating in challenging environments and continued focus on the company 's strategic initiatives : engaging to build our brands ; innovation for growth ; effectiveness and efficiency ; and leading to win . this focus , together with the strength of the company 's global brand names , its broad international presence in both mature and emerging markets and initiatives such as the 2012 restructuring program , should position the company well to increase shareholder value over the long-term . story_separator_special_tag by cost savings from the company 's funding-the-growth initiatives ( 190 bps ) and higher pricing ( 50 bps ) . replace_table_token_2_th replace_table_token_3_th selling , general and administrative expenses selling , general and administrative expenses increased 3 % to $ 5,930 in 2012 from $ 5,758 in 2011. selling , general and administrative expenses in both periods included the impact of costs associated with the business realignment and other cost-saving initiatives . selling , general and administrative expenses in 2012 also included charges related to the 2012 restructuring program . excluding these costs , selling , general and administrative expenses increased to $ 5,910 in 2012 from $ 5,748 in 2011. selling , general and administrative expenses as a percentage of net sales increased to 34.7 % in 2012 from 34.4 % in 2011. excluding the items described above , selling , general and administrative expenses as a percentage of net sales were 34.6 % , an increase of 30 bps as compared to 2011. the 30 bps increase in 2012 was a result of higher overhead expenses ( 20 bps ) due primarily to increased commercial capabilities on the ground in emerging markets and higher advertising investments ( 10 bps ) . in 2012 , advertising increased 3.3 % to $ 1,792 as compared with $ 1,734 in 2011 , or 10.5 % as a percentage of net sales in 2012 as compared to 10.4 % in 2011. selling , general and administrative expenses increased 6 % to $ 5,758 in 2011 from $ 5,414 in 2010. excluding the impact of costs associated with the business realignment and other cost-saving initiatives in 2011 , selling , general and administrative expenses increased to $ 5,748 in 2011 . 18 ( dollars in millions except per share amounts ) selling , general and administrative expenses as a percentage of net sales decreased to 34.4 % in 2011 from 34.8 % in 2010 . excluding the impact of costs associated with the business realignment and other cost-saving initiatives in 2011 , selling , general and administrative expenses as a percentage of net sales were 34.3 % , a decrease of 50 bps as compared to 2010 primarily due to lower advertising investments ( 20 bps ) and lower overhead expenses ( 30 bps ) . in 2011 , advertising increased 4.7 % to $ 1,734 as compared with $ 1,656 in 2010 , but decreased as a percentage of net sales from 10.6 % in 2010 to 10.4 % in 2011 . replace_table_token_4_th replace_table_token_5_th other ( income ) expense , net other ( income ) expense , net was $ 113 , ( $ 9 ) and $ 301 in 2012 , 2011 and 2010 , respectively . the components of other ( income ) expense , net are presented below : replace_table_token_6_th other ( income ) expense , net was $ 113 in 2012 as compared to ( $ 9 ) in 2011. other ( income ) expense , net in both periods included costs associated with the business realignment and other cost-saving initiatives . in 2012 , other ( income ) expense , net also included charges related to the 2012 restructuring program . in 2011 , other ( income ) expense , net also included costs related to the sale of land in mexico , the gain on the sale of the non-core laundry detergent business in colombia and a charge for a competition law matter in france related to a divested detergent business . 19 ( dollars in millions except per share amounts ) other ( income ) expense , net was ( $ 9 ) in 2011 as compared to $ 301 in 2010. in 2010 , other ( income ) expense , net included the one-time charge related to the transition to hyperinflationary accounting in venezuela , termination benefits and the gain on sales of non-core product lines . in 2011 , other ( income ) expense , net also included transaction costs of $ 12 related to the sanex acquisition in 2011. excluding these items in all applicable years , other ( income ) expense , net was $ 30 in 2012 , $ 28 in 2011 and ( $ 6 ) in 2010. replace_table_token_7_th operating profit in 2012 , operating profit increased 1 % to $ 3,889 from $ 3,841 in 2011 . in 2011 , operating profit increased 10 % to $ 3,841 from $ 3,489 in 2010. in 2012 and 2011 , operating profit included the impact of costs related to the sale of land in mexico and costs associated with the business realignment and other cost-saving initiatives . in 2012 , operating profit also included charges related to the 2012 restructuring program .
| excluding the impact of the divestment of the non-core laundry detergent business in colombia , volume increased 4.0 % . the sanex business contributed 1.0 % to worldwide net sales and volume growth in 2011 . organic sales increased 4.0 % , on organic volume growth of 3.0 % in 2011 . gross profit/margin worldwide gross profit increased 4 % to $ 9,932 in 2012 from $ 9,590 in 2011 . gross profit in both periods included the 17 ( dollars in millions except per share amounts ) impact of costs associated with the business realignment and other cost-saving initiatives . gross profit in 2012 also included the impact of charges related to the 2012 restructuring program and costs related to the sale of land in mexico . excluding the items described above , gross profit increased to $ 9,963 in 2012 from $ 9,634 in 2011 , primarily due to strong sales growth , cost savings from the company 's funding-the-growth initiatives and higher pricing , which were partially offset by higher raw and packaging material costs driven by global commodity cost increases and negative foreign exchange transaction costs . worldwide gross profit margin increased to 58.1 % in 2012 from 57.3 % in 2011 . excluding the items described above , gross profit margin increased by 70 basis points ( bps ) to 58.3 % in 2012 . the increase was primarily due to cost savings from the company 's funding-the-growth initiatives ( 190 bps ) and higher pricing ( 120 bps ) , which were partially offset by higher raw and packaging material costs driven by global commodity cost increases and negative foreign exchange transaction costs ( 250 bps ) . worldwide gross profit increased 4 % to $ 9,590 in 2011 from $ 9,204 in 2010 . excluding the impact of costs associated with the business realignment and other cost-saving initiatives in 2011 , gross profit increased to $ 9,634 in 2011 . worldwide gross profit margin decreased to 57.3 % in 2011 from 59.1 % in 2010 . excluding the impact of costs associated with the
| 11,629 |
19 revenue from non-interest income sources was also a positive contributor to the 2011 earnings as compared to 2010. non-interest income in 2011 increased by $ 4,633,000 or 27 % over that recorded in 2010. somewhat offsetting this enhanced revenue , the company 's total non-interest expenses increased by approximately $ 9,421,000 or 23 % during 2011 as compared with 2010. much of these increases were attributable to expenses associated with acquisition of american community bancorp , inc. , and its banking subsidiary , bank of evansville , the continuing operations of the bank of evansville during 2011 , and to a lesser extent the acquisition of two branches effective may 7 , 2010. critical accounting policies and estimates the financial condition and results of operations for german american bancorp , inc. presented in the consolidated financial statements , accompanying notes to the consolidated financial statements , and selected financial data appearing elsewhere within this report , are , to a large degree , dependent upon the company 's accounting policies . the selection of and application of these policies involve estimates , judgments , and uncertainties that are subject to change . the critical accounting policies and estimates that the company has determined to be the most susceptible to change in the near term relate to the determination of the allowance for loan losses , the valuation of securities available for sale , and the valuation allowance on deferred tax assets . allowance for loan losses the company maintains an allowance for loan losses to cover probable incurred credit losses at the balance sheet date . loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed . subsequent recoveries , if any , are credited to the allowance . allocations of the allowance may be made for specific loans , but the entire allowance is available for any loan that , in management 's judgment , should be charged-off . a provision for loan losses is charged to operations based on management 's periodic evaluation of the necessary allowance balance . evaluations are conducted at least quarterly and more often if deemed necessary . the ultimate recovery of all loans is susceptible to future market factors beyond the company 's control . the company has an established process to determine the adequacy of the allowance for loan losses . the determination of the allowance is inherently subjective , as it requires significant estimates , including the amounts and timing of expected future cash flows on impaired loans , estimated losses on other classified loans and pools of homogeneous loans , and consideration of past loan loss experience , the nature and volume of the portfolio , information about specific borrower situations and estimated collateral values , economic conditions , and other factors , all of which may be susceptible to significant change . the allowance consists of two components of allocations , specific and general . these two components represent the total allowance for loan losses deemed adequate to cover losses inherent in the loan portfolio . commercial and agricultural loans are subject to a standardized grading process administered by an internal loan review function . the need for specific reserves is considered for credits when graded substandard or when : ( a ) the customer 's cash flow or net worth appears insufficient to repay the loan ; ( b ) the loan has been criticized in a regulatory examination ; ( c ) the loan is on non-accrual ; or , ( d ) other reasons where the ultimate collectibility of the loan is in question , or the loan characteristics require special monitoring . specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that we believe indicates the loan is impaired . specific allocations on impaired loans are determined by comparing the loan balance to the present value of expected cash flows or expected collateral proceeds . allocations are also applied to categories of loans not considered individually impaired but for which the rate of loss is expected to be greater than historical averages , including those graded substandard and non-performing consumer or residential real estate loans . such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values . general allocations are made for other pools of loans , including non-classified loans , homogeneous portfolios of consumer and residential real estate loans , and loans within certain industry categories believed to present unique risk of loss . general allocations of the allowance are primarily made based on a one-year historical average for loan losses for these portfolios , judgmentally adjusted for economic factors and portfolio trends . due to the imprecise nature of estimating the allowance for loan losses , the company 's allowance for loan losses includes a minor unallocated component . the unallocated component of the allowance for loan losses incorporates the company 's judgmental determination of inherent losses that may not be fully reflected in other allocations , including factors such as economic uncertainties , lending staff quality , industry trends impacting specific portfolio segments , and broad portfolio quality trends . therefore , the ratio of allocated to unallocated components within the total allowance may fluctuate from period to period . 20 securities valuation securities available-for-sale are carried at fair value , with unrealized holding gains and losses reported separately in accumulated other comprehensive income ( loss ) , net of tax . the company obtains market values from a third party on a monthly basis in order to adjust the securities to fair value . equity securities that do not have readily determinable fair values are carried at cost . additionally , when securities are deemed to be other than temporarily impaired , a charge will be recorded through earnings ; therefore , future changes in the fair value of securities could have a significant impact on the company 's operating results . story_separator_special_tag in determining whether a market value decline is other than temporary , management considers the reason for the decline , the extent of the decline , the duration of the decline and whether the company intends to sell or believes it will be required to sell the securities prior to recovery . as of december 31 , 2011 , gross unrealized losses on the securities available-for-sale portfolio totaled approximately $ 92,000 and gross unrealized gains totaled approximately $ 16,808,000. as of december 31 , 2011 , held-to-maturity securities had a gross unrecognized gain of approximately $ 7,000. income tax expense income tax expense involves estimates related to the valuation allowance on deferred tax assets and loss contingencies related to exposure from tax examinations . a valuation allowance reduces deferred tax assets to the amount management believes is more likely than not to be realized . in evaluating the realization of deferred tax assets , management considers the likelihood that sufficient taxable income of appropriate character will be generated within carryback and carryforward periods , including consideration of available tax planning strategies . tax related loss contingencies , including assessments arising from tax examinations and tax strategies , are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated . in considering the likelihood of loss , management considers the nature of the contingency , the progress of any examination or related protest or appeal , the views of legal counsel and other advisors , experience of the company or other enterprises in similar matters , if any , and management 's intended response to any assessment . story_separator_special_tag style= '' font : 10pt times new roman , times , serif ; margin-top : 0 ; margin-bottom : 0 '' width= '' 100 % '' > ( 2 ) loans held-for-sale and non-accruing loans have been included in average loans . interest income on loans includes loan fees of $ 3,335 , $ 909 , and $ 545 for 2011 , 2010 , and 2009 , respectively . 23 the following table sets forth for the periods indicated a summary of the changes in interest income and interest expense resulting from changes in volume and changes in rates : net interest income – rate / volume analysis ( tax-equivalent basis , dollars in thousands ) replace_table_token_3_th ( 1 ) the change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each . see the company 's average balance sheet and the discussions headed uses of funds , sources of funds , and “ risk management – liquidity and interest rate risk management ” for further information on the company 's net interest income , net interest margin , and interest rate sensitivity position . provision for loan losses the company provides for loan losses through regular provisions to the allowance for loan losses . the provision is affected by net charge-offs on loans and changes in specific and general allocations required on the allowance for loan losses . provisions for loan losses totaled $ 6,800,000 , $ 5,225,000 , and $ 3,750,000 in 2011 , 2010 , and 2009 , respectively . the level of provision for loan losses increased by $ 1,575,000 or 30 % during 2011 compared with 2010. the increase in provision during 2011 compared with 2010 was largely the result of a higher level of net charge-offs and an upward trend in the company 's level of non-performing loans . during 2011 , the provision for loan losses totaled 0.61 % of average outstanding loans while net charge-offs represented 0.43 % of average outstanding loans . the company 's allowance for loan losses represented 1.37 % of total loans at year-end 2011 compared with 1.45 % at year-end 2010. the decline in the allowance compared with total loans at year-end 2011 compared with year-end 2010 was attributable to the acquisition of the bank of evansville . under acquisition accounting , loans are recorded at fair value which includes a credit risk component , and therefore the allowance on loans acquired is not carried over from the seller . the level of provision for loan losses increased by $ 1,475,000 or 39 % during 2010 compared with 2009. the increase in provision during 2010 compared with 2009 was largely the result of a higher level of net charge-offs and an upward trend in the company 's level of non-performing loans and impaired loans . during 2010 , the provision for loan losses totaled 0.58 % of average outstanding loans while net charge-offs represented 0.32 % of average outstanding loans . as a result , the company 's allowance for loan losses increased to 1.45 % of total loans at year-end 2010 compared with 1.25 % at year-end 2009. provisions for loan losses in all periods were made at a level deemed necessary by management to absorb estimated , probable incurred losses in the loan portfolio . a detailed evaluation of the adequacy of the allowance for loan losses is completed quarterly by management , the results of which are used to determine provisions for loan losses . management estimates the allowance balance required using past loan loss experience , the nature and volume of the portfolio , information about specific borrower situations and estimated collateral values , economic conditions , and other qualitative factors . refer also to the sections entitled critical accounting policies and estimates and “ risk management – lending and loan administration ” for further discussion of the provision and allowance for loan losses .
| net interest income increased $ 15,310,000 or 31 % ( an increase of $ 15,721,000 or 32 % on a tax-equivalent basis ) for the year ended december 31 , 2011 compared with 2010. the tax equivalent net interest margin was 3.84 % for 2011 compared with 3.98 % during 2010. the yield on earning assets totaled 4.79 % during 2011 compared to 5.23 % in 2010 while the cost of funds ( expressed as a percentage of average earning assets ) totaled 0.95 % during 2011 compared to 1.25 % in 2010. the increased level of net interest income during 2011 compared with 2010 was primarily attributable to an increased level of average earning assets . the decline in the net interest margin expressed as a percentage was largely the result of the company carrying a higher level of federal funds sold and other short-term investments during 2011 compared with 2010 and an increased securities portfolio driven by an increase in the company 's core deposit base . this core deposit increase was the result of the acquisition of american community and growth from the company 's existing branch network . 21 average earning assets increased by approximately $ 456.9 million or 37 % during 2011 compared with 2010. average loans outstanding increased by $ 208.1 million , or 23 % , during 2011 compared with 2010. the increase in average loans was largely attributable to the american community acquisition as of january 1 , 2011 and the acquisition of two branch offices in the second quarter of 2010. average federal funds sold and other short-term investments increased by $ 44.2 million during 2011 compared with 2010. the average securities portfolio increased by $ 204.6 million , or 69 % , in 2011 compared with 2010. the key driver of the increased federal funds sold position and securities portfolio was an increased level of average core deposits ( core deposits defined as demand deposits - both interest and non-interest bearing , savings , money market and time deposits in denominations of less than $ 100,000 ) . the increase in average core deposits totaled $ 451.4 million , or approximately 47 % , during 2011 compared with 2010. the acquisition of the american community and the branch acquisition completed in the second quarter of 2010 contributed approximately $ 304.6 million of the average
| 11,630 |
at the time of rice poseidon 's formation , the only natural gas gathering , compression and fresh water distribution assets in pennsylvania in which rice energy owned any interest that were not held directly by rice poseidon were the alpha assets , which are treated as having been acquired by our predecessor upon rice energy 's acquisition of the remaining 50 % interest in alpha shale resources , lp from a third party in january 2014. prior to the formation of rice poseidon , the assets of rice poseidon were owned by various subsidiaries of rice energy . as it relates to our predecessor , when discussing periods : prior to the formation of rice poseidon in july 2013 , refers to the pennsylvania natural gas gathering , compression and water distribution assets and operations held in various subsidiaries of rice energy ; subsequent to the formation of rice poseidon in july 2013 through january 29 , 2014 , refers to the natural gas gathering , compression and water distribution assets and operations of rice poseidon ; subsequent to january 29 , 2014 through april 17 , 2014 , refers collectively to the natural gas gathering , compression and water distribution assets and operations of rice poseidon taken together with the alpha assets ; and subsequent to april 17 , 2014 up to december 22 , 2014 , refers collectively to the natural gas gathering , compression and water distribution assets and operations of rice poseidon , the alpha assets and the momentum assets ( described below ) from their respective dates of acquisition . subsequent to january 29 , 2014 , our predecessor includes the alpha assets , which consist of certain natural gas gathering and compression assets held in alpha shale resources , lp , a wholly-owned subsidiary of rice energy . prior to january 29 , 2014 , each of rice energy and a third party owned a 50 % interest in alpha shale resources , lp , a joint venture formed to develop natural gas acreage in the marcellus shale . on january 29 , 2014 , in connection with the completion of its initial public offering , rice energy acquired the remaining 50 % interest in alpha shale resources , lp . in addition , on april 17 , 2014 , rice poseidon acquired , from m3 appalachia gathering llc , the momentum assets , which consist of a 28-mile , 6- to 16-inch gathering system in eastern washington county , pennsylvania , and permits and rights of way in washington and greene counties , pennsylvania , necessary to construct an 18-mile , 30-inch gathering system connecting the washington county system to tetco . our predecessor included certain fresh water distribution assets and operations in pennsylvania that were distributed to rice midstream holdings concurrently with the closing of our initial public offering . such fresh water distribution assets historically did not derive any revenue for our predecessor and are presented as discontinued operations in our consolidated financial statements . 48 factors that significantly affect comparability of our financial condition and results of operations our future results of operations may not be comparable to the historical results of operations of our predecessor presented below for the following reasons : revenues . there are differences in the way our predecessor recorded revenues and the way we record revenues . as our assets have historically been a part of the integrated operations of rice energy , our predecessor generally recognized only the costs and did not record revenue associated with the gathering services provided to rice energy on an intercompany basis . accordingly , the revenues in our historical consolidated financial statements for periods prior to december 22 , 2014 relate generally only to amounts received from third parties for these services . subsequent to december 22 , 2014 , our revenues are generated by existing third-party contracts and from the gas gathering and compression agreement that we entered into with rice energy in connection with the closing of our initial public offering . midstream build-out . all of the natural gas gathering and compression assets of our predecessor that were contributed to us in connection with the closing of our initial public offering have been constructed in the last five years . as a result of this build out , the aggregate capacity on our natural gas gathering systems increased to 3.2 mmdth/d as of december 31 , 2014 from 1.6 mmdth/d as of december 31 , 2013 , a 100 % increase . average daily throughput on our systems increased from 95 mdth/d for the year ended december 31 , 2013 to 378 mdth/d for the year ended december 31 , 2014 , a 298 % increase . due to the significant build-out of our gathering systems , capital expenditures over the covered periods were higher than those that we anticipate we will experience in future periods . capital expenditures with respect to our assets for the year ended december 31 , 2013 and the year ended december 31 , 2014 were $ 43.3 million and $ 172.3 million , respectively , and we expect incurring total capital expenditures of approximately $ 180.0 million for the year ending december 31 , 2015 , of which approximately $ 90.0 million is anticipated to pertain to the construction and development of compressor stations . rice energy 's development focus . in the second quarter of 2013 , rice energy , our anchor customer , shifted its operational focus from exploration to development , commencing a two-horizontal rig drilling program in the dry gas core of the marcellus shale in southwestern pennsylvania . with this development focus , rice energy has focused almost exclusively on pad drilling , in which rice energy drills multiple wells on a single well pad ( and a single receipt point for our gathering systems ) as opposed to one or two wells per pad . story_separator_special_tag as such , within our dedicated area , rice energy turned 41 horizontal marcellus wells into sales in the year ended december 31 , 2014 as compared to 37 horizontal marcellus wells over the preceding four years . furthermore , rice energy has continued to increase the average lateral length of wells drilled , resulting in increased initial throughput volumes per receipt point for our gathering systems . system acquisition . as described under “ —our predecessor , ” our predecessor is treated as having acquired two businesses in the first half of 2014. collectively , the acquired businesses represent approximately 40 % of the natural gas volumes on our gathering systems for the year ended december 31 , 2014 . similar to the balance of our assets , the assets and operations acquired were early stage assets , in particular with respect to the momentum assets . general and administrative expenses . our predecessor 's general and administrative expenses included direct and indirect charges for the management of our assets and certain expenses allocated by rice energy for general corporate services , such as treasury , accounting and legal services . these expenses were charged or allocated to our predecessor based on the nature of the expenses and rice energy 's estimate of the expense attributable to our predecessor 's operations . under our omnibus agreement with rice energy , rice energy charges us a combination of direct and allocated charges for general and administrative services . we also currently anticipate incurring approximately $ 2.5 million of incremental general and administrative expenses attributable to operating as a publicly traded partnership , such as costs associated with : annual and quarterly reporting ; tax return and schedule k-1 preparation and distribution expenses ; sarbanes-oxley compliance expenses ; expenses associated with listing on the nyse ; independent auditor fees ; legal fees ; investor relations expenses ; registrar and transfer agent fees ; director and officer liability insurance expenses ; and director compensation . financing . there are differences in the way we will finance our operations as compared to the way our predecessor financed its operations . historically , our predecessor 's operations were financed as part of rice energy 's integrated operations and our predecessor did not record any separate costs associated with financing its operations . additionally , our predecessor largely relied on capital contributions from rice energy to satisfy its capital expenditure requirements . for purposes of our predecessor 's historical financial statements , we have recorded our proportionate share of rice energy 's interest based upon rice energy 's estimate of the expense attributable to our operations . we intend to make cash distributions to our unitholders at an initial distribution rate of $ 0.1875 per unit per quarter ( $ 0.75 per unit on an annualized basis ) . based on the terms of our cash distribution policy , we expect that we will distribute most of the cash generated by our operations to our unitholders . as a result , we expect to fund future growth capital expenditures primarily from a combination of borrowings under our revolving credit facility and the issuance of additional equity or debt securities . 49 how we evaluate our operations we evaluate our business on the basis of the following key measures : our throughput volumes ; our operating expenses ; our adjusted ebitda ; and our distributable cash flow . throughput volumes our management analyzes our performance based on the aggregate amount of throughput volumes on our gathering systems . we must connect additional wells or well pads within our dedicated areas in order to maintain or increase throughput volumes on our gathering systems as a whole . our success in connecting additional wells is impacted by successful drilling activity on the acreage dedicated to our systems , our ability to secure volumes from new wells drilled on non-dedicated acreage , our ability to attract natural gas volumes currently gathered by our competitors and our ability to cost-effectively construct new infrastructure to connect new wells . operating expenses our management seeks to maximize the profitability of our operations in part by minimizing operating expenses . these expenses are comprised primarily of field operating costs ( which include labor and measurement services , among other items ) , compression expense and other operating costs , some of which are independent of the volumes through our systems but fluctuate depending on the scale of our operations during a specific period . we plan to utilize rice energy 's operational , technical and administrative personnel to enhance our operating efficiency and overall asset utilization . in some instances , these services are available to us at a low cost compared to the expense of developing these functions internally , and we intend to use rice energy personnel for many general and administrative services that represent a significant expense for competing midstream businesses . adjusted ebitda and distributable cash flow we define adjusted ebitda as net income ( loss ) before interest expense , income tax benefit , depreciation expense and non-cash stock compensation expense and certain other items management believes affect the comparability of operating results . we define distributable cash flow as adjusted ebitda , less net cash paid for interest expense , acquisition costs and estimated maintenance capital expenditures . distributable cash flow does not reflect changes in working capital balances . distributable cash flow and adjusted ebitda are not presentations made in accordance with gaap .
| the increase year-over-year was 51 primarily due to our acquisitions of the alpha assets and the momentum assets and increased expenses associated with the ongoing operation of the gathering assets including leases for compression equipment , contract labor and permitting . general and administrative expenses . general and administrative expenses increased from $ 2.7 million for the year ended december 31 , 2013 to $ 9.9 million for the year ended december 31 , 2014 , an increase of $ 7.2 million . the increase year over year was primarily a result of additional employees and associated indirect costs incurred to operate the partnership . incentive unit expense . incentive unit expense for the year ended december 31 , 2014 was $ 12.0 million . this expense was triggered by rice energy 's initial public offering in january 2014 and as such was not applicable for years prior thereto . these costs have been allocated to us based on our estimate of the expense attributable to our operations . the payment obligation as it relates to the incentive units is with rice energy family holdings , lp and ngp rice holdings llc and will not be borne by rice energy or by us . for periods subsequent to our initial public offering , we will not be allocated incentive unit expense incurred by rice energy . stock compensation expense . stock compensation expense for the year ended december 31 , 2014 was $ 0.7 million . rice energy allocated $ 0.6 million of stock compensation expense to us based on our estimate of expense attributable to our operations and $ 0.1 million of stock compensation expense was incurred related to phantom unit awards granted in connection with our initial public offering . for periods subsequent to our initial public offering , we will not be allocated stock compensation expense incurred by rice energy . depreciation expense . depreciation expense increased from $ 0.6 million for the year ended december 31 , 2013 to $ 2.9 million for the year ended december 31 , 2014 , an increase of $ 2.3 million . the increase year
| 11,631 |
· technology services : our technology services design , integrate and operate highly scalable , digital omnichannel technology solutions in the cloud , on premise , or hybrid , including journey orchestration , automation and ai , knowledge management , and workforce productivity . · professional services : our management consulting practices deliver customer experience strategy , analytics , process optimization , and learning and performance services . ttec engage provides the essential technologies , human resources , infrastructure and processes to operate customer care , acquisition , and fraud detection and prevention services . · customer acquisition services : our customer growth and acquisition services optimize the buying journeys for acquiring new customers by leveraging technology and analytics to deliver personal experiences that increase the quantity and quality of leads and customers . · customer care services : our customer care services provide turnkey contact center solutions , including digital omnichannel technologies , associate recruiting and training , facilities , and operational expertise to create exceptional customer experiences across all touchpoints . · fraud prevention services : our digital fraud detection and prevention services proactively identify and prevent fraud and provide community content moderation and compliance . based on our clients ' preference , we provide our services on an integrated cross-business segment and or on a discrete basis . additional information with respect to our segments and geographic footprint is included in part ii , item 8. financial statements and supplementary data , note 3 to the consolidated financial statements . our 2019 financial results in 2019 , our revenue increased 8.9 % to $ 1,644 million over 2018 , including an increase of 0.1 % or $ 0.8 million due to foreign currency fluctuations and a decrease of $ 17.9 million , or 1.2 % , due to the initial adoption of asc 606 for revenue in the first quarter of 2018. the increase in revenue was comprised of a $ 66.5 million , or 27.9 % , increase for ttec digital and a $ 68.0 million , or 5.4 % , increase for ttec engage . 25 our 2019 income from operations increased $ 31.7 million to $ 123.7 million or 7.5 % of revenue , from $ 92.1 million or 6.1 % of revenue for 2018. the change in operating income is attributable to a number of different factors across the segments . the ttec digital operating income expanded with an 18 % , or $ 5.9 million , improvement over last year primarily on the growth of its higher margin cloud business and its system integration business which provides services pre and post the buildout of each client 's cloud platform . the ttec engage operating income increased 44 % , or $ 25.8 million , compared to the prior year based on the increase in revenue and a $ 6.8 million benefit related to foreign currency fluctuations which was offset by a $ 9.8 million decrease related to the initial adoption of asc 606 during the first quarter of 2018. income from operations in 2019 and 2018 included a total of $ 5.5 million and $ 7.6 million of restructuring and asset impairments , respectively . our offshore customer engagement centers serve clients based in the u.s. and in other countries and span five countries with 23,915 workstations representing 52 % of our global delivery capabilities . revenue for our ttec engage segment provided in these offshore locations was $ 455 million and represented 34 % of our 2019 revenue , as compared to $ 440 million and 35 % of our 2018 revenue . as of december 31 , 2019 , the total production workstations for our ttec engage segment was 45,611 and the overall capacity utilization in our centers was 74 % . the utilization is lower than the previous year as we expand and shift capacity in certain countries to accommodate the volume and location related to client specific customer engagement volume . the table below presents workstation data for all of our centers as of december 31 , 2019 and 2018. our utilization percentage is defined as the total number of utilized production workstations compared to the total number of available production workstations . replace_table_token_3_th we continue to see demand from all geographic regions to utilize our offshore delivery capabilities and expect this trend to continue . on the other hand , some of our clients may be subject to regulatory pressures to bring more services onshore to the united states . in light of these trends , we plan to continue to selectively retain and grow capacity in and expand into new offshore markets , while maintaining appropriate capacity in the united states . as we grow our offshore delivery capabilities and our exposure to foreign currency fluctuations increases , we continue to actively manage this risk via a multi-currency hedging program designed to minimize operating margin volatility . critical accounting policies and estimates management 's discussion and analysis of our 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 u.s. ( “ gaap ” ) . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenue and expenses as well as the disclosure of contingent assets and liabilities . we regularly review our estimates and assumptions . these estimates and assumptions , which are based upon historical experience and on various other factors believed to be reasonable under the circumstances , form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . reported amounts and disclosures may have been different had management used different estimates and assumptions or if different conditions had occurred in the periods presented . below is a discussion of the policies that we believe may involve a high degree of judgment and complexity . story_separator_special_tag 26 revenue recognition – 2019 and 2018 revenue the company recognizes revenue from contracts and programs when control of the promised goods or services is transferred to the customers , in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services . revenue is recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer . a performance obligation is a promise in a contract to transfer a distinct good or service to the customer . performance obligation is the unit of accounting for revenue recognition under the provisions of asc topic 606 , “ revenue from contracts with customers ” and all related amendments ( “ asc 606 ” ) . a contract 's transaction price is allocated to each distinct performance obligation in recognizing revenue . the bpo inbound and outbound service fees are based on either a per minute , per hour , per fte , per transaction or per call basis , which represents the majority of our contracts . these contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and , therefore , not distinct . for example , services for the training of the company 's agents ( which are separately billable to the customer ) are a separate promise in our bpo contracts , but they are not distinct from the primary service obligations to transfer services to the customers . the performance of the customer service by the agents is highly dependent on the initial , growth , and seasonal training services provided to the agents during the life of a program . the training itself is not considered to have value to the customer on a standalone basis , and therefore , training on a standalone basis can not be considered a separate unit of accounting . the company therefore defers revenue from certain training services that are rendered mainly upon commencement of a new client contract or program , including seasonal programs . revenue is also deferred when there is significant growth training in an existing program . accordingly , recognition of initial , growth , and seasonal training revenues and associated costs ( consisting primarily of labor and related expenses ) are deferred and amortized over the period of economic benefit . with the exception of training , which is typically billed upfront and deferred , the remainder of revenue is invoiced on a monthly or quarterly basis as services are performed and does not create a contract asset or liability . in addition to revenue from bpo services , revenue also consists of fees from services for program launch , professional consulting , fully-hosted or managed technology and learning innovation services . the contracts containing these service offerings may contain multiple performance obligations . for contracts with multiple performance obligations , the company allocates the contract 's transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract . the primary method used to estimate standalone selling price is the expected cost plus a margin approach , under which the company forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that distinct good or service . the company forecasts its expected cost based on historical data , current prevailing wages , other direct and indirect costs incurred in recently completed contracts , market conditions , and other client specific cost considerations . for these services , the point at which the transfer of control occurs determines when revenue is recognized in a specific reporting period . within our digital segment , where there are product sales , the attribution of revenue is recognized when the transfer of control is completed and the products are delivered to the client 's location . where services are rendered to a customer , the attribution is aligned with the progress of work and is recognized over time ( i.e . based on measuring the progress toward complete satisfaction of a performance obligation using an output method or an input method ) . where output method is used , revenue is recognized on the basis of direct measurements of the value to the customer of the goods or services transferred relative to the remaining goods or services promised under the contract . the majority of the company 's services are recognized over time using the input method in which revenue is recognized on the basis of efforts or inputs toward satisfying a performance obligation ( for example , resources consumed , labor hours expended , costs incurred , or time elapsed ) relative to the total expected inputs to satisfy the performance obligation . the measures used provide faithful depiction of the transfer of goods or services to the customers . for example , revenue is recognized on certain consulting contracts based on labor hours expended as a measurement of progress where the consulting work involves input of consultants ' time . the progress is measured based on the hours expended over total number of estimated hours included in the contract multiplied by the total contract consideration . the contract consideration can be a fixed price or an hourly rate , and in either case , the use of labor hours expended as an input measure provides a faithful depiction of the transfer of services to the customers . deferred revenues for these services represent amounts collected from , or invoiced to , customers in excess of revenues recognized . 27 this results primarily from i ) receipt of license fees that are deferred due to one or more of the revenue recognition criteria not being met , and ii ) the billing of annual customer support agreements , annual managed service agreements , and billings for other professional services that have not yet been performed by the company .
| ttec engage replace_table_token_5_th the increase in revenue for the ttec engage segment was due to a net increase of $ 172.2 million in client programs including noteworthy increases in the customer growth , @ home and fraud detection and prevention offerings as well as our automotive and hypergrowth born digital sectors , our acquisition of fcr , and a $ 1.6 million increase due to foreign currency fluctuations . this increase was offset by decreases for program completions of $ 88.0 million , a $ 17.9 million reduction due to the initial adoption of asc 606 related to revenue in 2018. the operating income increased in line with the improved revenue , pricing increases related to rising wages , lower healthcare costs , improved profitability in our customer growth , @ home and fraud detection and prevention offerings and our automotive and hypergrowth client portfolios , and a $ 6.4 million volume commitment payment . additionally , the operating income was positively affected by $ 6.7 million of foreign currency fluctuations and negatively impacted by an $ 9.8 million decrease due to the initial adoption of asc 606 in 2018. as a result , the operating income as a percentage of revenue increased to 6.3 % in 2019 as compared to 4.6 % in the prior period . included in the operating income was amortization expense related to acquired intangibles of $ 9.0 million and $ 8.2 million for the years ended december 31 , 2019 and 2018 , respectively . 33 interest income ( expense ) interest income decreased to $ 1.9 million in 2019 from $ 4.5 million in 2018 due to lower average cash balances . interest expense decreased to $ 19.1 million during 2019 from $ 28.7 million during 2018 , primarily due to lower utilization of the line of credit , and a $ 5.3 million reduction in the charge related to the future purchase of the remaining 30 % interest in motif versus the prior year . other income ( expense ) , net included in the year ended december 31 , 2019 was a $ 2.4 million benefit related to the fair value adjustment of contingent consideration for an acquisition , a $ 1.4 million benefit on recovery of receivables in connection with the consulting business that we
| 11,632 |
12 royalty income – royalty revenues increased by 9.4 % in 2015 , with barrier and building royalties increasing over those of 2014 . the other royalty product lines were up slightly when comparing 2015 to 2014 . the company signed one new building license during 2015 and added an additional plant to an existing licensee . management is currently in discussions with several precast companies regarding the issuance of new licenses . based on currently reporting licensees , management believes that royalties will continue on an upward trend in 2016. barrier rentals – barrier rentals increased by 189 % in 2015 when compared to 2014 . the increase resulted primarily from two large rental contracts awarded the company for two short-term barrier rental projects in washington d.c. and philadelphia , pa for the month of september 2015. these projects were related to the papal visit , and this type of special event may not be repeated in 2016. management believes barrier rentals will be lower in 2016 over that of 2015 due to the revenue of the papal visit in 2015. the company continues to pursue its rental barrier expansion plans for its local geographical sales areas and expects its core rental business to increase . shipping and installation – shipping revenue results from shipping our products to the customers ' final destination and is recognized when the shipping services take place . installation activities include installation of our products at the customers ' construction site . installation revenue results when attaching architectural wall panels to a building , installing an easi-set® building at a customers ' site or setting any of our other precast products at a site specific to the requirements of the owner . shipping and installation revenue decreased by 15.5 % during 2015 when compared to 2014. several of our larger customers are late in having their stored material products sent to their final destinations followed by their appropriate installation . currently our storage yard is filled with stored material causing our revenues from shipping and installation to be less in 2015 compared to 2014 . 2016 should improve over 2015 as of our current storage of the sold products will begin to ship and install in 2016. cost of goods sold – total cost of goods sold for the year ended december 31 , 2015 was $ 22,093,834 , an increase of $ 3,468,799 , or 18.6 % , from $ 18,625,035 for the year ended december 31 , 2014 . total cost of goods sold , as a percentage of total revenue decreased to 76 % for the year ended december 31 , 2015 from 83 % for the year ended december 31 , 2014 . the decrease in the cost of goods sold as a percentage of total revenue was , in part , because of the increase in production and sales for the period while fixed overhead costs remained relatively flat . raw material costs increased slightly in 2015 over 2014 with very little inflationary pressures for the company . steel products , one of our largest purchases , decreased slightly in 2015. in addition , the special barrier rental projects were at slightly higher margins than our normal product sales . many of our past projects with lower margins from the construction downturn have been both produced and sold prior to and during the first half of 2015 , making 2015 slightly more profitable on a job by job comparison than 2014. the company continues to seek new vendor partnerships to help develop a price advantage for its raw materials as well as a continuous supply of these materials . management continues to improve its effectiveness through the use of lean manufacturing principals . general and administrative expenses – for the year ended december 31 , 2015 , the company 's general and administrative expenses increased by $ 385,678 , or 13 % , to $ 3,365,513 from $ 2,979,835 during the same period in 2014 . the increase in general and administrative expenses resulted primarily from an increase in employee costs and an increase in general office expenses . the increase in employee costs resulted from an across the board raise given to all employees in april 2015. general and administrative expense as a percent of total revenue were 12 % for the year ended december 31 , 2015 and 13 % for the year ended december 31 , 2014 . selling expenses – selling expenses for the year ended december 31 , 2015 decreased by $ 50,256 , or 2 % , to $ 2,168,013 from $ 2,218,269 for the year ended december 31 , 2014 . the decrease was due to a decrease in advertising expenses partially offset by an increase in employee costs . the increase in employee costs resulted from an across the board raise given to all employees in april 2015. operating income – the company had operating income for the year ended december 31 , 2015 of $ 1,668,670 compared to an operating loss of $ 1,194,936 for the year ended december 31 , 2014 , an increase of $ 2,863,606 . the increase in operating income was primarily the result of a significant increase in sales and a decrease in the cost of goods sold for year ended december 31 , 2015 as a percentage of revenue as discussed above . interest expense – interest expense was $ 103,086 for the year ended december 31 , 2015 compared to $ 116,229 for the year ended december 31 , 2014 . the decrease of $ 13,143 , or 11 % , was due primarily to the early payment of a note payable to a bank and lower balances on the remaining notes payable outstanding . income tax expense – the company had income tax expense of $ 557,000 for the year ended december 31 , 2015 compared to an income tax benefit of $ 498,000 for the year ended december 31 , 2014 . story_separator_special_tag the company had an effective rate of 35 % for the 13 year ended december 31 , 2015 compared to an effective rate of 38 % for the same period in 2014 . the changes in the tax expense for the periods correlated to the change in pre-tax income . net income – the company had net income of $ 1,044,304 for the year ended december 31 , 2015 , compared to a net loss of 804,838 for the same period in 2014 . the basic and diluted income per share for 2015 was $ 0.21 , compared to basic and diluted loss per share of $ 0.16 for the year ended december 31 , 2014 . there were 4,895,367 basic and 4,881,548 diluted weighted average shares outstanding in 2015 and 4,881,548 basic and diluted weighted average shares outstanding in the 2014 . liquidity and capital resources the company financed its capital expenditures and operating requirements in 2015 with cash flows from operations , cash balances on hand and notes payable to the bank . the company has a note payable to summit community bank ( the “ bank ” ) with a balance of $ 1,575,951 as of december 31 , 2015 . the note has a remaining term of approximately eight years and a fixed interest rate of 3.99 % annually with monthly payments of $ 25,642 and is secured by principally all of the assets of the company . under the terms of the note , the bank will permit chattel mortgages on purchased equipment not to exceed $ 250,000 for any one individual loan so long as the company is not in default . also , the company is limited to $ 1,000,000 for annual capital expenditures . at december 31 , 2015 , the company was in compliance with all covenants pursuant to the loan agreement as amended except for the payment of cash dividends on december 31 , 2014 for which the company received approval prior to payment and the limit of $ 1,000,000 for the purchase of capital expenditures , for which the company received a waiver for the capital expenditures for 2015. on march 27 , 2016 , the company executed an agreement to purchase the land , building and fixtures of a facility located in hopkins , south carolina for a purchase price of $ 1,550,000. the facility is located on 39 acres of land and has approximately 40,000 square feet of production space . the closing of the purchase is subject to certain conditions , including a satisfactory appraisal and an environment study . the purchase will be financed by a new 10 year term facility , pursuant to a commitment letter , with the company 's current bank in the amount of $ 1,240,000 with the balance being provided from the company 's cash resources . it is anticipated that the company will make payments of approximately $ 8,000 per month for principal and interest under the loan . the facility and related assets will serve as collateral for such loan . the company anticipates that the closing , if it occurs , shall occur in 4-6 weeks . earlier in 2016 the company signed a contract to provide $ 3,500,000 of jj-hooks highway safety barrier to a single customer located in north carolina . it is anticipated , should the purchase of the south carolina facility be consummated , that the product will be produced primarily from that facility . the contract will be provide a profitable start for the new facility and allow time for advertising and sales plans to be put in place prior to the beginning of the second year after its purchase . certain purchases of production equipment , vehicles and miscellaneous equipment will be required to be made over the first year of ownership in the approximate amount of $ 500,000 to be financed under the company 's $ 1,000,000 equipment line or from the operating cash generated by the new facility . in addition to the note payable discussed above , the company also has a $ 2,000,000 line of credit with the bank , of which $ 352,022 was outstanding at december 31 , 2015 . the amount due under the line is for the purchase of fixed assets that will be converted to a long term note payable in the near future . the line of credit is evidenced by a commercial revolving promissory note which carries a variable interest rate of prime and matures on september 12 , 2016. the loan is collateralized by a first lien position on the company 's accounts receivable and inventory and a second lien position on all other business assets . key provisions of the line of credit require the company , ( i ) to obtain bank approval for capital expenditures in excess of $ 1,000,000 during the term of the loan ; ( ii ) to obtain bank approval prior to its funding any acquisition and ( iii ) to obtain bank approval prior to the payment of cash dividends on the company 's common stock . on september 8 , 2015 the company received a commitment letter from the bank to provide a guidance line of credit specifically to purchase business equipment in an amount up to $ 1,000,000. the commitment provides for the purchase of equipment with minimum advances of $ 50,000 for which a note payable will be executed with a term not to exceed five years with an interest rate at the wall street journal prime rate plus .5 % with a floor of 4.49 % per annum . the loan is collateralized by a first lien position on all equipment purchased under the line .
| architectural sales increased by 122.9 % in 2015 over 2014 due to a large contract that was started and completed in 2015. although architectural project bids have increased somewhat over the last year , they are still lagging behind other project type bids and are still bidding at lower gross margins . management expects architectural revenue to decrease slightly in 2016 based on contracts currently in hand . slenderwall sales increased by 88.9 % in 2015 when compared to 2014 . the company had only one large slenderwall project in production during 2014 , however , the company had several new slenderwall projects in production during 2015. while the company has only one large slenderwall project scheduled for production in 2016 , we have an additional project for which the contract has not been executed , but the general contractor has specified slenderwall for the cladding . this project is scheduled to start in the fall of 2016. the company has bid on several additional slenderwall projects that will begin 2016 or 2017 and expects to be awarded one or more of these projects . miscellaneous wall sales are mainly retaining walls which are used to hold back earth on sloped land . during the third quarter of 2015 , some of the miscellaneous product revenues were reclassified from miscellaneous products to miscellaneous wall panels as it was believed to be better classified under the latter product type . the reclassification was made to the 2014 products so a comparison could be made . miscellaneous wall sales increased significantly in 2015 when compared to 2014 , due mainly to a series of related projects awarded to the company and produced in 2015 at an accelerated production schedule . miscellaneous projects are difficult to predict from year to year , however , based on current jobs in our backlog and bids outstanding , management believes that production and sales in 2016 will be at or near 2015
| 11,633 |
in instances where the company is not able to establish vsoe for all deliverables in a multiple 28 moody 's 2014 10k element arrangement , which may be due to the company infrequently selling each element separately , not selling products within a reasonably narrow price range , or only having a limited sales history , the company attempts to establish tpe for deliverables . the company determines whether tpe exists by evaluating largely similar and interchangeable competitor products or services in standalone sales to similarly situated customers . however , due to the difficulty in obtaining third party pricing , possible differences in the company 's market strategy from that of its peers and the potential that products and services offered by the company may contain a significant level of differentiation and or customization such that the comparable pricing of products with similar functionality can not be obtained , the company generally is unable to reliably determine tpe . based on the selling price hierarchy established by asu 2009-13 , when the company is unable to establish selling price using vsoe or tpe , the company will establish an esp . esp is the price at which the company would transact a sale if the product or service were sold on a stand-alone basis . the company establishes its best estimate of esp considering internal factors relevant to its pricing practices such as costs and margin objectives , standalone sales prices of similar products , percentage of the fee charged for a primary product or service relative to a related product or service , and customer segment and geography . additional consideration is also given to market conditions such as competitor pricing strategies and market trend . the company reviews its determination of vsoe , tpe and esp on an annual basis or more frequently as needed . in the mis segment , revenue attributed to initial ratings of issued securities is recognized when the rating is issued . revenue attributed to monitoring of issuers or issued securities is recognized ratably over the period in which the monitoring is performed , generally one year . in the case of commercial mortgage-backed securities , structured credit , international residential mortgage-backed and asset-backed securities , issuers can elect to pay the monitoring fees upfront . these fees are deferred and recognized over the future monitoring periods based on the expected lives of the rated securities , which was approximately 28 years on a weighted average basis at december 31 , 2014. at december 31 , 2014 , 2013 and 2012 , deferred revenue related to these securities was approximately $ 107 million , $ 97 million and $ 82 million , respectively . multiple element revenue arrangements in the mis segment are generally comprised of an initial rating and the related monitoring service . in instances where monitoring fees are not charged for the first year monitoring effort , fees are allocated to the initial rating and monitoring services based on the relative selling price of each service to the total arrangement fees . the company generally uses esp in determining the selling price for its initial ratings as the company rarely sells initial ratings separately without providing related monitoring services and thus is unable to establish vsoe or tpe for initial ratings . mis estimates revenue for ratings of commercial paper for which , in addition to a fixed annual monitoring fee , issuers are billed quarterly based on amounts outstanding . revenue is accrued each quarter based on estimated amounts outstanding and is billed when actual data is available . the estimate is determined based on the issuers ' most recent reported quarterly data . at december 31 , 2014 , 2013 and 2012 , accounts receivable included approximately $ 22 million , $ 21 million and $ 22 million , respectively , related to accrued commercial paper revenue . historically , mis has not had material differences between the estimated revenue and the actual billings . furthermore , for certain annual monitoring services , fees are not invoiced until the end of the monitoring period , however , revenue is recognized ratably over the monitoring period . in the ma segment , products and services offered by the company include software licenses and related maintenance , subscriptions , and professional services . revenue from subscription based products , such as research and data subscriptions and certain software-based credit risk management subscription products , is recognized ratably over the related subscription period , which is principally one year . revenue from sale of perpetual licenses of credit processing software is generally recognized at the time the product master or first copy is delivered or transferred to and accepted by the customer . software maintenance revenue is recognized ratably over the annual maintenance period . revenue from professional services rendered is generally recognized as the services are performed . if uncertainty exists regarding customer acceptance of the product or service , revenue is not recognized until acceptance occurs . a large portion of annual research and data subscriptions as well as annual software maintenance is invoiced in november , december and january of each year . products and services offered within the ma segment are sold either stand-alone or together in various combinations . in instances where a multiple element arrangement includes software and non-software deliverables , revenue is allocated to the non-software deliverables and to the software deliverables , as a group , using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy . revenue is recognized for each element based upon the conditions for revenue recognition previously described . if the arrangement contains more than one software deliverable , the arrangement consideration allocated to the software deliverables as a group is allocated to each software deliverable using vsoe . story_separator_special_tag in the instances where the company is not able to determine vsoe for all of the deliverables of an arrangement , the company allocates the revenue to the undelivered elements equal to its vsoe and the residual revenue to the delivered elements . if the company is unable to determine vsoe for an undelivered element , the company defers all revenue allocated to the software deliverables until the company has delivered all of the elements or when vsoe has been determined for the undelivered elements . in cases where software implementation services are considered essential and vsoe of fair value exists for post-contract customer support ( pcs ) , once the delivery criteria have been met on the standard software , license and moody 's 2014 10k 29 service revenue is recognized on a percentage-of-completion basis as implementation services are performed , while pcs is recognized over the coverage period . if vsoe of fair value does not exist for pcs , once the delivery criteria have been met on the standard software , service revenue is recognized on a zero profit margin basis until essential services are complete , at which point total remaining arrangement revenue is then spread ratably over the remaining pcs coverage period . accounts receivable allowance moody 's records an allowance for estimated future adjustments to customer billings as a reduction of revenue , based on historical experience and current conditions . such amounts are reflected as additions to the accounts receivable allowance . additionally , estimates of uncollectible accounts are recorded as bad debt expense and are reflected as additions to the accounts receivable allowance . actual billing adjustments and uncollectible account write-offs are charged against the allowance . moody 's evaluates its accounts receivable allowance by reviewing and assessing historical collection and adjustment experience and the current aging status of customer accounts . moody 's also considers the economic environment of the customers , both from an industry and geographic perspective , in evaluating the need for allowances . based on its analysis , moody 's adjusts its allowance as considered appropriate in the circumstances . this process involves a high degree of judgment and estimation and could involve significant dollar amounts . accordingly , moody 's results of operations can be affected by adjustments to the allowance . management believes that the allowance for uncollectible accounts receivable is adequate to cover anticipated adjustments and write-offs under current conditions . however , significant changes in any of the above factors , or actual write-offs or adjustments that differ from the estimated amounts could impact the company 's consolidated results of operations . contingencies accounting for contingencies , including those matters described in note 18 to the consolidated financial statements , is highly subjective and requires the use of judgments and estimates in assessing their magnitude and likely outcome . in many cases , the outcomes of such matters will be determined by third parties , including governmental or judicial bodies . the provisions made in the consolidated financial statements , as well as the related disclosures , represent management 's best estimates of the then current status of such matters and their potential outcome based on a review of the facts and in consultation with outside legal counsel where deemed appropriate . the company regularly reviews contingencies and as new information becomes available may , in the future , adjust its associated liabilities . for claims , litigation and proceedings and governmental investigations and inquiries not related to income taxes , where it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated , the company records liabilities in the consolidated financial statements and periodically adjusts these as appropriate . when the reasonable estimate of the loss is within a range of amounts , the minimum amount of the range is accrued unless some higher amount within the range is a better estimate than another amount within the range . in other instances , because of uncertainties related to the probable outcome and or the amount or range of loss , management does not record a liability but discloses the contingency if significant . as additional information becomes available , the company adjusts its assessments and estimates of such matters accordingly . in view of the inherent difficulty of predicting the outcome of litigation , regulatory , governmental investigations and inquiries , enforcement and similar matters and contingencies , particularly where the claimants seek large or indeterminate damages or where the parties assert novel legal theories or the matters involve a large number of parties , the company can not predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters . the company also can not predict the impact ( if any ) that any such matters may have on how its business is conducted , on its competitive position or on its financial position , results of operations or cash flows . as the process to resolve any pending matters progresses , management will continue to review the latest information available and assess its ability to predict the outcome of such matters and the effects , if any , on its operations and financial condition . however , in light of the large or indeterminate damages sought in some of them , the absence of similar court rulings on the theories of law asserted and uncertainties regarding apportionment of any potential damages , an estimate of the range of possible losses can not be made at this time . the company 's wholly-owned insurance subsidiary insures the company against certain risks including but not limited to deductibles for worker 's compensation , employment practices litigation , employee medical claims and terrorism , for which the claims are not material to the company . in addition , for claim years 2008 and 2009 , the insurance subsidiary insured the company for defense costs related to professional liability claims .
| excluding the litigation settlement in the first quarter of 2013 and the benefits from legacy tax matters in both years , non-gaap diluted eps was $ 3.65 , or $ 0.66 higher than $ 2.99 in 2012. moody 's corporation replace_table_token_15_th ( 1 ) adjusted operating income , adjusted operating margin and non-gaap diluted eps attributable to moody 's common shareholders are non-gaap financial measures . refer to the section entitled non-gaap financial measures of this management discussion and analysis for further information regarding these measures . 42 moody 's 2014 10k the table below shows moody 's global staffing by geographic area : replace_table_token_16_th * total as of december 31 , 2013 includes 971 staff from the fourth quarter 2013 acquisition of amba , of which a significant portion are based in low cost jurisdictions . global revenue of $ 2,972.5 million in 2013 increased $ 242.2 million compared to 2012 reflecting good growth in both reportable segments . the increase in ratings revenue reflects benefits from changes in the mix of fee type , new fee initiatives and certain pricing increases , primarily in the u.s. , coupled with higher global rated issuance volumes for high-yield corporate debt and bank loans . the growth in ma reflects higher revenue across all lobs , most notably in rd & a , which benefited from solid demand for data and analytic products , and in ers which was driven by the completion of certain software implementations . transaction revenue accounted for 50 % of global mco revenue in both 2013 and 2012. u.s. revenue of $ 1,626.5 million increased $ 154.1 million over 2012 , reflecting growth across all ratings lobs , most notably in cfg and sfg , coupled with growth in all lobs within ma . non-u.s. revenue increased $ 88.1 million compared to 2012 , reflecting higher cfg revenue in all regions coupled with increases in ma revenue within the emea and asia-pacific regions . these increases were partially offset by declines in all asset classes in sfg within the emea region . operating expenses were $ 822.4 million in 2013 , an increase of $ 27.4 million from 2012 and reflected growth in both compensation and non-compensation
| 11,634 |
steel inflation during the first half of 2016 was followed by deflation in the third quarter , and significant inflation late in the year . this steel inflation continued throughout 2017. we implemented price increases to recover most of the higher costs , but with the normal lag in realizing selling price increases , the cost inflation led to margin pressure throughout 2017. as a producer of steel rod , we are also impacted by changes in metal margins ( the difference between the cost of steel scrap and the market price for steel rod ) . metal margins within the steel industry have been volatile in past years , were moderately compressed in late 2016 , and began to increase modestly in the second half of 2017. our other raw materials include woven and non-woven fabrics , foam scrap , and chemicals . we have experienced changes in the cost of these materials in past years and generally have been able to pass them through to our customers . when we raise our prices to recover higher raw material costs , this sometimes causes customers to modify their product designs and replace higher cost components with lower cost components . we must continue providing product options to our customers that enable them to improve the functionality of their products and manage their costs , while providing higher profits for our operations . competition many of our markets are highly competitive , with the number of competitors varying by product line . in general , our competitors tend to be smaller , private companies . many of our competitors , both domestic and foreign , compete primarily on the basis of price . our success has stemmed from the ability to remain price competitive , while delivering innovation , better product quality , and customer service . we continue to face pressure from foreign competitors as some of our customers source a portion of their components and finished products offshore . in addition to lower labor rates , foreign competitors benefit ( at times ) from lower raw material costs . they may also benefit from currency factors and more lenient regulatory climates . we typically remain price competitive in most of our business units , even versus many foreign manufacturers , as a result of our highly efficient operations , low labor content , vertical integration in steel and wire , logistics and distribution efficiencies , and large scale purchasing of raw materials and commodities . however , we have also reacted to foreign competition in certain cases by selectively adjusting prices , and by developing new proprietary products that help our customers reduce total costs . since 2009 , there have been antidumping duty orders on innerspring imports from china , south africa and vietnam , ranging from 116 % to 234 % . in march 2014 , the department of commerce ( doc ) and the international trade commission ( itc ) determined that the duties should be continued . in april 2014 , the doc published its final order continuing the duties through february 2019 ( for china ) and december 2018 ( for south africa and vietnam ) . an antidumping and countervailing duty case filed in january 2014 by major u.s. steel wire rod producers was concluded in december 2014 , resulting in the imposition of duties on imports of chinese steel wire rod . the 29 part ii antidumping duties range from 106 % to 110 % and the countervailing duties range from 178 % to 193 % . both remain in effect through december 2019. also , in march 2017 certain u.s. steel wire rod producers filed antidumping and countervailing duty petitions on imports of steel wire rod from belarus , italy , korea , russia , south africa , spain , turkey , ukraine , united arab emirates , and the united kingdom . the itc and the doc have made final affirmative determinations and imposed antidumping duties on imports from belarus ( 280 % ) , russia ( 437 % to 757 % ) , south africa ( 135 % to 142 % ) , ukraine ( 35 % to 44 % ) , and united arab emirates ( 84 % ) . final antidumping and countervailing duty determinations on the remaining countries are expected in march and april 2018. because of the documented evasion of antidumping orders by certain importers , typically shipping goods through third countries and falsely identifying the countries of origin , leggett and several other u.s. manufacturers formed a coalition to seek stronger enforcement of existing antidumping and or countervailing duty orders . as a result of these efforts , the u.s. congress passed the enforcing orders and reducing customs evasion ( enforce ) act . the enforce act requires u.s. customs and border protection to implement a transparent , time-limited process to investigate allegations of duty evasion and to assess duties where appropriate . change in segment reporting in 2017 our reportable segments are the same as our operating segments , which also correspond with our management organizational structure . in conjunction with a change in executive officers , our management organizational structure and all related internal reporting changed as of january 1 , 2017. effective january 1 , 2017 , perry e. davis became president of the residential products and industrial products segments , and j. mitchell dolloff became president of the specialized products and furniture products segments . the composition of our four segments also changed effective january 1 , 2017. the table below outlines the new segment structure . we reported under this new structure when we filed our 2017 first quarter 10-q . story_separator_special_tag residential products industrial products furniture products specialized products bedding group wire group work furniture group automotive group fabric & carpet cushion group home furniture group aerospace products group machinery group consumer products group cvp group the new structure is largely the same as in prior years except that the home furniture group was moved from residential products ( formerly residential furnishings ) to furniture products ( formerly commercial products ) , and the machinery group was moved from specialized products to residential products . the industrial products segment ( formerly industrial materials ) had no changes . our final cvp operation was sold in 2017. prior to january 1 , 2017 , all of our segments used the first-in , first-out ( fifo ) method for valuing inventory . in our consolidated financials , we converted approximately 50 % of these inventories ( primarily our domestic , steel-related inventories ) to the last-in , first-out ( lifo ) method , and reported the related lifo benefit or expense outside of the segments . effective january 1 , 2017 , the lifo benefit or expense was recognized within the segment to which it relates . this change has been retrospectively applied to all prior periods presented . 30 part ii results of operations—2017 vs. 2016 sales increased 5 % in 2017 , from growth in volume , raw material-related price inflation , and currency impact . acquisitions added 2 % to sales but were offset by divestitures . sales growth came primarily from automotive , reflecting content gains and new program awards , and adjustable bed . several other businesses , including international spring , geo components , work furniture and aerospace , contributed to sales growth this year . earnings from continuing operations decreased significantly from the effects of one-time costs associated with the recently enacted tcja . other significant factors that reduced earnings include ongoing steel inflation and the timing lag associated with passing along higher steel costs . these reductions were partially offset by increased sales and lower income taxes . further details about our consolidated and segment results are discussed below . consolidated results ( continuing operations ) the following table shows the changes in sales and earnings from continuing operations during 2017 , and identifies the major factors contributing to the changes . replace_table_token_6_th * calculations impacted by rounding 31 part ii sales increased 5 % from volume growth , raw-material price increases and currency impact . acquisitions also contributed 2 % to sales growth but were offset by divestitures . the growth came primarily from automotive and adjustable bed . several other businesses , including international spring , geo components , work furniture and aerospace , also contributed to sales growth this past year . during 2017 , we divested the last remaining cvp operation , which had total annual sales of $ 43 million . as indicated in the table above , earnings from continuing operations decreased primarily from the impact of the recently enacted tcja . operationally , earnings decreased largely from steel inflation , the timing lag associated with passing along these higher steel costs , and several smaller items partially offset by higher volume and lower income taxes . lifo impact approximately 50 % of our inventories are valued on the lifo method . these are primarily our domestic , steel-related inventories . in 2017 , increasing steel costs over the course of the year resulted in a full-year pretax lifo expense of $ 19 million . in 2016 , increasing steel costs , particularly in the fourth quarter , resulted in a full-year pretax lifo expense of $ 11 million . for further discussion of inventories , see note a to the consolidated financial statements on page 71 . interest and income taxes net interest expense in 2017 did not appreciably change . our tax rate is determined by a combination of items , some recurring and some discrete . recurring items include income earned in various tax jurisdictions and differences in tax rates in those jurisdictions . these items tend to be relatively stable from year to year . conversely , discrete items may not be as consistent from year to year . on december 22 , 2017 , president trump signed into law tcja , enacting significant changes to the u.s. internal revenue code of 1986 , as amended , including a reduction in the maximum u.s. federal corporate income tax rate from 35 % to 21 % , the transition of u.s. taxation from a worldwide tax system to a territorial system , and the imposition of a one-time tax associated with the mandatory deemed repatriation of untaxed foreign earnings . although these provisions are generally applicable for years after december 31 , 2017 , several impacted our 2017 earnings , including the one-time deemed repatriation tax , additional taxes for expected foreign cash repatriations , and the revaluation of our u.s. deferred taxes . as a result , we recorded a net tax expense of $ 50 million in the fourth quarter of 2017 related to these items , which negatively impacted our full year tax rate by 12 % . of this total amount , $ 67 million is related to the one-time deemed repatriation tax that will be paid on a graduated scale over the next eight years . the amount recorded is our best estimate and based on our current understanding of tcja and the guidance currently available , but should be considered provisional .
| the operational impacts were partially offset by a divestiture gain ( $ 16 million ) from the sale of one of the wire products operations , and the non-recurrence of the prior year 's impairment charge ( $ 6 million ) and divestiture loss ( $ 3 million ) , both associated with the sale of the steel tubing business . furniture products sales in furniture products decreased 2 % , primarily from lower volume in home furniture , steel-related price decreases , and currency impact . these items were partially offset by growth from a work furniture acquisition completed in march 2015. adjustable bed unit volume increased 1 % ( versus strong growth in each of the prior two years ) as we began ramping up new programs selling directly to major bedding retailers and transitioning away from former programs with bedding manufacturers . the decline in these bedding manufacturer programs also caused the decrease in pass-through sales of adjustable beds discussed in the residential products segment above . ebit and ebit margin decreased , primarily from higher raw material costs ( including lifo impact ) and lower volume , partially offset by operational improvements , gains from building sales of $ 3 million , and a favorable sales mix . specialized products in specialized products , sales increased 7 % in 2016 , with volume gains in automotive and an aerospace acquisition completed early in the year , partially offset by divestitures , and currency impact . ebit and ebit margin increased from higher sales , a divestiture gain ( $ 11 million ) related to the sale of a cvp operation , and currency impact . these items were partially offset by goodwill impairment of $ 4 million . we agreed to sell real estate associated with the cvp business and expected to realize a gain on this transaction in 2017. this property reached held-for-sale status in 2016 , causing the fair value of the cvp reporting unit to fall below its carrying value , and triggering the $ 4
| 11,635 |
we seek to take full advantage of all credits and exemptions in our various taxing jurisdictions . in general , the production taxes we pay correlate to the changes in oil and natural gas revenues . depreciation , depletion , amortization and impairment . depreciation , depletion , amortization and impairment includes the systematic expensing of the capitalized costs incurred to acquire , explore and develop oil and natural gas properties . as a full cost company , we capitalize all costs associated with our development and acquisition efforts and allocate these costs to each unit of production using the units-of-production method . general and administrative expenses . general and administrative expenses include overhead , including payroll and benefits for our corporate staff , costs of maintaining our headquarters , costs of managing our acquisition and development operations , franchise taxes , audit and other professional fees and legal compliance . interest expense . we finance a portion of our working capital requirements , capital expenditures and acquisitions with borrowings . as a result , we incur interest expense that is affected by both fluctuations in interest rates and our financing decisions . we capitalize a portion of the interest paid on applicable borrowings into our full cost pool . we include interest expense that is not capitalized into the full cost pool , the amortization of deferred financing costs and bond premiums ( including origination and amendment fees ) , commitment fees and annual agency fees as interest expense . 46 income tax expense . our provision for taxes includes both federal and state taxes . we record our federal income taxes in accordance with accounting for income taxes under gaap which results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities . 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 and carryforwards are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date . a valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized . selected factors that affect our operating results our revenues , cash flows from operations and future growth depend substantially upon : the timing and success of drilling and production activities by our operating partners ; the prices and the supply and demand for oil , natural gas and ngls ; the quantity of oil and natural gas production from the wells in which we participate ; changes in the fair value of the derivative instruments we use to reduce our exposure to fluctuations in the price of oil ; our ability to continue to identify and acquire high-quality acreage and drilling opportunities ; and the level of our operating expenses . in addition to the factors that affect companies in our industry generally , the location of our acreage and wells in the williston basin subjects our operating results to factors specific to this region . these factors include the potential adverse impact of weather on drilling , production and transportation activities , particularly during the winter and spring months , and the limitations of the developing infrastructure and transportation capacity in this region . the price of oil in the williston basin can vary depending on the market in which it is sold and the means of transportation used to transport the oil to market . light sweet crude from the williston basin has a higher value at many major refining centers because of its higher quality relative to heavier and sour grades of oil ; however , because of north dakota 's location relative to traditional oil transport centers , this higher value is generally offset to some extent by higher transportation costs . while rail transportation has historically been more expensive than pipeline transportation , williston basin prices have justified shipment by rail to markets such as st. james , louisiana , which offers prices benchmarked to brent/lls . although pipeline , truck and rail capacity in the williston basin has historically lagged production in growth , we believe that additional planned infrastructure growth will help keep price discounts from significantly eroding wellhead values in the region . the price at which our oil production is sold typically reflects a discount to the nymex wti benchmark price . thus , our operating results are also affected by changes in the oil price differentials between the nymex wti and the sales prices we receive for our oil production . our oil price differential to the nymex wti benchmark price during 2016 was $ 8.25 per barrel , as compared to $ 9.42 per barrel in 2015 . fluctuations in our oil price differential are due to several factors such as takeaway capacity relative to production levels in the williston basin , and seasonal refinery maintenance temporarily depressing crude demand . as the rail capacity continues to increase and planned pipeline expansions are completed , we believe the oil price differentials will improve . another significant factor affecting our operating results is drilling costs . the cost of drilling wells has varied significantly over the past few years as volatility in oil prices has substantially impacted the level of drilling activity in the williston basin . generally , higher oil prices have led to increased drilling activity , with the increased demand for drilling and completion services driving these costs higher . lower oil prices have generally had the opposite effect . in addition , individual components of the cost can vary depending on numerous factors such as the length of the horizontal lateral , the number of fracture stimulation stages , and the choice of proppant ( sand or ceramic ) . story_separator_special_tag 47 given the significant decline in oil and gas prices that began in the second half of 2014 , drilling activity in the williston basin has significantly reduced . north dakota 's average rig count dropped from an average of 58 in december 2015 to 32 in december 2016. the declines in drilling activity and commodity prices have recently lowered drilling costs . during 2016 , the weighted average authorization for expenditure ( or afe ) cost for wells we elected to participate in was $ 7.0 million , compared to $ 7.7 million for the wells we elected to participate in during 2015 . market conditions the price that we receive for the oil and natural gas we produce is largely a function of market supply and demand . being primarily an oil producer , we are more significantly impacted by changes in oil prices than by changes in the price of natural gas . world-wide supply in terms of output , especially the production quota set by opec , and the strength of the u.s. dollar has adversely impacted oil prices . additionally , an economic slowdown in europe and asia has reduced overall demand . historically , commodity prices have been volatile and we expect the volatility to continue in the future . factors impacting the future oil supply balance are world-wide demand for oil , as well as the growth in domestic oil production . prices for various quantities of natural gas , ngls and oil that we produce significantly impact our revenues and cash flows . the following table lists average nymex prices for oil and natural gas for the years ended december 31 , 2016 , 2015 and 2014 . replace_table_token_18_th ( 1 ) based on average nymex closing prices . oil and natural gas prices have fallen significantly since their early third quarter 2014 levels . lower oil and gas prices not only decrease our revenues , but an extended decline in oil or gas prices has adversely affected our business and may materially and adversely affect our future business , financial position , cash flows , results of operations , liquidity , ability to finance planned capital expenditures and the oil and natural gas reserves that we can economically produce . during 2016 , the average wti nymex pricing was $ 43.47 per barrel or 11 % lower than the average nymex price per barrel in 2015 . although oil and natural gas prices have shown slight increases , if a lower pricing environment reoccurs our net revenue per boe could decrease due to the lower average wti nymex prices , as well as a reduced percentage of our oil production being hedged in 2017 as compared to 2016 . also , lower oil and gas prices may reduce the amount of our borrowing base under our credit agreement , which is determined at the discretion of the lenders based on the collateral value of our proved reserves . at december 31 , 2016 , we have hedged 3.3 million barrels in 2017 and 2018 with swaps at an average price of $ 53.00 per barrel . additionally , as of december 31 , 2016 , we had hedged 0.3 million barrels under costless collar arrangements in 2017 with an average floor price of $ 50.00 per barrel and an average ceiling price of $ 60.06 per barrel . 48 story_separator_special_tag and are not included in accumulated other comprehensive income in the accompanying balance sheets . as commodity prices increase or decrease , such changes will have an opposite effect on the mark-to-market value of our derivatives . any gains on our derivatives will be offset by lower wellhead revenues in the future or any losses will be offset by higher future wellhead revenues based on the value at the settlement date . at december 31 , 2016 , all of our derivative contracts are recorded at their fair value , which was a net liability of $ 11.7 million , a decrease of $ 76.3 million from the $ 64.6 million net asset recorded as of december 31 , 2015 . the increase in the net liability at december 31 , 2016 as compared to net asset at december 31 , 2015 was primarily due to settlements of those derivative instruments that matured during 2016 , as well as changes in oil prices on the open oil derivative contracts . our open oil derivative contracts are summarized in “ item 7a . quantitative and qualitative disclosures about market risk—commodity price risk. ” production expenses production expenses were $ 45.7 million in 2016 compared to $ 52.1 million in 2015 and $ 55.7 million in 2014 . on a per unit basis , production expenses increased 4 % from $ 8.77 per boe in 2015 to $ 9.14 per boe in 2016 due to lower production levels over which fixed costs are spread . on an absolute dollar basis , our production expenses in 2016 were 12 % lower when compared to 2015 due primarily to lower contract labor and maintenance costs and reduced variable costs on lower production levels which was partially offset by a 4 % increase in the total number of net wells . on a per unit basis , production expenses decreased 9 % from $ 9.66 per boe in 2014 to $ 8.77 per boe in 2015 . on an absolute dollar basis , our production expenses in 2015 were 6 % lower when compared to 2014 due primarily to lower contract labor and maintenance costs which was partially offset by a 3 % increase in production levels and a 10 % increase in the total number of net wells . production taxes we pay production taxes based on realized oil and natural gas sales . lower production tax rates , production levels and commodity prices in 2016 as compared to 2015 lowered the taxable base that is used to calculate production taxes . lower commodity prices in 2015 as compared to 2014 lowered the taxable base that is used to calculate production taxes .
| we add production through drilling success as we place new wells into production and through additions from acquisitions , which is offset by the natural decline of our oil and natural gas sales from existing wells . low commodity prices and reduced development activity in the williston basin caused our 2015 annual capital expenditure spending to be reduced by 76 % as compared to the prior year and lowered the number of new wells placed into production . in 2016 , low commodity prices and reduced activity persisted and our annual capital expenditure spending was further reduced by 34 % compared to 2015 . although the per well productivity of our wells has improved , that was more than offset by the natural decline of oil and gas production in 2016 due to the lower number of new wells placed into production . in addition , during 2016 certain of our operators have curtailed production due to their desire to produce the wells at higher prices than currently exist , and or shut-in production to protect surrounding wells while completion activities were occurring on new wells being drilled . fewer new well additions coupled with these production curtailments and shut-in wells resulted in a production volume decrease of 16 % in 2016 compared to 2015 . the higher number of net well completions in 2015 , coupled with a higher number of well completions during 2014 resulted in a 3 % increase in production volumes in 2015 , as compared to 2014 . the net productive wells added to production in 2016 , 2015 and 2014 was 10.7 , 18.6 and 41.6 , respectively . our production for each of the last three years is set forth in the following table : replace_table_token_20_th ( 1 ) natural gas and ngls are converted to boe at the rate of one barrel equals six mcf based upon the approximate relative energy content of oil and natural gas , which is not necessarily indicative of the relationship of oil and natural gas prices . derivative instruments we enter into derivative instruments to manage the price risk attributable to
| 11,636 |
in december 2020 , apc purchased a 100 % interest in medical property partners llc , amg properties llc , and zll partners llc , each of which own land and buildings leased to tenants in alhambra and pasadena , california . we consolidated these entities in our consolidated financial statements . apc also purchased a 50 % interest in tag-6 medical investments group llc ( `` tag 6 '' ) , tag-8 medical investments group llc ( `` tag 8 '' ) , and one mso llc ( `` one mso '' ) . tag 6 and tag 8 own land in alhambra , california . one mso owns a building in monterey park , california , which is currently leased to tenants . 48 recent developments on january 26 , 2021 , the company entered into an agreement to purchase a 30 % interest in caipa mso . caipa mso provides management , consulting , administrative , and other support services to professional healthcare service providers , including to the chinese american ipa d/b/a coalition of asian-american ipa ( `` caipa '' ) , a leading independent practice association serving the greater new york city area . the transaction is subject to third-party consents and other customary closing conditions . apollomed will fund the transaction from cash on hand . we expect this transaction will close by the end of the second quarter of 2021. key financial measures and indicators operating revenues our revenue primarily consists of capitation revenue , risk pool settlements and incentives , ngaco aipbp revenue , management fee income and fee-for-services ( “ ffs ” ) revenue . revenue is recorded in the period in which services are rendered . the form of billing and related risk of collection for such services may vary by type of revenue and the customer . operating expenses our largest expenses consist of the cost of patient care paid to contracted physicians , the cost of information technology equipment and software and the cost of hiring staff to provide management and administrative support services to our affiliated physician groups , as further described in the following sections . these services include payroll , benefits , physician practice billing , revenue cycle services , physician practice management , administrative oversight , coding services , and other consulting services . 49 story_separator_special_tag impairment of goodwill and intangible assets there was no impairment of goodwill and intangible assets for the year ended december 31 , 2020 , as compared to $ 2.0 million for the year ended december 31 , 2019 , which related to a write-off of medicare licenses that were acquired as part of the merger between apollomed and nmm . income ( loss ) from equity method investments income from equity method investments in 2020 was $ 3.7 million , as compared to a loss of $ 6.9 million in 2019 , an increase of $ 10.6 million , or 154 % . the increase was primarily due to equity earnings recognized related to universal care inc , of $ 3.6 million compared to a loss of $ 1.2 million in 2019. during the year ended december 31 , 2020 , we recognized equity earnings from our investment of lsma of $ 0.3 million as compared to an equity loss of $ 2.8 million in 2019. further , we recognized an equity loss of $ 2.5 million related to our investment in accountable health care during the year ended december 31 , 2019 , which was acquired in august 2019 and is now a consolidated entity of apc . interest expense interest expense in 2020 was $ 9.5 million as compared to $ 4.7 million in 2019. the increase was primarily due to interest incurred from a new credit facility we secured in september 2019 to fund growth , primarily through acquisitions . interest income interest income in 2020 was $ 2.8 million as compared to $ 2.0 million in 2019 , an increase of $ 0.8 million or 39 % . the increase in interest income is mainly related to interest earned from money market , certificate of deposits and loan receivables . gain on sale of equity method investment gain on sale of equity method investment for the year ended december 31 , 2020 was $ 99.8 million resulting primarily from the sale of uci which closed on april 30 , 2020. other income other income was $ 1.1 million for 2020 as compared to $ 3.0 million in 2019 , a decrease of $ 2.0 million or 64 % . other income for the year ended december 31 , 2020 is primarily related to certain loan forgiveness . the decrease from 2019 was primarily attributable to the gain on assumption of a loan receivable as a result of the accountable health care acquisition in august 2019. provision for income taxes provision for income taxes was $ 56.1 million in 2020 , as compared to $ 8.2 million in 2019 , an increase of $ 47.9 million or 587 % . this was primarily attributable to the increase in pre-tax income in 2020 , as compared to 2019 , due to the factors described above . net income attributable to noncontrolling interests net income attributable to noncontrolling interests was $ 84.5 million in 2020 , as compared to $ 3.6 million in 2019 , an increase of $ 80.9 million . the increase was primarily due to the sale of uci in april 2020 where the gain , net of tax , remained strictly with the apc excluded assets and increased consolidated net income generated in the current period which resulted in additional income allocated to the noncontrolling interest . story_separator_special_tag 52 2019 compared to 2018 our consolidated operating results for the year ended december 31 , 2019 , as compared to the year ended december 31 , 2018 were as follows : apollo medical holdings , inc. consolidated statements of income ( in thousands ) replace_table_token_3_th net income our net income in 2019 was $ 17.7 million , as compared to $ 60.3 million in 2018 , a decrease of $ 42.6 million or 71 % . physician groups and patients as of december 31 , 2019 and 2018 , the total number of affiliated physician groups we managed was 13 groups and 11 groups , respectively , and the total number of patients for whom we managed the delivery of healthcare services was 0.9 million patients and 1.0 million patients , respectively . 53 revenue our total revenue in 2019 was $ 560.6 million , as compared to $ 519.9 million in 2018 , an increase of $ 40.7 million or 8 % . the increase in total revenue was primarily attributable to the following : ( i ) an increase of $ 109.9 million in capitation revenue due to the acquisitions of alpha care and accountable health care which were acquired as of may 31 , 2019 and august 30 , 2019 , respectively , resulting in our recognition of approximately $ 79.2 million and $ 17.2 million in revenue , respectively , from these acquired ipas , in addition to capitation revenue growth at apc of $ 22.4 million . these increase was offset by the delayed commencement by the centers for medicare & medicaid services ( `` cms '' ) of apaaco 's 2019 next generation aco performance year from january 1 , 2019 , to april 1 , 2019 which resulted in decreased revenue of approximately $ 8.9 million . ( ii ) a decrease of $ 49.9 million in risk pool revenue due to the refinement of the assumptions used to estimate the amount of net surplus expected to be received from the risk pool of our affiliated hospitals . our estimated risk pool receivable is calculated based on reports received from our hospital partners and on management 's estimate of the company 's portion of any estimated risk pool surpluses in which payments have not been received . the actual risk pool surpluses are settled approximately 18 months later . ( iii ) a decrease in management fee income of $ 15.1 million , primarily due to the acquisition of accountable health care and a decrease in the number of patients served by some of our affiliated physician groups , including golden shore medical group , which contributed approximately $ 3.8 million in management fee income for the year ended december 31 , 2018 , that ceased operations on january 31 , 2019 as their primary health plan canceled their contract . ( iv ) a decrease in ffs revenue of $ 4.2 million , primarily due to our wind down of affiliated medical groups , bay area hospitalist associates ( `` baha '' ) , akm medical group , inc. ( `` akm '' ) , and maverick medical group , inc. ( `` mmg '' ) . cost of services , excluding depreciation and amortization expenses related to cost of services , excluding depreciation and amortization , in 2019 were $ 467.8 million , as compared to $ 361.1 million in 2018 , an increase of $ 106.7 million or 30 % . the increase was due to a $ 100.4 million increase in medical claims , capitation and other health services expenses driven by the alpha care and accountable health care acquisitions , a $ 2.8 million increase in management fee expense paid to a third party mso during alpha care 's transition , and an increase of $ 3.5 million in personnel costs to support the continued growth in the depth and breadth of our operations . general and administrative expenses general and administrative expenses in 2019 were $ 41.5 million , as compared to $ 43.4 million in 2018 , a decrease of $ 1.9 million or 4 % . the decrease was primarily due to a reduction in professional services costs of $ 2.0 million . depreciation and amortization depreciation and amortization expense was $ 18.3 million and $ 19.3 million for the years ended december 31 , 2019 and 2018 , respectively . these amounts included depreciation of property and equipment and the amortization of intangible assets . provision for doubtful accounts during the year ended december 31 , 2019 , we released reserves related to certain management fees in the amount of $ 3.8 million as the collectability of the outstanding amount was no longer in doubt . these reserves related to accountable health care and were no longer necessary as a result of our acquisition of the company . as such our provision for doubtful accounts was a negative $ 1.4 million . impairment of goodwill and intangible assets impairment of goodwill and intangible assets was $ 2.0 million for the year ended december 31 , 2019 , as compared to $ 3.8 million for the year ended december 31 , 2018. during 2019 , we impaired intangible assets related to medicare licenses obtained as part of the merger . in 2018 , we impaired the goodwill related to mmg . we will no longer utilize the medicare licenses and mmg has been wound down . accordingly , we do not expect to receive future economic benefits from such assets and goodwill . 54 loss from equity method investments loss from equity method investments in 2019 was $ 6.9 million , as compared to $ 8.1 million in 2018 , a decrease of $ 1.2 million , or 15 % .
| ( ii ) an increase of $ 26.3 million in risk pool settlements and incentives revenue due to the settlement of the 2019 aco performance year , resulting in a shared risk settlement of $ 19.8 million recognized during the third quarter of 2020 , as compared to $ 0.9 million in shared risk settlement related to the 2018 performance year and recognized during the year ended december 31 , 2019. in addition , during the year ended december 31 , 2020 , risk pool revenues increased by $ 6.2 million primarily driven by reduced hospital costs as a result of covid-19 . ( iii ) a decrease in fees-for-services revenue of $ 2.8 million primarily due to the covid-19 pandemic that resulted in the closure of our surgery centers and heart center from march 2020 to may 2020 and fewer procedures completed in 2020. cost of services , excluding depreciation and amortization expenses related to cost of services , excluding depreciation and amortization , in 2020 were $ 539.2 million , as compared to $ 467.8 million in 2019 , an increase of $ 71.4 million or 15 % . the increase was due primarily to the acquisitions of alpha care and accountable health care in may 2019 and september 2019 , respectively , which provided for a full year of costs for the year ended december 31 , 2020. cost of services , excluding depreciation and amortization , related to alpha care and accountable health care contributed $ 52.2 million and $ 28.0 million , respectively , to the overall increase . furthermore , there was an $ 8.6 million increase at our apaaco entity resulting from a full year of services in the 2020 performance year as compared to nine months of services under the 2019 performance year due to the delayed commencement by cms of apaaco 's 2019 next generation aco performance year from january 1 , 2019 to april 1 , 2019. lastly , cost of sales increased by $ 5.6 million at nmm to support the continued growth of the company . these increases were offset by a reduction in claims costs totaling approximately $ 25.1m as a result of the
| 11,637 |
we record amounts invoiced for annual subscription periods that have not occurred or services that have not been performed as deferred revenue on our balance sheet . with the growth in the number of clients , our revenue grew to $ 423.1 million for the year ended december 31 , 2016 from $ 339.7 million for the same period in 2015 . we have historically experienced seasonality in terms of when we enter into client agreements . we usually sign a significantly higher percentage of agreements with new clients , as well as renewal agreements with existing clients , in the fourth quarter of each year . in addition , within a given quarter , we typically sign a large portion of these agreements during the last month , and often the last two weeks , of that quarter . we believe this seasonality is driven by several factors , most notably the tendency of procurement departments at our enterprise clients to purchase technology at the end of a quarter or calendar year , possibly in order to use up their available quarterly or annual funding allocations . as the terms of most of our client agreements are full year increments , agreements initially entered into the fourth quarter or last month of any quarter will generally come up for renewal at that same time in subsequent years . this seasonality is reflected to a much lesser extent , and sometimes is not immediately apparent , in our revenue , due to the fact that we recognize subscription revenue over the term of the client agreement , which is generally three years . in addition , this seasonality is reflected in changes in our deferred revenue balance , which generally is impacted by the timing of when we enter into agreements with new clients , invoice new clients , invoice existing clients for annual subscription periods and recognize revenue . we expect this seasonality to continue , which may cause fluctuations in certain of our operating results and financial metrics , and thus limit our ability to predict future results . we believe the market for human capital management remains large and underpenetrated , providing us with significant growth opportunities . we expect businesses and other organizations to continue to increase their spending on human capital management platforms in order to maximize the productivity of their employees , manage changing workforce demographics and ensure compliance with global regulatory requirements . historically , many of these software solutions have been human resource applications running on hardware located on organizations ' premises . we have seen many of these organizations increasingly choose saas for their human capital management platform and we anticipate that trend will continue . we have focused on growing our business to pursue what we believe is a significant market opportunity , and we plan to continue to invest in building for growth . as a result , we expect our cost of revenue and operating expenses to increase in future periods . sales and marketing expenses are expected to increase , as we continue to expand our direct sales teams , increase our marketing activities , and grow our international operations . research and development expenses are expected to increase as we continue to improve the existing functionality for our products . we also believe that we must invest in maintaining a high degree of client service and support that is critical for our continued success . we plan to continue our policy of implementing best practices across our organization , expanding our technical operations and investing in our network infrastructure and service capabilities in order to support continued future growth . we also expect to incur additional general and administrative expenses as a result of our growth . while we expect to increase our level of investment in the business , we also expect that these increased levels of spending will drive improved profitability over time , and expect to obtain leverage in every expense category other than research and development , which we expect to remain flat , as a percentage of revenue . our operating results have fluctuated in the past and may continue to fluctuate in the future based on a number of factors , many of which are beyond our control , including those described in the “ risk factors ” section of this annual report on form 10-k. one or more of these factors may cause our operating results to vary widely . as such , we believe that our results of operations may vary significantly in the future and that period-to-period comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future performance . metrics we regularly review a number of metrics , including the following key metrics , to evaluate our business , measure our performance , identify trends affecting our business , formulate financial projections and make strategic decisions . revenue . we generally recognize subscription revenue over the contract period , and as a result of our revenue recognition policy and the seasonality of when we enter into new client agreements , revenue from client agreements signed in the current period may not be fully reflected in the current period . billings . under our revenue recognition policy , we generally recognize subscription revenue from our client agreements ratably over the terms of those agreements . for this reason , the major portion of our revenue for a period will be from client agreements signed in prior periods rather than from new business activity during the current period . in order to assess our business performance with a metric that more fully reflects current period business activity , we track billings ( formerly referred to as “ bookings ” ) , which is a non-gaap financial measure we define as the sum of revenue and the change in the deferred revenue balance for the period . story_separator_special_tag we include changes in the deferred revenue balance to calculate billings so it better reflects new business activity in the 38 period as evidenced by prepayments or billings under our billing policies arising from acquisition of new clients , sales of additional products to existing clients , the addition of incremental users by existing clients and client renewals . billings are affected by our billing terms , and any changes in those billing terms may shift billings between periods . due to the seasonality of our sales , billings growth is inconsistent from quarter to quarter throughout a calendar year . additionally , billings growth can be impacted by fluctuations in foreign exchange rates . for a reconciliation of billings to revenue , please see “ results of operations – revenue and metrics . ” annual dollar retention rate . we define annual dollar retention rate as the implied monthly recurring revenue under client agreements at the end of a fiscal year , divided by the implied monthly recurring revenue , for that same client base , at the beginning of the fiscal year and includes incremental sales up to but not exceeding the original renewal amount to the existing client base . this ratio does not reflect implied monthly recurring revenue for new clients added between the end of the prior fiscal year and the end of the current fiscal year . we define implied monthly recurring revenue as the total amount of minimum recurring revenue to which we have a contractual right under each of our client agreements over the entire term of the agreement , but excluding non-recurring support , consulting and maintenance fees , divided by the number of months in the term of the agreement . implied monthly recurring revenue is substantially comprised of subscriptions to our enterprise human capital management platform . this ratio excludes the implied monthly recurring revenue from clients of our cornerstone for salesforce and cornerstone growth edition products . prior to 2013 , this ratio did not include any incremental sales to the existing client base . we believe that our annual dollar retention rate is an important metric to measure the long-term value of client agreements and our ability to retain our clients . constant currency results . we present constant currency information , a non-gaap financial measure , to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency fluctuations . due to our legal and operating structure , our international revenues are favorably impacted as the united states dollar weakens relative to the british pound , and unfavorably impacted as the united states dollar strengthens relative to the british pound . we believe the presentation of results on a constant currency basis in addition to reported results helps improve the ability to understand our performance because they exclude the effects of foreign currency volatility that are not indicative of our core operating results . to present this information , current period results for entities reporting in british pounds are translated into united states dollars at the prior period exchange rates as opposed to the actual exchange rates in effect for the current period . these results should be considered in addition to , not as a substitute for , results reported in accordance with gaap . results on a constant currency basis , as we present them , may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with gaap . number of clients . we believe that our ability to expand our client base is an indicator of our market penetration and the growth of our business as we continue to invest in our direct sales teams and distributors . our client count includes contracted clients for our enterprise human capital management platform as of the end of the period and excludes clients of our cornerstone for salesforce and cornerstone growth edition products . number of users . since our clients generally pay fees based on the number of users of our products within their organizations , we believe the total number of users is an indicator of the growth of our business . our user count includes active users for our enterprise human capital management platform and excludes users of our cornerstone for salesforce and cornerstone growth edition products . key components of our results of operations sources of revenue and revenue recognition our platform is designed to enable organizations to meet the challenges they face in maximizing the productivity of their human capital . we generate revenue from the following sources : subscriptions to our products . clients pay subscription fees for access to our products and support for a specified period of time , typically three years for our human capital management platform . fees are based on a number of factors , including the number of products purchased , which may include e-learning content , and the number of users having access to a product . we generally recognize revenue from subscriptions ratably over the term of the agreements . 39 professional services and other . we offer our clients assistance in implementing our products and optimizing their use . professional services include application configuration , system integration , business process re-engineering , change management and training services . services are billed either on a time-and-material or a fixed-fee basis . these services are generally purchased as part of a subscription arrangement and are typically performed within the first several months of the arrangement . clients may also purchase professional services at any other time . we generally recognize revenue from fixed fee professional services using the proportional performance method over the period the services are performed and as time is incurred for time-and-material arrangements . our client agreements generally include both subscription to access our products and related professional services . our agreements generally do not contain any cancellation or refund provisions other than in the event of our default .
| the following table sets forth our sources of revenue for 2016 and 2015. prior to 2015 we did not separately quantify and evaluate the mix of revenue between subscription and professional services . ( dollars in thousands ) : replace_table_token_9_th subscription revenue increased by $ 69.7 million in 2016 . the increase was attributable to new business , which includes new clients , upsells and renewals from existing clients . professional services revenue increased by $ 13.8 million in 2016 . the increase was primarily due to higher demand for professional services from an increased number of clients at the top end of the market , who generally experience a higher mix of services relative to the total deal size . the following table sets forth our revenue based on the location of our clients for each of the periods indicated ( dollar amounts in thousands ) : replace_table_token_10_th billings increased $ 52.9 million , or 13 % in 2016 , reflecting the increase in revenue for the period , plus an increase in deferred revenue compared to the same period in 2015 . billings growth on a constant currency basis increased 20 % in 2016 . billings increased $ 84.4 million , or 27 % in 2015 , reflecting the increase in revenue for the period , plus an increase in deferred revenue compared to the same period in 2014. billings growth on a constant currency basis increased 29 % in 2015. the growth rates for revenue and billings are not correlated with each other in a given period due to the seasonality of when we enter into client agreements , fluctuations in foreign exchange rates , the varied timing of billings , the recognition of subscription revenue generally on a straight-line basis over the term of each client agreement , and the recognition of professional services revenue generally on a proportional performance basis over the period the services are performed . as discussed above under the heading “ metrics , ” billings is a non-gaap financial measure defined
| 11,638 |
the company also had significant alternative minimum tax ( “ amt ” ) refundable tax credit carryforwards available to offset future income tax liabilities . the company made an election on the 2016 income tax return to claim the available portion of these credits in lieu of claiming bonus depreciation . as a result , the company had cash income tax refunds ( net of payments ) , totaling $ 12.9 million in 2017 . the company plans to make the same election to accelerate amt refundable tax credits on the 2017 tax return and , as a result , reclassed $ 14.8 million of amt refundable tax credits from “ deferred income taxes , net ” to “ receivables ” as these credits are expected to be received during 2018. in periods without tax law changes , the company expects its effective tax rate to exceed statutory rates due to non-deductible expenses . non-deductibles expenses during 2017 were higher than in recent prior years due to $ 10.4 million of non-deductible acquisition related expenses incurred during the year . on december 22 , 2017 , the u.s. tax cuts and jobs act ( the `` tax act '' ) was signed in to law . the tax act significantly revised the u.s. corporate income tax regime by , among other things , lowering the u.s. corporate tax rate from 35 percent to 21 percent . in addition , effective january 1 , 2018 , there are limitations on the deductibility of interest and executive compensation and the corporate alternative minimum tax ( amt ) is eliminated . as a result of the tax act , the company recorded a tax expense of $ 6.8 million due to a remeasurement of deferred tax assets and liabilities . effective march 31 , 2015 , we discontinued operating our wireless business as there were no subscribers remaining on the network . as a result , we no longer required the use of the spectrum being leased . therefore , the $ 112.6 million gain on sale of wireless spectrum licenses , which had previously been deferred , was recognized during the three months ended march 31 , 2015. on april 1 , 2015 , we transferred certain other wireless assets to the purchaser , including leases to certain wireless towers and related equipment and other assets , which resulted in a gain of $ 15.9 million in the second quarter of 2015. these gains were partially offset by operating losses as we continued to incur costs during the wind down of the wireless business . 34 form 10-k part ii cincinnati bell inc. discussion of operating segment results the company manages its business based upon product and service offerings . for the years ended december 31 , 2017 , 2016 , and 2015 , we operated two business segments : entertainment and communications and it services and hardware . the closing of our wireless operations , effective march 31 , 2015 , represented a strategic shift in our business . therefore , certain wireless assets , liabilities and results of operations are reported as discontinued operations in our financial statements . for further details of discontinued operations , see note 1 and note 16 of notes to consolidated financial statements . certain corporate administrative expenses have been allocated to our business segments based upon the nature of the expense and the relative size of the segment . intercompany transactions between segments have been eliminated . entertainment and communications the entertainment and communications segment provides products and services such as data transport , high-speed internet , video , local voice , long distance , voip and other services . cbt , a subsidiary of the company , is the ilec for a geography that covers a radius of approximately 25 miles around cincinnati , ohio , and includes parts of northern kentucky and southeastern indiana . cbt has operated in this territory for over 140 years . voice and data services beyond its ilec territory , particularly in dayton and mason , ohio , are provided through the operations of cbet , a clec and subsidiary of cbt . the entertainment and communications segment provides long distance and voip services primarily through cbts technology solutions llc , which was formerly known as cincinnati bell any distance inc. 35 form 10-k part ii cincinnati bell inc. entertainment and communications , continued $ change % change $ change % change ( dollars in millions ) 2017 2016 2017 vs. 2016 2017 vs. 2016 2015 2016 vs. 2015 2016 vs. 2015 revenue : data $ 351.6 $ 344.8 $ 6.8 2 % $ 322.8 $ 22.0 7 % voice 267.3 275.0 ( 7.7 ) ( 3 ) % 291.9 ( 16.9 ) ( 6 ) % video 149.2 125.7 23.5 19 % 96.6 29.1 30 % services and other 21.8 23.3 ( 1.5 ) ( 6 ) % 32.4 ( 9.1 ) ( 28 ) % total revenue 789.9 768.8 21.1 3 % 743.7 25.1 3 % operating costs and expenses : cost of services and products 379.3 359.5 19.8 6 % 331.5 28.0 8 % selling , general and administrative 138.7 141.6 ( 2.9 ) ( 2 ) % 150.9 ( 9.3 ) ( 6 ) % depreciation and amortization 174.7 168.6 6.1 4 % 129.2 39.4 30 % restructuring and severance charges 27.9 7.7 20.2 n/m 1.6 6.1 n/m other 4.0 0.8 3.2 n/m 0.6 0.2 33 % total operating costs and expenses 724.6 678.2 46.4 7 % 613.8 64.4 10 % operating income $ 65.3 $ 90.6 $ ( 25.3 ) ( 28 ) % $ 129.9 $ ( 39.3 ) ( 30 ) % operating margin 8.3 % 11.8 % ( 3.5 ) 17.5 % ( 5.7 ) capital expenditures $ 196.4 $ 272.5 $ ( 76.1 ) ( 28 ) % $ 269.5 $ 3.0 1 % metrics ( in thousands ) : fioptics units passed 572.2 533.4 38.8 7 % 432.0 101.4 23 % internet subscribers : dsl 82.1 105.6 ( 23.5 ) ( 22 ) % 133.7 ( 28.1 ) story_separator_special_tag ( 21 ) % fioptics 226.6 197.6 29.0 15 % 153.7 43.9 29 % total internet subscribers 308.7 303.2 5.5 2 % 287.4 15.8 5 % fioptics video subscribers 146.5 137.6 8.9 6 % 114.4 23.2 20 % residential voice lines : legacy 94.9 117.5 ( 22.6 ) ( 19 ) % 146.4 ( 28.9 ) ( 20 ) % fioptics 88.8 83.8 5.0 6 % 71.4 12.4 17 % total residential voice lines 183.7 201.3 ( 17.6 ) ( 9 ) % 217.8 ( 16.5 ) ( 8 ) % business voice lines : legacy 167.1 190.7 ( 23.6 ) ( 12 ) % 215.4 ( 24.7 ) ( 11 ) % voip * 166.0 131.7 34.3 26 % 89.5 42.2 47 % total business voice lines 333.1 322.4 10.7 3 % 304.9 17.5 6 % total voice lines 516.8 523.7 ( 6.9 ) ( 1 ) % 522.7 1.0 0 % long distance lines : residential 175.8 187.6 ( 11.8 ) ( 6 ) % 199.4 ( 11.8 ) ( 6 ) % business 117.8 129.7 ( 11.9 ) ( 9 ) % 140.3 ( 10.6 ) ( 8 ) % total long distance lines : 293.6 317.3 ( 23.7 ) ( 7 ) % 339.7 ( 22.4 ) ( 7 ) % * voip lines include fioptics voice lines 36 form 10-k part ii cincinnati bell inc. revenue the following table illustrates our revenue by market : consumer , business and carrier . our products within each market have been classified as either strategic , legacy or integration . replace_table_token_16_th 37 form 10-k part ii cincinnati bell inc. consumer consumer market revenue has increased each of the previous two years due to fioptics growth offsetting legacy access line and dsl subscriber losses . our fioptics internet subscriber base increased 14 % and average revenue per user ( `` arpu '' ) was up 4 % in 2017. during 2016 , the fioptics internet subscriber base increased 27 % with arpu growing 9 % . fioptics video subscribers increased 8 % and 21 % in 2017 and 2016 , respectively , in addition to a 4 % increase in arpu in each year . video arpu growth rates increased in both 2017 and 2016 as a result of price increases . in 2017 , price increases were partially offset by competition in the market putting pressure on prices . in 2016 , price increases were partially offset by the popularity of mytv , which was not the focus of our advertising campaign during 2017. the company continues to lose access and long distance lines as a result of , among other factors , customers electing to solely use wireless service in lieu of traditional local wireline service , or electing to move to other service providers . the company also continues to experience dsl subscriber loss because of customers migrating to fioptics , or an alternative internet provider , particularly in areas not upgraded to fioptics . higher integration revenue in 2015 is primarily due to $ 3.1 million of revenue generated through an agreement to sell verizon wireless products and services at our retail locations . we discontinued the sale of verizon handsets at our retail locations effective january 31 , 2016. business business market revenue in 2017 is down slightly from the prior year as the growth in strategic revenue continues to partially offset declines by our legacy and integration products and services . legacy data revenue from our business customers has decreased by $ 3.2 million in 2017 , while strategic data revenue has increased by $ 4.0 million as customers migrate from our legacy product offerings to higher bandwidth fiber solutions . voice revenue declined $ 2.0 million in 2017 and $ 2.9 million in 2016 as the growth in voip lines continues to mitigate legacy voice line loss and the migration of certain customers to national providers . in total , business voice lines increased 3 % during 2017 in comparison to an increase of 6 % in 2016. however , the revenue impact of the increase in voice lines was more than offset by the fact that voip lines have a lower arpu than legacy access lines . in addition , service and other revenue has declined each year primarily due to lower maintenance and service center revenue . carrier overall carrier revenue was down $ 3.1 million in 2017 compared to 2016. carrier data revenue declined by $ 7.5 million in 2017 compared to prior year as national carriers increased their focus on improving network efficiencies . strategic services and other revenue offset this decline as it increased $ 5.4 million due to a one time project that was completed in the second quarter of 2017. data revenue declined by $ 7.0 million in 2016 compared to 2015 because we no longer provide backhaul services to our discontinued wireless operations effective march 31 , 2015. voice revenue declines in 2017 and 2016 are primarily due to federal communications commission ( `` fcc '' ) mandated reductions of terminating switched access rates . reductions have occurred over a six-year period and will conclude in 2018. operating costs and expenses cost of services and products has increased for the past two years primarily due to higher programming costs of $ 16.6 million and $ 17.9 million in 2017 and 2016 , respectively . these increases are the result of the growing number of fioptics video subscribers combined with rising programming rates . in addition to programming costs , growth in voip and mpls revenue in both 2017 and 2016 led to higher costs of services and products . network and materials costs increased in both 2017 and 2016 as we continue to build out our fiber investment . furthermore , the amortization of the prior service benefit related to the postretirement plans produced a smaller benefit in 2017 as compared to 2016 , causing an increase in cost of services and products .
| the company sold 2.8 million cyrusone inc. common shares for cash totaling $ 140 million during 2017. the cash generated from this transaction was used to pay down the receivables facility and partially fund the merger and acquisition activity that closed during 2017. in the fourth quarter of 2017 , the company issued the $ 600.0 million tranche b term loan due 2024. the proceeds of the debt were primarily used to repay the remaining $ 315.8 million of outstanding principal of its tranche b term loan , accrued and unpaid interest , and to fund the acquisition of onx . additionally in the fourth quarter of 2017 , the company issued $ 350.0 million of 8 % senior notes due 2025 at par . the offering of the 8 % senior notes is part of the financing of the cash portion of the merger consideration for the previously announced merger with hawaiian telcom by the company ( the “ hcom acquisition ” ) . 30 form 10-k part ii cincinnati bell inc. consolidated results of operations revenue replace_table_token_7_th entertainment and communications revenue increased as the growth in fioptics and other strategic services offset the declines in legacy revenue . fioptics revenue totaled $ 309.8 million , $ 254.1 million and $ 190.8 million for the years ended december 31 , 2017 , 2016 and 2015 , respectively , up 22 % in 2017 and up 33 % in 2016 from the comparable prior year . it services and hardware revenue increased $ 5.3 million in 2017 compared to 2016 as the contribution of $ 40.1 million of revenue from the acquisitions of suntel and onx were able to offset losses related to decreases in billable headcount as a key customer pursued cost saving initiatives by in-sourcing it professionals . replace_table_token_8_th product revenue in entertainment and communications decreased by $ 2.9 million in 2016 compared to 2015. in 2015 , we sold verizon wireless handsets and accessories at our retail locations generating revenue of $ 3.1 million . in 2016 and 2017 , the entertainment and communications segment is no longer selling verizon wireless handsets at our retail locations . product revenue in it services and hardware is primarily driven by the volume of telecom and it hardware sales , reflecting the cyclical fluctuation in capital spending by our enterprise customers . it services
| 11,639 |
million . in november 2018 , we paid $ 0.5 million , including $ 0.2 million of suspended revenues , to the buyer in connection with the final settlement . 43 financial condition liquidity our primary sources of liquidity include our cash on hand , cash provided by operating activities and borrowings under the credit facility . the credit facility provides us with up to $ 450 million in borrowing commitments . the current borrowing base under the credit facility is also $ 450 million . as of february 22 , 2019 , we had $ 136.6 million of availability under the credit facility . our cash flows from operating activities are subject to significant volatility due to changes in commodity prices for crude oil , ngl and natural gas products , as well as variations in our production . the prices for these commodities are driven by a number of factors beyond our control , including global and regional product supply and demand , weather , product distribution , refining and processing capacity and other supply chain dynamics , among other factors . the level of our hedging activity and duration of the financial instruments employed depend on our desired cash flow protection , available hedge prices , the magnitude of our capital program and our operating strategy . in order to mitigate this volatility , we entered into derivative contracts hedging a portion of our estimated future crude oil production through the end of 2020. capital resources we plan to fund our 2019 capital spending primarily with cash from operating activities and , to the extent necessary , borrowings under the credit facility . based upon current price and production expectations for 2019 , we believe that our cash from operating activities and borrowings under our credit facility will be sufficient to fund our operations through year-end 2019 ; however , future cash flows are subject to a number of variables and significant additional capital expenditures may be required to more fully develop our properties . for a detailed analysis of our historical capital expenditures , see the “ cash flows ” discussion that follows . cash on hand and cash from operating activities . as of february 22 , 2019 , we had approximately $ 14 million of cash on hand . for additional information and an analysis of our historical cash flows from operating activities , see the “ cash flows ” discussion that follows . credit facility borrowings . during 2018 , we borrowed $ 244 million , under the credit facility . for additional information regarding the terms and covenants under the credit facility , see the “ capitalization ” discussion that follows . the following table summarizes our borrowing activity under the credit facility for the periods presented : replace_table_token_11_th proceeds from sales of assets . we continually evaluate potential sales of non-core assets , including certain oil and gas properties and non-strategic undeveloped acreage , among others . for additional information and an analysis of our historical proceeds from sales of assets , including the sale in 2018 of our mid-continent properties , see the “ cash flows ” discussion that follows . capital market transactions . from time-to-time and under market conditions that we believe are favorable to us , we may consider capital market transactions , including the offering of debt and equity securities . 44 cash flows the following table summarizes our cash flows for the periods presented : replace_table_token_12_th cash flows from operating activities . the increase in net cash from operating activities for 2018 compared to 2017 was primarily attributable to : ( i ) higher overall production volume in 2018 , ( ii ) incremental net operating cash inflows from the hunt acquisition and the 2017 acquisition of oil and gas assets from devon energy corporation , or the devon acquisition , ( iii ) higher overall product pricing in 2018 and ( iv ) lower payments in 2018 for bankruptcy-related administration costs as the case was closed in november 2018. these items were partially offset by : ( i ) substantially higher settlements paid for crude oil derivatives , ( ii ) higher interest payments due to greater outstanding borrowings in 2018 , ( iii ) higher payments for acquisition , divestiture and strategic transaction costs in 2018 and ( iv ) certain costs paid in connection with the retirement of our executive chairman in february 2018. cash flows from investing activities . in 2018 , we paid a combined total of $ 86.5 million for the hunt acquisition and the purchase of other working interests in producing properties in the eagle ford and received a total of $ 1.1 million in connection with the final settlement of the devon acquisition . in 2017 , we paid a total of $ 200.8 million for the preliminary settlement of the devon acquisition which included $ 0.7 million paid to other parties that had tag-along rights to sell their interests . as illustrated in the tables below , our cash payments for capital expenditures were higher during 2018 as compared to 2017 due primarily to an increase to a three-rig and two frac spread development program from a two-rig and single frac spread program in 2017 as well as the effect of higher working interests from the hunt and devon acquisitions . the increased capital expenditures for 2018 and 2017 were partially offset by proceeds from asset sales during each year . we received proceeds of $ 7.7 million in 2018 attributable to the sales of : ( i ) all of our mid-continent properties , ( ii ) undeveloped acreage holdings in the tuscaloosa marine shale in louisiana , ( iii ) certain undeveloped leasehold rights in oklahoma , ( iv ) certain pipeline assets in our former marcellus shale operating region and ( v ) scrap and surplus tubular and well materials . in 2017 , we received proceeds of $ 0.9 million from the sale of certain inactive acreage in oklahoma . story_separator_special_tag 45 the following table sets forth costs related to our capital expenditure program for the periods presented : replace_table_token_13_th the following table reconciles the total costs of our capital expenditure program with the net cash paid for capital expenditures as reported in our consolidated statements of cash flows for the periods presented : replace_table_token_14_th cash flows from financing activities . during 2018 we borrowed $ 244 million under the credit facility to fund the three-rig capital program and the hunt acquisition , while 2017 only included borrowings of $ 52 million , net of repayments . in 2017 , we received proceeds of $ 196 million from the $ 200 million second lien facility , or second lien facility , net of oid , primarily to fund the devon acquisition . we also paid approximately $ 1.0 million of debt issuance costs in 2018 in connection with amendments to the credit facility and other costs in connection with the second lien facility compared to $ 9.8 million paid in 2017 in connection with an amendments to the credit facility and the issuance of the second lien facility . the receipt in the 2017 period of delayed proceeds attributable to the rights offering in september 2016 were fully offset by costs paid in connection with the registration of our common stock in 2017. capitalization the following table summarizes our total capitalization as of the dates presented : replace_table_token_15_th credit facility . the credit facility provides for a $ 450 million revolving commitment and borrowing base . the credit facility includes a $ 5.0 million sublimit for the issuance of letters of credit . the availability under the credit facility may not exceed the lesser of the aggregate commitments or the borrowing base . the borrowing base under the credit facility is redetermined semi-annually , generally in april and october of each year . additionally , the credit facility lenders may , at their discretion , initiate a redetermination at any time during the six-month period between scheduled redeterminations . the credit facility is available to us for general corporate purposes including working capital . the credit facility matures in september 46 2020. we had $ 0.4 million and $ 0.8 million in letters of credit outstanding as of december , 2018 and december 31 , 2017 , respectively . the outstanding borrowings under the credit facility bear interest at a rate equal to , at our option , either ( a ) a customary reference rate plus an applicable margin ranging from 2.00 % to 3.00 % , determined based on the average availability under the credit facility or ( b ) a customary london interbank offered rate , or libor , plus an applicable margin ranging from 3.00 % to 4.00 % , determined based on the average availability under the credit facility . interest on reference rate borrowings is payable quarterly in arrears and is computed on the basis of a year of 365/366 days , and interest on libor borrowings is payable every one , three or six months , at our election , and is computed on the basis of a year of 360 days . as of december 31 , 2018 , the actual weighted-average interest rate on the outstanding borrowings under the credit facility was 5.96 % . unused commitment fees are charged at a rate of 0.50 % . the credit facility is guaranteed by us and all of our subsidiaries , or the guarantor subsidiaries . the guarantees under the credit facility are full and unconditional and joint and several . substantially all of our consolidated assets are held by the guarantor subsidiaries . there are no significant restrictions on our ability or any of the guarantor subsidiaries to obtain funds through dividends , advances or loans . the obligations under the credit facility are secured by a first priority lien on substantially all of our assets . second lien facility . on september 29 , 2017 , we entered into the $ 200 million second lien facility . the maturity date under the second lien facility is september 29 , 2022. the outstanding borrowings under the second lien facility bear interest at a rate equal to , at our option , either ( a ) a customary reference rate based on the prime rate plus an applicable margin of 6.00 % or ( b ) a customary libor rate plus an applicable margin of 7.00 % . amounts under the second lien facility were borrowed at a price of 98 % with an initial interest rate of 8.34 % resulting in an effective interest rate of 9.89 % . as of december 31 , 2018 , the actual interest rate on the second lien facility was 9.53 % . interest on reference rate borrowings is payable quarterly in arrears and is computed on the basis of a year of 365/366 days , and interest on eurocurrency borrowings is payable every one or three months ( including in three month intervals if we select a six month interest period ) , at our election and is computed on the basis of a year of 360 days . we have the right , to the extent permitted under the credit facility and an intercreditor agreement between the lenders under the credit facility and the lenders under the second lien facility , to prepay loans under the second lien facility at any time , subject to the following prepayment premiums ( in addition to customary “ breakage ” costs with respect to eurocurrency loans ) : during year one , a customary “ make-whole ” premium ; during year two , 102 % of the amount being prepaid ; during year three , 101 % of the amount being prepaid ; and thereafter , no premium . the second lien facility also provides for the following prepayment premiums in the event of a change in control that results in an offer of prepayment that is accepted by the lenders under the second lien facility .
| our dd & a increased to $ 39.6 million , or $ 16.75 per boe from $ 35.0 million , or $ 16.61 per boe due primarily to $ 4.2 million from the effect of higher production volume , as well as $ 0.4 million attributable to the effect of higher rates , resulting from higher capitalized costs for oil and gas properties . our operating income declined to $ 54.9 million from $ 64.0 million due to the combined impact of the matters noted in the bullets above . 40 the following table sets forth certain historical summary operating and financial statistics for the periods presented : replace_table_token_9_th _ 1 the effects of the adoption of asc topic 606 , if applied to the three months ended december 31 , 2017 and the year ended december 31 , 2017 , would have resulted in realized prices for ngls of $ 19.27 and $ 16.40 per boe and gpt of $ 2.43 and $ 2.45 per boe , respectively . 2 includes combined amounts of $ 1.56 and $ 0.51 per boe for the three months ended december 31 , 2018 and september 30 , 2018 , respectively , and $ 1.11 , $ 1.36 and $ 6.98 per boe for the successor periods ended december 31 , 2018 and 2017 and the predecessor period in 2016 , respectively , attributable to equity- and liability-classified share-based compensation and significant special charges , including acquisition , divestiture and strategic transaction costs and strategic and financial advisory costs prior to our bankruptcy filing , among others costs , as described in the discussion of “ results of operations - general and administrative ” that follows . 3 determined using the full cost method for the successor periods and the successful efforts method for the predecessor period . 4 includes amounts accrued and excludes capitalized interest and capitalized labor . 5 includes net cash paid for derivative settlements of $ 13.1 million and $ 15.2 million for the three months ended december 31 , 2018 and september 30 , 2018 , respectively , and $ 48.3 million and $ 3.5 million for the years ended december 31 , 2018 and
| 11,640 |
cost of goods sold includes the direct cost of p urchased merchandise ; inventory shrinkage ; inventory adjustments due to obsolescence , including excess and slo w-moving inventory and lower of cost or market reserves ; inbound freight ; and freight from our distribution ce nters to our retail stores . depreciation and amortization is excluded from gross profit . the primary drivers of the costs of individual goods are raw material costs . we expect gross profit to increase to the extent that we successfully grow our net sales . given the size of our direct segment sales relative to our total net sales , shipping and handling revenue has had a significant impact on our gross profit and gross profit margin . historically , this revenue has partially offset shipping and handling expense included in selling , general and administrative expenses . we have experience d declines in shipping and handling revenues , and this trend is expected to continue . declines in shipping and handling revenues may have a material adverse effect on our gross profit and gross profit margin , as well as adjusted ebitda to the ex tent there are not commensurate declines , or if there are increases , in our shipping and handling expense . our gro ss profit may not be comparable to other retailers , as we do not include distribution network and store occupanc y expenses in calculating gross profit , but instead we include them in selling , general and administrative expenses . selling , general and administrative expenses selling , general and administrative expenses include all operating costs not included in cost of goods sold . these expenses include all payroll and payroll-related expenses and occupancy exp enses related to our stores and to our operations at our headquarters , including utilities , depreciation and amortization . they also include marketing expense , which primarily includes television advertising , catalo g production , mailing and print advertising costs , as well as all logistics costs associated with shipping product to our customers , consulting and software expenses and professional services fees . selling , general and administrative expenses as a percentage of net sales is usually higher in lower-volume quarters and lower in higher-volume qu arters because a portion of the costs are relatively fixed . our historical sales growth has been accompanied by increased selling , gener al and administrative expenses . the most significant components of these increases are advertising , market ing , occupancy , depreciation , and payroll expenses . while we expect these expenses to increase as we continue to open new stores , increa se brand awareness and grow our organization to support our growing business , we believe these expenses will de crease as a percentage of sales over time . adjusted ebitda we believe adjusted ebitda is a useful measure of operating performance , as it provides a clearer picture of operating results by excluding the effects of financing and investing activities by eliminating the effects of interest and depreciation costs and eliminating expenses that are not reflective of underlying business performance . we use adjusted ebitda to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business . we also use adjusted ebitda as one of the key financial metrics in determining our annual bonus comp ensation plan for our employees . we define adjusted ebitda as consolidated net income ( loss ) before depreciation and amortization , interest expense and provision for income taxes adjusted for the impact of certain items , including non-cash and other items we do not consider representative of our ongoing opera ting performance . we believe adjusted ebitda is less susceptible to variances in actual performance resulting from depreciation , amortization and other items . 34 story_separator_special_tag 10pt '' > wi thin the calculation of our annu al effective tax rate we have used assumptions and estimates that may change as a result of future guidance , interpretation , and rule-making from the internal revenue service , the sec , and the fasb and or vario us other taxing jurisdictions . the tax act contains many significant changes to the u.s. tax laws , the consequences of which have not yet been fully determined . for example , we anticipate that the state jurisdictions will continue to determine and announce their conformity to the tax act which could have an impact on the annual effective tax rate . any adjustment to these amounts will be reported as a component of income tax expense ( benefit ) in the reporting period in which any such adjustments are determined , which we expect will be no later than the fourth quarter of fiscal 2018. net income net income increased $ 2.0 million , or 9.6 % , to $ 23.4 million in fiscal 2017 compared to $ 21.3 million in fiscal 201 6 , primarily due to the factors discussed above . excluding the impact from the tax act discussed above , net income increased $ 0.2 million , or 0.8 % to $ 21.5 million in fiscal 2017 . fiscal 2016 compared to fiscal 2015 net sales net sales increased $ 72.0 million , or 23.7 % , to $ 376.1 million in fiscal 2016 compared to $ 304.2 million in fiscal 2015 , driven by gains in both direct and retail segments of $ 43.3 million , or 16.3 % , and $ 28.6 million , or 75.7 % , respectively , across all product categories . the dir ect net sales gains were primarily attri butable to an increase in website sales . story_separator_special_tag our website visits increased 14.9 % in fiscal 2016 compared to fiscal 2015. the $ 28.6 million increase in retail net sales was primarily attributable to the opening of seven new stores during fiscal 2016. gross profit gross profit increased $ 40.6 million , or 23.4 % , to $ 214.1 milli on in fiscal 2016 compared to $ 173.5 million in fiscal 2015 . as a percenta ge of net s ales , gross margin decreased 10 basis points to 56.9 % of net sales in fiscal 2016 compared to 57.0 % of net sales in fiscal 201 5 . the slight decrease in gross margin rate was primarily due to a highly promotional retail environment , particularly during our fiscal fourth quarter , which was partially offset by a product mix shift into higher margin product s. selling , general and administrative expenses selling , general and administrative expenses increased $ 34 . 8 million , or 24.1 % , to $ 179 .1 million in fiscal 2016 compared to $ 144.4 million in fiscal 2015 . selling , general and administrative expenses as p ercentage of net sales increased 1 0 basis points to 47.6 % in fiscal 2016 , compared to 47.5 % in fiscal 2015 . the increase in selling , general an d administrative expenses of $ 34 . 8 million was primarily attributable to increases of $ 13.3 million in advertising and marketing costs , $ 9.8 million in selling expenses and $ 11 . 7 million in general and administrative expenses . as a percentage of net sales , advertising and marketing costs decreased 5 0 basis points t o 20.9 % in fiscal 2016 , compared to 21.4 % in fiscal 2015. the 5 0 basis point decrease in advertising and marketing costs as a percentage of net sales was primarily attributable to our planned decrease in catalog spend as a percentage of net sales , which was partially offset by an increase in our men 's television advertisin g . as a percentage of net sales , selling expenses decreased 10 basis points to 13.9 % in fiscal 2016 , compared to 14.0 % in fiscal 2015. the slight decrease in selling expenses as a percentage of net sales was primarily due a decrease of 4 0 basis points in shipping expenses due to leverage from the increase in retail net sales , coupled with a decrease of 1 0 basis points in distribution labor due to the effective utilization of our expanded belleville distribution center versus the two third party logistics providers ( “ 3pls ” ) . this was partially offset by an increase of 40 basis points in customer service expense due to the growt h of retail . 37 as a percentage of net sales , general and administrative expenses increased 70 basis points to 12.8 % in fiscal 2016 , compared to 12.1 % in fiscal 2015. the 7 0 basis point increase in general and administrative expenses as a percentage of net sale s was p rimarily due to an increase of 8 0 basis points in rent expenses and related store opening costs due to the opening of seven new stor es in fiscal 2016 , an increase of 30 basis points in depreciation expense primarily due to the increase in stores and infrastruc ture and technology investments , and an increase of 20 basis points in consulting expenses , which was partially of fset by a decrease of 60 basis points in personnel cost primarily due to leverage from higher net sales . fiscal 2015 includes a $ 1.1 million payment related to a portion of the grantees ' tax liabilities associated with the grant of restricted stock awards . excluding this $ 1.1 million payment , as percentage of net sales , general and administrative expenses increased 120 basis points . interest expense interest expense decreased $ 0.1 million to $ 0.2 million in fiscal 2016 compared to $ 0.3 million in fiscal 201 5. the decrease in interest expense was primarily due to lower outstanding balances during fiscal 2016 compared to fiscal 2015 on our revolving line of credit as a result of cash proceeds from our ipo in november 2015. income taxes income tax expense was $ 1 3 . 5 million in fiscal 201 6 compared to $ 1.3 million in fiscal 2015. the prior year $ 1.3 million income tax expense consisted of a $ 1.2 million one-time deferred tax expense recognized upon the conversion of the company to a “ c ” corporation on november 25 , 2015. our effective tax rate related to controlling interest was 38.8 % and 4.7 % in fiscal 2016 and fiscal 2015 , respectively . prior to november 25 , 2015 , we had been classified as an “ s ” corporation for federal and state income tax purposes and therefore , we had not been subject to income taxes . prior to that date , our shareholders had been subject to income tax on their distributive share of our earnings . in connection with our ipo , we converted to a “ c ” corporation . on a pro forma basis , if we had been taxed as a “ c ” corporation at an estimated 40 % effective tax rate , income taxes would have increased $ 2.0 million , or 17.5 % , to $ 13.5 million in fiscal 201 6 from $ 11 .5 million in fiscal 201 5 . net income net income decreased $ 6 .1 million , or 22.3 % , to $ 21.3 million in fiscal 2016 compared to $ 27.4 million in fiscal 2015 , primarily due to the factors discussed above . applying a pro forma 40 % “ c ” corpor ation effective tax rate to full year fiscal 2015 , net income increased $ 4.0 million , or 23.4 % , to $ 21.3 million in fiscal 2016 from pro forma net income of $ 17.3 million in fiscal 2015 .
| as a percentage of net sales , gross margin decreased 1 50 basis points to 55.4 % of net sales in fiscal 201 7 compared to 56.9 % of net sales in fiscal 2016. the decrease in gross margin rate was primarily due to a decline in shipping revenues , a slight increase in global promotions , including flash sales d uring our fiscal fourth quarter , and an increase in freight cost for transporting inventory from our belleville distribution center to our stores . selling , general and administrative expenses selling , general and administrative expenses increased $ 44 . 8 million , or 25.0 % , to $ 223 . 9 million in fiscal 201 7 compared to $ 179.1 million in fiscal 201 6 . selling , general and administrative expens es as percentage of net sales de creas ed 10 basis points to 47.5 % in fiscal 201 7 , compared to 47.6 % in fiscal 2016 . the increase in selling , general and administrative expenses of $ 44 . 8 million was primarily at tributable to increases of $ 10.1 million in advertising and marketing costs , $ 16.0 milli on in selling expenses and $ 18 . 7 million in gener al and administrative expenses . as a percentage of net sales , advertising and marketing costs decreased 210 basis points to 18.8 % in fiscal 2017 , compared to 20.9 % in fiscal 2016 . the 210 basis point decrease in advertising and marketing costs as a percentage of net sales was primarily attributable to a decrease of 140 basis points in catalog costs , a decrease of 40 basis points in digital advertising , and a decrease of 30 basis points in national television advertising as a result of leverage gained from the increase in retail net sales as discussed above . as a percentage o f net sales , selling expenses increased 60 basis points to 14.5 % in fiscal 2017 , compared to 13.9 % in fiscal 2016 . the in crease in selling expenses as a percentage of net sales was primarily due an increase of 100 basis points in customer service due to the growth in retail , partially offset by a
| 11,641 |
the transition has had a positive impact on our operating margins and we expect continued benefits from the transition over time . from time to time we have experienced , and may continue to experience , warranty costs and claims relating to our products . in the ordinary course of business , we reserve for such costs and claims in our financial statements . there is a risk , however , that in the future we will experience higher than expected warranty costs and claims , as well as other related costs . we intend to evaluate selective potential acquisition opportunities for performance products and technologies that we believe will help us extend our ride dynamics product platform . any acquisitions that we might make are subject to various risks and uncertainties and could have a negative impact on our results of operations . in addition , we may contractually obligate ourselves to contingent consideration or acquisition related compensation payments in conjunction with such acquisitions , which could have a negative impact on our cash flow and results of operations . see item 7 . `` management 's discussion and analysis of financial condition and results of operations - contractual obligations and commitments '' for additional information . basis of presentation sales are primarily comprised of : sales from : product sales : consists of sales of products sold primarily to our oem and aftermarket customers . we recognize revenue when products are shipped , title has transferred , collection of the receivable is probable , persuasive evidence of an arrangement exists , and the sales price to our customers is fixed or determinable ; shipping and handling fees : consists of shipping and handling fees billed to customers in sales . net of : rebates : consists of incentives we provide to customers based on sales of eligible products ; and sales returns allowances : consists of an estimate of our sales returns . this allowance is based upon estimates of the projected returns in future periods based on our experience with returns recorded in previous periods . sales returns have not been significant to date . we attribute our past growth in sales predominantly to continued higher demand for on and off-road suspension products and the success of our current bike product lines including new products within those lines . cost of sales the cost of sales includes the cost of purchased parts and manufactured products ( raw materials consumed , the cost to procure materials , labor costs , including wages , and employee benefits , and factory overhead to produce finished good products ) , including : the costs to inspect and repair products ; shipping costs associated with inbound freight . these costs are capitalized as part of inventory and included in cost of sales as the inventory is sold ; royalty expenses , including payments to certain parties for our use of licensed technology incorporated into our products ; freight expenses incurred for certain shipments to customers , excluding customers who pay for their own freight ; warranty costs associated with the repair or replacement of products under warranty ; and reductions in the cost of inventory to its net realizable value , if required , for estimated excess , obsolescence or impaired balances . gross profit/gross margin our gross profit equals our sales minus cost of sales . our gross margin measures our gross profit as a percentage of sales . our gross margins fluctuate based on production volumes , product , customer and channel mix and overall supply chain and manufacturing efficiencies . generally , we earn higher gross margins on our products sold to the aftermarket channel . we are working on various efficiency initiatives designed to improve our gross margin , and we anticipate that our margins will continue to gradually improve in the future . 33 operating expenses our operating expenses consist of the following : sales and marketing ; research and development ; general and administrative ; amortization of purchased intangibles ; and fair value adjustment of contingent consideration and acquisition related compensation . our sales and marketing expenses include costs related to our sales , customer service and marketing personnel , including their wages , employee benefits and related stock-based compensation , and occupancy related expenses . other significant sales and marketing expenses include race support and sponsorships of events and athletes , advertising and promotions related to trade shows , travel and entertainment , promotional materials and products and our sales office costs . our research and development expenses consist primarily of salaries and personnel costs , including wages , employee benefits and related stock-based compensation for our engineering , research and development teams , occupancy related expenses , fees for third party consultants , service fees , and expenses for prototype tooling and materials , travel , and supplies . we expense research and development costs as incurred and such costs are included as research and development expenses on our consolidated statements of income . our general and administrative expenses include costs related to our executive , finance , information technology , business development , human resources and administrative personnel , including wages , employee benefits and related stock-based compensation expenses . we record professional and contract service expenses , occupancy related expenses associated with corporate locations and equipment , and legal expenses in general and administrative expenses . our amortization of purchased intangibles includes amortization over their respective useful lives of our purchased intangible assets , such as customer lists and our core technology . our intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable . no impairments of intangible assets were identified in the years ended december 29 , 2017 , december 30 , 2016 and december 31 , 2015 . story_separator_special_tag our fair value adjustments of contingent consideration and acquisition related compensation related primarily to adjustments to our contingent consideration liability arising from the acquisition of sport truck as well as accruals for earn-outs related to our acquisition of race face/easton . our contingent consideration and acquisition related compensation for the sport truck and race face/easton acquisitions have been fully recognized and paid off as of december 29 , 2017 . income from operations we define income from operations as gross profit less our operating expenses . we use income from operations as an indicator of the profitability of our business and our ability to manage costs . other expense , net other expense , net consists of interest expense and other ( income ) expense , net . interest expense consists of interest charged to us under our credit facility . other ( income ) expense , net consists of foreign currency transaction gains and losses , gains and losses on the disposal of fixed assets , and other miscellaneous items . income taxes we are subject to income taxes in the united states and various other foreign jurisdictions in which we do business . until the enactment of the tax cuts and jobs act ( the `` tcja '' ) in december 2017 , these foreign jurisdictions had statutory tax rates that differed significantly from those in the united states . effective in 2016 , we restructured the majority of our international operations to allow for deferral of taxes on indefinitely reinvested international earnings . the tcja has significantly changed the u.s. federal income taxation of u.s. corporations by reducing the u.s. corporate income tax rate , adopting elements of a territorial tax system , imposing a one-time transition tax ( or `` deemed repatriation tax '' ) on all undistributed earnings and profits of certain u.s. owned foreign corporations , and revising the rules governing foreign tax credits , among other changes . we asserted permanent reinvestment of the earnings of certain of our foreign subsidiaries since 2016 , and discontinued this assertion as a result of the enactment of the tcja . the deemed repatriation tax and the discontinuance of our assertion regarding permanent reinvestment resulted in an increase of $ 5.9 million in our income tax expense for the year ended december 29 , 2017 . 34 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 . the reduction in the u.s. corporate tax rate reduced our net deferred tax liability and our income tax expense for the year ended december 29 , 2017 by $ 2.4 million . additionally , tax assets arise from various credits for foreign taxes , research and development and other business activities . as of december 29 , 2017 , our deferred tax assets include foreign tax credits of approximately $ 9.4 million , which begin to expire in 2025 unless utilized . we also have federal and state research credits of approximately $ 1.4 million and $ 2.1 million , respectively . the federal research credits begin to expire in 2036 unless utilized ; the state research credits do not expire . valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized . as of december 29 , 2017 , we recorded a valuation allowance of $ 6.3 million , as we anticipate that the tcja will partially limit our ability to utilize our foreign tax credits given our current legal structure , and considering the changes we expect to make to our operations and structure in response to the legislation . in the future , our effective tax rate could vary if we determine that there is a need to record additional valuation allowances for our deferred tax assets , including those associated with credit carryforwards . stock-based compensation gives rise to deferred tax assets to the extent of the compensation expense recognized on non-qualified stock options that have not been exercised or expired and restricted stock awards that have not vested . as of december 29 , 2017 , our deferred tax assets include $ 1.7 million associated with stock-based compensation expense . we adopted asu 2016-09 , improvements to employee share-based payment accounting in 2016 , and as a result , record the difference between the deferred tax asset and the actual tax deduction for stock-based compensation as a component of our income tax expense . prior to adoption , such differences were recorded as a component of equity . in 2016 and 2017 , and in future periods , our effective tax rate will vary based on such differences . we are subject to examination of our income tax returns irs and other tax authorities . we regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our income tax liabilities and expense . should actual events or results differ from our current expectations , charges or credits to our income tax liabilities and income tax expense may become necessary . any such adjustments could have a significant impact on our effective tax rate . under u.s. generally accepted accounting principles , or gaap , an uncertain income tax position will not be recognized unless it has a greater than 50 % likelihood ( i.e. , more likely than not ) of being sustained and then , measured only to the largest amount of benefit that is greater than 50 % likely to be realized upon ultimate settlement . we established liabilities for uncertain tax positions and deferred taxes associated with the deductibility of certain amortization and depreciation expenses which were incurred as a result of compass group diversified holdings llc 's acquisition of us in 2008 ( the `` compass acquisition '' ) .
| operating expenses replace_table_token_10_th total operating expenses for the year ended december 29 , 2017 increase d approximately $ 6.5 million , or 8.0 % , over 2016 . when expressed as a percentage of sales , operating expenses decreased to 18.3 % of sales for the year ended december 29 , 2017 compared to 20.1 % of sales in 2016 . within operating expenses , our sales and marketing expense increased by approximately $ 2.1 million primarily due to a $ 1.0 million increase in wages and related expenses , a $ 0.9 million increase in promotional expenses to support the growth of our products and brands , and an increase of $ 0.2 million in facility related costs . research and development increased approximately $ 1.7 million primarily due to a $ 1.4 million increase in wages and related expenses , and a $ 0.3 million increase in equipment and supply related expenses . general and administrative expenses increased approximately $ 7.2 million primarily as a result of higher incentive compensation of $ 3.2 million , a $ 1.5 million increase in litigation related expenses , a $ 0.8 million increase in acquisition related expenses , a $ 0.6 million increase in audit fees primarily associated with sarbanes-oxley act compliance , and higher operating costs at our subsidiaries of $ 1.6 million reflecting our overall growth . these increases were partially offset by a decrease of $ 0.6 million in erp implementation related expenses . amortization of purchased intangible assets in the year ended december 29 , 2017 remained relatively unchanged as compared to the year ended december 30 , 2016 . 38 during the year ended december 29 , 2017 , we incurred $ 1.4 million in acquisition related compensation in connection with management earn-out arrangements , a decrease of $ 4.5 million compared to $ 5.9 million for the year ended december 30 , 2016. the decrease is due to the completion of the earn-out arrangements during the current fiscal year . income from operations replace_table_token_11_th as a result of the factors discussed above , income from
| 11,642 |
currently , the company is the sole carrier of containerized freight from the west coast of the u.s. to guam following the departure of its major competitor from the trade lane in mid-november of 2011. all trade lanes typically experience seasonality in volume and generally follow a pattern of increasing volumes starting in the second quarter of each year culminating in a peak season throughout the third quarter , with subsequent weakening of demand thereafter in the fourth and first quarters . as a result , earnings tend to follow a similar pattern , offset by periodic vessel dry-docking and other episodic cost factors , which can lead to earnings variability . ocean transportation : following year over year volume growth in the first half of 2013 , hawaii container volume contracted in the third and fourth quarters . despite the lull in container volume that has continued into early 2014 , the company believes that the hawaii economy is in a multi-year recovery and is anticipating modest market growth in the trade in 2014. containership capacity is projected to increase in the second half of 2014 as a competitor is expected to launch an additional , new vessel into the trade . overall , the company anticipates a slight year over year increase in its hawaii container volume for 2014. in the china trade , freight rates eroded in the fourth quarter 2013 , a reflection of the ongoing vessel overcapacity in the market and the international carriers ' inability to sustain general rate increases . in 2014 , overcapacity is expected to continue , with vessel deliveries outpacing demand growth , leading to modest freight rate erosion . however , the company expects its ships will remain at high utilization levels , and its service will continue to realize a premium to market rates for its expedited service in 2014. in guam , the company 's container volume contracted in the fourth quarter due to general market conditions . muted growth is expected in guam for 2014 and therefore the company expects its volume to be relatively flat compared to 2013 , assuming no new competitors enter the market . the company plans to maintain its core nine-ship fleet deployment throughout 2014 for the trade lanes referenced above . additionally , in 2013 the company incurred start-up costs and service reconfiguration expenses in the south pacific trade . the company expects performance improvement in the trade as these costs are not expected to recur in 2014. the company 's terminal operations joint venture , ssat , had year over year improvement in operating results during the fourth quarter , primarily due to new customer activity and improved lift volume at its expanded oakland terminal . the company expects modest profit at ssat for 2014. in addition to its ocean transportation service lines , matson incurred response costs , legal expenses and third party claims of $ 1.7 million and $ 3.0 million in the fourth quarter and second half of 2013 , respectively , in connection with the molasses incident at honolulu harbor that occurred in september 2013. at this stage in the proceedings , the company is not able to estimate the future costs , penalties , damages or expenses that it may incur related to the incident . 21 the company accrued $ 9.95 million for a proposed litigation settlement in the case entitled united states of america , ex rel . mario rizzo v. horizon lines , llc et al . ( the litigation charge ) . the full settlement of all of plaintiff 's claims was reached at a non-binding mediation and was approved by the company 's board of directors on february 23 , 2014. the settlement is contingent upon approval of the united states government , and the dismissal of the case with prejudice by the district court . the company 's outlook for 2014 excludes any future impact of the molasses incident and is being provided relative to the prior year 's operating income excluding the litigation charge . for the full year 2014 , ocean transportation operating income is expected to be near or slightly above levels achieved in 2013 , which was $ 104.3 million , excluding the litigation charge . operating income for the first quarter of 2014 is expected to be approximately one half the prior year 's level of $ 18.5 million due to the timing of fuel surcharge collections , lower hawaii volume , and lower china freight rates . logistics : volume growth in logistics ' intermodal and highway businesses extended into the fourth quarter 2013 , and combined with continued cost cutting measures , operating income margin improved to 1.9 percent of revenues . the company expects 2014 operating income to modestly exceed the 2013 levels of $ 6.0 million , driven by continued volume growth , expense control and improvements in warehouse operations . interest expense : the company expects its interest expense in 2014 to increase over the 2013 amount by approximately $ 3.5 million due primarily to the notes financing transaction that closed on january 28 , 2014. income tax expense : net income and earnings per share in the fourth quarter 2013 were adversely impacted by an effective tax rate of 49.3 percent as compared to 21.9 percent in the fourth quarter 2012. the rate for the fourth quarter 2013 was higher primarily due to the impact of the litigation charge , and a change in timing of ccf deposits that led to a corresponding increase in tax expense . the rate for fourth quarter 2012 was unusually low primarily due to a favorable , non-recurring change to state tax law that required the company re-value its deferred tax liabilities . the company expects its 2014 effective tax rate to be approximately 38.5 % percent . other : the company expects maintenance capital expenditures for 2014 to be approximately $ 40.0 million . story_separator_special_tag additionally , while the company does not have any scheduled contract payments in 2014 relating to its two vessels under construction , it does expect to make additional contributions to its ccf . 22 story_separator_special_tag style= '' font-size:10.0pt ; '' > approximate container volumes included for the period are based on the voyage departure date , but revenue and operating income are adjusted to reflect the percentage of revenue and operating income earned during the reporting period for voyages that straddle the beginning or end of each reporting period . ( 2 ) in january 2013 , the company purchased the assets of reef shipping limited . accordingly , given new route configurations in the south pacific service , the company reclassified 2012 volume related to yap and palau from the guam containers total to the micronesia/south pacific containers total . ocean transportation revenue increased $ 39.6 million , or 3.3 percent , during the year ended december 31 , 2013 compared to the prior year . the increase was primarily due to new volume associated with the company 's micronesia/south pacific service and improved freight rates and favorable cargo mix changes in hawaii , partially offset by lower fuel surcharges resulting from lower fuel prices . 24 during the year ended december 31 , 2013 , hawaii container and automobile volume increased 0.9 percent and 3.4 percent , respectively , due to modest market growth ; china volume was 2.2 percent higher primarily the result of an additional sailing in 2013 ; guam volume was slightly lower due to general market conditions ; and micronesia/south pacific volume increased due to the acquisition of the assets of reef shipping limited , a south pacific ocean freight carrier based in auckland , new zealand , early in the year . ocean transportation operating income decreased $ 2.3 million , or 2.4 percent , during the year ended december 31 , 2013. the decrease in operating income was principally due to the litigation charge of $ 9.95 million , start-up costs and service reconfiguration expenses in the south pacific trade , higher general and administrative expenses , and other non-recurring unfavorable items . in addition , the company incurred $ 3.0 million in response costs , legal expenses and third party claims related to the molasses released into honolulu harbor . the decrease in operating income was partially offset by freight rate and cargo mix improvements in hawaii , lower vessel expenses from the full year deployment of a nine-ship fleet , lower outside transportation costs due to barge dry-dockings in the prior year , and the absence of separation costs . losses attributable to the company 's ssat terminal joint venture investment were $ 2.0 million during the year ended december 31 , 2013 , compared to an income contribution of $ 3.2 million in the prior year . the loss reflected past customer losses that resulted in lower lift volume and higher than expected transition costs related to the expansion of its terminal operations in oakland , partially offset by new customers and volumes at the expanded oakland terminal in the fourth quarter 2013. ocean transportation : 2012 compared with 2011 replace_table_token_9_th ( 1 ) the company incurred additional costs related to the shutdown of clx2 that did not meet the criteria to be classified as discontinued operations of $ 7.1 million and therefore reduced operating income for the year ended december 31 , 2011 . ( 2 ) approximate container volumes included for the period are based on the voyage departure date , but revenue and operating income are adjusted to reflect the percentage of revenue and operating income earned during the reporting period for voyages that straddle the beginning or end of each reporting period . ( 3 ) in january 2013 , the company purchased the assets of reef shipping limited . accordingly , given new route configurations in the south pacific service , the company reclassified 2012 and 2011 volume related to yap and palau from the guam containers total to the micronesia containers total . ocean transportation revenue increased $ 113.6 million , or 10.6 percent , in the year ended december 31 , 2012 compared with the prior year . the increase was due principally to significantly higher volume in the guam service that resulted from the exit of a major competitor in that trade in late 2011 , an increase in china freight rates and increased fuel surcharges resulting from higher fuel prices , partially offset by reduced volumes in the hawaii service . 25 container and automobile volume decreased in the hawaii service in the year ended december 31 , 2012 compared with the prior year : hawaii container volume decreased 2.0 percent due to market weakness , competitive pressures , and a modest market contraction resulting from direct foreign sourcing of cargo ; hawaii automobile volume decreased 2.7 percent due primarily to the timing of automobile rental fleet replacement . container volume in the china and guam services increased during the year ended december 31 , 2012 as compared to the year ended december 31 , 2011 : china container volume increased 1.7 percent due to increased demand and a shift in direct foreign sourcing of cargo destined to hawaii ; guam volume was substantially higher , increasing 77.5 percent in the year due to gains related to the departure of a major competitor from the trade in mid-november 2011. ocean transportation operating income increased $ 22.9 million , or 31.1 percent , in the year ended december 31 , 2012 compared with the prior year . the increase in operating income was principally due to higher volume in the guam service and increased freight rates and volume in the china service , partially offset by decreased volume in the hawaii service , increased costs related to vessel and barge dry-docking , and higher outside transportation costs . the company also incurred higher terminal handling costs due primarily to increased wharfage and container handling rates , higher general and administrative expenses , including separation costs , and higher vessel expenses .
| there were no discontinued operations during 2013. consolidated results : 2012 compared with 2011 replace_table_token_7_th 23 consolidated operating revenue for the year ended december 31 , 2012 increased $ 97.4 million , or 6.7 percent , compared to the prior year . this increase was due to $ 113.6 million in higher revenue for ocean transportation , partially offset by $ 16.2 million in lower revenue from logistics . the reasons for the operating revenue changes are described below , by business segment , in the analysis of operating revenue and income by segment . operating costs and expenses for the year ended december 31 , 2012 increased $ 79.3 million , or 5.7 percent , compared to the prior year . the increase was due to a $ 90.7 million increase in costs for the ocean transportation segment , which is inclusive of $ 8.6 million in separation costs , partially offset by a reduction of cost in logistics of $ 11.4 million . the reasons for the operating expense changes are described below , by business segment , in the analysis of operating revenue and income by segment . income tax expense during the year ended december 31 , 2012 was $ 33.0 million , or 38.8 percent of income from continuing operations before income tax as compared to $ 25.1 million , or 35.4 percent , in 2011. the change in the tax rate percentage is due principally to certain non-recurring and non-deductible separation related transaction costs and the re-measurement of uncertain tax positions in 2012 as required as part of the separation tax accounting treatment . loss from discontinued operations during the year ended december 31 , 2012 decreased $ 5.5 million compared to prior year . due to the completion of the separation on june 29 , 2012 , matson has restated the operations for the six and twelve months ended june 30 , 2012 and december 31 , 2011 , respectively , as discontinued operations from a & b . the loss from discontinued operations , net of tax , decreased primarily due to the reduction in losses related
| 11,643 |
our sales and expenses can be impacted significantly by the number and timing of new restaurant openings and closings , and relocations and remodeling of existing restaurants . pre-opening expenses each period reflect the costs associated with opening new restaurants in current and future periods . story_separator_special_tag , respectively . the sales increase for fiscal 2017 was primarily driven by the cheddar 's scratch kitchen acquisition and the incremental sales from new yard house restaurants . sales growth also reflected same-restaurant sales increases at the capital grille , bahama breeze and eddie v 's in fiscal 2017 , partially offset by a same-restaurant sales decrease at yard house . the sales increase for fiscal 2016 was 29 primarily driven by incremental sales from new yard house restaurants and same-restaurant sales increases at all five brands partially offset by the impact of the 53 rd week in fiscal 2015 . costs and expenses the following table sets forth selected operating data as a percent of sales from continuing operations for the periods indicated . this information is derived from the consolidated statements of earnings for the fiscal years ended may 28 , 2017 , may 29 , 2016 and may 31 , 2015 . replace_table_token_13_th total operating costs and expenses from continuing operations were $ 6.49 billion in fiscal 2017 , $ 6.31 billion in fiscal 2016 and $ 6.40 billion in fiscal 2015 . as a percent of sales , total costs and expenses from continuing operations were 90.6 percent in fiscal 2017 , 91.0 percent in fiscal 2016 and 94.6 percent in fiscal 2015 . fiscal 2017 compared to fiscal 2016 : food and beverage costs decreased as a percent of sales as a result of pricing , cost savings initiatives and food cost deflation , primarily beef . restaurant labor costs were flat as a percent of sales as wage-rate inflation was offset by sales leverage and improved productivity . restaurant expenses ( which include rent , utilities , repairs and maintenance , credit card , property tax , workers ' compensation , new restaurant pre-opening and other restaurant-level operating expenses ) increased as a percent of sales , primarily due to higher rent expense resulting from leasebacks of properties included in the spin-off of four corners property trust ( four corners ) and individual sale-leasebacks ( collectively , real estate transactions ) , partially offset by sales leverage . marketing expenses decreased as a percent of sales as sales leverage was mostly offset by higher media cost . general and administrative expenses decreased as a percent of sales , primarily due to expenses incurred in fiscal 2016 related to the real estate plan implementation partially offset by a pension settlement charge and expenses incurred in fiscal 2017 related to the acquisition and integration of cheddar 's scratch kitchen . depreciation and amortization expense decreased as a percent of sales primarily from the impact of the real estate transactions . impairments and disposal of assets , net , were lower as a percent of sales due the benefit from lease termination and asset disposal gains in fiscal 2017 compared to restaurant-related impairments in fiscal 2016 . 30 fiscal 2016 compared to fiscal 2015 : food and beverage costs decreased as a percent of sales as a result of favorable menu mix and pricing , cost savings initiatives and food cost deflation , primarily seafood and dairy . restaurant labor costs were flat as a percent of sales as wage-rate inflation , higher manager bonus and salary costs were offset by sales leverage . restaurant expenses ( which include utilities , repairs and maintenance , credit card , lease , property tax , workers ' compensation , new restaurant pre-opening and other restaurant-level operating expenses ) increased as a percent of sales , primarily as a result of increased rent expense partially offset by sales leverage and cost savings initiatives . marketing expenses decreased as a percent of sales , primarily as a result of sales leverage . general and administrative expenses decreased as a percent of sales , primarily due to lower general and administrative expenses incurred in fiscal 2016 related to the real estate plan implementation as compared to the strategic action plan costs incurred in fiscal 2015. general and administrative expenses as a percent of sales also decreased as a result of sales leverage , support cost savings and the favorable settlement of legal matters . depreciation and amortization expense decreased as a percent of sales primarily from the impact of the real estate transactions and sales leverage . impairments and disposal of assets , net , decreased as a percent of sales primarily due to higher restaurant-related impairments in fiscal 2015. interest expense net interest expense decreased as a percent of sales in fiscal 2017 primarily due to debt retirement costs of $ 106.8 million recorded in fiscal 2016 and lower average debt balances in fiscal 2017 as compared to fiscal 2016 due to the repayment of debt with proceeds from the real estate transactions and additional cash on hand . net interest expense decreased as a percent of sales in fiscal 2016 primarily due to lower average debt balances in fiscal 2016 as compared to fiscal 2015 related to the retirement of $ 1.03 billion in principal of long-term debt in fiscal 2016. the decrease was partially offset by higher debt retirement costs of $ 106.8 million in fiscal 2016 compared to debt retirement costs of $ 91.3 million in fiscal 2015. income taxes the effective income tax rates for fiscal 2017 , 2016 and 2015 for continuing operations were 24.3 percent , 20.0 percent and ( 12.0 ) percent , respectively . the increase in our effective tax rate for fiscal 2017 compared to fiscal 2016 and for fiscal 2016 compared to fiscal 2015 was primarily due to higher earnings before income taxes . story_separator_special_tag our effective tax rate from continuing operations was negative in fiscal 2015 primarily due to the impact of certain tax credits on lower earnings before income taxes driven primarily by costs incurred related to our strategic action plan . net earnings and net earnings per share from continuing operations net earnings from continuing operations for fiscal 2017 were $ 482.5 million ( $ 3.83 per diluted share ) compared with net earnings from continuing operations for fiscal 2016 of $ 359.7 million ( $ 2.78 per diluted share ) and net earnings from continuing operations for fiscal 2015 of $ 196.4 million ( $ 1.51 per diluted share ) . net earnings from continuing operations for fiscal 2017 increased 34.1 percent and diluted net earnings per share from continuing operations increased 37.8 percent compared with fiscal 2016 , primarily due to increased sales , lower food and beverage costs , marketing expenses , general and administrative expenses , depreciation and amortization expenses and impairments and disposal of assets , net as a percent of sales , partially offset by higher restaurant expenses as a percent of sales and a higher effective income tax rate . our diluted net earnings per share from continuing operations for fiscal 2017 were adversely impacted by approximately $ 0.10 due to a non-cash pension settlement charge and approximately $ 0.09 related to the acquisition and integration of cheddar 's scratch kitchen . net earnings from continuing operations for fiscal 2016 increased 83.1 percent and diluted net earnings per share from continuing operations increased 84.1 percent compared with fiscal 2015 , primarily due to increased sales , lower food and beverage costs , marketing expenses , general and administrative expenses , depreciation and amortization expenses and impairments and disposal of assets , net as a percent of sales , partially offset by higher restaurant expenses as a percent of sales and a higher effective income tax rate . our diluted net earnings per share from continuing operations for fiscal 2016 were adversely impacted by approximately $ 0.51 due to debt retirement costs and approximately $ 0.26 related to the real estate plan implementation and positively impacted by approximately $ 0.02 due to a tax benefit associated with the prior year lobster aquaculture divestiture . 31 earnings ( loss ) from discontinued operations on an after-tax basis , results from discontinued operations for fiscal 2017 were a net loss of $ 3.4 million ( $ 0.03 per diluted share ) compared with earnings from discontinued operations for fiscal 2016 of $ 15.3 million ( $ 0.12 per diluted share ) and fiscal 2015 of $ 513.1 million ( $ 3.96 per diluted share ) . earnings from discontinued operations reflects pre-tax gains of $ 17.9 million recorded in fiscal 2016 and $ 837.0 million in fiscal 2015 , related to the sale of red lobster . segment results we manage our restaurant brands , olive garden , longhorn steakhouse , cheddar 's scratch kitchen , the capital grille , yard house , bahama breeze , seasons 52 and eddie v 's in north america as operating segments . we aggregate our operating segments into reportable segments based on a combination of the size , economic characteristics and sub-segment of full-service dining within which each brand operates . our four reportable segments are : ( 1 ) olive garden , ( 2 ) longhorn steakhouse , ( 3 ) fine dining and ( 4 ) other business . see note 6 of the notes to consolidated financial statements ( part ii , item 8 of this report ) for further details . our management uses segment profit as the measure for assessing performance of our segments . the following table presents segment profit margin for the periods indicated . replace_table_token_14_th the decrease in olive garden 's segment profit margin for fiscal 2017 was driven primarily by additional rent expense resulting from the real estate transactions . the growth in olive garden 's segment profit margin for fiscal 2016 was driven primarily by leveraging positive same-restaurant sales , food and beverage cost favorability and cost reduction initiatives , partially offset by additional rent expense resulting from real estate transactions . longhorn 's segment profit margins for fiscal 2017 were flat as additional rent expense resulting from the real estate transactions was offset by food cost deflation . the growth in longhorn 's segment profit margins for fiscal 2016 was driven primarily by leveraging positive same-restaurant sales as well as improved cost of sales and lower marketing expense , partially offset by additional rent expense resulting from real estate transactions . the growth in fine dining 's segment profit margins for fiscal 2017 was driven primarily by food cost deflation , primarily beef , partially offset by higher restaurant expenses . the growth in fine dining 's segment profit margins for fiscal 2016 was driven primarily by improved food and beverage costs . the other business segment profit margins for fiscal 2017 were flat as food cost deflation was offset by higher labor costs . the growth for fiscal 2016 was driven by positive same-restaurant sales leverage and lower food and beverage costs . seasonality our sales volumes fluctuate seasonally . typically , our average sales per restaurant are highest in the winter and spring , followed by the summer , and lowest in the fall . holidays , changes in the economy , severe weather and similar conditions may impact sales volumes seasonally in some operating regions . because of the seasonality of our business , results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year . impact of inflation we attempt to minimize the annual effects of inflation through appropriate planning , operating practices and menu price increases . we do not believe inflation had a significant overall effect on our annual results of operations during fiscal 2017 or fiscal 2016 . we experienced higher than normal inflationary costs during fiscal 2015 and were able to partially reduce the annual impact utilizing these strategies .
| in june 2017 , we announced a quarterly dividend of $ 0.63 per share , payable on august 1 , 2017 . based on the $ 0.63 quarterly dividend declaration , our expected annual dividend is $ 2.52 per share , which reflects an increase of 12.5 percent compared to our fiscal 2017 annual dividend . dividends are subject to the approval of our board of directors and , accordingly , the timing and amount of our dividends are subject to change . there are significant risks and challenges that could impact our operations and ability to increase sales and earnings . the restaurant industry is intensely competitive and sensitive to economic cycles and other business factors , including changes in consumer tastes and dietary habits . other risks and uncertainties are discussed in part i , item 1a of this report . 27 results of operations for fiscal 2017 , 2016 and 2015 to facilitate review of our results of operations , the following table sets forth our financial results for the periods indicated . all information is derived from the consolidated statements of earnings for the fiscal years ended may 28 , 2017 , may 29 , 2016 and may 31 , 2015 . replace_table_token_9_th the following table details the number of company-owned restaurants currently reported in continuing operations , compared with the number open at the end of fiscal 2016 and the end of fiscal 2015 . replace_table_token_10_th ( 1 ) includes six locations in canada for all periods presented . ( 2 ) includes the 140 cheddar 's scratch kitchen restaurants acquired on april 24 , 2017 . 28 sales the following table presents our company-owned restaurant sales and u.s. same-restaurant sales ( srs ) by brand for the periods indicated . replace_table_token_11_th ( 1 ) same-restaurant sales is a year-over-year comparison of each period 's sales volumes for a 52-week year and is limited to restaurants open at least 16 months . ( 2 ) cheddar 's scratch kitchen sales from company-owned restaurants are reflected for the period april 24 , 2017 through may 28 ,
| 11,644 |
118 ( sab 118 ) , which provides sec staff guidance regarding the application of accounting standards codification ( asc ) topic 740 , income taxes , in the reporting period in which the 2017 act became law . see note 11 to the financial statements for further information on the financial impact of the 2017 act . financial highlights and outlook our revenue was $ 30.4 million in 2018 , $ 23.1 million in 2017 and $ 32.5 million in 2016. our diluted earnings per share was $ 0.52 in 2018 , $ 0.04 in 2017 and $ 0.60 in 2016. our cash from operations was $ 7.4 million in 2018 , $ 3.4 million in 2017 and $ 9.4 million in 2016. our estimated installed base of medical devices is as follows : replace_table_token_6_th in 2019 , we expect our revenues to increase due to higher sales of our medical devices and related accessories , disposables and services through the continued execution of our critical care strategy and headcount growth of our sales team . we intend to continue targeting an increased number of hospitals and acute care facilities that have yet to adopt our technology and furthering our penetration into the intensive care unit , emergency room and other critical care locations within hospitals where there is a high probability that interventional radiology procedures will need to be performed on patients . we expect operating expenses to increase in 2019 due to growth in the size of our sales team and higher sales person commission costs due to anticipated higher sales . application of critical accounting policies we prepare our financial statements in conformity with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and use assumptions that affect the reported amounts of assets , liabilities and related disclosures at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period . actual results could differ from those estimates . our significant accounting policies are more fully described in note 1 to the financial statements . however , we believe that the following critical accounting policies require the use of significant estimates , assumptions and judgments . the use of different estimates , assumptions and judgments could have a material effect on the reported amounts of assets , liabilities and related disclosures as of the date of the financial statements and revenue and expenses during the reporting period . revenue recognition on january 1 , 2018 , we adopted asu 2014-09 , revenue from contracts with customers ( topic 606 ) using the modified retrospective method applied to contracts which were incomplete as of january 1 , 2018. results from reporting periods beginning after january 1 , 2018 are presented under this new guidance , while prior period amounts are unadjusted and continue to be reported under previous revenue recognition guidance . we generate revenue from the one-time sale of mri compatible medical devices and accessories , extended warranty agreements , product maintenance and the sale of disposable products used with our devices . the principal customers for our mri compatible products include hospitals and acute care facilities , both in the u.s. and internationally . in the u.s. we sell our products through our direct sales force and outside of the u.s. we sell our products through third-party distributors who resell our products to end users . for most domestic sales , we enter into agreements with healthcare supply contracting companies , commonly referred to as group purchasing organizations ( gpos ) , which enable us to sell and distribute our products to their member hospitals . our agreements with gpos typically include negotiated pricing for all group members established at time of gpo contract execution . 41 we do not sell to gpos . hospitals , group practices and other acute care facilities that are members of a gpo , purchase products directly from us under the terms of our gpo agreements . we recognize revenue when all of the following criteria are met : we have a contract with a customer that creates enforceable rights and obligations ; promised products or services are identified ; the transaction price , or the amount we expect to receive , is determinable and we have transferred control of the promised products or services to the customer . we consider transfer of control evidenced upon the passage of title and risks and rewards of ownership to the customer . we allocate the transaction price using the relative standalone selling price method . customer sale prices for our mri compatible iv infusion pump systems and related disposables and services are contractually fixed over the gpo contract term . we recognize a receivable at the point in time we have an unconditional right to payment . payment terms are typically within 45 days after transferring control to u.s. customers . most international distributors are required to pay a portion of the transaction price in advance and the remaining amount within 30 days of receiving the related products . due to the short-term nature of these payment terms , we have elected to use the practical expedient that allows us to ignore the possible existence of a significant financing component within the contract . we have elected to account for shipping and handling charges billed to customers as revenue and shipping and handling related expenses as cost of revenue . in certain u.s. states we are required to collect sales taxes from our customers . we have elected to exclude the amounts collected for these taxes from revenue and record them as a liability until remitted to the taxing authority . contract liabilities we record contract liabilities , or deferred revenue , when we have an obligation to provide a product or service to the customer and payment is received in advance of our performance . story_separator_special_tag when we sell a product or service with a future performance obligation , we defer revenue allocated to the unfulfilled performance obligation and recognize this revenue when , or as , the performance obligation is satisfied . our deferred revenue consists of advance payments received from customers prior to the transfer of products or services , shipments that are in-transit at the end of a period and sales of extended warranty agreements . advanced payments received from customers and shipments in-transit are recognized in revenue at the time control of the related products has been transferred to the customer or services have been delivered . amounts related to extended warranty agreements are deferred and recognized in revenue ratably over the agreement period , which is typically one to four years after control of the related products is transferred to the customer , as we believe this recognition pattern best depicts the transfer of services being provided . deferred revenue is classified as current or long-term deferred revenue in our balance sheets , depending on the expected timing of satisfying the related performance obligations . capitalized contract costs we capitalize commissions paid to our sales managers related to contracts with customers when the associated revenue is expected to be earned over a period of time . deferred commissions are primarily related to the sale of extended warranty agreements . capitalized commissions are included in prepaid expenses and other current assets in our balance sheets when the associated expense is expected to be recognized in one year or less , or in other assets when the associated expense is expected to be recognized in greater than one year . the associated expense is included in sales and marketing expenses in our statements of operations . variable consideration most of our sales are subject to 30 to 60-day customer-specified acceptance provisions primarily for purposes of ensuring products were not damaged during the shipping process . historically , we have experienced immaterial product returns and , when experienced , we typically exchange the affected products with new products . accordingly , variable consideration from contracts with customers is immaterial to our financial statements . 42 accounts receivable and allowance for doubtful accounts accounts receivable is recorded at the transaction price of the related products and services . we regularly assess the sufficiency of the allowance for estimated uncollectible accounts receivable . estimates are based on historical collection experience and other customer-specific information , such as bankruptcy filings or known liquidity issues of our customers . when it is determined that an account receivable is uncollectible , it is written off and relieved from the allowance . any future determination that the allowance for estimated uncollectible accounts receivable is not properly stated could result in changes in operating expense and results of operations . inventory inventory is stated at the lower of standard cost , which approximates actual cost on a first-in , first-out basis , or net realizable value . net realizable value is the estimated selling prices in the ordinary course of business , less reasonably predictable costs of completion , disposal and transportation . we may be exposed to a number of factors that could result in portions of our inventory becoming either obsolete or in excess of anticipated usage . these factors include , but are not limited to , technological changes , competitive pressures in products and prices , and the introduction of new product lines . we regularly evaluate our ability to realize the value of inventory based on a combination of factors , including historical usage rates , forecasted sales , product life cycles , and market acceptance of new products . when inventory that is obsolete or in excess of anticipated usage is identified , it is written down to net realizable value or an inventory valuation allowance is established . the estimates we use in projecting future product demand may prove to be incorrect . any future determination that our inventory is overvalued could result in increases to our cost of sales and decreases to our operating margins and results of operations . stock-based compensation we apply the fair value recognition provisions of financial accounting standards board accounting standards codification topic 718 , compensation stock compensation ( asc 718 ) . determining the amount of stock-based compensation to be recorded for stock options that we grant requires us to develop estimates of the fair value as of the grant date . calculating the fair value of stock option awards requires that we make highly subjective assumptions . we use the black-scholes option pricing model to value our stock option awards . use of this valuation methodology requires that we make assumptions as to the volatility of our common stock , the expected term of our stock options , the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield . as we completed our ipo in july 2014 , we utilize the historical stock price volatility from a representative group of public companies , which includes the company , to estimate expected stock price volatility . we selected companies from the medical device industry with market capitalizations that are similar to ours . we intend to continue to utilize the historical volatility of the same or similar public companies to estimate expected volatility until a sufficient amount of historical information regarding the price of our publicly traded stock becomes available . we use the simplified method as prescribed by asc 718 to calculate the expected term of stock options granted to employees as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term of our stock option awards . the risk-free interest rate used for each grant is based on the u.s. treasury yield curve in effect at the time of the grant for instruments with a similar expected life . we utilize a dividend yield of zero as we have no current intention to pay cash dividends .
| compatible patient vital signs monitoring system is due to higher domestic unit sales in 2018 when compared to 2017. revenue from sales in the u.s. increased $ 5.0 million , or 25.7 percent , to $ 24.5 million from $ 19.5 million for the same period in 2017. revenue from sales internationally increased $ 2.3 million , or 65.6 percent , to $ 5.9 million from $ 3.6 million for the same period in 2017. domestic sales accounted for 80.5 percent of total revenue for the year ended december 31 , 2018 , compared to 84.5 percent for the same period in 2017. revenue from sales of devices increased $ 5.7 million , or 37.0 percent , to $ 21.2 million from $ 15.5 million for the same period in 2017. revenue from sales of our disposables and services increased $ 1.1 million , or 16.9 percent , to $ 7.7 million from $ 6.6 million for the same period in 2017. revenue from the amortization of our extended maintenance contracts increased $ 0.5 million , or 52.2 percent , to $ 1.5 million from $ 1.0 million for the same period in 2017 . 45 cost of revenue and gross profit replace_table_token_10_th cost of revenue increased approximately $ 1.6 million , or 29.5 percent , to $ 7.2 million for the year ended december 31 , 2018 , from $ 5.6 million for the same period in 2017. gross profit increased approximately $ 5.7 million , or 32.6 percent , to $ 23.2 million for the year ended december 31 , 2018 from $ 17.5 million for the same period in 2017. the increase in cost of revenue and gross profit is due to higher sales during the year ended december 31 , 2018 , compared to the same period in 2017. gross profit margin was 76.3 percent and 75.9 percent for the years ended december 31 ,
| 11,645 |
critical accounting policies and estimates our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the united states ( u.s . gaap ) . the preparation of these financial statements requires management to make estimates and assumptions that 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 reporting period . on an on-going basis , management evaluates its estimates and judgments , including those related to product returns , customer incentives , bad debts , inventories , asset impairment , pension plans , contingent consideration , deferred tax assets , accrued warranty reserves , restructuring costs , contingencies and litigation . management bases its estimates and judgments 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 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 , among others , contain our more significant judgments and estimates used in the preparation of our consolidated financial statements . revenue revenue is recognized when all of the following criteria have been met : persuasive evidence of an arrangement exists . we generally rely upon sales contracts or agreements , and customer purchase orders to determine the existence of an arrangement . delivery has occurred . we use shipping terms and related documents , or written evidence of customer acceptance , when applicable , to verify delivery or performance . sales price is fixed or determinable . we assess whether the sales price is fixed or determinable based on the payment terms and whether the sales price is subject to refund or adjustment . collectability is reasonably assured . we assess collectability based on creditworthiness of customers as determined by our credit checks and their payment histories . we record accounts receivable net of allowance for doubtful accounts , estimated customer returns , and pricing credits . in 2011 , we adopted the financial accounting standards board ( fasb ) issued accounting standards update ( asu ) no . 2009-13 , revenue recognition ( topic 605 ) multiple-deliverable revenue arrangements ( asu 2009-13 ) . asu 2009-13 changes the requirements for establishing separate units of accounting in a multiple element arrangement and eliminates the residual method of allocation and requires the allocation of arrangement consideration to each deliverable to be based on 42 the relative selling price . the relative selling price method allocates any discount in the arrangement proportionately to each deliverable on the basis of the deliverable 's estimated fair value . concurrently with issuing asu 2009-13 , the fasb also issued asu no . 2009-14 , software ( topic 985 ) certain revenue arrangements that include software elements ( asu 2009-14 ) which amends the scope of software revenue guidance in accounting standards codification ( asc ) subtopic 985-605 , software-revenue recognition ( asc 985-605 ) , to exclude tangible products containing software and non-software components that function together to deliver the product 's essential functionality . asu 2009-14 provides that tangible products containing software components and non-software components , that function together to deliver the tangible product 's essential functionality , are no longer within the scope of the software revenue guidance in asc 985-605 and should follow the guidance in asu 2009-13 for multiple-element arrangements . all non-essential and standalone software components will continue to be accounted for under the guidance of asc 985-605. asu 2009-13 and asu 2009-14 are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after june 15 , 2010. we prospectively adopted the provisions of asu 2009-13 and asu 2009-14 effective january 1 , 2011. our revenue is derived primarily from sales of hardware products , and to a lesser extent , from the license of proprietary software products and software components in revenue arrangements that are considered standalone . as a result , asu 2009-14 did not have any significant impact and revenues from such software products will continue to be recognized under the guidance of asc 985-605. asu 2009-13 establishes a selling price hierarchy for determining the selling price of a deliverable in revenue arrangements . the revenue is generated from sales to direct end-users and to distributors . when a sales arrangement contains multiple elements and software and non-software components function together to deliver the tangible products ' essential functionality , we allocate revenue to each element based on a selling price hierarchy . the selling price for a deliverable is based on its vendor-specific objective evidence ( vsoe ) if available , third-party evidence ( tpe ) if vsoe is not available , or estimated selling price ( esp ) if neither vsoe nor tpe is available . we then recognize revenue on each deliverable in accordance with its policies for product and service revenue recognition . vsoe of selling price is based on the price charged when the element is sold separately . tpe of selling price is established by evaluating largely interchangeable competitor products or services in stand-alone sales to similarly situated customers . the best estimate of selling price is established considering multiple factors , including , but not limited to , pricing practices in different geographies and through different sales channels , gross margin objectives , internal costs , competitor pricing strategies and industry technology lifecycles . some of our offerings contain a significant element of proprietary technology and provide substantially unique features and functionality ; as a result , the comparable pricing of products 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 , typically we are not able to determine tpe for such products . story_separator_special_tag therefore esp is often used for such products in the selling price hierarchy for allocating the total arrangement consideration . we evaluate each deliverable in an arrangement to determine whether it represents a separate unit of accounting in accordance with the provisions of asu 2009-13. certain sales arrangements of our hardware products are bundled with professional services and maintenance contracts , and in some cases with software products . in such multiple element arrangements , revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables using the relative selling prices of each of the deliverables in the arrangement , based on the aforementioned selling price hierarchy . allocation of the consideration is determined at arrangement inception on the basis of each unit 's relative selling price . we account for software sales in accordance with asc 985-605 and hardware sales in accordance with asu 2009-13 , when all the revenue recognition criteria noted above have been met . professional services include security system integration , system migration and database conversion services , among others . the revenue from professional services contracts is recognized upon completion of such services and upon acceptance 43 from the customer , if applicable . the revenue from maintenance contracts is deferred and amortized ratably over the period of the maintenance contracts . certain sales arrangement contains hardware , software and professional service elements where professional services are essential to the functionality of the hardware and software system and a test of the functionality of the complete system is required before the customer accepts the system . as a result , hardware , software and professional service elements are accounted for as one unit of accounting and revenue from these arrangements is recognized upon completion of the project . in revenue arrangements associated with our payment solution business , which was acquired in january 2012 , we facilitate cashless payments by providing an integrated payment system ( system ) for sports stadiums , arenas , theme parks and other venues for leisure and entertainment ( recreational facilities ) throughout europe , including multi-functional customer cards based on rfid contactless chip technology ( smart cards or cards ) and comprehensive payment management software . the system is designed to ensure the seamless interaction of all relevant components such as ticketing , access , point-of-sale , parking , and other services . in addition to the smart cards and software , the system consists of readers and communication infrastructure , all supplied and implemented by identive . the system enables consumers at recreational facilities to make quick , cashless payments for food , beverages and merchandise . customers are provided the option of purchasing a turnkey solution or entering into a multi-year contract under which we operate and maintain responsibility for the system over a set period , in return for sharing in the revenue generated . the revenue on a turnkey solution is recognized in accordance with asu 2009-13. we evaluate each deliverable in the arrangement to determine whether it represents a separate unit of accounting . revenue is then recognized on each deliverable when the product has been delivered or the service has been completed , and upon acceptance of the product or service by the customer , if applicable . under multi-year contracts , we are entitled to various cash processing fees and revenue share commissions according to the terms of each specific contract . under certain of the multi-year contracts we also are entitled to card breakage income as described below . revenue from cash processing fees and revenue share commissions from events is recognized after an event has taken place , the payment services have been provided , and the event revenue has been agreed with the relevant parties . where commissions depend on thresholds measured over more than one event , revenue is not recognized until all conditions are met , and collectability is reasonably assured . smart cards are used by consumers to make purchases at the recreational facilities and they pay an initial deposit fee to obtain the cards and then may load money onto the cards to enable purchases . there may be an unredeemed balance on the cards at any given time . although there are expiration dates on the cards , our practice has been to honor all cards presented for payment or redemption . we do not charge any service fees that cause a decrease in the card balance . revenues from unredeemed balances on cards are estimated and recognized when the likelihood of the card being redeemed by the customer is remote ( card breakage income ) , based on an aging of card balances and historical evidence of redemption rates . we determine the likelihood of redemption to be remote for cards due to , among other things , long periods of inactivity and change in customer behavior as part of the normal accounting processes performed each reporting period . based on historical information , including the historical redemption patterns experienced by payment solution during its pre-acquisition period , we determine the likelihood of a card remaining unredeemed 12 months after the card is issued and recognize breakage income accordingly . card breakage income is included in revenue in the company 's consolidated statements of operations . inventories inventories are stated at the lower of cost , using fifo , average cost or standard cost , as applicable , or market value . we typically plan our production and inventory levels based on internal forecasts of customer demand , which are highly unpredictable and can fluctuate substantially . we regularly review inventory quantities on hand and record an estimated provision for excess inventory , technical obsolescence and inability to sell based primarily on our historical sales and expectations for future use . actual demand and market conditions may be different from those projected by our management . this could have a material effect on our operating results and financial position .
| our identity management segment includes the operations of our identity management & cloud solutions division and our id solutions division , both of which specialize in the design and manufacturing of highly secure , integrated systems that can enhance security and better meet compliance and regulatory requirements while providing users the benefits and convenience of simple and secure solutions . the majority of sales in our identity management segment are made to customers in the government , education , enterprise and commercial markets and encompass vertical market segments including payment , healthcare , banking , industrial , retail and critical infrastructure . because of the complex nature of the problems we address for our identity management customers , pricing pressure is not prevalent in this segment . revenue in our identity management segment was $ 54.1 million in 2012 , down 4 % from $ 56.5 million in 2011. results for the identity management segment included $ 6.2 million of incremental revenue from idondemand , polyright and payment solution in 2012. excluding the impact of this incremental revenue , organic revenue was 15 % lower in 2012 compared with the prior year , primarily due to the complete absence of new orders for secure card readers and software for the german national id program within our european id solutions business , which had accounted for $ 7.6 million of sales in 2011. additionally , sales in our id solutions 55 business in australia declined 41 % in 2012 due to the completion of a large customer program deployment during 2011. these declines were partially offset by an 8 % increase in sales of our access control systems in 2012 , despite continued budget and project delays from u.s. government customers . in our id products segment we design and manufacture rfid products and components that are used for a number of identity-based and related applications in the government , enterprise , transportation and financial markets . our id products segment includes sales of id infrastructure products including smart card , rfid and nfc
| 11,646 |
we also continue to face uncertainties due to the current general business environment , and we continue to see protests of major contract awards and delays in government procurement activities . in addition , a shift of expenditures away from programs that we support could cause federal government agencies to reduce their purchases under contracts , to exercise their right to terminate contracts at any time without penalty , or to decide not to exercise options to renew contracts . additional factors that could affect our federal government contracting business include an increase in set-asides for small businesses and budgetary priorities limiting or delaying federal government spending in general . department of veterans affairs ( va ) health spending trends : dlh continues to see critical need for expanded health care solutions within our sector of the federal health market , largely focused on the needs of veterans and their families . serving nearly nine million veterans each year , the va operates the nation 's largest integrated health care system , with more than 1,700 hospitals , clinics , community living centers , readjustment counseling centers , and other facilities . on september 21 , 2018 , the president signed the energy and water , legislative branch , and military construction and veterans affairs appropriations act which provides full-year funding through september 30 , 2019 for various projects and 20 activities of the federal government . the bill includes funding for critical va healthcare programs , including the va mission act and veterans electronic health record system . department of health and human services ( hhs ) spending trends : hhs is the principal federal department charged with protecting the health of all americans and providing essential human services . dlh has existing contracts with multiple agencies under hhs , and we are actively pursuing growth opportunities within this vital agency . hhs spending priorities are being evaluated by the trump administration with particular focus on the affordable care act programs which are outside of our market space . on september 28 , 2018 the president signed the fiscal 2019 appropriations bill for the departments of labor , health and human services and education . the bill targets investments in medical research , and biodefense . priority issues addressed in fy19 funding include research for cancer and alzheimers disease , and a historical level of funding to help combat the opioid epidemic . large defense companies divesting from federal services market : large government contractors have been divesting from the federal services market to increase their focus on advanced military products , which typically generate higher margins than services . this trend may open up increased opportunities for smaller federal service providers such as dlh . industry consolidation among federal government contractors : there has been active consolidation and a strong increase in m & a activity among federal government contractors over the past few years that we expect to continue into fiscal year 2019 and beyond , fueled by public companies leveraging strong balance sheets to pursue strategic acquisitions that supplement organic growth and create shareholder value . companies often look to acquisitions that augment core capabilities , contracts , customers , market differentiators , stability , cost synergies , and higher margin and revenue streams . we plan continued focus on our core capabilities , as we look at potential future strategic acquisitions to grow our business and enhance shareholder value . potential impact of federal contractual set-aside laws and regulations : the federal government has an overall goal of 23 % of prime contracts flowing through small businesses . as previously reported , various agencies within the federal government have policies that support small business goals , including the adoption of the “ rule of two ” by the va , which provides that the agency shall award contracts by restricting competition for the contract to service-disabled or other veteran owned businesses . to restrict competition pursuant to this rule , the contracting officer must reasonably expect that at least two of these businesses , which are capable of delivering the services , will submit offers and that the award can be made at a fair and reasonable price that offers best value to the united states . when two qualifying small businesses can not be identified , the va may proceed to award contracts following a full and open bid process . at present , the company derives 100 % of its revenue from agencies of the federal government , primarily as a prime contractor but also as a subcontractor to other federal prime contractors . our largest customer continues to be the va , which comprised approximately 63 % and 62 % of revenue for the year ended september 30 , 2018 and 2017 , respectively . hhs which comprised approximately 34 % and 34 % of revenue for the year ended september 30 , 2018 and 2017 , respectively , is also a major customer . these agreements are subject to the federal acquisition regulations . while there can be no assurance as to the actual amount of services that the company will ultimately provide to va and hhs under its current contracts , we believe that our strong working relationships and our effective service delivery support ongoing performance for the terms of the contracts . our results of operations , cash flows and financial condition would be materially adversely affected if we were unable to continue our relationship with either of these customers , or if the amount of services we provide to them was materially reduced . our revenues from the va are derived from 16 separate contracts related to its performance of pharmacy and logistics services in support of the va 's consolidated mail outpatient pharmacy program . approximately 57 % of the company 's current business base with the va is derived from nine contracts ( for pharmacy services ) that are currently operating under extensions through april 2019 pending completion of the procurement process for a new contract . story_separator_special_tag a single renewal request for proposal ( “ rfp ” ) has currently been issued for these nine contracts and we expect further extensions until the procurement process is completed . the rfp , however , requires the prime contractor be a service-disabled veteran owned small business ( sdvosb ) , which 21 precludes us from bidding on the rfp as a prime contractor . we have joined an sdvosb team as a subcontractor to respond to this rfp . should the contract be awarded to an sdvosb partner of dlh , we expect to continue to perform a significant amount of the contract 's volume of business . the remaining seven contracts for logistics services to the va are performed under contracts which do not expire until may 2019 , and we believe that these contracts will be similarly extended during the procurement process . these contracts may be subject to the same requirement of awarding to a sdvosb prime contractor . the award of any contract is subject to an evaluation of proposals submitted and adjudication of any and all protests filed . the company believes that protests may be filed for any award announcement . based on historical experience , the company believes that final resolution of all protests could require an extended period of time , during which the company expects to continue to perform as prime contractor . should the va fail to receive proposals from two qualified sdvosb companies which is required in order for the work to be eligible for set aside status , the company expects that the va would reissue the rfp on a full and open basis in which dlh can respond as a prime contractor . dlh believes that its past performance on this business and track record of successfully vying for renewals provide a competitive advantage . while the effect of set-aside provisions may limit our ability to compete for prime contractor positions on programs that we recompete or that we have targeted for growth , dlh may elect to join an sdvosb team as a subcontractor in support of such small businesses for specific pursuits that align with our core markets and corporate growth strategy . story_separator_special_tag style= '' line-height:120 % ; font-size:10pt ; '' > non-gaap financial measures for fiscal 2018 and 2017 on a non-gaap basis , earnings before interest tax depreciation and amortization ( “ ebitda ” ) for the year ended september 30 , 2018 was approximately $ 11.0 million , an increase of approximately $ 2.6 million , or 31.5 % , over the prior fiscal year . this increase was due principally to improved gross margin of approximately $ 4.4 million , partially offset by expense growth of $ 1.7 million as previously described . the company uses ebitda as a supplemental non-gaap measures of our performance . dlh defines ebitda as net income excluding ( i ) interest expense , ( ii ) provision for or benefit from income taxes , if any , and ( iii ) depreciation and amortization . beginning with the first quarter of fiscal year 2018 , we commenced reporting ebitda rather than adjusted ebitda , as a key non-gaap financial measure of our business . we believe that due to the growth and maturation of our business , this change will improve the transparency of our business performance and increase the comparability of our results with peers . non-gaap measures for prior periods have been recast to conform to this change in our reporting . it is important to note that our gaap results and presentation of gaap metrics do not change and this change has no effect on our business , nor how we manage our business . in addition , for the year , we are also reporting our net income excluding the impact of the tax cut and jobs act of 2017 on the valuation of our deferred tax assets . on december 22 , 2017 , the tax cut and jobs act was enacted , which , among other things , reduced corporate tax rates and revised rules regarding the usability of net operating losses . these changes have resulted in a discrete charge to the first quarter tax provision of $ 3.4 million associated with revaluing the benefit of our net operating losses . we are reporting this non-gaap metric to demonstrate the impact of the tax law change . these non-gaap measures of our performance are used by management to conduct and evaluate its business during its regular review of operating results for the periods presented . management and the company 's board utilize these non-gaap measures to make decisions about the use of the company 's resources , analyze performance between periods , develop internal projections and measure management 's performance . dlh believes that these non-gaap measures are useful to investors in evaluating the company 's ongoing operating and financial results and understanding how such results compare with the company 's historical performance . by providing these non-gaap measure as a supplement to gaap information , dlh believes we enhance investors understanding of our business and results of operations . reconciliation of gaap net income to ebitda , a non-gaap measure : replace_table_token_5_th 24 reconciliation of gaap net income to net income adjusted for the effect of the 2017 tax act , a non-gaap measure : replace_table_token_6_th liquidity and capital management for the year ended september 30 , 2018 , the company generated operating income of $ 8.8 million and net income of approximately $ 1.8 million . cash flows from operations totaled approximately $ 14.0 million and $ 6.5 million for the years ended september 30 , 2018 and 2017 , respectively . the increase in cash flow from operations was due principally to increased income from operations and increased non-cash expenses . we used $ 0.7 million and $ 1.3 million of cash in investing activities during fiscal 2018 and fiscal 2017 , respectively .
| general and administrative expenses general and administrative ( “ g & a ” ) expenses primarily relate to functions such as operations overhead , corporate management , legal , finance , accounting , contracts administration , human resources , management information systems , and business development . fiscal year 2018 g & a expenses were approximately $ 19.2 million , an increase of $ 1.7 million or 9.8 % over the prior year period . the increase in g & a spending reflects the impact of the additional investment in business development and management resources to grow the company 's business . as a percent of revenue , g & a expenses were 14.4 % , a decrease of approximately 0.7 % from the prior year period . depreciation and amortization this category comprises non-cash expenditures related to depreciation on fixed assets and the amortization of acquired definite-lived intangible assets . as a primarily professional services organization , dlh does not require significant expenditures on capital equipment and other fixed assets . for the year ended september 30 , 2018 , depreciation and amortization were approximately $ 2.2 million , as compared as compared to approximately $ 1.7 million for the prior fiscal year , an increase of $ 0.5 million or 27.8 % , with the increase due principally to the amortization of intangibles and the company 's new internally developed erp system software which was placed in service in january 2018. income from operations income from operations for the year ended september 30 , 2018 was $ 8.8 million , with an operating margin of 6.6 % , representing an increase of approximately $ 2.2 million over the prior fiscal year for which the operating income was $ 6.6 million at an operating margin of 5.7 % . the improvement is due principally to gross margin growth of $ 4.4 million , partially offset by expense growth of $ 1.7 million as described above . interest expense , net interest expense , net , typically includes items such as , interest expense and amortization of deferred financing costs on debt obligations . for the year ended september 30 , 2018 , interest
| 11,647 |
specifically , total nonperforming assets were $ 3.9 million , or 0.44 percent of total assets . total delinquent loans at december 31 , 2017 were 0.42 percent of total loans . as of december 31 , 2016 , the company had total nonperforming assets of $ 5.3 million , or 0.65 percent of total assets . total delinquent loans at december 31 , 2016 were 0.34 percent of total loans . as of december 31 , 2015 , the company had total nonperforming assets of $ 8.4 million , or 1.15 percent of total assets . total delinquent loans at december 31 , 2015 were 1.09 percent of total loans . 28 critical accounting policies the accounting and reporting policies of the company are in accordance with generally accepted accounting principles in the united states and conform to general practices within the banking industry . the company 's significant accounting policies are described in detail in the notes to the company 's consolidated financial statements for the years ended december 31 , 2017 , 2016 and 2015. the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions . the company 's financial position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of reported results . critical accounting policies are those policies that management believes are the most important to the portrayal of the company 's financial condition and results , and they require management to make estimates that are difficult , subjective or complex . allowance for loan losses : the allowance for loan losses provides coverage for probable losses inherent in the company 's loan portfolio . management evaluates the adequacy of the allowance for loan losses each quarter based on changes , if any , in the nature and amount of problem assets and associated collateral , underwriting activities , loan portfolio composition ( including product mix and geographic , industry or customer-specific concentrations ) , trends in loan performance , regulatory guidance and economic factors . this evaluation is inherently subjective , as it requires the use of significant management estimates . many factors can affect management 's estimates of specific and expected losses , including volatility of default probabilities , rating migrations , loss severity and economic and political conditions . the allowance is increased through provisions charged to operating earnings and reduced by net charge-offs . the company determines the amount of the allowance based on relative risk characteristics of the loan portfolio . the allowance recorded for commercial loans is based on reviews of individual credit relationships and an analysis of the migration of commercial loans and actual loss experience . the allowance recorded for homogeneous consumer loans is based on an analysis of loan mix , risk characteristics of the portfolio , fraud loss and bankruptcy experiences , and historical losses , adjusted for current trends , for each homogeneous category or group of loans . the allowance for credit losses relating to impaired loans is based on each impaired loan 's observable market price , the collateral for certain collateral-dependent loans , or the discounted cash flows using the loan 's effective interest rate . regardless of the extent of the company 's analysis of customer performance , portfolio trends or risk management processes , certain inherent , but undetected , losses are probable within the loan portfolio . this is due to several factors including inherent delays in obtaining information regarding a customer 's financial condition or changes in their unique business conditions , the subjective nature of individual loan valuations , collateral assessments and the interpretation of economic trends . volatility of economic or customer-specific conditions affecting the identification and estimation of losses for larger non-homogeneous credits and the sensitivity of assumptions utilized to establish allowances for homogenous groups of loans are also factors . the company estimates a range of inherent losses related to the existence of these exposures . the estimates are based upon the company 's evaluation of imprecise risk associated with the commercial and consumer allowance levels and the estimated impact of the current economic environment . goodwill and other intangibles : the company records all assets and liabilities acquired in purchase acquisitions , including goodwill and other intangibles , at fair value as required . goodwill is subject , at a minimum , to annual tests for impairment . other intangible assets are amortized over their estimated useful lives using straight-line and accelerated methods , and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying amount . the initial goodwill and other intangibles recorded and subsequent impairment analysis requires management to make subjective judgments concerning estimates of how the acquired asset will perform in the future . events and factors that may significantly affect the estimates include , among others , customer attrition , changes in revenue growth trends , specific industry conditions and changes in competition . deferred tax liability : the company has evaluated its deferred tax liability to determine if it is more likely than not that the liability will be utilized in the future . the company 's most recent evaluation has determined that the company will more likely than not be able to utilize the remaining deferred tax liability . 29 income tax accounting : the company files a consolidated federal income tax return . the provision for income taxes is based upon income in the consolidated financial statements , rather than amounts reported on our income tax return . deferred tax assets and liabilities are recognized for 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 . story_separator_special_tag the effect of a change in rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date . changes in financial condition total assets at december 31 , 2017 , were $ 876.6 million , compared to $ 816.0 million at december 31 , 2016. loans ( excluding loans held for sale ) were $ 696.6 million at december 31 , 2017 , compared to $ 644.4 million at december 31 , 2016. total deposits were $ 729.6 million at december 31 , 2017 , compared to $ 673.1 million at december 31 , 2016. total equity was $ 94.0 million at december 31 , 2017 , up from $ 86.5 million at december 31 , 2016. the $ 7.5 million increase in equity , which reflected an 8.6 percent increase over 2016 , was a result of net income less common and preferred dividends of $ 2.3 million . replace_table_token_19_th replace_table_token_20_th loans held for investment increased $ 52.2 million , or 8.1 percent , to $ 696.6 million at december 31 , 2017. the largest component of this increase was in commercial real estate loans , which rose $ 48.1 million , followed by residential real estate , which rose $ 8.4 million . deposits increased $ 56.5 million , or 8.4 percent , to $ 729.6 million at december 31 , 2017. deposit growth for the year included $ 10.4 million in noninterest demand deposits and $ 26.5 million in savings and money market deposits . 30 stockholders ' equity at december 31 , 2017 , was $ 94.0 million or 10.7 percent of total assets compared to $ 86.5 million or 10.6 percent of total assets at december 31 , 2016. replace_table_token_21_th nonperforming assets consisting of loans , other real estate owned ( oreo ) and accruing tdrs totaled $ 3.9 million , or 0.44 percent of total assets at december 31 , 2017 , a decrease of $ 1.4 million or 27.5 percent from 2016. net charge offs were up during 2017 , at $ 0.20 million , which was a $ 0.18 million increase compared to 2016. the company 's loan loss allowance at december 31 , 2017 , now covers nonperforming loans at 207 percent , up from 179 percent at december 31 , 2016. regulatory capital reporting is required for state bank only , as the company is now exempt from quarterly regulatory capital level measurement . as of december 31 , 2017 , state bank met all regulatory capital levels required to be considered well-capitalized ( see note 13 to the consolidated financial statements ) . earnings summary – 2017 vs. 2016 net income for 2017 was $ 11.1 million , and net income available to common shareholders was $ 10.1 million , or $ 1.74 per diluted share , compared with net income of $ 8.8 million and net income available to common of $ 7.8 million , or $ 1.38 per diluted share , for 2016. the company 's 2017 results included a $ 1.7 million one-time reduction in tax expense due to the recently enacted tcja . state bank reported net income for 2017 of $ 12.3 million , which was up from the $ 9.7 million in net income in 2016. rdsi reported a net loss for 2017 of $ 0.2 million , compared to a net loss of $ 0.08 million reported for 2016. positive results for 2017 included loan growth of $ 52.2 million , and deposit growth of $ 56.5 million . the mortgage banking business line continues to contribute significant revenues , with residential real estate loan production of $ 315.8 million for the year , resulting in $ 7.1 million of revenue from gains on sale . the level of mortgage origination was down from the $ 382.8 million in 2016. the company 's loans serviced for others ended the year at $ 994.9 million , up from $ 899.7 million at december 31 , 2016. operating revenue was up compared to the prior year by $ 1.9 million , or 4.3 percent , due to sba gains , wealth management income and $ 52.2 million in balance sheet loan growth . net interest margin on a tax equivalent basis ( fte ) for 2017 was 3.78 percent , up 3 basis points from 2016. operating expense was up compared to the prior year by $ 1.50 million , or 4.90 percent , due to fringe benefit cost increases and higher staffing levels . net charge offs for 2017 of $ 0.20 million resulted in a loan loss provision of $ 0.40 million , which was down from the $ 0.02 million and $ 0.75 million respectively in 2016 . 31 story_separator_special_tag the $ 0.9 million and $ 1.1 million respectively in 2015 . 33 results of operations replace_table_token_25_th net interest income year ended december 31 , ( $ in thousands ) 2016 2015 % change net interest income $ 25,853 $ 23,343 10.8 % net interest income was $ 25.9 million for 2016 compared to $ 23.3 million for 2015 , an increase of $ 2.5 million or 10.8 percent . average earning assets increased to $ 698.5 million in 2016 , compared to $ 628.0 million in 2015 , an increase of $ 70.5 million or 11.2 percent due to loan volume . the consolidated 2016 full year net interest margin decreased 3 basis points to 3.75 percent compared to 3.78 percent for the full year of 2015. provision for loan losses of $ 0.75 million was taken in 2016 compared to $ 1.1 million taken for 2015. the $ 0.35 million decrease was due to the lower level of charge offs and the improvement in the company 's nonperforming asset levels . for 2016 , net charge offs totaled $ 0.02 million , or essentially 0.00 percent of average loans .
| the company sold $ 261.3 million of originated mortgages into the secondary market , which allowed our serviced loan portfolio to grow to $ 994.9 million at december 31 , 2017 from $ 899.7 million at december 31 , 2016. higher servicing income on the portfolio led to the 24 percent increase in mortgage loan serving income . data servicing fees from rdsi continued to decline , and were down 19.5 percent in 2017 , due to lower check processing volume and client losses . other income decreased due to lower swap and commercial fee income . noninterest expense replace_table_token_24_th total noninterest expense was $ 31.6 million for 2017 compared to $ 30.1 million for 2016 , representing a $ 1.5 million , or 4.9 percent , increase year-over-year . total full-time equivalent employees ended 2017 at 240 , which was up 13 from year-end 2016. salaries and benefits were driven by higher personnel and incentive costs from mortgage origination and support . we also added staffing in compliance and commercial/sba loan sales . marketing costs were higher due to expanded campaigns and higher sales staff needing support . our professional fees were higher due to greater regulatory requirements based on market capitalization thresholds and costs associated with the sale of the dcm division of rdsi . earnings summary – 2016 vs. 2015 net income for 2016 was $ 8.8 million , and net income available to common shareholders was $ 7.8 million or $ 1.38 per diluted share , compared with net income of $ 7.6 million and net income available to common of $ 6.7 million , or $ 1.19 per diluted share , for 2015. state bank reported net income for 2016 of $ 9.7 million , which was up from the $ 8.4 million in net income in 2015. rdsi reported a net loss for 2016 of $ 0.08 million , compared to a net loss of $ 0.003 million reported for 2015. positive results for 2016 included loan growth of $ 86.8 million , and deposit growth of $ 86.6 million . the mortgage banking business line continues to grow , with residential real estate
| 11,648 |
as a result of the offering , we received aggregate net proceeds , after underwriting discounts and commissions and other offering expenses , of approximately $ 48.3 million . since inception , we have incurred significant operating losses . our net losses were $ 51.0 million and $ 49.3 million for the years ended december 31 , 2019 and 2018 , respectively . as of december 31 , 2019 , we had an accumulated deficit of $ 157.8 million . we expect to continue to incur significant expenses and operating losses for the foreseeable future . in addition , we anticipate that our expenses will increase in connection with our ongoing activities , as we : · continue development activities for srk-015 , our first product candidate , including the conduct of our topaz phase 2 clinical trial ; · continue research and development activities for srk-181 , including the conduct of our phase 1 clinical trial ; · continue research and development activities to support our collaboration with gilead ; · continue research and development activities to allow us to nominate a product candidate that targets rgmc to pursue in iron-restricted anemias ; · continue to discover , validate and develop additional product candidates through the use of our proprietary platform ; · maintain , expand and protect our intellectual property portfolio ; · hire additional research , development and business personnel ; and · continue to build the infrastructure to support our operations as a public company . to date , we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future . if we successfully complete clinical development and obtain regulatory approval for srk‑015 , srk-181 or any of our future product candidates , we may generate revenue in the future from product sales . in addition , if we obtain regulatory approval for srk‑015 , srk-181 or any of our future product candidates , we expect to incur significant expenses related to developing our commercialization capability to support product sales , marketing and distribution activities . 117 financial operations overview revenue no revenues have been recorded from the sale of any commercial product . revenue generation activities have been limited to collaborations , containing research services and the issuance of a license . currently , revenue is being recognized related to the gilead collaboration agreement which was executed in december 2018 , and we began recognizing associated revenue in 2019. under the gilead collaboration agreement , gilead has exclusive options to license worldwide rights to product candidates that emerge from three of the company 's gilead programs . revenue associated with the research and development and license performance obligations relating to the gilead programs is recognized as revenue as the research and development services are provided using an input method , according to the costs incurred on each gilead program and the costs expected to be incurred in the future to satisfy the performance obligation . the transfer of control occurs over time . in management 's judgment , this input method is the best measure of progress towards satisfying the performance obligations . we evaluate the measure of progress each reporting period and , if necessary , adjust the measure of performance and related revenue recognition . the estimated remaining costs is highly subjective , as the research is novel , therefore efforts to be successful may be significantly different than the estimated costs made at the balance sheet date . the amounts received that have not yet been recognized as revenue are recorded in deferred revenue on our consolidated balance sheet . we expect to recognize the deferred revenue according to costs incurred , over the remaining research term for each respective gilead program , which is up to three years from the execution of the agreement ; each research term is dependent on the timing of gilead either exercising its options for the gilead programs or terminating further development on the gilead programs prior to the expiration date of the research term . operating expenses research and development research and development expenses consist primarily of costs incurred for our research and development activities , including our product candidate discovery efforts , preclinical studies , manufacturing , and clinical trials under our research programs , which include : · employee-related expenses , including salaries , benefits and equity-based compensation expense for our research and development personnel ; · expenses incurred under agreements with third parties that conduct research and development and preclinical activities on our behalf ; · expenses incurred under agreements related to our clinical trials , including the costs for investigative sites and contract research organizations ( “ cros ” ) , that conduct our clinical trials ; · manufacturing process-development , clinical supplies and technology-transfer expenses ; · consulting and professional fees related to research and development activities ; · costs of purchasing laboratory supplies and non-capital equipment used in our internal research and development activities ; · costs related to compliance with clinical regulatory requirements ; and · facility costs and other allocated expenses , which include expenses for rent and maintenance of facilities , insurance , depreciation and other supplies . 118 research and development costs are expensed as incurred . costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks . nonrefundable advance payments for research and development goods and services to be received in the future from third parties are deferred and capitalized . the capitalized amounts are expensed as the related services are performed . a significant portion of our research and development costs have been external costs , which we track on a program-by-program basis after a clinical product candidate has been identified . however , we do not allocate our internal research and development expenses , consisting primarily of employee related costs , depreciation and other indirect costs , on a program-by-program basis as they are deployed across multiple projects . research and development activities are central to our business model . story_separator_special_tag product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials , as well as the associated clinical trial material requirements . we expect research and development costs to increase for the foreseeable future as our product candidate development programs progress , and we expect to incur additional costs in connection with our research and development activities under our collaboration with gilead . however , 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 . the successful development of srk‑015 , srk-181 and any future product candidates is uncertain . accordingly , at this time , we can not reasonably estimate or know the nature , timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of srk‑015 , srk-181 and any future product candidates . we are also unable to predict when , if ever , material net cash inflows will commence from the sale of our product candidates , if approved . this is due to the numerous risks and uncertainties associated with developing product candidates , including the uncertainty of : · the scope , progress , outcome and costs of our preclinical development activities , clinical trials and other research and development activities ; · establishing an appropriate safety profile ; · successful enrollment in and completion of clinical trials ; · whether our product candidates show safety and efficacy in our clinical trials ; · receipt of marketing approvals from applicable regulatory authorities , if any ; · establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers ; · obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates ; · significant and changing government regulation ; · commercializing the product candidates , if and when approved , whether alone or in collaboration with others ; and · continued acceptable safety profile of the products following any regulatory approval . 119 a change in the outcome of any of these variables with respect to the development of srk‑015 , srk-181 or any of our future product candidates could significantly change the costs and timing associated with the development of that product candidate . general and administrative general and administrative expenses consist primarily of employee-related expenses , including salaries , benefits and equity-based compensation expenses for personnel in executive , finance , business development , investor relations , legal , information technology and human resources functions . other significant general and administrative expenses include facility costs not otherwise included in research and development expenses , legal fees relating to patent and corporate matters and fees for accounting , consulting services , and corporate expenses . we anticipate that our general and administrative expenses will increase in the future as our business expands to support expected growth in research and development activities , including the continued development of our product candidates . these increases will likely include increased costs related to the hiring of additional personnel , as well as fees to outside consultants , among other expenses . we also anticipate continued expenses associated with being a public company , including costs for audit , legal , regulatory and tax-related services , director and officer insurance premiums and investor relations costs . other income ( expense ) , net other income ( expense ) , net consists primarily of interest income earned on our cash and cash equivalents and marketable securities , interest expense incurred on our credit facility , including amortization of debt discount and debt issuance costs , gains and losses on foreign currency invoices and non-cash changes in the fair value of the warrant issued in connection with our credit facility . story_separator_special_tag style= '' margin-left:10.2941176470588 % ; margin-right:10.2941176470588 % ; '' > from inception and prior to the ipo , we primarily funded our operations with the net proceeds of $ 109.2 million from sales of our convertible preferred stock and units . cash flows the following table provides information regarding our cash flows for the years ended december 31 , 2019 and 2018 ( in thousands ) : replace_table_token_4_th net cash ( used in ) provided by operating activities net cash used in operating activities was $ 63.1 million for the year ended december 31 , 2019 and consisted of our net loss of $ 51.0 million and changes in our assets and liabilities of $ 21.2 million , of which $ 25.0 million is a change in accounts receivable related to the milestone achieved in the gilead collaboration . the uses of cash were partially offset by non-cash adjustments of $ 9.1 million , primarily from equity-based compensation . net cash provided by operating activities was $ 24.6 million for the year ended december 31 , 2018 and consisted of changes in our assets and liabilities of $ 67.9 million , primarily related to a change of $ 62.9 million from deferred revenue related to the gilead collaboration and non-cash adjustments of $ 6.0 million , primarily from equity compensation , partially offset by our net loss of $ 49.3 million . net cash used in investing activities net cash used in investing activities was $ 62.2 million for the year ended december 31 , 2019 compared to $ 60.2 million for the year ended december 31 , 2018. net cash used in investing activities for both periods was primarily associated with transactions involving our marketable securities , including purchases , sales , and maturities .
| the $ 14.1 million increase in costs associated with srk-181 includes manufacturing costs in preparation for our phase 1 clinical trial as well as a one-time option fee owed upon its product candidate declaration , partially offset by : o $ 2.0 million decrease in costs related to other early development candidates and unallocated costs ; and o $ 1.6 million decrease in our costs associated with srk-015 , due to timing of manufacturing development in 2018 . · $ 7.4 million increase in internal research and development costs , which was primarily driven by an increase in employee compensation and benefits costs , associated with increased headcount and related overhead as we continued to build out our research and development functions , in addition to an increase in facility costs as we added the additional space to our current location in july 2018. we expect our research and development expenses to increase as we continue to advance the development of our product candidates , including srk-015 , through our topaz phase 2 clinical trial , and srk-181 , through our phase 1 clinical trial . additionally , we expect to continue to conduct research under the gilead collaboration . general and administrative general and administrative expense was $ 20.8 million for the year ended december 31 , 2019 compared to $ 14.4 million for the year ended december 31 , 2018 , an increase of $ 6.4 million or 44.7 % . the increase in general and administrative expense was primarily attributable to an increase of $ 4.9 million in employee compensation and benefits , related to increased headcount , $ 1.0 million in professional services , and $ 0.5 million in other costs , such as those related to operating as a public company . the current year growth in general and administrative expense is primarily attributed to operating as a public company for a full year as compared to the prior year with the completion of our ipo in may 2018 . 121 we anticipate that our general and administrative expenses will increase in
| 11,649 |
the purpose of the phase 2 study ( nct03234465 ) is to evaluate the efficacy ( preventing the occurrence and shortening the duration of severe oral mucositis ( “ som ” ) , safety and tolerability of topically administered ag013 rinse compared to the placebo for reducing the incidence and severity of om in patients undergoing traditional chemoradiation for the treatment of head and neck cancer . key efficacy measures include collection of data regarding the duration , time to development , and overall incidence of om ( world health organization scale used ) during the active treatment phase , beginning from the start of chemoradiation therapy until 2 weeks following its completion . 58 on december 2 , 2019 we announced completion of enrollment in our phase 2 clinical trial . as of february 27 , 2020 , all 200 randomized patients , have completed the phase 2 clinical trial . we expect to release top line results f rom the trial early in the second quarter of 2020. an interim safety analysis was requested by the fda on patients from our phase 2 clinical trial of ag013 for the treatment of om . we completed enrollment of the interim safety analysis cohort , which included 24 randomized patients in our phase 2 clinical trial of ag013 for the treatment om . nineteen of those patients were included in the unblinded safety evaluation , of which 10 received ag013 . we announced positive results from our interim safety analysis in may , 2018. the study provided information that , we believe , likely indicates that the overall incidence of severe om is less than would be anticipated in the general head and neck cancer population . safety was evaluated on the basis of treatment-emergent adverse events , vital signs , weight , physical examinations , clinical laboratory assessments and the presence of ag013 in whole blood . tolerability measures ( taste , consistency and smell ) were collected from the patient diaries . in addition , the reasons for study treatment discontinuation were also summarized . following review of the data by an independent data safety monitoring board ( dsmb ) , it was concluded that the clinical trial can proceed with no changes to the study . the data analysis indicated that the distribution of adverse events was similar between ag013 and placebo . the serious adverse events reported were consistent with those commonly reported in a head and neck cancer population receiving traditional chemoradiation therapy treatments and included fevers , neutropenia , anemia , nausea and vomiting , infections and oral ( mouth and throat ) pain and there were no reports of ag013 related bacteremia or sepsis . of patients that discontinued participation in the clinical study , 4 patients experienced adverse events , including 3 patients who developed nausea and vomiting , 2 patients that were non-compliant with the study procedures and 3 patients developed severe om . the dsmb met again in december 2019 and reviewed safety data on the first 150 patients who completed the trial and determined that the clinical trial could continue with no adjustments or further review . on september 30 , 2019 , we made a poster presentation at the european society for medical oncology congress where we announced initial blinded blended data from our phase 2 , placebo-controlled , clinical trial of ag013 in oral mucositis . the presentation described the methods and initial blinded results from the ongoing phase 2 clinical trial for our lead oral mucositis product candidate , ag013 . the initial blinded data , submitted in the abstract , reflected the results for 42 of the 71 enrolled and randomized patients across 48 study sites who had completed their treatment course and demonstrated that in the blinded , combined placebo and active treatment groups , there was sufficient evidence of efficacy and safety to continue the study . additional data accumulated since poster submission , indicated the blinded efficacy evaluation , which included any patient with som after week one of treatment and those receiving a cumulative dose of 55 gy ( week 6 of treatment ) , demonstrated an overall som incidence of 47 % , which we believe is lower than would be expected based on historical data in the head and neck cancer population receiving this chemoradiation regimen . the overall rate of som was reported in only 13.1 % ( 110 of 842 ) of evaluable visits . the overall safety profile continues to be consistent with those adverse events that normally occur in cancer patients receiving chemoradiation therapy . the study , however , remains blinded and individual treatment responses remain to be identified . our antibiotic product candidate-preclinical members of our scientific team discovered that a certain bacterial strain produces mu1140 , a molecule belonging to the novel class of antibiotics known as lantibiotics . lantibiotics , such as mu1140 , are highly modified peptide antibiotics made by a small group of gram-positive bacterial species . over 700 lantibiotics have been characterized , to date . we believe lantibiotics are generally recognized by the scientific community to be potent antibiotic agents . in nonclinical testing , mu1140 has shown activity against all gram-positive bacteria against which it has been tested , including those responsible for a number of healthcare associated infections , or hais . a high percentage of hospital-acquired infections are caused by highly resistant bacteria such as methicillin-resistant staphylococcus aureus ( mrsa ) or multidrug-resistant gram-negative bacteria . we believe the need for novel antibiotics is increasing as a result of the growing resistance of target pathogens to existing fda approved antibiotics on the market . lantibiotics have been difficult to investigate for their clinical usefulness as therapeutic agents in the treatment of infectious diseases due to a general inability to produce or synthesize sufficient quantities of pure amounts of these molecules . traditional fermentation methods can only produce minute amounts of the lantibiotic . story_separator_special_tag in june 2012 , we entered into the lantibiotic exclusive channel collaboration agreement ( “ lantibiotic ecc ” ) with precigen for the development and commercialization of the native strain of mu1140 and related homologs using precigen 's advanced transgene and cell engineering platforms . through our work with precigen , we have been able to produce a significant increase in the fermentation titer of mu1140 compared to standard fermentation methods and have discovered a new purification process for mu1140 . our work with precigen generated a substantial number of homologs of mu1140 . in january 2020 precigen consummated a reorganization of its ongoing api fermentation operations and assets into ilh holdings , inc. which at the time was an affiliate of precigen . in connection with the reorganization , precigen assigned the lantibiotic ecc and related stock issuance agreements to ilh holdings . following such reorganization , precigen divested certain of its assets to ts biotechnology holdings , llc which included ilh holdings and shares of oragenics securities held by precigen . as a result of such change by precigen we expect to continue our research and development and collaboration efforts with ilh holdings to develop potential derivatives of the mu1140 molecule using genetically modified bacteria . 59 in our pre-clinical studies to support a potential ind filing with the fda , we tested a total of six homologs of mu1140 for certain compound characteristics , including but not limited to : drug activity ( based on minimum inhibitory concentration or “ mic ” ) equal or better than “ standard of care ” drugs against certain drug-resistant bacteria , safety , toxicity , stability , and manufacturability . an animal study specifically evaluated homolog efficacy in relation to survival , measurable amounts of clostridium difficile ( “ c . diff ” ) colony forming units , and toxin levels . three homologs demonstrated promising results with one homolog , og253 , delivered rectally achieving a 100 % survival rate throughout the entire study in contrast to an approximately 30 % survival rate for the vancomycin positive control . based on these early results , we selected a lead candidate , og253 , for which we had a pre-ind meeting with the fda in november of 2015 regarding the pursuit of an ind for og253 . following additional research and development on second generation lantibiotics , in august of 2016 , we opted to select a second generation lantibiotic , og716 , for treatment of c. diff as our new lead candidate . og716 is a new , orally-active homolog , that has exhibited positive results in an animal model for potential treatment of c. diff . generated from our mu1140 platform , this new lantibiotic showed promising efficacy in reducing clinically relevant c. diff infections as measured by increased animal survival and decreased relapse as well as reduced production of toxins a & b and c. diff spores . the timing of the filing of an ind regarding og716 is subject to our having sufficient available capital given all of our anticipated needs and expected requirements in connection with our ongoing research and development initiatives . we currently expect the ind for a first-in-human clinical trial of og716 to be filed with the fda based on our ability to complete the requisite studies , contingent on sufficient funding . based upon the funding available we expect to conduct some of the requisite studies . while we commenced certain of these studies at the end of 2019 , we expect to focus on efficient and cost-effective manufacturing of the product to support and be able to conduct further broad-based studies . other product candidates and technologies . in addition to our lantibiotics and oral mucositis product candidates , we also have other candidates and technologies in the oral care and weight loss areas . we do not intend to continue to develop these potential product candidates and technologies without partnering with a third party . we out-licensed the continued research and development of our weight loss product candidate in december 2013 to , lpthera llc , and lpthera llc continues to work to develop a product for commercial use . our oral care product candidate smart replacement therapy is positioned for out-licensing opportunities . recent developments precigen restructuring . in january 2020 precigen ( formerly known as intrexon corporation ) consummated a reorganization of its ongoing api fermentation operations and assets into ilh holdings , inc. which at the time was an affiliate of precigen . in connection with the reorganization , precigen assigned the lantibiotic ecc and related stock issuance agreements to ilh holdings . following such reorganization , precigen divested certain of its assets to ts biotechnology holdings , llc which included ilh holdings and shares of oragenics securities held by precigen . financial overview net revenues we did not generate any revenue for the years ended december 31 , 2019 and 2018 , respectively from the sales or licensing of our product candidates . research and development expenses research and development consist of expenses incurred in connection with the discovery and development of our product candidates . these expenses consist primarily of employee-related expenses , which include salaries and benefits and attending science conferences ; expenses incurred under our ecc agreements with third parties and under other agreements with contract research organizations , investigative sites and consultants that conduct our clinical trials and a substantial portion of our nonclinical studies ; the cost of acquiring and manufacturing clinical trial materials ; facilities , depreciation and other allocated expenses , which include direct and allocated expenses for rent and maintenance of facilities and equipment , and depreciation of fixed assets ; license fees , for and milestone payments related to , in-licensed products and technology ; stock-based compensation expense ; and costs associated with nonclinical activities and regulatory approvals . we expense research and development costs as incurred . 60 our research and development expenses can be divided into ( i ) clinical research , and ( ii ) nonclinical research and development activities .
| other income ( expense ) was $ 311,566 for the year ended december 31 , 2019 compared to $ 79,999 for the year ended december 31 , 2018 ; an increase of $ 231,567. the increase was primarily attributable to an increase in interest income of $ 233,484. liquidity and capital resources since our inception , we have funded our operations primarily through the sale of equity securities in our initial public offering , the sale of equity securities and warrants in private and public offerings , debt financing , warrant exercises and grants . as of december 31 , 2019 , we had an accumulated deficit of $ ( 127,352,826 ) and we have yet to achieve profitability . we incurred net losses of $ ( 15,566,003 ) and $ ( 9,914,141 ) for the years ended december 31 , 2019 and 2018 , respectively . we expect to incur significant and increasing operating losses for the foreseeable future as we seek to advance our product candidates through nonclinical testing and clinical trials to ultimately obtain regulatory approval and eventual commercialization . we will need to raise additional capital to fund our operations . we anticipate that our cash resources as of december 31 , 2019 , will be sufficient to fund our operations as presently structured through the second quarter of 2021. there can be no assurance that additional capital will be available to us on acceptable terms , if at all . adequate additional funding may not be available to us on acceptable terms , or at all . we expect that research and development expenses will increase along with general and administrative costs , as we grow and operate our business . the following table sets forth the primary sources and uses of cash for each of the periods indicated : replace_table_token_1_th during the years ended december 31 , 2019 and 2018 , our operating cash flows from operations used cash of $ ( 13,012,843 ) and $ ( 9,079,817 ) , respectively . the use of cash in all periods primarily resulted from our net losses adjusted for non-cash items and changes in operating assets and liabilities . we had working capital surplus of $ 16,987,690 and $ 20,765,707 as of december 31 , 2019 and 2018 , respectively . additional details of our financing activities for the periods reflected in this report are provided below : financings the may 2017 series a preferred stock financing on may 10 , 2017 we
| 11,650 |
story_separator_special_tag justify '' > our cash and restricted cash balance was $ 7,211,000 as of december 27 , 2020 , compared to $ 25,000 as of december 29 , 2019. the following table summarize key components of our audited consolidated cash flows for the fiscal years ended december 27 , 2020 and december 29 , 2019 : ( in thousands ) for the fiscal years ended replace_table_token_2_th operating activities net cash from operating activities decreased $ 13,078,000 in 2020 compared to 2019. there were variations in the components of the cash from operations between the two periods . our net loss in 2020 was $ 14,860,000 , compared to a net loss in 2019 of $ 1,018,000. the net positive adjustments to reconcile these net losses to net cash provided by ( or used in ) operations were $ 3,376,000 in 2020 compared to $ 2,612,000 in 2019. the primary components of the adjustments to reconcile the net loss to net cash from operations for each year were as follows : for the fiscal year ended december 27 , 2020 : ● a positive adjustment to reconcile cash due to an increase in impairment expenses of $ 9,295,000 ● a positive adjustment to reconcile cash due to accretion expense related to each of the following : ( i ) the term loan , ( ii ) the preferred shares , and ( iii ) the acquisition purchase price payables totaling $ 1,516,000 ● a positive adjustment to due to an increase in accrued advertising of $ 1,398,000 ● a negative adjustment to reconcile cash due to an increase in accrued interest receivable from an affiliate of $ 3,631,000 ● a negative adjustment to reconcile cash due to a decrease in accounts payable and accrued expenses of $ 1,687,000 ● a negative adjustment to reconcile cash due to an increase in deferred income tax assets of $ 4,077,000 for the fiscal year ended december 29 , 2019 : ● a positive adjustment to reconcile cash due to an increase in accounts payable and accrued expenses of $ 3,771,000 ● a positive adjustment to reconcile cash due to accretion expense related to each of the following : ( i ) the term loan , ( ii ) the preferred shares , and ( iii ) the acquisition purchase price payables totaling $ 2,505,000 ● a positive adjustment to reconcile cash due to an increase in dividends payable on preferred stock of $ 1,431,000 ● a negative adjustment to reconcile cash due to a decrease in deferred income of $ 2,364,000 ● a negative adjustment to reconcile cash due to the recorded gain on sale of refranchised restaurants in 2019 in the amount of $ 1,795,000 ● a negative adjustment to reconcile cash due to a decrease in accrued interest payable of $ 982,000 35 investing activities net cash used in investing activities increased by $ 27,562,000 in 2020 compared to 2019 primarily due to the acquisition of johnny rockets in 2020 for $ 23,918,000 ( net of cash acquired ) and by an increase in advances to affiliates of $ 4,383,000 over the 2019 levels . financing activities net cash from financing activities increased by $ 48,454,000 in 2020 compared to 2019. proceeds from borrowings were $ 51,272,000 higher in 2020 than in 2019 due to our $ 80,000,000 whole business securitization . we also issued preferred stock in 2020 , resulting in net cash proceeds of $ 8,122,000. our repayments of borrowings were $ 7,569,000 higher in 2020 than in 2019. dividends in connection with the acquisition of fccg by the company , in december 2020 , we declared a special stock dividend ( the “ special dividend ” ) payable only to holders of our common stock , other than fccg , on the record date , consisting of 0.2319998077 shares of our 8.25 % series b cumulative preferred stock ( the “ series b preferred stock ” ) for each outstanding share of common stock held by such stockholders . the value of fractional shares of series b preferred stock was paid in cash and amounted to approximately $ 29,000. the special dividend was paid on december 23 , 2020 and resulted in the issuance of 520,145 additional shares of series b preferred stock with a market value on the payment date of approximately $ 8,885,000. on february 7 , 2019 , our board of directors declared a stock dividend equal to 2.13 % on its common stock , representing the number of shares equal to $ 0.12 per share of common stock based on the closing price as of february 6 , 2019. the stock dividend was paid on february 28 , 2019 to stockholders of record as of the close of business on february 19 , 2019. the company issued 245,376 shares of common stock at a per share price of $ 5.64 in satisfaction of the stock dividend . no fractional shares were issued , instead the company paid stockholders cash totaling $ 1,670 for fractional interests based on the market value of the common stock on the record date . the declaration and payment of future dividends , as well as the amount thereof , are subject to the discretion of our board of directors . the amount and size of any future dividends will depend upon our future results of operations , financial condition , capital levels , cash requirements and other factors . there can be no assurance that we will declare and pay dividends in future periods . securitization on march 6 , 2020 , we completed a whole-business securitization ( the “ securitization ” ) through the creation of a bankruptcy-remote issuing entity , fat brands royalty i , llc ( “ fat royalty ” ) in which fat royalty issued notes ( the “ securitization notes ” ) pursuant to an indenture and the supplement thereto ( collectively , the “ indenture ” ) . story_separator_special_tag the securitization notes issued in march 2020 consist of the following ( the “ series a and b notes ” ) : replace_table_token_3_th net proceeds from the issuance of the series a and b notes were $ 37,389,000 , which consists of the combined face amount of $ 40,000,000 , net of discounts of $ 246,000 and debt offering costs of $ 2,365,000. the discount and offering costs will be accreted as additional interest expense over the expected term of the series a and b notes . 36 a portion of the proceeds from the series a and b notes were used to repay the remaining $ 26,771,000 in outstanding balance under the loan and security agreement ( the “ loan and security agreement ” ) with the lion fund , l.p. and the lion fund ii , l.p. ( collectively , “ lion ” ) and to pay securitization debt offering costs . the remaining proceeds from the securitization were available for working capital . on september 21 , 2020 , fat royalty completed the sale of an additional $ 40 million of series 2020-2 fixed rate asset-backed notes ( the “ series m-2 notes ” ) , increasing our securitization notes to $ 80 million . the series m-2 notes consist of the following : note seniority issue amount coupon first call date final legal maturity date m-2 subordinated $ 40,000,000 9.75 % 4/27/2021 4/27/2026 net proceeds from the issuance of the series m-2 notes were $ 35,371,000 , which consists of the face amount of $ 40,000,000 , net of discounts of $ 3,200,000 and debt offering costs of $ 1,429,000. the discount and offering costs will be accreted as additional interest expense over the expected term of the series a and b notes . we used approximately $ 24,730,000 to acquire johnny rockets and the balance of the proceeds were available as working capital . the series m-2 notes are subordinate to the series a-2 notes and series b-2 notes . all securitization notes issued under the base indenture are secured by an interest in substantially all of the assets of fat royalty , including the johnny rockets companies , contributed to fat royalty and are obligations only of fat royalty under the base indenture and not obligations of the company . while the securitization notes are outstanding , scheduled payments of principal and interest are required to be made on a quarterly basis , with the scheduled principal payments of $ 1,000,000 per quarter on each of the series a-2 and series b-2 notes and $ 200,000 per quarter on the series m-2 notes beginning the second quarter of 2021. it is expected that the securitization notes will be repaid prior to the final legal maturity date , with the anticipated repayment date occurring in january 2023 for the a-2 notes , october 2023 for the b-2 notes and april 2026 for the series m-2 notes ( the “ anticipated repayment dates ” ) . if fat royalty has not repaid or refinanced the securitization notes prior to the applicable anticipated repayment date , additional interest expense will begin to accrue and all additional proceeds will be utilized for additional amortization , as defined in the indenture . in connection with the securitization , fat royalty and each of the franchise entities ( as defined in the indenture ) entered into a management agreement with the company , dated as of the closing date ( the “ management agreement ” ) , pursuant to which we agreed to act as manager of fat royalty and each of the franchise entities . the management agreement provides for a management fee payable monthly by fat royalty to the company in the amount of $ 200,000 , subject to three percent ( 3 % ) annual increases ( the “ management fee ” ) . the primary responsibilities of the manager are to perform certain franchising , distribution , intellectual property and operational functions on behalf of the franchise entities pursuant to the management agreement . the securitization notes are secured by substantially all of the assets of fat royalty , including the equity interests in the franchise entities . the restrictions placed on the fat royalty subsidiaries require that the securitization principal and interest obligations have first priority , after the payment of the management fee and certain other fat royalty expenses ( as defined in the indenture ) , and amounts are segregated monthly to ensure appropriate funds are reserved to pay the quarterly principal and interest amounts due . the amount of monthly cash flow that exceeds the required monthly debt service is generally remitted to the company . once the required obligations are satisfied , there are no further restrictions , including payment of dividends , on the cash flows of the subsidiaries . the securitization notes have not been and will not be registered under the securities act or the securities laws of any jurisdiction . 37 the securitization notes are subject to certain financial and non-financial covenants , including a debt service coverage ratio calculation , as defined in the indenture . in the event that certain covenants are not met , the notes may become partially or fully due and payable on an accelerated schedule . in addition , fat royalty may voluntarily prepay , in part or in full , the notes in accordance with the provisions in the indenture . as of december 27 , 2020 , fat royalty was in compliance with these covenants . during the twelve months following the date of the issuance of this annual report on form 10-k , the company anticipates that it may refinance the securitization notes and series m-2 notes at an amount greater than the outstanding principal indebtedness and borrowing rates that are lower than its existing rates , which could provide additional liquidity to the company .
| the increase was primarily the result of an increase in covid driven bad debt expense of $ 904,000 ; increased occupancy costs of $ 337,000 relating to new office space ; an increase in legal fees of $ 738,000 relating primarily to various litigation matters ; an increase in amortization of intangible assets of $ 385,000 arising from a full year of amortization for elevation burger and the addition of johnny rockets in 2020 ; and an increase in public company expenses of $ 494,000 relating to various capital transactions in 2020. our refranchising efforts were significantly negatively impacted by the covid pandemic . during the fiscal year ended december 27 , 2020 , our refranchising efforts resulted in a net loss of $ 3,827,000. the refranchising loss consisted of losses on the sale or closure of certain restaurant locations in the amount of $ 1,463,000 , plus restaurant operating expenses , net of food sales , of $ 2,364,000. during the fiscal year ended december 29 , 2019 , our refranchising efforts resulted in a net loss of $ 219,000. the refranchising loss consisted of gains on the sale of six restaurant locations to new franchisees in the amount of $ 1,795,000 , less restaurant operating expenses , net of food sales , of $ 2,014,000. we review our goodwill and other intangible assets regularly throughout the year . in large part as a result of impacts from covid-19 , this analysis resulted in recognition of impairment charges of these assets in the amount of $ 9,295,000 for the year ended december 27 , 2020. there were no impairment charges during the 2019 fiscal year . advertising expenses totaled $ 5,218,000 during the fiscal year ended december 27 , 2020 , compared with $ 4,111,000 during the prior year period , representing an increase of $ 1,107,000 ( 27 % ) . these expenses generally vary in relation to the advertising revenue recognized . however , the increase in 2020 is largely the result of expensing advertising expenditures in excess of the advertising fees collected from franchisees . 33 other expense , net – other expense for
| 11,651 |
the adjusted notional amount outstanding of $ 416.9 trillion as of june 30 , 2012 indicates increased clearing and compression of otc derivatives resulting , in part , in the $ 23.2 trillion , or 5.3 % , decline in the total notional amounts outstanding when compared to december 31 , 2011 and the $ 73.7 trillion , or 15 % , decline when compared to june 30 , 2011. isda believes that the adjusted numbers provide better insight into underlying market activity and trends by showing the impact of clearing , netting , compression and collateral on notional amounts outstanding in the otc derivatives market . in the interest rate derivatives market , adjusted notional amounts outstanding decreased to $ 341.2 trillion as of june 30 , 2012 as compared to $ 362.4 trillion and $ 405.1 trillion as of december 31 , 2011 and june 30 , 2011 , respectively . this was a decrease of $ 21.2 trillion , or 5.9 % , and $ 63.9 trillion , or 15.8 % , when compared to december 31 , 2011 and june 30 , 2011 , respectively . the decline in adjusted notional amounts outstanding was attributed to the effects of compression and lower interest rate derivative activity . isda estimates that 54.2 % of adjusted interest rate swap volumes were centrally cleared as of june 30 , 2012 , up from 21.3 % as of december 31 , 2007. isda estimates that 43.2 % of forward rate agreements were centrally cleared as of june 30 , 2012 , up from 0.0 % at december 31 , 2010. in the credit default swaps market , adjusted notional amounts outstanding decreased by $ 1.6 trillion , or 6.2 % , to $ 24.3 trillion from $ 25.9 trillion as of december 31 , 2011 , the lowest reported level since 2006 due to the substantial effects of compression and lower credit derivative activity . isda estimates that 10.7 % of credit default swaps were centrally cleared as of june 30 , 2012 , up from 7.9 % as of december 31 , 2010. competitive and regulatory environment another major external market factor affecting our business and results of operations is competition , which may take the form of competitive pressure on the commissions we charge for our brokerage services or competition for brokerage and technology development personnel with extensive experience in the specialized markets we serve . we currently compete for the services of productive brokers with other wholesale market participants . while the demand for productive brokers has remained strong over the last few years , we believe such demand has begun to lessen as the wholesale brokerage industry has been impacted by lower trading volumes and sluggish trading conditions in certain markets we serve . however , the consolidation and personnel layoffs by dealers , hedge funds and other market participants over the last few years , as well as dealers exiting proprietary trading operations , has increased competition to provide brokerage services to a smaller number of market participants in the near term . in addition , we believe that the ongoing global regulatory overhaul of many of the markets in which we provide our services has led to continued uncertainty in 2012 and resulted in lower trading volumes and fewer participants in these markets . regulators and legislators in the u.s. and abroad have proposed and , in some instances , adopted a slate of regulatory changes that call for , among other things , central clearing of certain derivatives , greater transparency and reporting of derivatives transactions , mandatory trading of certain derivatives transactions on regulated exchanges or swap execution facilities ( sef ) and increased use of electronic trading system technologies . we believe that these new and proposed regulations have not yet eliminated the uncertainty that has persisted in many otc derivatives markets since the start of the financial crisis . during the third quarter of 2012 , ice announced that all cleared swaps in energy products would be converted to regulated futures contracts on october 15 , 2012 on the basis that trading those products as futures would present significant advantages to customers seeking to avoid the impact of the dodd-frank act . cme also announced that certain contracts already listed as futures on cme clearport would be made available for trading on cme globex on october 12 , 2012 , with more to be added in the future . subject to the rules and regulations applicable to futures products , including with respect to 54 block trades , we expect to continue to broker all the products that we have customarily brokered as swaps prior to october 12 , 2012 without regard to whether those products are now traded as futures . we remain optimistic that pending regulatory reform , including requirements for enhanced regulatory transparency , central clearing and efficient execution , will benefit and eventually grow the global derivatives markets . we remain confident that our business will qualify in the u.s. as a sef , and in europe as an organized trading facility . we are also actively preparing to meet all regulatory requirements necessary to support the brokerage of u.s. energy future contracts , as well as other futures contracts that migrate over from the swaps market . over the past year , we have continued to expand our proprietary electronic trade execution capabilities as well as the number of users of our hybrid electronic trading platforms . we believe that this technological capability will position us well in the future as regulatory rules are finalized and implemented . financial overview our results for the last three years continue to reflect the challenging economic and market conditions that have existed following the late-2000 's financial crisis , during which many market participants , including many of our key customers , had to deal with reduced liquidity , credit contraction , market consolidation and market participant bankruptcies . story_separator_special_tag our geographic and product diversity enabled us to take advantage of areas of market strength over this period , even as several otc derivative markets in which we provide our services were impacted by economic and regulatory uncertainty . as more fully discussed below , our results of operations are significantly impacted by the amount of revenues we generate and the amount of compensation and benefits we provide to our employees . the following factors had a significant impact on our revenues we generate and employee costs during the three year period ended december 31 , 2012 : our total revenues decreased 9.0 % to $ 924.6 million for the year ended december 31 , 2012 from $ 1.02 billion for the year ended december 31 , 2011. the main factors contributing to this decrease in our revenues were : · decreased trading activity in many of the derivative markets in which we provide our services due to ( i ) sluggish global economic conditions , ( ii ) fiscal , tax , political and market uncertainty , and ( iii ) sovereign debt issues in the eurozone ; · regulatory uncertainty as it relates to market structure and operations in otc derivative markets , especially in north america and europe , including the uncertainty resulting from the conversion of otc swaps to exchange-traded futures contracts in many north american energy products ; · lower market volatility in many derivative markets during the year compared to the prior year , including in many fixed income and equity derivatives ; · lower trading volumes in many of the emerging markets globally in which we provide brokerage services ; · lower trading activity in the u.s. in the fourth quarter of 2012 due to hurricane sandy and its effects on customer trading operations ; · the weakening of the euro relative to the u.s. dollar and its effect on the translation of brokerage revenues in emea ; and · the closure of certain unprofitable brokerage desks globally . offsetting the above factors were the following factors that affected our brokerage and other revenues , including : · contributions from investments in new brokerage businesses in certain financial products in france and switzerland ; · the continued strong performance of our trayport subsidiary , which led to an increase in our software , analytics and market data revenue ; · increased clearing services revenues due to a variation in the mix of products and exchanges utilized by our new and existing clearing service customers at kyte ; and · increased use of our electronic matching sessions and hybrid electronic trading systems by our customers . the main factors contributing to our increase in total revenues for the year ended december 31 , 2011 from the year ended december 31 , 2010 are set forth below under year ended december 31 , 2011 compared to the year ended december 31 , 2010. 55 the most significant component of our cost structure is employee compensation and benefits , which includes salaries , sign-on and retention bonuses , incentive compensation and related employee benefits and taxes . our employee compensation and benefits expense decreased 12.9 % to $ 546.5 million for the year ended december 31 , 2012 from $ 627.4 million for the year ended december 31 , 2011. our compensation and employee benefits for all employees have both a fixed and a variable component . base salaries and benefit costs are primarily fixed for all employees while performance bonuses constitute the variable portion of our compensation and employee benefits . sign-on and retention bonuses , when granted , also increase the fixed component of our compensation and employee benefits for the remainder of the term over which such bonus is earned by the employee . within overall compensation and employee benefits , the employment cost of our brokerage personnel is the key component . bonuses for brokerage personnel are primarily based on individual performance and or the operating results of their related brokerage desk . additionally , a portion of our bonus expense is subject to contractual guarantees that may require us to make bonus payments to brokers regardless of their performance in any particular period . for many of our brokerage employees , bonuses constitute a significant component of their overall compensation . broker performance bonuses decreased to $ 170.4 million for the year ended december 31 , 2012 from $ 244.0 million for the year ended december 31 , 2011. further , we may pay sign-on bonuses to certain newly-hired brokers and retention bonuses to certain of our existing brokers who agree to long-term employment agreements . these bonuses may be paid in the form of cash or restricted stock units ( rsus ) and are typically expensed over the term of the related employment agreement for cash bonuses and the related service period for rsus , which is generally two to four years . these employment agreements typically contain provisions requiring the repayment of all or a portion of the cash payment and forfeiture provisions for unvested rsus should the employee voluntarily terminate his or her employment or if the employee 's employment is terminated for cause during the initial term of the agreement . compensation expense resulting from the amortization of broker sign-on and retention bonuses was $ 34.6 million for the year ended december 31 , 2012 , as compared to $ 41.6 million for the year ended december 31 , 2011 . 56 results of consolidated operations the following table sets forth our consolidated results of operations for the periods indicated : replace_table_token_4_th 57 the following table sets forth our consolidated results of operations as a percentage of our revenues , net of interest and transaction-based expenses for the periods indicated : replace_table_token_5_th year ended december 31 , 2012 compared to the year ended december 31 , 2011 net ( loss ) income gfi 's net loss for the year ended december 31 , 2012 increased $ 6.8 million to $ 10.0 million from a net loss of $ 3.2 million for the year ended december 31 , 2011.
| for our three brokerage segments decreased by $ 95.6 million , or 12.2 % , to $ 686.8 million for the year ended december 31 , 2012 from $ 782.4 million for the year ended december 31 , 2011. the decrease in total revenues for our brokerage segments was primarily due to the factors described above under year ended december 31 , 2012 compared to the year ended december 31 , 2011. 67 · total revenues for clearing and backed trading decreased $ 5.0 million , or 3.0 % , to $ 159.9 million for the year ended december 31 , 2012 from $ 164.9 million for the year ended december 31 , 2011. the decrease was due , in large part , to a decrease in equity earnings of unconsolidated businesses , a decrease in brokerage revenues at kyte , lower clearing services revenues due to a variation in the mix of products and exchanges utilized by our new and existing clearing service customers and a decrease in the number of trades cleared by our kyte subsidiary . · total revenues for our all other segment primarily consisted of revenues generated from sales of software , analytics and market data . total revenues from all other increased by $ 9.7 million , or 14.2 % , to $ 77.9 million for the year ended december 31 , 2012 from $ 68.2 million for the year ended december 31 , 2011. this increase was due , in large part , to an increase in software , analytics and market data revenues at our trayport subsidiary due to growth in its customer base , as well as new product offerings . total interest and transaction-based expenses · total interest and transaction-based fees for our three brokerage segments decreased by $ 1.5 million , or 6.0 % , to $ 23.7 million for the year ended december 31 , 2012 from $ 25.2 million for the year ended december 31 , 2011. this decrease was primarily due to a decrease in brokerage revenues executed on a matched
| 11,652 |
with respect to pools of similar loans , allocations are assigned based upon historical experience subject to a floor , unless the rate of loss is expected to be greater than historical losses as noted below . a detailed analysis is performed on loans that are classified but determined not to be impaired which incorporates different scenarios where the risk that the borrower will be unable or unwilling to repay its debt in full or on time is combined with an estimate of loss in the event the borrower can not pay to develop non-specific allocations for such loan pools . these allocations may be adjusted based on the other factors cited above . an appropriate level of general allowance for pooled loans is determined by portfolio segment using historical loss percentages subject to a floor , supplemented with other environmental factors based on the risks present for each portfolio segment . these factors include consideration of the following : levels of , and trends in , delinquencies and impaired loans ; trends in volume and terms of loans ; effects of any changes in risk selection and underwriting standards ; other changes in lending policies , procedure , and practices ; experience , ability , and depth of lending management and other relevant staff ; national and local economic trends and conditions ; industry conditions ; and effects of changes in credit concentrations . it is also possible that the following could affect the overall process : social , political , economic and terrorist events or activities . all of these factors are susceptible to change , which may be significant . as a result of this detailed process , the allowance results in two forms of allocations , specific and general . these two components represent the total allowance for loan losses deemed adequate to cover probable losses inherent in the loan portfolio . commercial loans are subject to a dual standardized grading process administered by the credit administration function . these grade assignments are performed independent of each other and a consensus is reached by credit administration and the loan review officer . specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that indicate the loan is impaired . considerations with respect to specific allocations for these individual credits include , but are not limited to , the following : ( a ) does the customer 's cash flow or net worth appear insufficient to repay the loan ; ( b ) is there adequate collateral to repay the loan ; ( c ) has the loan been criticized in a regulatory examination ; ( d ) is the loan impaired ; ( e ) are there other reasons where the ultimate collectability of the loan is in question ; or ( f ) are there unique loan characteristics that require special monitoring . allocations are also applied to categories of loans considered not to be individually impaired , but for which the rate of loss is expected to be consistent with or greater than historical averages . such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values . in addition , general allocations are made for other pools of loans , including non-classified loans . these general pooled loan allocations are performed for portfolio segments of commercial and industrial , commercial real estate and multi-family , agri-business and agricultural , other commercial , consumer 1-4 family mortgage and other consumer loans , and loans within certain industry categories believed to present unique risk of loss . general allocations of the allowance are primarily made based on a three-year historical average for loan losses for these portfolios , subject to a floor , and are adjusted for economic factors and portfolio trends . due to the imprecise nature of estimating the allowance for loan losses , the company 's allowance for loan losses includes an unallocated component . the unallocated component of the allowance for loan losses incorporates the company 's judgmental determination of inherent losses that may not be fully reflected in other allocations , including factors such as the level of classified credits , economic uncertainties , industry trends impacting specific portfolio segments , broad portfolio quality trends and trends in the composition of the company 's large commercial loan portfolio and related large dollar exposures to individual borrowers . valuation and other-than-temporary impairment of available-for-sale investment securities the fair values of securities available-for-sale are determined on a recurring basis by obtaining quoted prices on nationally recognized securities exchanges or pricing models , which utilize significant observable inputs such as matrix pricing . this is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities ' relationship to other benchmark quoted securities . different judgments and assumptions used in pricing could result in different estimates of value . the fair value of certain securities is determined using unobservable inputs , primarily observable inputs of similar securities . 33 at the end of each reporting period , securities held in the investment portfolio are evaluated on an individual security level for other-than-temporary impairment in accordance with current accounting guidance . impairment is other-than-temporary if the decline in the fair value of the security is below its amortized cost and it is probable that all amounts due according to the contractual terms of a debt security will not be received . significant judgments are required in determining impairment , which includes making assumptions regarding the estimated prepayments , loss assumptions and the change in interest rates . story_separator_special_tag we consider the following factors when determining other-than-temporary impairment for a security or investment : ● the length of time and the extent to which the market value has been less than amortized cost ; ● the financial condition and near-term prospects of the issuer ; ● the underlying fundamentals of the relevant market and the outlook for such market for the near future ; and ● our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in market value . the assessment of whether a decline exists that is other-than-temporary , involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time . if , in management 's judgment , other-than-temporary impairment exists , the cost basis of the security will be written down to the computed net present value , and the unrealized loss will be transferred from accumulated other comprehensive loss as an immediate reduction of current earnings ( as if the loss had been realized in the period of other-than-temporary impairment ) . story_separator_special_tag addition , net interest income increased $ 3.8 million , or 2.5 % , to $ 155.0 million versus $ 151.3 million in 2018 and the provision for loan losses decreased $ 3.2 million , or 49.5 % . noninterest expense increased by $ 3.2 million , or 3.7 % and income tax expense increased $ 1.8 million , or 9.7 % . net interest income the following table presents a three-year average balance sheet and , for each major asset and liability category , its related interest income and yield or its expense and rate for the years ended december 31 , 2020 , 2019 and 2018 . 36 three year average balance sheet and net interest analysis replace_table_token_8_th ( 1 ) tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate . the tax equivalent rate for tax exempt loans and tax exempt securities acquired after january 1 , 1983 included the tax equity and fiscal responsibility act of 1982 ( “ tefra ” ) adjustment applicable to nondeductible interest expenses . taxable equivalent basis adjustments were $ 2.4 million , $ 2.1 million and $ 1.8 million for the years ended december 31 , 2020 , 2019 and 2018 , respectively . ( 2 ) loan fees are included as taxable loan interest income . net loan fees attributable to ppp loans were $ 9.0 million for the year ended december 31 , 2020. all other loan fees were immaterial in relation to total taxable loan interest income for the periods presented . ( 3 ) nonaccrual loans are included in the average balance of taxable loans . 37 the following table shows fluctuations in net interest income attributable to changes in the average balances of assets and liabilities and the yields earned or rates paid for the years ended december 31. net interest income – rate/volume analysis ( fully tax equivalent basis , dollars in thousands ) replace_table_token_9_th ( 1 ) the earning assets and interest bearing liabilities used to calculate interest differentials are based on average daily balances for 2020 , 2019 and 2018. the changes in net interest income are created by changes in interest rates and changes in the volumes of loans , investments , deposits and borrowings . in the table above , changes attributable to volume are computed using the change in volume from the prior year multiplied by the previous year 's rate , and changes attributable to rate are computed using the change in rate from the prior year multiplied by the previous year 's volume . the change in interest or expense due to both rate and volume has been allocated between factors in proportion to the relationship of the absolute dollar amounts of the change in each . ( 2 ) tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate . the tax equivalent rate for tax exempt loans and tax exempt securities acquired after january 1 , 1983 included the tefra adjustment applicable to nondeductible interest expense . net interest income increased by $ 8.0 million to $ 163.0 million in 2020 compared to 2019 , primarily due to a $ 528.1 million , or 11.3 % , increase in average earning assets , driven by a $ 469.0 million increase in average commercial loans . the yield on average earning assets decreased 90 basis points to 3.77 % in 2020 from 4.67 % in 2019. the growth in average commercial loans was driven by $ 376.8 million in average ppp loans . average core loan growth , with excludes ppp loans , was $ 73.2 million , or 1.8 % . the net interest margin decreased to 3.19 % in 2020 versus 3.38 % in 2019 , driven by the federal reserve bank decreasing the target federal funds rate by 225 basis points since the second half of 2019 , inclusive of two emergency cuts during march 2020 , in response to the covid-19 pandemic . the net interest margin decreased to 3.38 % in 2019 versus 3.43 % in 2018 , due to higher costs on average interest bearing liabilities , which offset an increase in the yield of earning assets during 2019 . 38 growth in the commercial loan portfolio accounted for most of the growth in loans , as well as total earning assets , during both 2020 and 2019 and positively impacted total interest income . management believes that the growth in the loan portfolio unrelated to the ppp loan program will likely continue in a measured and prudent fashion as a result of our continued strategic focus on commercial and industrial lending , as well as commercial real estate lending . loan growth , excluding ppp loans , was slower in 2020 and 2019 as compared to prior years due to a slowdown in demand for manufacturing and industrial loans .
| management believes this is an important measure because it provide for better comparability to prior periods , given the expectation that ppp represents a limited governmental intervention in the lending market , designed to support small businesses through the pandemic , its low fixed interest rate of 1.0 % and because the accretion of net loan fee income can be accelerated upon borrower forgiveness and repayment by the sba . management is actively monitoring net interest margin on a fully tax equivalent basis with and without ppp loan impact for the duration of this program . see reconciliation on the next page . ( 4 ) non-gaap financial measure . pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense . management believes this is an important measure because it may enable investors to identify the trends in the company 's earnings exclusive of the effects of tax and provision expense , which may vary significantly from period to period . see reconciliation below . the company believes that providing non-gaap financial measures provides investors with information useful to understanding the company 's financial performance . a reconciliation of these non-gaap financial measures is provided below ( dollars in thousands , except per share data ) . replace_table_token_6_th 35 the impact of the paycheck protection program on net interest margin fte is provided below ( dollars in thousands ) replace_table_token_7_th net income net income was $ 84.3 million in 2020 , a decrease of $ 2.7 million , or 3.1 % , versus net income of $ 87.0 million in 2019. the decrease in net income from 2019 to 2020 was primarily due to an increase in the provision for loan losses of $ 11.5 million , or 356.6 % , as well as an increase of $ 1.8 million , or 2.0 % , in noninterest expense . net interest income increased $ 8.0 million , or 5.1 % , and noninterest income increased $ 1.8 million , or 4.1 % . net interest income for 2020 included $ 12.8 million in ppp interest and fee income . and unamortized ppp fee income was $ 6.3 million at december 31 , 2020 .
| 11,653 |
a reconciliation of the as adjusted measures to the most comparable gaap measures is included below : replace_table_token_4_th 1 reflects the net impact of non-recurring compensation and benefits expenses incurred in the fourth quarter of 2019 , primarily driven by the one-time issuance of certain unit-based and other awards to a number of the firm 's key contributors pursuant to the terms of our equity incentive plans in addition to costs related to certain employee departures . 2 reflects the net impact of a change in the calculation of historical 754 step-ups and related deferred tax asset and corresponding liability to selling and converting shareholders recognized during the year ended december 31 , 2018 as noted in the income tax expense discussion below . 30 rev enue we generate revenue primarily from management fees and performance fees , which we collectively refer to as our advisory fees , by managing assets on behalf of our separately managed and sub-advised accounts , as well as our pzena funds . our advisory fee income is primarily based on our aum , as discussed below , and is recognized over the period in which investment management services are provided . in accordance with revenue recognition topic of the financial accounting standards board accounting standards codification ( “ fasb asc ” ) , income from performance fees is recorded at the conclusion of the contractual performance period , when it is probable that significant reversal of the performance fee will not occur . advisory fee income is presented net of fund expense cap reimbursements . our advisory fees are primarily driven by the level of our aum . our aum increases or decreases with the net inflows or outflows of funds into our various investment strategies and with the investment performance thereof . in order to increase our aum and expand our business , we must develop and market investment strategies that suit the investment needs of our target clients , and provide attractive returns over the long-term . the value and composition of our aum , and our ability to continue to attract clients will depend on a variety of factors as described in “ item 1 — risk factors — risks related to our business — our primary source of revenue is derived from management fees , which are directly tied to our assets under management . fluctuations in aum therefore will directly impact our revenue . '' for our separately managed accounts , we are paid management fees according to a schedule , which varies by investment strategy . the substantial majority of these accounts pay us management fees pursuant to a schedule in which the rate we earn on the aum declines as the amount of aum increases . pursuant to our sub-investment advisory agreements , we are generally paid a management fee according to a schedule in which the rate we earn on the aum declines as the amount of aum increases . certain of these funds pay us fixed-rate management fees . due to the substantially larger account size of certain of these sub-advised accounts , the average advisory fees we earn on them , as a percentage of aum , are lower than the advisory fees we earn on our separately managed accounts . advisory fees we earn on separately managed accounts and pzena funds are generally based on the value of aum at a specific date on a quarterly basis . certain of our separately managed accounts , sub-advised accounts , and pzena funds are calculated based on the average of the monthly or daily market value . advisory fees are also generally adjusted for any cash flows into or out of a portfolio , where the cash flow represents greater than 10 % of the value of the portfolio . while a specific group of accounts may use the same fee rate , the calculation methodology may differ as described above . certain of our clients pay us performance fees according to the performance of their accounts relative to certain agreed-upon benchmarks , which results in a lower base fee , but allows for us to earn higher fees if the relevant investment strategy outperforms the agreed-upon benchmark . some performance-based fee arrangements include high-water mark provisions , which generally provide that if a client account underperforms relative to its performance target , it must gain back such underperformance before we can collect future performance-based fees . fulcrum fee arrangements related to one client relationship require a reduction in the base fee , or allow for a performance fee if the relevant investment strategy underperforms or outperforms , respectively , the agreed-upon benchmark . our advisory fees may fluctuate based on a number of factors , including the following : changes in aum due to appreciation or depreciation of our investment portfolios , and the levels of the contribution and withdrawal of assets by new and existing clients ; distribution of aum among our investment strategies , which have differing fee schedules ; distribution of aum between separately managed accounts and sub-advised accounts , for which we generally earn lower overall advisory fees ; 31 the level of our performance with respect to accounts on which we are paid performance fees or have fulcrum fee arrangements ; and changes in the amount of expense cap reimbursements paid . expenses our expenses consist primarily of compensation and benefits expense , as well as general and administrative expense . our largest expense is compensation and benefits , which includes the salaries , bonuses , equity-based compensation , and related benefits and payroll costs attributable to our employee members and employees . compensation and benefits packages are benchmarked against relevant industry and geographic peer groups in order to attract and retain qualified personnel . general and administrative expense includes lease expenses , professional and outside services fees , depreciation , costs associated with operating and maintaining our research , trading and portfolio accounting systems , and other expenses . story_separator_special_tag our occupancy-related costs and professional services expenses , in particular , generally increase or decrease in relative proportion to the overall size and scale of our business operations . we incur additional expenses associated with being a public company for , among other things , director and officer insurance , director fees , sec reporting and compliance ( including sarbanes-oxley compliance ) , professional fees , transfer agent fees , and other similar expenses . our expenses may fluctuate due to a number of factors , including the following : variations in the level of total compensation expense due to , among other things , bonuses , awards of equity to our employees and employee members of our operating company , changes in our employee count and mix , and competitive factors ; and general and administrative expenses , such as professional service fees , rent , and data-related costs , incurred , as necessary , to run our business . other income/ ( expense ) other income/ ( expense ) is derived primarily from investment income or loss arising from our consolidated subsidiaries and interest income generated on our cash balances . other income/ ( expense ) is also affected by changes in our estimates of the liability due to our selling and converting shareholders associated with payments owed to them under the tax receivable agreement which was executed in connection with our reorganization and ipo on october 30 , 2007. as discussed further below under “ tax receivable agreement , ” this liability represents 85 % of the amount of cash savings , if any , in u.s. federal , state , and local income tax that we realize as a result of the amortization of the increases in tax basis generated from our acquisitions of our operating company 's units from our selling and converting shareholders . we expect the interest and investment components of other income/ ( expense ) , in the aggregate , to fluctuate based on market conditions and the performance of our consolidated subsidiaries and other investments . non-controlling interests we are the sole managing member of our operating company and control its business and affairs and , therefore , consolidate its financial results with ours . in light of our employees ' and outside investors ' direct and indirect interests in our operating company ( as noted in `` item 1 — business — overview '' ) , we have reflected their membership interests as a non-controlling interest in our consolidated financial statements . as of december 31 , 2019 , the holders of our class a common stock and the holders of class b units of our operating company held approximately 25.4 % and 74.6 % , respectively , of the economic interests in the december 31 , 2019 value of the operating company . as of december 31 , 2019 , the holders of our class a common stock and the holders of class b and b-1 units of our operating company held approximately 24.1 % and 75.9 % , respectively , of the future income and distributions of our operating company . in addition , our operating company consolidates the results of operations of the private investment partnerships and pzena-branded mutual funds over which we exercise a controlling influence . non-controlling interests recorded in our consolidated financial statements include the non-controlling interests of the outside investors in these consolidated subsidiaries . 32 story_separator_special_tag style= '' margin-bottom:0pt ; margin-top:0pt ; text-indent:0 % ; font-family : times new roman ; font-size:10pt ; '' > the change in aum in our separately managed accounts , sub-advised accounts and pzena funds for the years ended december 31 , 2019 and 2018 is described below . inflows are composed of the investment of new or additional assets by new o r existing clients . outflows consist of redemptions of assets by existing clients . replace_table_token_8_th during the year ended december 31 , 2019 , our aum increased $ 7.8 billion , or 23.4 % , from $ 33.4 billion at december 31 , 2018. this increase is primarily due to market appreciation and net inflows during the year ended december 31 , 2019. at december 31 , 2019 , we managed $ 16.4 billion in separately managed accounts , $ 22.4 billion in sub-advised accounts , and $ 2.4 billion in pzena funds , for a total of $ 41.2 billion in assets . for the year ended december 31 , 2019 , we experienced $ 7.0 billion in market appreciation and total gross inflows of $ 6.6 billion , which were partially offset by total gross outflows of $ 5.8 billion . assets in separately managed accounts increased by $ 3.8 billion , or 30.2 % , from $ 12.6 billion at december 31 , 2018 , due to $ 2.6 billion in market appreciation and $ 3.2 billion in gross inflows , partially offset by $ 2.0 billion in gross outflows . assets in sub-advised accounts increased by $ 3.6 billion , or 19.1 % , from $ 18.8 billion at december 31 , 2018 , due to $ 4.0 billion in market appreciation and $ 3.0 billion in gross inflows , partially offset by $ 3.4 billion in gross outflows . assets in pzena funds increased by $ 0.4 billion , or 20.0 % , from $ 2.0 billion at december 31 , 2018 as a result of $ 0.4 billion in gross inflows and $ 0.4 billion in market appreciation , partially offset by $ 0.4 billion in gross outflows . 37 at december 31 , 2018 , we managed $ 12.6 billion in separately managed accounts , $ 18.8 billion in sub -advised accounts , and $ 2.0 billion in pzena funds , for a total of $ 33.4 billion in assets . for the year ended december 31 , 2018 , we experienced $ 6.1 billion in market depreciation and total gross outflows of $ 4.5 billion , which were partially offset by to tal gross inflows of $ 5.5 billion . assets in separately managed accounts decreased by $ 2.4 billion , or 16.0
| replace_table_token_7_th 1 the historical returns of these investment strategies are not necessarily indicative of their future performance , or the future performance of any of our other current or future investment strategies . 34 2 net of applicable withholding taxes and presented in u.s. $ . large cap value . this strategy reflects a portfolio composed of approximately 50 to 80 stocks drawn generally from a universe of 500 of the largest u.s. listed companies , based on market capitalization . this strategy was launched in july 2012. at december 31 , 2019 , the large cap value strategy generated a one-year annualized gross return of 26.0 % , underperforming its benchmark . the top detracting sectors were the consumer discretionary and technology sectors , partially offset by the performance of the financial services sector . international value . this strategy reflects a portfolio composed of approximately 60 to 80 stocks drawn generally from a universe of 1,500 of the largest companies across the world excluding the united states , based on market capitalization . this strategy was launched in november 2008. at december 31 , 2019 , the international value strategy generated a one-year annualized gross return of 18.1 % , underperforming its benchmark . the top detracting sectors were the energy and consumer discretionary sectors as well as certain chinese stocks , partially offset by the performance of the industrials sector . emerging markets focused value . this strategy reflects a portfolio composed of approximately 40 to 80 stocks drawn generally from a universe of 1,500 of the largest emerging market companies , based on market capitalization . this strategy was launched in january 2008. at december 31 , 2019 , the emerging markets focused value strategy generated a one-year annualized gross return of 13.4 % , underperforming its benchmark . the top detracting sectors included the consumer discretionary and utilities sectors as well as certain chinese and korean stocks , partially offset by the performance of the consumer staples sector . large cap focused value . this strategy reflects a portfolio composed of approximately 30 to 40 stocks drawn generally from a universe of 500
| 11,654 |
this decrease in personnel-related costs resulted from a decrease in stock-based compensation expense of $ 4.5 million and increased research and development salaries of $ 500,000 due to five headcount additions in 2015. manufacturing costs decreased from $ 310,000 for the year ended december 31 , 2015 to $ 99,000 for the year ended december 31 , 2016. this $ 210,000 decrease was primarily associated with decreased bait-box design and production costs during 2016. further , other general research and development expenses for activities not directly associated with our principal research and development programs decreased by $ 240,000 during 2016 primarily as a result of reduced laboratory related expenses . we continue to investigate other applications of our core technology to other product candidates , which includes laboratory tests and academic collaborations . we also continue to develop our supply chain , particularly identifying and improving our sourcing of triptolide , a key active ingredient for our product candidates . general and administrative expenses general and administrative expenses were $ 8.1 million for the year ended december 31 , 2016 , compared to $ 8.6 million for the year ended december 31 , 2015. the decrease of $ 500,000 in general and administrative expenses was due to a decrease of $ 2.8 million in personnel-related costs , including a reduction of $ 3.3 million in stock-based compensation expense during 2016 offset by a $ 1.0 million for a contract cancellation settlement , $ 500,000 in additional salary costs , an increase of $ 400,000 in legal , accounting and audit-related fees , an increase of $ 270,000 in travel expenses and $ 140,000 in increased epa registration fees . interest expense we recorded $ 87,000 of interest expense for the year ended december 31 , 2016 , compared to $ 855,000 for the year ended december 31 , 2015. the decrease in interest expense of $ 768,000 was a result of a decrease of $ 2.9 million of convertible notes that were issued in 2014 and exchanged for series b convertible preferred stock in december of 2016. other income ( expense ) , net we recorded $ 31,000 of other expense , net , for the year ended december 31 , 2016 , compared to $ 678,000 for the year ended december 31 , 2015. the $ 647,000 net decrease in other expense was primarily due to the expense related to the year-over-year fair market value adjustment of our convertible promissory notes . liquidity and capital resources since our inception , we have incurred significant operating losses . we have generated limited revenue to date from research grants and licensing fees received under our former license agreement with neogen . we have not yet begun full scale marketing of our first product , contrapest and we continue to develop other product candidates , which are in various phases of development . we have funded our operations to date primarily with proceeds from the sale of common stock and preferred stock , the issuance of convertible and other promissory notes and , to a lesser extent , payments received under research grants and pursuant to our former license agreement with neogen . through december 31 , 2016 , we had received net proceeds of $ 41.8 million from our sales of common stock and preferred stock and issuance of convertible and other promissory notes , and an aggregate of $ 1.6 million from licensing fees . 36 in the course of our research and development activities , we have sustained operating losses since our inception and expect such losses to continue for the foreseeable future . our ultimate success depends upon the outcome of a combination of factors , including our ability to : ( i ) engage in successful research and development efforts ; ( ii ) obtain regulatory approval of contrapest and our other product candidates ; ( iii ) achieve market acceptance and commercialization of contrapest and our other products ; ( iv ) successfully market our products and establish an effective sales force and marketing infrastructure to generate significant revenue ; ( v ) retain and attract key personnel to develop , operate and grow our business ; and ( vi ) successfully obtain additional financing as needed . as of december 31 , 2016 , we had an accumulated deficit of $ 61.3 million . from time to time in 2014 and 2015 , members of our management have provided financing to us in the form of promissory notes totaling $ 4.0 million , of which $ 0 remained outstanding as of december 31 , 2016. in november 2015 , we issued to nau ventures 400,000 shares of series a convertible preferred stock ( on a post-reverse split basis ) , valued at $ 4.4 million , and a warrant , valued at $ 330,000 , in exchange for full cancellation of the outstanding principal and unpaid accrued interest on a promissory note , totaling $ 3.2 million . in december 2015 , the principal amount under our convertible and other promissory notes and accrued interest ( aggregating $ 2.9 million ) were exchanged for shares of series b convertible preferred stock . based upon our current operating plan , we expect that our cash and cash equivalents of approximately $ 11.8 million as of december 31 , 2016 , will be sufficient to fund our current operations for at least the next 12 months . we have based these estimates on assumptions that may prove to be wrong , and we could utilize our available capital resources sooner than we expect . funding requirements we expect our expenses to increase substantially in connection with our ongoing activities , particularly as we advance field studies of our product candidates in development . in addition , we incur additional costs associated with operating as a public company . story_separator_special_tag in particular , we expect to incur substantial and increased expenses as we : continue the research and development of contrapest and our other product candidates , including engaging in any necessary field studies ; seek regulatory approvals for contrapest and our other product candidates ; scale up manufacturing processes and quantities to prepare for the commercialization of contrapest and any other product candidates for which we receive regulatory approval ; establish an infrastructure for the sales , marketing and distribution of contrapest and any other product candidates for which we may receive regulatory approval ; attempt to achieve market acceptance for our products ; expand our research and development activities and advance the discovery and development programs for other product candidates ; maintain , expand and protect our intellectual property portfolio ; and add operational , financial and management information systems and personnel , including personnel to support our product development and commercialization efforts and operations as a public company . 37 cash flows the following table summarizes our sources and uses of cash for each of the periods presented : replace_table_token_3_th operating activities . during the year ended december 31 , 2016 , operating activities used $ 6.7 million of cash , primarily resulting from our net loss of $ 10.8 million , partially offset by non-cash charges of $ 3.8 million and by changes in our operating assets and liabilities of $ 342,000. our net loss was primarily attributed to research and development activities and our general and administrative expenses , as we generated limited research grant and licensing revenue during the period . net cash used by changes in our operating assets and liabilities for the year ended december 31 , 2016 consisted primarily of an increase in prepaid expenses of $ 301,000 , a $ 221,000 decrease in deferred revenue related to our former license agreement with neogen , an increase in inventories of $ 57,000 and an increase in deposits of $ 3,000 , partially offset by a $ 916,000 increase in accrued expenses and accounts payable , an increase in deferred rents and accounts receivable of $ 8,000. the decrease in accrued expenses and accounts payable was due to increased payments of accrued expenses and accounts payable as a result of the receipt of cash raised in financing activities . during the year ended december 31 , 2015 , operating activities used $ 3.7 million of cash , primarily resulting from our net loss of $ 18.2 million , partially offset by non-cash charges of $ 13.9 million and by cash provided by changes in our operating assets and liabilities of $ 648,000. our net loss was primarily attributed to research and development activities and our general and administrative expenses , as we generated limited research grant and licensing revenue during the year . net cash provided by changes in our operating assets and liabilities for the year ended december 31 , 2015 consisted primarily of a $ 151,000 decrease in deferred revenue related to our former license agreement with neogen offset by a $ 779,000 increase in accounts payable and accrued expenses and a decrease of accounts receivable of $ 18,000. the increase in accounts payable and accrued expenses was due to increased spending associated with research and development programs as well as the timing of vendor invoicing and payments . investing activities . during the year ended december 31 , 2016 and december 31 , 2015 , we used $ 57,000 and $ 130,000 , respectively , of cash in investing activities , in each case consisting of purchases of property and equipment . financing activities . during the year ended december 31 , 2016 , net cash provided by financing activities was $ 18.4 million as a result of $ 18.8 million of proceeds from the issuance of shares of common stock in our initial public offering and the rights offering discussed elsewhere in this annual report on form 10-k , $ 896,000 of proceeds received from the issuance of series b convertible preferred stock , $ 521,000 of proceeds received from the exercise of stock options and warrants , $ 326,000 of proceeds received from our issuance of notes payable , all of which were partially offset by payments of $ 1.9 million related to the notes payable , notes payable related party and convertible notes payable , $ 2.2 of deferred offering costs , $ 176,000 of payments of preferred stock dividends and $ 21,000 in payments of capital lease obligations . 38 during the year ended december 31 , 2015 , net cash provided by financing activities was $ 3.1 million as a result of $ 3.1 million of proceeds received from our issuance of related party convertible and other promissory notes , $ 155,000 of proceeds received from the issuance of series b convertible preferred stock , and $ 56,000 of proceeds received from the exercise of stock options , all of which were partially offset by payments of $ 132,000 related to the issuance costs for the convertible promissory notes and $ 100,000 in repayments of notes payable balances . recent developments we previously identified material weaknesses in our internal control over financial reporting for the year ended december 31 , 2015 which we have addressed and resolved the issues identified for the year ended december 31 , 2015. see “ risk factors — we have not fully assessed our internal control over financial reporting . we have previously identified and may in the future identify material weaknesses in our internal control over financial reporting . if we are unable to remediate these material weaknesses , or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls , we may not be able to accurately or timely report our financial condition or results of operations , which may adversely affect investor confidence in us and , as a result , the value of our common stock .
| 33 we plan to continue to hire employees to support our research and development efforts and anticipate that we will continue to utilize various forms of stock-based compensation awards in order to attract and retain employees for our research and development efforts . as a result , we anticipate that stock-based compensation expense will continue to represent a significant portion of our research and development expenses for the foreseeable future . general and administrative expenses general and administrative expenses consist primarily of salaries and related costs , including stock-based compensation , for personnel in executive , finance and administrative functions . general and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal , consulting , accounting and audit services . we anticipate that our general and administrative expenses may increase in the future as we increase our headcount to support commercialization of any approved products and further development of our product candidates . we also anticipate that we will incur increased accounting , audit , legal , regulatory , compliance , director and officer insurance costs as well as investor and public relations expenses associated with being a public company . we plan to continue to hire employees to support our commercialization of any approved products and further development of our product candidates , and anticipate that we will continue to utilize various forms of stock-based compensation awards in order to attract and retain qualified employees . as a result , we anticipate that stock-based compensation expense will continue to represent a significant portion of our general and administrative expenses for the foreseeable future . other income ( expense ) , net interest income . interest income consists primarily of interest income earned on cash and cash equivalents . our interest income has not been significant due to nominal cash and investment balances and low interest earned on invested balances . interest expense . interest expense consists of interest accrued on $ 2.9 million in convertible and other promissory notes we issued during 2014 and 2015 that were exchanged for series b convertible preferred stock in december 2015. other income ( expense ) , net .
| 11,655 |
selling , general and administrative expenses selling , general and administrative expenses include advertising and consumer promotion costs , fixed costs ( i.e. , personnel and related expenses , research and development costs , certain warehousing fees , non-manufacturing overhead , rent on operating leases and professional fees ) , share-based compensation and other operating expenses . selling , general and administrative expenses also include the expense or benefit relating to our share-based compensation plans that are accounted for as liability plans through our ipo and as equity plans thereafter . see critical accounting policies and estimatesshare-based compensation. income taxes the provision for income taxes represents federal , foreign , state and local income taxes . the effective rate differs from statutory rates due to the effect of state and local income taxes , tax rates in foreign jurisdictions and certain nondeductible expenses . our effective tax rate will change from quarter to quarter based on recurring and nonrecurring factors including , but not limited to , the geographical mix of earnings , enacted tax legislation , state and local income taxes , tax audit settlements and the interaction of various global tax strategies . changes in judgment from the evaluation of new information resulting in the recognition , derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of the change . non-gaap financial measures adjusted operating income , adjusted income before income taxes , adjusted net income attributable to coty inc. and adjusted net income attributable to coty inc. per common share are non-gaap financial measures which we believe better enable management and investors to analyze and compare the underlying business results from period to period . these non-gaap financial measures should not be considered in isolation , or as a substitute for or superior to , financial measures calculated in accordance with gaap . moreover , these non-gaap financial measures have limitations in that they do not reflect all the items associated with the operations of our business as determined in accordance with gaap . we compensate for these limitations by analyzing current and future results on a gaap basis as well as a non-gaap basis , and we provide reconciliations from the most directly comparable gaap financial measures to the non- gaap financial measures . our non-gaap financial measures may not be comparable to similarly titled measures of other companies . other companies , including companies in our industry , may calculate similarly titled non-gaap financial measures differently than we do , limiting the usefulness of those measures for comparative purposes . adjusted operating income , adjusted income before income taxes , adjusted net income attributable to coty inc. and adjusted net income attributable to coty inc. per common share provide an alternative view of performance used by management and we believe that an investor 's understanding of our performance is enhanced by disclosing these adjusted performance measures . in addition , our financial covenant compliance calculations under our debt agreements are substantially derived from these adjusted performance measures . the following are examples of how these adjusted performance measures are utilized by management : senior management receives a monthly analysis of our operating results that are prepared on an adjusted performance basis ; strategic plans and annual budgets are prepared on an adjusted performance basis ; and 35 senior management 's annual compensation is calculated , in part , using adjusted performance measures . adjusted operating income we define adjusted operating income as operating income adjusted for the following : following june 12 , 2013 , the effective date of the share-based compensation plan amendments , the component of share-based compensation expense represents the difference between equity plan accounting using the grant date fair value and equity plan accounting using the june 12 , 2013 fair value . prior to june 12 , 2013 , the component of the share-based compensation expense included the difference between share-based compensation expense accounted for under equity plan accounting based on grant date fair value , and under liability plan accounting based on reporting date fair value ; and other adjustments , which include : asset impairment charges ; restructuring costs and business structure realignment programs ; acquisition-related costs and certain acquisition accounting impacts ; and other adjustments that we believe investors may find useful . adjusted net income and net income per common share attributable to coty inc. we define adjusted net income attributable to coty inc. as net income attributable to coty inc. adjusted for the following : adjustment made to reconcile operating income to adjusted operating income , net of the income tax effect thereon ( see adjusted operating income ) ; certain interest and other ( income ) expense , net of the income tax effect thereon , that we do not consider indicative of our performance ; and certain tax effects that are not indicative of our performance . adjusted basic and diluted net income attributable to coty inc. per common share is calculated as : adjusted net income attributable to coty inc. divided by adjusted weighted-average basic and diluted common shares using the treasury stock method . constant currency we operate on a global basis , with the majority of our net revenues generated outside of the u.s. accordingly , fluctuations in foreign currency exchange rates can affect our results of operations . therefore , to supplement financial results presented in accordance with gaap , certain financial information is presented excluding the impact of foreign currency exchange translations to provide a framework for assessing how our underlying businesses performed excluding the impact of foreign currency exchange translations ( constant currency ) . constant currency information compares results between periods as if exchange rates had remained constant period-over-period . we calculate constant currency information by translating current and prior-period results for entities reporting in currencies other than u.s. dollars into u.s. dollars using constant foreign currency exchange rates . story_separator_special_tag the constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate . the constant currency information we present may not be comparable to similarly titled measures reported by other companies . 36 story_separator_special_tag font-size:3.8mm ; `` > in fiscal 2012 , net revenues of fragrances increased 5 % , or $ 127.5 , to $ 2,452.8 from $ 2,325.3 in fiscal 2011. excluding the negative impact of foreign currency exchange translations , net revenues of fragrances increased 6 % . the increase was primarily due to strong growth of our products in the prestige market primarily resulting from new product launches . higher net revenues from calvin klein , marc jacobs , chloé and new launches roberto cavalli , bottega veneta and truth or dare by madonna contributed to that increase . the incremental growth in calvin klein was driven by the launches of ck one shock and forbidden euphoria . growth in marc jacobs was driven by new launch oh lola ! , a full year of sales of daisy marc jacobs eau so fresh , the effect of which was only partially observed in fiscal 2011 as a result of a mid-year launch , and higher net revenues in the existing brand daisy marc jacobs . higher net revenues of chloé were driven by new launch eau de chloé . in the mass market , higher net revenues from playboy , beyoncé , guess ? and new launch shine by heidi klum also contributed to segment growth . improved results from playboy primarily reflected the success of recent launches of playboy london and play it rock . growth in beyoncé was primarily due to the new launch of beyoncé pulse , and the increase in guess ? was driven by guess ? seductive homme and guess ? seductive intense love . these increases in net revenues were partially offset by lower net revenues from existing celebrity brands that are later in their life cycles and a decline in davidoff due to strong innovation in fiscal 2011 that was not replicated in fiscal 2012. net revenues growth for the segment reflects unit volume growth of 10 % , partially offset by a negative price and mix impact of 4 % , primarily reflecting an increase in the proportion of the segment 's net revenues from lower than segment average priced playboy products . color cosmetics in fiscal 2013 , net revenues of color cosmetics increased 3 % , or $ 37.9 , to $ 1,468.5 from $ 1,430.6 in fiscal 2012. the increase was primarily the result of unit volume growth of 4 % , partially offset by a negative impact of foreign currency exchange translations of 1 % . excluding the negative impact of foreign currency exchange translations , net revenues of color cosmetics increased 4 % , primarily driven by strong growth in rimmel . rimmel brand growth reflects the success of new launches rimmel scandal'eyes mascara and rimmel apocalips lip lacquer along with higher net revenues of rimmel match perfection foundation and rimmel kate lipstick . higher net revenues in rimmel also reflect expanded distribution in one of our key retailers in the u.s. , expanded distribution in france and expansion in the pharmacy and discount department store retail channels in australia . growth in n.y.c . new york color and manhattan also contributed to the increase in the color cosmetics segment . higher net revenues in n.y.c . new york color were primarily driven by strong growth in the u.s. along with increased net revenues in canada and certain emea markets , while the increase in manhattan was driven by strong growth in germany . opi net revenues were in line with fiscal 2012 as higher net revenues from expanded distribution in europe 39 and in our travel retail businesses in all three geographic regions was offset by a decline in the u.s. the decline in opi in the u.s. reflects lower net revenues of nicole by opi and the discontinuation of a particular product line sold exclusively by a large retailer , along with lower net revenues of opi shatter and opi gelcolor which generated strong net revenues in fiscal 2012 as new launches . sally hansen net revenues were in line with fiscal 2012 as higher net revenues from the brand 's introduction into the german market along with strong net revenues growth in mexico , argentina and the u.k. , primarily driven by new launches and expanded distribution , were offset by a decline in the u.s. despite growth from our entry into the gel nail color category where sally hansen earned a market share lead , the brand declined in the u.s. in part due to an intensified competitive environment . partially offsetting segment growth was a decline in astor primarily driven by lower net revenues in spain , reflecting difficult economic conditions , and in germany , as results in fiscal 2012 reflected the rollout of the brand in one of our key customers . in fiscal 2012 , net revenues of color cosmetics increased 25 % , or $ 287.4 , to $ 1,430.6 from $ 1,143.2 in fiscal 2011. excluding the negative impact of foreign currency exchange translations , net revenues of color cosmetics increased 26 % . the increase in this segment includes an increase in net revenues related to the acquisitions of opi and dr. scheller of $ 155.2. the increase for the 2011 acquisitions in color cosmetics was primarily due to the inclusion of opi and dr. scheller in net revenues for the full fiscal year of 2012. in fiscal 2011 , opi and dr. scheller were only included in net revenues from the respective dates of acquisition .
| our consolidated statements of operations include the results of the 2011 acquisitions from the date they were acquired , which was january 14 , 2011 for tjoy , january 3 , 2011 for dr. scheller , december 20 , 2010 for opi and december 17 , 2010 for philosophy . see note 4 , acquisitions in our notes to consolidated financial statements . we acquired 100 % of dr. scheller 's stock for $ 53.9 cash , and acquired 100 % of the net assets of opi for $ 948.8 cash . we acquired 100 % of philosophy 's stock for $ 929.7 cash , and acquired 100 % of tjoy via a stock purchase , for a total purchase price of $ 351.7 cash at the january 14 , 2011 date of purchase , subject to certain post-closing adjustments . net revenues in fiscal 2013 , net revenues increased 1 % , or $ 37.8 , to $ 4,649.1 from $ 4,611.3 in fiscal 2012. excluding the negative impact of foreign currency exchange translations , net revenues increased 2 % . the negative impact of foreign currency exchange translations primarily reflects the weakening of the euro in fiscal 2013 compared to fiscal 2012. by segment , net revenues growth in color cosmetics and fragrances was partially offset by lower net revenues in skin & body care . by geographic region , net revenues increased in the americas and asia pacific . net revenues in emea increased 1 % excluding the negative impact of foreign currency exchange translations which impacted the region by 2 % . new launches represented approximately 16 % of our net revenues for fiscal 2013. the contribution from new launches was partially offset by an approximate 15 % decline in net revenues from existing products that are later in their life cycles . in fiscal 2012 , net revenues increased 13 % , or $ 525.2 , to $ 4,611.3 from $ 4,086.1 in fiscal 2011 , which includes the negative impact of foreign currency exchange translations of approximately 1 % . the 2011 acquisitions contributed $ 261.0 to the increase in net revenues . the increase for the 2011 acquisitions was primarily due to the inclusion of the 2011 acquisitions for full fiscal 2012. in fiscal 2011 , the 2011 acquisitions were only included in
| 11,656 |
in february 2012 , we sold 6,037,500 shares of our class a common stock through a firm commitment , underwritten public offering at a price to the public of $ 15.09 per share . as a result of the offering , we received aggregate net proceeds , after underwriting discounts and commissions and other estimated offering expenses , of approximately $ 85.2 million . on january 4 , 2013 , we closed a private placement of $ 175.0 million in aggregate principal amount of 11 % notes due on or before june 15 , 2024. the notes bear an annual interest rate of 11 % , with interest paid quarterly beginning june 15 , 2013 , and principal expected to be paid quarterly beginning march 15 , 2014. as a result of the debt offering , we received aggregate net proceeds , after offering expenses , of approximately $ 167.3 million . we intend to use the net proceeds from this debt financing 46 to fund our research and development efforts and to support the commercial launch of linzess , in addition to general corporate purposes . financial overview revenue . revenue to date from our human therapeutics segment has been generated primarily through our collaboration agreements with forest and astrazeneca , and our license agreements with almirall and astellas . the terms of these agreements contain multiple deliverables which may include ( i ) licenses , ( ii ) research and development activities , and ( iii ) the manufacture of api , finished drug product and development materials for the collaborative partners . payments to us may include one or more of the following : nonrefundable license fees ; payments for research and development activities ; payments for the manufacture of api , finished drug product and development materials ; and payments based upon the achievement of certain milestones and royalties on product sales . additionally , we will receive our share of the net profits or bear our share of the net losses from the sale of linaclotide in the u.s. and china . linzess launched in the u.s. in the fourth quarter of 2012 and constella is expected to be commercially available in certain european countries in the first half of 2013. we record our share of the net profits and losses from the sales of linzess in the u.s. on a net basis and present the settlement payments as collaborative arrangements revenue or collaboration expense , as applicable . net profits or losses consist of net sales to third-party customers in the u.s. less the cost to manufacture linzess as well as selling and marketing expenses . although we expect net sales to increase during the launch phase , the settlement payments between forest and us resulting in collaborative arrangement revenue or collaboration expense are subject to fluctuation based on the ratio of selling and marketing expenses incurred by each party . in addition , our collaborative arrangements revenue may fluctuate as a result of timing and amount of license fees and clinical and commercial milestones received and recognized under our current and future strategic partnerships as well as timing and amount of royalties from the sales of constella in the european market . revenue from our biomanufacturing segment was generated by our former subsidiary , microbia , which had entered into research and development service agreements with various third parties . these agreements generally provided for fees for research and development services rendered . as a result of the sale of our interest in microbia , revenue from our biomanufacturing segment , for the year ended december 31 , 2010 , is included in net income from discontinued operations . cost of revenue . cost of revenue is recognized upon shipment of linaclotide api to certain of our collaboration partners . our cost of revenue consists of the costs of producing such api . we expensed most of the manufacturing costs of api as research and development expenses in the periods prior to july 1 , 2012 , at which date we began capitalizing linaclotide-related inventory costs as their realizability became probable . as of december 31 , 2012 , the previously expensed api inventory that is commercially saleable has been substantially utilized . we expect our cost of revenue to increase in future periods . research and development expense . research and development expense consists of expenses incurred in connection with the discovery , development , manufacture and distribution of our product candidates . these expenses consist primarily of compensation , benefits and other employee related expenses , research and development related facility costs , third-party contract costs relating to research , formulation , manufacturing , nonclinical study and clinical trial activities as well as licensing fees for our product candidates prior to regulatory approval . we charge all research and development expenses to operations as incurred . under our forest and astrazeneca collaboration agreements , we are reimbursed for certain research and development expenses , and we net these reimbursements against our research and development expenses as incurred . payments to forest or astrazeneca are recorded as incremental research and development expense . 47 the costs of revenue related to the microbia services contracts and costs associated with microbia 's research and development activities are included in net income ( loss ) from discontinued operations . our lead product is linaclotide , and it represents the largest portion of our research and development expense for our product candidates . linaclotide is our only product or product candidate that has demonstrated clinical proof of concept . an nda for linzess with respect to both ibs-c and cic was approved by the fda in august 2012. in november 2012 , the ema approved constella for the treatment of ibs-c in adults . we are also exploring development opportunities to strengthen the clinical profile of linzess within its indicated population and to expand the product label for additional patient populations and indications , and we are exploring the potential for linaclotide-based combination products . story_separator_special_tag as part of this strategy , we and forest initiated a phase 3b clinical trial to further characterize the effect of linaclotide on abdominal symptoms in patients with cic . in addition to exploring further linaclotide development opportunities , we also have a pipeline focused on both research and development of early development candidates and discovery research in multiple therapeutic areas , including gastrointestinal disease , cns disorders , allergic conditions and cardiovascular disease . the following table sets forth our research and development expenses related to our product pipeline for the years ended december 31 , 2012 , 2011 and 2010. these expenses relate primarily to external costs associated with manufacturing , including supply chain development , nonclinical studies and clinical trial costs . costs related to facilities , depreciation , share-based compensation and research and development support services are not directly charged to programs . replace_table_token_5_th since 2004 , the date we began tracking costs by program , we have incurred approximately $ 173.8 million of research and development expenses related to linaclotide . the expenses for linaclotide include both reimbursements to us by forest or astrazeneca as well as our portion of research and development costs incurred by forest or astrazeneca for linaclotide and invoiced to us under the cost-sharing provisions of our collaboration agreements . the lengthy process of securing regulatory approvals for new drugs requires the expenditure of substantial resources . any failure by us to obtain , or any delay in obtaining , regulatory approvals would materially adversely affect our product development efforts and our business overall . in august 2012 , the fda approved our nda for linzess as a once-daily treatment for adult men and women suffering from ibs-c and cic . in connection with the fda approval , we are required to conduct certain nonclinical and clinical studies aimed at understanding : ( a ) whether orally administered linaclotide can be detected in breast milk , ( b ) the potential for antibodies to be developed to linaclotide , and if so , ( c ) whether antibodies specific for linaclotide could have any therapeutic or safety implications . in addition , we and forest established a nonclinical and clinical post-marketing plan with the fda to understand linzess 's efficacy and safety in pediatric patients . in october 2012 , we entered into a collaboration agreement with astrazeneca under which we will jointly develop and commercialize linaclotide in china , hong kong and macau . we also are exploring the expansion of linaclotide in other parts of the world outside of our currently partnered territories , as well as the potential for linaclotide in other indications and the potential for linaclotide-based combination 48 products . therefore , we can not currently estimate with any degree of certainty the amount of time or money that we will be required to expend in the future on linaclotide in pediatrics , for other geographic markets or additional indications . we also continue to advance our pipeline focused on early development candidates and discovery research in multiple therapeutic areas , including gastrointestinal disease , cns disorders , allergic conditions and cardiovascular disease . given the inherent uncertainties that come with the development of pharmaceutical products , we can not estimate with any degree of certainty how these programs will evolve , and therefore the amount of time or money that would be required to obtain regulatory approval to market them . as a result of these uncertainties surrounding the timing and outcome of any approvals , we are currently unable to estimate precisely when , if ever , linaclotide will be developed in pediatrics or for other indications or markets , or when , if ever , any of our other product candidates will generate revenues and cash flows . we invest carefully in our pipeline , and the commitment of funding for each subsequent stage of our development programs is dependent upon the receipt of clear , supportive data . in addition , we are actively engaged in evaluating externally-discovered drug candidates at all stages of development . in evaluating potential assets , we apply the same criteria as those used for investments in internally-discovered assets . the successful development of our product candidates is highly uncertain and subject to a number of risks including , but not limited to : the duration of clinical trials may vary substantially according to the type , complexity and novelty of the product candidate . the fda and comparable agencies in foreign countries impose substantial requirements on the introduction of therapeutic pharmaceutical products , typically requiring lengthy and detailed laboratory and clinical testing procedures , sampling activities and other costly and time-consuming procedures . data obtained from nonclinical and clinical activities at any step in the testing process may be adverse and lead to discontinuation or redirection of development activity . data obtained from these activities also are susceptible to varying interpretations , which could delay , limit or prevent regulatory approval . the duration and cost of discovery , nonclinical studies and clinical trials may vary significantly over the life of a product candidate and are difficult to predict . the costs , timing and outcome of regulatory review of a product candidate may not be favorable . the emergence of competing technologies and products and other adverse market developments may negatively impact us . as a result of the uncertainties discussed above , we are unable to determine the duration and costs to complete current or future nonclinical and clinical stages of our product candidates or when , or to what extent we will generate revenues from the commercialization and sale of our products and product candidates . development timelines , probability of success and development costs vary widely . we anticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to the data of each product candidate , the competitive landscape and ongoing assessments of such product candidate 's commercial potential .
| the increase in cost of revenue of approximately $ 1.0 million for the year ended december 31 , 2012 compared to the year ended december 31 , 2011 was related to our inventory capitalization policy . we expensed most of the manufacturing costs of api for linaclotide as research and development expenses in the periods prior to july 1 , 2012. in the third quarter of 2012 , we began capitalizing inventory costs for linaclotide api manufactured in preparation for its planned launch in the u.s. and europe . as of december 31 , 2012 , the previously expensed api inventory that is commercially saleable has been substantially utilized . research and development expense . the increase in research and development expense of approximately $ 27.4 million for the year ended december 31 , 2012 compared to the year ended december 31 , 2011 was primarily related to an increase of approximately $ 10.8 million in compensation , benefits , and employee related expenses associated mainly with increased headcount ; an increase of approximately $ 6.7 million associated with linaclotide development , consisting of increased contract manufacturing costs associated with validation of batches of linaclotide api in anticipation of a potential commercial launch , higher collaboration expenses from forest and decreased reimbursements from forest , partially offset by a decrease in contract research associated with lower clinical trial expenses ; an increase of approximately $ 3.8 million in research and development related facilities costs , including rent , property taxes and amortization of leasehold improvements , associated with additional space we leased and improved in our 301 binney street facility ; an increase of approximately $ 3.1 million in research costs related to our other pipeline candidates , including research and development fees , and up-front and milestone payments associated with our licensing agreements ; and an increase of approximately $ 3.0 million in share-based compensation expense primarily related to our new hire grants and our annual stock option grant made in february 2012. selling , general and administrative expense .
| 11,657 |
19 net cash provided by investing activities of $ 2.1 million for fiscal 2011 was attributable to the sale of an auction rate security for $ 3.1 million , partially offset by an increase in restricted cash of approximately $ 0.7 million and additions to property , plant and equipment of approximately $ 0.2 million . net cash used in financing activities was $ 3.2 million for fiscal 2011 , resulting primarily from payments made of $ 3.1 million to reduce the outstanding loan against the company 's investment in auction rate securities upon its sale . other events and circumstances pertaining to liquidity on may 31 , 2011 , upon application of a major creditor , the high court of hong kong appointed provisional liquidators over grande , which is the company 's majority stockholder . following the appointment of the provisional liquidators over grande , certain major factory suppliers , including midea , have significantly reduced the maximum amount of open credit lines available to the company . at the factories ' request , the company made accelerated payments in june and july of 2011 to reduce the balances owing from the company on its open trade payable accounts with the respective factory suppliers to comply with such new credit terms . the company relies on its cash on hand and cash generated by ongoing operations to manage its business . commercial credit the company 's loan agreement with wachovia bank n.a . expired by its terms on december 23 , 2010. beginning november 2010 , the company began utilizing hang seng bank in hong kong to issue secured letters of credit on behalf of the company , as needed , on a 100 % cash collateralized basis . at march 31 , 2011 , there were approximately $ 0.5 million in letters of credit outstanding under this arrangement . the company anticipates that its cash on hand and cash flow generated from operations will provide sufficient liquidity to meet the company 's operating requirements in the year ahead . short-term liquidity . in fiscal 2011 , products representing approximately 30 % of net sales were imported directly to the company 's customers . the direct importation of product by the company to its customers significantly benefits the company 's liquidity because this inventory does not need to be financed by the company . the company 's principal existing sources of cash are generated from operations . the company believes that its cash on hand and existing sources of cash will be sufficient to support its existing operations over the next 12 months . as of march 31 , 2011 , there were no material capital expenditure commitments and no substantial commitments for purchase orders outside the normal purchase orders used to secure product . off-balance sheet arrangements on april 7 , 2010 , upon a request made to the company by its foreign controlling stockholder , s & t , the company entered into an agreement with s & t whereby the company returned to s & t on april 7 , 2010 that portion of the taxes that the company had withheld from the dividend paid on march 24 , 2010 to s & t , as the company believes the dividend paid is not subject to u.s. tax based on the company 's good-faith estimate of its accumulated earnings and profits , and received collateral ( in the form of shares in the company ) which was sufficient to cover any claims for taxes on the dividend paid ( the agreement ) . the company believes this transaction resulted in an off-balance sheet arrangement , which is comprised of a possible contingent tax liability of the company , which , if recognized , would be offset by the calling by the company on s & t of the indemnification provisions of the agreement . in february 2011 , upon the request of s & t to the company , the company and s & t agreed the collateral pledged as a part of the agreement would no longer be required and this collateral was returned by the company to s & t in march 2011 ( see note 3 related party transactions ) . critical accounting policies the discussion and analysis of the company 's financial condition and results of operations are based upon its consolidated financial statements , which have been prepared in accordance with accounting principles that are generally accepted within the united states . the preparation of the company 's financial statements requires management to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . management considers certain accounting policies related to inventories , trade accounts receivables , impairment of long-lived assets , valuation of deferred tax assets , sales return reserves and sales allowance accruals to be critical policies due to the estimation processes involved in each . 20 revenue recognition . revenues from product distribution are recognized at the time title passes to the customer . under the direct import program , title passes in the country of origin . under the domestic program , title passes primarily at the time of shipment . estimates for possible returns are based upon historical return rates and netted against revenues . except in connection with infrequent sales with specific arrangements to the contrary , returns are not permitted unless the goods are defective . story_separator_special_tag in addition to the distribution of products , the company grants licenses for the right to use the company 's trademarks for a stated term for the manufacture and or sale of consumer electronics and other products under agreements which require payment of either i ) a non-refundable minimum guaranteed royalty or , ii ) the greater of the actual royalties due ( based on a contractual calculation , normally comprised of actual product sales by the licensee multiplied by a stated royalty rate , or sales royalties ) or a minimum guaranteed royalty amount . in the case of ( i ) , such amounts are recognized as revenue on a straight-line basis over the term of the license agreement . in the case of ( ii ) , sales royalties in excess of guaranteed minimums are accounted for as variable fees and are not recognized as revenue until the company has ascertained that the licensee 's sales of products have exceeded the guaranteed minimum . in effect , the company recognizes the greater of sales royalties earned to date or the straight-line amount of minimum guaranteed royalties to date . in the case where a royalty is paid to the company in advance , the royalty payment is initially recorded as a liability and recognized as revenue as the royalties are deemed to be earned according to the principles outlined above . inventories . inventories are stated at the lower of cost or market . cost is determined using the first-in , first-out basis . the company records inventory reserves to reduce the carrying value of inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions . if actual market conditions are less favorable than those projected by management , additional inventory reserves may be required . conversely , if market conditions improve , such reserves are reduced . trade accounts receivable . the company extends credit based upon evaluations of a customer 's financial condition and provides for any anticipated credit losses in the company 's financial statements based upon management 's estimates and ongoing reviews of recorded allowances . if the financial condition of a customer deteriorates , resulting in an impairment of that customer 's ability to make payments , additional reserves may be required . conversely , reserves are reduced to reflect credit and collection improvements . income taxes . the company records a valuation allowance to reduce the amount of its deferred tax assets to the amount that management estimates is more likely than not to be realized . while management considers future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance , in the event that management determines that a deferred tax asset will likely be realized in the future in excess of the net recorded amount , an adjustment to the deferred tax asset would increase income in the period such determination was made . likewise , if it is determined that all or part of a net deferred tax asset will likely not be realized in the future , an adjustment to the deferred tax asset would be charged to income in the period such determination was made . sales return reserves . management must make estimates of potential future product returns related to current period product revenue . management analyzes historical returns , current economic trends and changes in customer demand for our products when evaluating the adequacy of the reserve for sales returns . management judgments and estimates must be made and used in connection with establishing the sales return reserves in any accounting period . additional reserves may be required if actual sales returns increase above the historical return rates . conversely , the sales return reserve could be decreased if the actual return rates are less than the historical return rates , which were used to establish the reserve . 21 sales allowance and marketing support accruals . sales allowances , marketing support programs , promotions and other volume-based incentives which are provided to retailers and distributors are accounted for on an accrual basis as a reduction to net revenues in the period in which the related sales are recognized in accordance with asc topic 605 , revenue recognition , subtopic 50 customer payments and incentives and securities and exchange commission staff accounting bulletins 101 revenue recognition in financial statements , and 104 revenue recognition , corrected copy ( sab 's 101 and 104 ) . at the time of sale , the company reduces recognized gross revenue by allowances to cover , in addition to estimated sales returns as required by asc topic 605 , revenue recognition. , subtopic 15 products , ( i ) sales incentives offered to customers that meet the criteria for accrual under asc topic 605 , subtopic 50 and ( ii ) under sab 's 101 and 104 , an estimated amount to recognize additional non-offered deductions it anticipates and can reasonably estimate will be taken by customers which it does not expect to recover . accruals for the estimated amount of future non-offered deductions are required to be made as contra-revenue items because that percentage of shipped revenue fails to meet the collectability criteria within sab 104 's and 101 's four revenue recognition criteria , all of which are required to be met in order to recognize revenue . if additional marketing support programs , promotions and other volume-based incentives are required to promote the company 's products subsequent to the initial sale , then additional reserves may be required and are accrued for when such support is offered .
| the major elements which contributed to the overall decrease in net revenues were as follows : i ) houseware product net sales increased $ 18.4 million , or 11.4 % , to $ 179.1 million in fiscal 2011 as compared to $ 160.7 million in fiscal 2010 , on increased net sales of , compact refrigerators , microwave ovens and wine coolers , partially offset by decreased net sales of toaster ovens and coffee makers ; ii ) emerson ( r ) branded product net sales were $ 14.4 million in fiscal 2011 compared to $ 33.1 million in fiscal 2010 , a decrease of $ 18.7 million , or 56.3 % , resulting from decreased net sales volumes across the entire audio product category ; iii ) licensing revenues in fiscal 2011 were $ 7.3 million as compared to $ 6.9 million for fiscal 2010 , an increase of $ 0.4 million or 5.3 % . the company 's largest license agreement is with funai corporation , inc. ( funai ) , which expires december 31 , 2012. the agreement provides that funai will manufacture , market , sell and distribute specified products bearing the ( emerson logo ) trademark to customers in the u.s. and canadian markets . under the terms of the agreement , the company will receive non-refundable minimum annual royalty payments of $ 3.75 million each calendar year and a license fee on sales of product subject to the agreement in excess of the minimum annual royalties . during fiscal 2011 and 2010 , revenues of $ 5.3 million and $ 4.9 million , respectively , were recorded under this agreement . iv ) themed product net sales were nil in fiscal 2011 as compared to $ 3.2 million in fiscal 2010. the company 's license agreement with mattel expired in december 2009 and was not renewed . v ) net sales of other products were nil in fiscal 2011 as compared to $ 3.0 million in fiscal 2010. other products net sales in fiscal 2010 were comprised of a sale of semiconductors in march 2010. cost of sales cost of sales includes those components as described in note 1 of the notes to the consolidated financial statements . in absolute terms , cost of sales decreased $ 2.5 million , or 1.5 % , to $ 172.9 million in fiscal 2011 as compared to $ 175.5 million
| 11,658 |
we expect operating expenses to increase with the continued expansion of our services and the increase in the number of aircraft in our fleet . aircraft fuel aircraft fuel expense increased during each of the past three years primarily due to a combination of an increase in consumption , and , from 2011 to 2012 , an increase in the average fuel price per gallon , as illustrated in the following table : replace_table_token_12_th 34 the increase in fuel expense from 2012 to 2013 is primarily due to an increase in fuel consumption due to the additional aircraft in the fleet ( five additional a330-200 offset by the return/retirement of three b767-300 aircraft ) , but was partially offset by a decrease in the average fuel price per gallon . the increase in fuel expense from 2011 to 2012 is due to an increase in fuel consumption due to the additional aircraft in the fleet ( four additional a330-200 and two additional b717-200 aircraft ) and an increase in the average fuel price per gallon . we believe economic fuel expense is the best measure of the effect of fuel prices on our business as it most closely approximates the net cash outflow associated with the purchase of fuel for our operations in a period and is consistent with how management manages our business and assesses our operating performance . we define economic fuel expense as raw fuel expense plus ( gains ) /losses realized through actual cash payments to/ ( receipts from ) hedge counterparties for fuel derivatives settled in the period inclusive of costs related to hedging premiums . economic fuel expense is calculated as follows : replace_table_token_13_th see item 7a , quantitative and qualitative disclosures about market risk , for additional discussion of our jet fuel costs and related derivative program . wages and benefits wages and benefits expense increased by $ 50.9 million , or 13.5 % , in 2013 , as compared to 2012 , primarily due to a 7.0 % increase in the number of employees as we continue to expand our operations with additional aircraft and new routes , which also resulted in an $ 8.4 million increase in health and fringe benefits provided to our employees . wages and benefits expense increased by $ 55.3 million , or 17.2 % , in 2012 , as compared to 2011 , primarily due to a 13.7 % increase in the number of employees as we continued to expand our operations with additional aircraft and new routes . also , our pension and other post-retirement expense increased by $ 15.8 million in 2012 , and was primarily due to a decrease in the discount rate used to determine net periodic benefit expense . we expect wages and benefits expense to increase in future periods as we continue to add additional employees for the expansion of our operations . aircraft rent aircraft rent expense increased by $ 9.7 million , or 9.9 % , in 2013 , as compared to 2012 , primarily due to the addition of two airbus a330-200 aircraft under operating leases ( one in february 2013 and one in april 2013 ) , partially offset by the return of three boeing 767-300 aircraft at the end of their lease terms in april , august , and october 2013. aircraft rent expense decreased by $ 14.1 million , or 12.5 % , in 2012 , as compared to 2011 , primarily due to the full year effects of aircraft leases that ended in 2011 ; the purchase of our existing fleet of 35 boeing 717-200 aircraft in june 2011 of which the majority were previously under operating lease agreements and the return of two boeing 767-300 aircraft at the end of their lease terms in may and october 2011. the decrease in aircraft rent expense was partially offset by the addition of two aircraft under operating lease agreements ( one b717-200 aircraft in december 2011 and one a330 aircraft in may 2012 ) . we expect aircraft rent expense to increase in 2014 as we operate for a full year with the two a330 aircraft under operating leases that were added in 2013. however , in future periods we expect aircraft rent expense to decrease with the planned return of operating leased aircraft . maintenance materials and repairs maintenance materials and repairs expense increased by $ 19.8 million , or 10.8 % , in 2013 , as compared to 2012 , primarily due to the increase in the number and utilization of airbus a330-200 aircraft in our fleet . maintenance materials and repairs expense increased by $ 13.7 million , or 8.1 % , in 2012 , as compared to 2011 , due to increased power-by-the-hour ( pbh ) expenses of $ 26.5 million for the a330-200 aircraft and b717-200 aircraft fleet additions during 2012. this increase was partially offset by decreased maintenance expense for our b717-200 aircraft of $ 7.3 million and b767-300 aircraft of $ 2.4 million , due to the non-recurrence of several heavy maintenance checks incurred in 2011. we expect maintenance materials and repairs expense to increase in future periods as we continue to integrate additional aircraft into revenue service . aircraft and passenger servicing aircraft and passenger servicing expense increased by $ 16.8 million , or 16.2 % , in 2013 , as compared to 2012 , due to increased food and beverage expenses of $ 8.4 million and ground handling expense of $ 5.5 million , as we expanded to new international destinations . aircraft and passenger servicing expense increased by $ 21.6 million , or 26.2 % , in 2012 , as compared to 2011 , due to increased food and beverage expenses of $ 13.6 million and fueling service expenses of $ 3.4 million , as we expanded to new international destinations . we expect aircraft and passenger servicing expense to increase in future periods as we continue to expand our fleet and add additional routes . story_separator_special_tag commissions and other selling expenses commissions and other selling expense increased by $ 11.6 million , or 10.1 % , in 2013 , as compared to 2012 , due to increases in volume-related selling expenses , which include increased frequent flyer expense of $ 3.6 million , advertising and promotional expenses of $ 3.0 million , and travel agency commissions of $ 2.4 million . commissions and other selling expense increased by $ 18.1 million , or 18.8 % , in 2012 , as compared to 2011 , due to increases in volume-related selling expenses , which include increased travel agency commissions of $ 10.1 million and segment booking fees of $ 5.0 million . we expect commissions and other selling expenses to increase in future periods as we continue to expand our fleet and add additional routes . depreciation and amortization depreciation and amortization expense decreased by $ 2.5 million , or 3.0 % , in 2013 , as compared to 2012 , primarily due to our frequent flyer marketing relationship intangible asset which was fully 36 amortized as of december 31 , 2012. this decrease was partially offset by the increase in the number of owned aircraft ( three a330-200 aircraft in april , june and november 2013 ) . depreciation and amortization expense increased by $ 19.3 million , or 29.2 % , in 2012 , as compared to 2011 , due to an increase in the number of owned ( 2 ) aircraft and aircraft under capital leases ( 3 ) from 2011 , which resulted in a $ 10.1 million increase . also , the purchase of 15 boeing 717-200 aircraft in june 2011 resulted in a $ 2.7 million increase in depreciation and amortization expense in 2012. we expect depreciation and amortization expenses to increase in future periods as we continue to expand our fleet . other rentals and landing fees other rentals and landing fees expense decreased by $ 4.3 million , or 5.0 % , in 2013 , as compared to 2012 , primarily due to decreased rental and landing fee rates at our honolulu operational facility . other rentals and landing fee expense increased by $ 13.2 million , or 18.2 % , in 2012 , as compared to 2011 , primarily due to the addition of new routes and increased frequencies on our existing routes . we expect expenses for other rentals and landing fees to increase in future periods as we continue to add additional routes and increase frequency on our existing routes . other expense other expense increased by $ 20.1 million , or 13.2 % , in 2013 , as compared to 2012 , and by $ 27.2 million , or 21.7 % , in 2012 , as compared to 2011 , due to increased travel related expenses and increased expenses incurred on services outsourced to third-party vendors . both increases were primarily the result of our continued expansion . we expect other expenses to increase in future periods as we continue to expand our operations . lease termination during 2011 , we entered into a purchase agreement with the lessor for the purchase of 15 boeing 717-200 aircraft , each such aircraft including two rolls-royce br700-715 engines , previously held through four capital and 11 operating lease agreements . the purchase price for the 15 boeing 717-200 aircraft was $ 230 million , comprised of financing of $ 192.8 million through secured loan agreements , cash payment of $ 25.0 million , and non-cash application of maintenance and security deposits held by the previous lessor and current debt financier of $ 12.2 million . we recognized the excess of the purchase price paid over the fair value of the aircraft under operating leases as a cost of terminating the leases under asc 840 leases and elected to apply the same accounting policy to the aircraft under capital leases . we recorded the 15 boeing 717-200 aircraft at their fair value of $ 135 million on the december 31 , 2011 consolidated balance sheets and reflected lease termination charges of $ 70.0 million on the december 31 , 2011 consolidated statements of operations . the purchase of the 15 boeing 717-200 aircraft resulted in lower aircraft rent expense in 2012 and 2011 , which was partially offset by increases in depreciation and amortization and interest expense , for these periods . nonoperating expense net nonoperating expense increased by $ 3.7 million in 2013 , as compared to 2012 , and $ 22.2 million in 2012 , as compared to 2011 , primarily due to increased interest and amortization of debt discounts and issuance costs of $ 6.9 million and $ 19.0 million , respectively , due to the additional financings we entered into subsequent to december 31 , 2012 and 2011 . 37 in may 2013 , hawaiian closed a $ 444.5 million eetc financing . as of december 31 , 2013 , $ 76.1 million was used to finance a portion of the purchase price of one new airbus aircraft . the remaining proceeds will be used to purchase equipment notes to fund a portion of the purchase price of five ( 5 ) new airbus aircraft scheduled for delivery through october 2014. we expect that the issuance of these equipment notes will significantly increase our interest expense starting in 2014 , which is when all equipment notes are expected to be issued and outstanding . income tax expense we recorded income tax expense of $ 34.6 million , $ 32.5 million and $ 1.6 million during the year ended december 31 , 2013 , 2012 and 2011 , respectively . in 2013 and 2012 , we had an effective tax rate of 40.0 % and 37.9 % , respectively . our 2011 effective tax rate differed from the statutory rate primarily due to a change in the state apportionment rates and tax rates for these tax jurisdictions . see note 9 to the consolidated financial statements for further discussion .
| 30 selected consolidated statistical data below are the operating statistics we use to measure our operating performance . replace_table_token_9_th ( a ) includes applicable taxes and fees . ( b ) includes lease termination charges of $ 70.0 million incurred in 2011 . ( c ) represents adjusted unit costs , a non-gaap measure . operating revenue our revenue is derived primarily from transporting passengers on our aircraft . revenue is recognized when either the transportation is provided or when the related ticket expires unused . we measure capacity in terms of available seat miles , which represent the number of seats available for passengers multiplied by the number of miles the seats are flown . yield , or the average amount one passenger pays to fly one mile , is calculated by dividing passenger revenue by rpms . we strive to increase passenger revenue primarily by increasing our yield per flight or by filling a higher proportion of available seats , which produces higher operating revenue per available seat mile . other revenue primarily consists of baggage fees , cargo revenue , ticket change and cancellation fees , incidental services revenue , revenue earned on reduced rate passengers , sale of frequent flyer miles , inflight revenue , contract services and charter services revenue . operating revenue increased to $ 2.16 billion , $ 1.96 billion and $ 1.65 billion for the years ended december 31 , 2013 , 2012 and 2011 , respectively , driven primarily by an increase in passenger revenue . passenger revenue passenger revenue increased to $ 1.94 billion , $ 1.77 billion and $ 1.48 billion for the years ended december 31 , 2013 , 2012 and 2011 , respectively . 31 the increase in passenger revenue of $ 175.8 million , or 9.9 % , for the year ended december 31 , 2013 , as compared to 2012 , is primarily due to an increase in the number of revenue passenger miles flown . the increase in passenger revenue of $ 286.4 million , or 19.3 % , for the year ended december
| 11,659 |
depreciation and amortization recognized within discontinued operations for fiscal 2013 were $ 4.0 million and $ 4.8 million , respectively , compared to $ 6.0 million and $ 6.9 million for fiscal 2012. business segment operating results the company is organized and managed on a global basis within two business platforms : ids and wps , which are the reportable segments . each business platform has a president that reports directly to the company 's chief operating decision maker , its chief executive officer . each platform has its own distinct operations , which are managed locally by its own management team , maintains its own financial reports and is evaluated based on global segment profit . the company has determined that these business platforms comprise its operating and reportable segments based on the information used by the chief executive officer to allocate resources and assess performance . the segment results have been adjusted to reflect continuing operations in all periods presented . the sales and profit of discontinued operations are excluded from the following information . 19 following is a summary of segment information for the fiscal years ended july 31 , 2013 , 2012 and 2011 : replace_table_token_7_th net earnings reconciliation replace_table_token_8_th 20 id solutions fiscal 2013 vs. 2012 net sales increased by 15.7 % from fiscal 2012 to fiscal 2013 , which consisted of organic growth of 0.3 % , currency impact of a negative 0.9 % and growth from acquisitions of 16.3 % . acquisition growth within the ids segment was almost entirely generated by the acquisition of pdc in december 2012 , with a small portion contributed by the acquisition of grafo in march 2012. the pdc acquisition contributed more than $ 100.0 million in sales in fiscal 2013 and provides an entry for the company into the healthcare identification space . we are in the process of integrating pdc into the existing business , and plan to leverage brady practices in all functional areas . organic sales in the ids segment grew by 0.3 % primarily due to growth within the americas of approximately 1 % , which was partially offset by modest declines in europe and apac . within the americas , north america growth was partially offset by a 10 % decline in brazil . sales over the internet increased by more than 15 % , and we experienced a positive response to our recent new product launches . in europe , the decline in the ids business platform was mainly driven by the economy , partially offset by our increased presence in emerging geographies , new and differentiated product launches , and our strategy to increase share in specific vertical markets . in apac , sales growth was modest , as the de-consolidation of certain business units from the asia die-cut disposal group impacted sales growth negatively . overall , sales globally were driven by new product launches and growth within vertical markets . new products launched include the bbp85 printer , which is a continuous-sleeving wire identification system for high volume applications in the electrical and aerospace markets , and three new high performance materials to address the changing requirements for identification of printed circuit boards and electronic components . vertical market growth was focused within the chemical , oil , and gas industries , as well as our targeted strategic account management programs . segment profit increased to $ 171.3 million in fiscal 2013 from $ 159.4 million in fiscal 2012 , an increase of $ 11.9 million or 7.5 % . the primary driver of the profit increase was the acquisition of pdc . this profit was partially offset by a decline in profitability in brazil and western europe . brazil 's decline was due to a combination of sales decline , cost increases and expenses associated with the implementation of a new erp system . in western europe , the largest decline in sales and profit was in italy , where we realized a 25 % sales decline partially due to one-time sales in the prior year that did not repeat . in addition , italy 's profitability was impacted by product quality issues associated with a printer introduced in fiscal 2012. the company performed its annual goodwill impairment assessment on may 1 , 2013 , and subsequently concluded that the ids apac reporting unit was impaired . although sales grew from 2012 to 2013 , profit declined and neither were as high as anticipated . specifically , fourth quarter fiscal 2013 gross margin and segment profit declined compared to the prior year , while results were anticipated to increase over the prior year fourth quarter . in addition , projections were not sufficient to support the balance of goodwill remaining within the reporting unit . as such , the company recorded a goodwill impairment charge of $ 18.2 million during fiscal 2013 , which represents all of the remaining goodwill for this reporting unit . fiscal 2012 vs. 2011 net sales increased by 1.3 % from fiscal 2011 to fiscal 2012 , which consisted of organic growth of 2.7 % , currency impact of a negative 1.6 % and growth from acquisitions of 0.2 % . the company acquired grafo in south africa as part of the ids segment in march 2012. organic sales in the ids segment grew 2.7 % . regionally , growth in the americas was strong at 7.8 % , growth in europe was modest at approximately 1 % and apac declined by more than 10 % . overall , during fiscal 2012 the u.s. economy appeared to be recovering while the european economy was weakening . within the americas , the strong growth rates were driven by the execution across multiple key growth initiatives , including a strong focus on our core distributor-based business delivering an improved customer experience , improvements in the e-commerce experience , key customer conversions , and an improved service offering . new product development continued to drive growth globally with the successful launch of portable printers and proprietary consumables . story_separator_special_tag in europe , despite negative economic growth , we grew modestly as we continued to focus on emerging economies . in asia , we experienced significant declines in several countries . during fiscal 2012 , we began the process to separate the sales and marketing resources between the traditional ids products and the die-cut business platform . segment profit increased to $ 159.4 million in fiscal 2012 from $ 146.1 million in fiscal 2011 , an increase of $ 13.3 million or 9.1 % . the profit increase was attributable to the americas business mainly due to strong sales growth , selected price increases , operational improvements , focus on lean and strategic sourcing , as well as actions taken to improve our selling expense structure . 21 europe maintained its profit levels and we increased investment in the apac business , which resulted in a decline in profit in asia . we added an experienced expatriate to the team in asia to begin building the ids business teams for future growth . workplace safety fiscal 2013 vs. 2012 net sales decreased by 3.7 % from fiscal 2012 to 2013 , which consisted of an organic decline of 7.0 % , currency impact of a negative 0.7 % and growth from acquisitions of 4.0 % . the company acquired runelandhs and pervaco in europe in may 2012. organic sales in the wps segment declined 7.0 % within all geographies from fiscal 2012 to 2013 , and have declined for the last seven quarters . wps apac sales are generated entirely in australia , and have declined for the last four quarters mainly due to the weakness in the australian economy . in the americas and europe , organic sales declined by 5 % and 6 % , respectively . beginning in fiscal 2012 , we experienced a deterioration of this business due to increased e-commerce competition and pricing pressures.the company continues to modify its strategy to grow this business , which includes : investments in e-commerce capabilities , pricing structure changes and expansion of product offerings . segment profit decreased in fiscal 2013 to $ 95.2 million from $ 117.2 million , a decline of $ 22.0 million or 18.8 % . this was primarily due to volume and price declines as a result of increased competition and reduced catalog advertising . in addition , the company redirected some of its investment from the traditional catalog model to e-business , the benefits of which are anticipated to be realized in future fiscal years . since the global economic recession of 2009 , organic growth within the wps americas reporting unit has been difficult to achieve , especially within mature markets such as the u.s. and canada where business-to-business transactions over the internet are more advanced than many of the european and australian markets . with the acceleration of the internet in the business-to-business market , competition and pricing pressure have intensified . as a result , organic sales declined by approximately 7 % and segment profit declined by nearly 20 % during fiscal 2013 as compared to fiscal 2012. the company is modifying its strategy within the wps platform , including investments in enhanced e-commerce capabilities , expanded product offerings , enhanced industry-specific expertise , and adjusting its pricing strategies . although management believes the strategy modifications will improve organic sales and profitability of the wps platform in future years , there is risk associated with any strategy . as such , the company 's annual goodwill impairment analysis ( `` step one '' ) reflected the risk in the strategy and the decline in fiscal 2013 sales and profitability , which occurred during a period of time in which the company was redirecting its investment from the traditional catalog model to e-business . in addition , the rate of decline became more pronounced during the second half of the fiscal year and fell short of internal forecasts , resulting in the conclusion that wps americas failed step one , as the resulting fair value was less than the carrying value of the reporting unit . upon completion of the impairment assessment , the company recognized a goodwill impairment charge of $ 172.3 million during fiscal 2013. in conjunction with the goodwill impairment test of the wps americas reporting unit , indefinite-lived tradenames associated with the reporting unit were revalued and analyzed for impairment . as a result , indefinite-lived tradenames in the amount of $ 10.6 million primarily associated with the wps americas reporting unit were impaired during fiscal 2013. fiscal 2012 vs. 2011 net sales increased by 0.2 % from fiscal 2011 to fiscal 2012 , which consisted of an organic decline of 0.2 % , currency impact of a negative 1.2 % and growth from acquisitions of 1.6 % . acquisition growth was driven by the acquisitions of runelandhs and pervaco in europe in may 2012. organic sales declined 0.2 % within the wps segment . regionally , the americas realized essentially no growth , while europe declined by 2.3 % and asia-pacific sales increased by approximately 6 % . in the fourth quarter , asia-pacific sales began to slow as the australian economy began to weaken . in the americas , growth was approximately 3 % for the first half of the year , followed by comparable declines in the second half . europe experienced a similar trend , as first quarter growth of 4.0 % was followed by a decline in growth in the subsequent quarters as increased competition and pricing pressure deteriorated sales . segment profit for fiscal 2012 was $ 117.2 million , a slight decline from $ 118.9 million in fiscal 2011. the growth in profit in the first half of the year due to sales was offset by the profit decline in the second half of the year due to investments in the e-commerce initiative increasing compared to the first half of the year .
| gross margin as a percentage of sales declined to 55.2 % in fiscal 2012 from 55.5 % in fiscal 2011. the reason for this decline was sales mix , as we realized no sales growth in the higher margin wps business and modest growth in the ids business . this decrease in gross margin was partially offset by a reduction in variable incentive compensation in fiscal 2012. research and development expenses decreased to $ 33.6 million in fiscal 2013 from $ 34.5 million in fiscal 2012. the decline was primarily due to the global consolidation of the project management office , which reduced costs while streamlining reporting processes globally . r & d expenses decreased to $ 34.5 million in fiscal 2012 from $ 38.3 million in 2011 due to a reduction in variable incentive compensation , as well as a reduction in external spending on systems development due to the timing of new product introductions . selling , general and administrative ( “ sg & a ” ) expenses include selling costs directly attributed to the ids and wps segments , as well as administrative expenses including finance , information technology , human resources and legal . sg & a expenses increased to $ 427.7 million in fiscal 2013 compared to $ 392.5 million in fiscal 2012. the increase was primarily due to the acquisition of pdc in december 2012 , which resulted in $ 6 million of amortization of intangible assets . the total increase in sg & a was partially offset by a reduction in variable incentive compensation from fiscal 2012 to fiscal 2013. sg & a expense decreased to $ 392.5 million in fiscal 2012 compared to $ 397.5 million in fiscal 2011 mainly due to a reduction in variable incentive compensation . in fiscal 2013 , the company announced a restructuring action to reduce its global workforce by approximately 5-7 % in order to address its cost structure , with expected annual savings of approximately $ 25 million to $ 30 million exclusive of reinvestments into ongoing business initiatives . in connection with this
| 11,660 |
if the financial condition of these customers were to deteriorate , resulting in an impairment of their ability to make payments , we may require additional allowances or we may defer revenue until we determine that collectability is probable . we specifically analyze accounts receivable and historical bad debts , customer creditworthiness , current economic trends and changes in customer payment terms when we evaluate the adequacy of the allowance for doubtful accounts . valuation of long-lived and intangible assets . we review goodwill for impairment annually and whenever events or changes in circumstances indicate its carrying value may not be recoverable in accordance with the intangibles-goodwill and other topic of the fasb accounting standards codification . effective fiscal 2012 , we opted to perform a qualitative assessment to test a reporting unit 's goodwill for impairment . based on our qualitative assessment , if we determine that the fair value of a reporting unit is more likely than not ( i.e. , a likelihood of more than 50 percent ) to be less than its carrying amount , the two step impairment test will be performed . in the first step , we compare the fair value of each reporting unit to its carrying value . if the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit , goodwill is not considered impaired and we are not required to perform further testing . if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit , then we must perform the second step of the impairment test in order to determine the impairment . our reporting units are consistent with our operating segments identified in note 9 of notes to consolidated financial statements included elsewhere in this annual report . in accordance with the property , plant , and equipment topic of the fasb accounting standards codification , long-lived assets , such as property and equipment and intangible assets , are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . recoverability would be measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset . if the carrying amount of an asset exceeds its estimated future cash flows , we recognize an impairment charge in the amount by which the carrying amount of the asset exceeds the fair value of the asset . the determination of estimated future cash flows , however , requires management to make estimates . future events and changes in circumstances may require us to record a significant impairment charge in the period in which such events or changes occur . impairment testing requires considerable analysis and judgment in determining results . if other assumptions and estimates were used in our evaluations , the results could differ significantly . annual tests or other future events could cause us to conclude that impairment indicators exist and that our goodwill is impaired . for example , if we had reason to believe that our recorded goodwill and intangible assets had become impaired due to decreases in the fair market value of the underlying business , we would have to take a charge to income for that portion of goodwill or intangible assets that we believed was impaired . any resulting impairment loss could have a material adverse impact on our financial position and results of operations . at april 30 , 2012 , our goodwill balance was $ 12.6 million and our intangible assets with definite lives balance was $ 1.3 million , net of accumulated amortization . valuation of capitalized software assets . we capitalize certain computer software development costs in accordance with the costs of software to be sold , leased , or marketed topic of the fasb accounting standards 53 codification . costs incurred internally to create a computer software product or to develop an enhancement to an existing product are charged to expense when incurred as research and development expense until technological feasibility for the respective product is established . thereafter , we capitalize all software development costs and report those costs at the lower of unamortized cost or net realizable value . capitalization ceases when the product or enhancement is available for general release to customers . we make ongoing evaluations of the recoverability of our capitalized software projects by comparing the amount capitalized for each product to the estimated net realizable value of the product . if such evaluations indicate that the unamortized software development costs exceed the net realizable value , we write off the amount by which the unamortized software development costs exceed net realizable value . any resulting impairment loss could have a material adverse impact on our financial position and results of operations . there was no impairment charge related to capitalized computer software during the years ended april 30 , 2012 , 2011 and 2010. at april 30 , 2012 , our capitalized software balance was $ 7.8 million , net of accumulated amortization . we amortize capitalized computer software development costs ratably based on the projected revenues associated with the related software or on a straight-line basis over three years , whichever method results in a higher level of amortization . amortization of capitalized computer software development costs is included in the cost of license revenues in the consolidated statements of operations . stock-based compensation . we estimate the value of options granted on the date of grant using the black-scholes option pricing model . management judgments and assumptions related to volatility , the expected term and the forfeiture rate are made in connection with the calculation of stock compensation expense . we periodically review all assumptions used in our stock option pricing model . changes in these assumptions could have a significant impact on the amount of stock compensation expense . income taxes . story_separator_special_tag we provide for the effect of income taxes on our financial position and results of operations in accordance with the income tax topic of the fasb accounting standards codification . under this accounting guidance , income tax expense is recognized for the amount of income taxes payable or refundable for the current year and for the change in net deferred tax assets or liabilities resulting from events that are recorded for financial reporting purposes in a different reporting period than recorded in the tax return . management must make significant assumptions , judgments and estimates to determine our current provision for income taxes and also our deferred tax assets and liabilities and any valuation allowance to be recorded against our net deferred tax asset . our judgments , assumptions and estimates relative to the current provision for income tax take into account current tax laws , our interpretation of current tax laws , allowable deductions , tax planning strategies , projected tax credits and possible outcomes of current and future audits conducted by foreign and domestic tax authorities . changes in tax laws or our interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in our financial position and results of operations . our assumptions , judgments and estimates relative to the value of our deferred tax asset take into account our expectations of the amount and category of future taxable income . actual operating results and the underlying amount and category of income in future years , which could significantly increase tax expense , could render inaccurate our current assumptions , judgments and estimates of recoverable net deferred taxes . 54 story_separator_special_tag 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 risk factors in item 1a . above . 56 adoption of new accounting pronouncements in september 2011 , the fasb issued an accounting standards update amending the guidance on the annual testing of goodwill for impairment . the update allows entities to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value . if a greater than 50 percent likelihood exists that the fair value is less than the carrying amount then it is necessary to perform the currently prescribed two-step goodwill impairment test . otherwise , the two-step goodwill impairment test is not required . this standard is effective for us in the first quarter of fiscal 2013 but early adoption was permitted . we adopted the new guidance in the fourth quarter of fiscal 2012 and it did not have an impact on our consolidated financial statements . in october 2009 , the fasb issued an accounting standard which provides guidance for arrangements with multiple deliverables which are not within the scope of the current software revenue recognition guidance . specifically , the new standard requires an entity to allocate consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices . in the absence of vsoe or third-party evidence of the selling prices , consideration must be allocated to the deliverables based on management 's best estimate of the selling prices . in addition , the new standard eliminates the use of the residual method of allocation . in october 2009 , the fasb also issued a new accounting standard which changes revenue recognition for tangible products containing software and hardware elements . specifically , tangible products containing software and hardware that function together to deliver the tangible products ' essential functionality are scoped out of the existing software revenue recognition guidance and will be accounted for under the multiple-element arrangements revenue recognition guidance discussed above . both standards were effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after june 15 , 2010 with early adoption permitted . we adopted the new guidance as of may 1 , 2011 and it did not have a material impact on our consolidated financial statements . market conditions by operating segment we operate and manage our business in three segments based on software and services provided in three key product markets : ( 1 ) supply chain management ( scm ) , which provides collaborative supply chain solutions to streamline and optimize the production , distribution and management of products between trading partners ; ( 2 ) enterprise resource planning ( erp ) , which automates customers ' internal financing , human resources , and manufacturing functions ; and ( 3 ) it consulting , which consists of it staffing and consulting services . the scm segment represents the business of logility , as well as its subsidiary , dmi . our scm segment experienced increased revenues during fiscal 2012 when compared to fiscal 2011 , due primarily to a 47 % increase in license fees and services and other revenues and an 11 % increase in maintenance revenues from logility customers . we believe this increase was a result of a moderate improvement in overall economic conditions , which resulted in increased capital spending in technology and increased sales related to our recent optiant acquisition . the erp segment revenues increased 1 % in fiscal 2012 when compared to fiscal 2011 , primarily due to a 29 % increase in license fees and a 6 % increase in maintenance revenues partially offset by a 13 % decrease in services and other revenues . our scm segment experienced increased revenues during fiscal 2011 when compared to fiscal 2010 , due primarily to a 28 % increase in license fees , a 35 % increase in services and other revenues and a 10 % increase in maintenance revenues from logility customers . we believe this increase was a result of a moderate improvement in overall economic conditions , which resulted in increased capital spending in technology .
| because of the problems in europe , activity will continue to disappoint for the advanced economies as a group , expanding by only about 1 1 / 2 percent in 2012 and by 2 percent in 2013. for fiscal 2013 , we expect the world economy to remain relatively weak with some moderate improvement towards the end of the fiscal year , which could result in a continuation of the difficult selling environment . overall information technology spending continues to be relatively weak as a result of the current global economic environment . however , we believe that information technology spending will incrementally improve over the long term as increased global competition forces companies to improve productivity by upgrading their technology systems . although this improvement could slow or regress at any time , due in part to concerns in global capital markets and general economic conditions , we believe that our organizational and financial structure will enable us to take advantage of any sustained economic rebound . customers continue to take long periods to evaluate discretionary software purchases . we believe weak economic conditions may be driving some businesses to focus on achieving more process and efficiency enhancements in their operations and to invest in solutions that improve operating margins , rather than make large infrastructure-type technology purchases . if this trend continues , we believe it may tend to favor solutions such as our logility supply chain solutions , which are designed to provide a more rapid return on investment and are targeted at some of the largest profit drivers in a customer 's business . while the current economic crisis has had a particularly adverse impact on the weaker companies in our target markets , we believe a large percentage of our customers are seeking to make investments to strengthen their operations , and some are taking advantage of current economic conditions to gain market share . business opportunities and risks we currently view the following factors as the primary opportunities
| 11,661 |
the nanoresearch and industry market includes universities , public and private research laboratories and a wide range of industrial customers , including automobiles , aerospace , metals , mining and petrochemicals . growth in these markets is driven by corporate and government funding for research and development in materials science and by development of new products based on innovations in materials at the nanoscale . our solutions provide researchers and manufacturers with atomic-level resolution images and permit development , analysis and production of advanced products . our products are also used in root cause failure analysis and quality control applications . the nanobiology market includes universities and research institutes engaged in biotech and life sciences applications , as well as pharmaceutical , biotech , medical device and hospital companies . our products ' ultra-high resolution imaging allows cell biologists and drug researchers to create detailed 3d reconstructions of complex biological structures , enabling them to map proteins within cells . our products are also used in a range of pathology and quality control applications . we have reclassified our 2005 and 2004 revenues and gross margin into the new market segments to provide comparability to the 2006 presentation in this management 's discussion and analysis of financial condition and results of operations . overview net sales increased to $ 479.5 million in 2006 compared to $ 420.1 million in 2005. net sales increased in each of our product lines and market segments . demand was particularly strong for our tem line , led by the titan high-end system , and for our small-stage dualbeam systems . our growth was driven by a variety of factors , including positive customer response to our new product offerings , ongoing growth in spending on nanotechnology research by governments , institutes and corporations worldwide , and a cyclical upturn in the semiconductor capital equipment industry . at december 31 , 2006 , our total backlog was $ 305.9 million , which consisted of product and service and components backlog of unfilled orders of $ 259.1 million and $ 46.8 million , respectively , compared to $ 145.5 million and $ 38.5 million , respectively , at december 31 , 2005. we only recognize backlog for firm purchase orders for which the terms of the sale have been agreed upon , including price , configuration , options and payment terms . product backlog consists of all open orders meeting these criteria . service backlog consists of open orders for service , unearned revenue on service contracts and open orders for spare parts . united states government backlog is limited to contracted amounts . the increase in backlog from december 31 , 2005 to december 31 , 2006 reflects increases in all of our segments and was driven by increases in orders for tems , including the titan , and small-stage dualbeam systems . of our total backlog at december 31 , 2006 , approximately 90 % is shippable by the end of 2007 and approximately 10 % to 15 % requires some incremental development . customers may cancel or delay delivery on previously placed orders , although our standard terms and conditions include penalties for cancellations made close to the scheduled delivery date . as a result , the timing of the receipt of orders or the shipment of products could have a significant impact on our backlog at any date . historically , cancellations have been insignificant . recently , our ability to ship product from backlog has been negatively affected by single-sourcing issues and problems in securing electronic components from a 27 certain vendor . in addition , product shipments have been delayed due to delays in completing certain application development . for these and other reasons , the amount of backlog at any date is not necessarily indicative of revenue to be recognized in future periods . financial results for 2006 were affected by the following charges and gains , which netted to an aggregate of $ 8.0 million loss as follows : · $ 9.3 million included in restructuring , reorganization , relocation and severance charges in connection with the termination of our former ceo , including $ 2.2 million of cash payments and a non-cash charge of $ 7.1 million for stock-based compensation , as a result of the acceleration and extended exercisability of his existing stock options in accordance with his 2002 severance agreement ; · $ 3.3 million of additional restructuring , reorganization , relocation and severance charges for facilities and severance charges related to the closure of certain of our european field offices , a research and development center in tempe , arizona , as well as residual costs related to the peabody , massachusetts plant closure and the downsizing of the related semiconductor businesses ; · $ 0.5 million for legal and other costs in connection with potential merger negotiations which were terminated by us in february 2006 ; · a $ 0.5 million charge for asset impairments related to the previously-announced decision to discontinue implementation of a new enterprise resource planning system and pursue less costly alternatives ; · a $ 0.5 million charge related to the repurchase and retirement of $ 29.0 million face value of our 5.5 % convertible notes ( included as a component of interest expense ) ; · a $ 3.9 million charge related to the write-off of our equity and debt investment in a privately-held company ( included as a component of other income , net ) ; · a $ 5.2 million gain related to the sale of our entire ownership interest in a privately-held company ( included as a component of other income ) ; · a $ 1.5 million gain related to the sale of certain intellectual property rights to a privately-held company ( included as a reduction to selling , general and administrative expense ) ; and · a $ 3.3 million gain , net of tax , on the disposal of discontinued operations . in 2006 , we implemented sfas no . 123 ( r ) using the modified prospective transition method . story_separator_special_tag stock-based compensation expense , excluding stock compensation charges related to the severance of our former ceo , totaled $ 5.7 million in 2006 and was recorded in cost of sales and operating expenses . prior to 2006 , we accounted for stock-based compensation using accounting principles board ( apb ) opinion no . 25 , accounting for stock issued to employees . in 2006 , we have continued to calculate compensation expense for restricted shares and restricted stock units using the fair value of the underlying shares on the date of grant as if the shares were vested and are recording compensation expense based on fair value estimates using the black-scholes option pricing model for options granted under our stock incentive plans and employee share purchase plan . based on existing grants as of december 31 , 2006 , stock-based compensation expense is expected to be approximately $ 5.2 million in 2007. outlook for 2007 in 2006 , our backlog of unfilled orders increased by $ 121.9 million to $ 305.9 million as orders totaled $ 601.4 million . the underlying trends in each of our markets remain fundamentally positive and our product positions in those markets are generally strong . in nanoresearch and industry , governments worldwide continue to invest in nanotechnology research , and industrial customers are seeking to use nanoscale features and material properties in new products . in nanoelectronics , the reduction in feature sizes in semiconductor and data storage devices , along with the use of new materials to improve performance , reduce power consumption and facilitate finer line widths , continues to require new tools for product development and yield improvement . the nanobiology market for our tools is relatively new and emerging , but we believe there will be increased demand from researchers in fields such as structural 28 biology and proteomics , as well as increased use of our types of instruments in pathology and quality control applications . demand for service for our products is also expected to grow with the expansion of our installed base of instruments . while our market environments are generally positive , the market positions of our broad product lines are also stable or improving . we believe we are the leader in dualbeam and tem sales , led by new products that have been well received by customers . our sem products also remain competitive in the marketplace . as a result of all of these factors , we expect net sales to increase in 2007 compared with 2006. our goal is to further increase our gross margins in 2007 , primarily through the shipment of a greater percentage of higher-margin products , more efficient use of manufacturing overhead due to higher volumes of shipments , improved supply chain management and more linear shipments within each quarter . research and development spending is expected to increase at approximately the same rate as the increase in net sales , as we continue to invest in the development of new products . selling , general and administrative expense is expected to grow more slowly than net sales , even as we build our sales and distribution organization , particularly in asia . because of the expected increase in revenue , the expense reduction efforts noted above and assuming a lack of restructuring and other one-time charges in 2007 , net income will increase during 2007 if we are able to realize our plans and expectations . our nanoelectronics markets are cyclical , and some observers expect an industry downturn in 2007. while we enter the year with a solid backlog on unfilled orders and our bookings have historically been less cyclical than the overall semiconductor capital equipment industry , the depth of any decline in overall industry capital spending could affect the rate of growth in our revenue for the year . potential weakness in the value of the u.s. dollar compared with the euro would also increase our costs more rapidly than our revenue and would thus affect our ability to improve margins . our foreign exchange hedging program will mitigate or delay those cost increases , but will not be able to completely offset a long-term significant weakening of the dollar . revenue growth in 2007 will also be affected by our level of success in meeting key operating objectives during the year , including increased production rates for high-performance new products and expansion of our market position in major asian markets . for other factors that could affect our revenue and income growth , please see the risk factors included in item 1a of this report . story_separator_special_tag 36.0pt ; page-break-after : avoid ; text-indent : -36.0pt ; '' > net sales by geographic region a significant portion of our revenue has been derived from customers outside of the united states , which we expect to continue . the following table shows our net sales by geographic location ( dollars in thousands ) : replace_table_token_11_th north america sales in north america increased $ 41.5 million , or 33.0 % , in 2006 compared to 2005. this increase was primarily due to increased data storage sales as the conversion to perpendicular recording accelerated , as well as increased tem sales , including the titan , and increased small-stage dualbeam sales . these improvements were partially driven by improvements in the semiconductor capital equipment and data storage markets in 2006 compared to 2005. in 2005 , we reorganized our sales management team in north america , which also contributed to the improved net sales in 2006 compared to 2005. sales in north america decreased $ 43.1 million , or 25.5 % , in 2005 compared to 2004 primarily due to softness in the semiconductor industry , a slow-down in growth of united states government funding for nanotechnology research in the nanoresearch and industry market and inefficiencies in our sales force due to organizational changes . these declines were partially offset by growth in our service revenues .
| the $ 61.8 million , or 29.7 % , decrease in nanoelectronics sales in 2005 compared to 2004 was primarily due to weakness in the global semiconductor and data storage markets , which resulted in fewer units sold in 2005 compared to 2004 , particularly in our circuit edit , mask repair and data storage tools . the decrease in data storage tools was primarily due to the industry 's timing of purchases and a shift to higher recording density technology . also , as discussed above , we deemphasized certain product lines in the second half of 2005. nanoresearch and industry the $ 35.0 million , or 26.9 % , increase in nanoresearch and industry sales in 2006 compared to 2005 was due primarily to an approximately $ 33.6 million increase related to sales of our tems , due primarily to a shift in mix to our higher-priced tems , including the titan , as well as a slight increase in unit sales . worldwide nanotechnology research funding remains strong . in addition , sales of our small-stage dualbeam systems increased by $ 3.0 million in 2006 compared to 2005 as a result of increased unit sales . we built backlog in this segment in 2006 for each of our major product lines . the $ 25.8 million , or 24.8 % , increase in nanoresearch and industry sales in 2005 compared to 2004 was due primarily to increased unit sales of our small-stage dualbeam systems , as well as our new titan s/tem and other tem products , which have higher average selling prices than other products in this segment . in addition , unit sales of our esem products also increased . these increases were partially offset by decreased demand due to a slow-down in growth of united states government funding for nanotechnology research . nanobiology the $ 5.6 million , or 15.8 % , increase in nanobiology sales in 2006 compared to 2005 was due primarily to a shift in mix to higher-priced tems .
| 11,662 |
in april 2017 , abbvie initiated a phase 3 clinical trial to evaluate rova-t compared with topotecan for subjects with advanced or metastatic sclc with high levels of delta-like protein 3 who have first disease progression during or following front-line platinum-based chemotherapy . abt-414 in november 2017 , abbvie presented results from the intellance-2 trial , a potential registration-enabling phase 2 study evaluating depatuxizumab mafodotin ( abt-414 ) , an investigational , antibody drug conjugate ( adc ) targeting epidermal growth factor receptor ( egfr ) alone or in combination with temozolomide ( tmz ) in subjects with recurrent glioblastoma multiforme ( gbm ) . results from the intellance-2 study failed to meet the primary endpoint of overall survival and abbvie will not be submitting regulatory applications for abt-414 in recurrent gbm . in intellance-2 , the combination of abt-414 and tmz performed numerically better than lomustine or tmz and a positive trend in overall survival was observed . while abbvie will not file in recurrent gbm based on these data , the phase 2/3 intellance-1 trial evaluating the safety and efficacy of abt-414 in combination with tmz in subjects with newly diagnosed gbm with egfr amplification is ongoing . veliparib in april 2017 , abbvie announced that two phase 3 studies evaluating veliparib , an investigational , oral poly ( adenosine diphosphate-ribose ) polymerase ( parp ) inhibitor in combination with chemotherapy did not meet their primary endpoints . the studies evaluated veliparib in combination with carboplatin and paclitaxel in patients with squamous non-small cell lung cancer ( nsclc ) and triple negative breast cancer ( tnbc ) . ongoing phase 3 studies include non-squamous non-small cell lung cancer , brca1/2 breast cancer and ovarian cancer . virology/liver disease in february 2017 , the european committee for medicinal products for human use ( chmp ) granted a positive opinion for a shorter , eight-week treatment of viekirax ( ombitasvir/paritaprevir/ritonavir tablets ) + exviera ( dasabuvir tablets ) as an option for previously untreated adult patients with genotype 1b chronic hcv and minimal to moderate fibrosis . in july 2017 , the european commission granted marketing authorization for maviret ( glecaprevir/pibrentasvir ) , a once-daily , ribavirin-free treatment for adults with hcv infection across all major genotypes ( gt1-6 ) . maviret is also indicated for patients with specific treatment challenges , including those with compensated cirrhosis across all major genotypes , and those who previously had limited treatment options , such as patients with severe chronic kidney disease ( ckd ) or those with genotype 3 chronic hcv infection . in august 2017 , the fda approved mavyret ( glecaprevir/pibrentasvir ) for the treatment of patients with chronic hcv genotype 1-6 infection without cirrhosis and with compensated cirrhosis ( child-pugh a ) . mavyret is also 2017 form 10-k | 31 indicated for the treatment of adult patients with hcv genotype 1 infection , who previously have been treated with a regimen containing an hcv ns5a inhibitor or an ns3/4a protease inhibitor , but not both . mavyret/maviret is an 8-week , pan-genotypic treatment for patients without cirrhosis and who are new to treatment . other in september 2017 , abbvie submitted a new drug application to the fda for elagolix , an investigational , orally administered gonadotropin-releasing hormone ( gnrh ) antagonist , being evaluated for the management of endometriosis with associated pain . in october , abbvie was granted priority review for elagolix by the fda for the management of endometriosis with associated pain . in november , abbvie announced detailed results from two replicate phase 3 extension studies evaluating the long-term efficacy and safety of elagolix , being evaluated for the management of endometriosis with associated pain . in december 2017 , abbvie announced the strategic decision to close the sonar study , a phase 3 clinical trial evaluating the effects of the investigational compound atrasentan on progression of kidney disease in patients with stage 2 to 4 chronic kidney disease and type 2 diabetes when added to standard of care . the ongoing monitoring of renal events observed in the study revealed considerably fewer endpoints than expected at the time of analysis , which will likely affect the ability to test the sonar study hypothesis . therefore , abbvie determined that it can not justify continuing the participation of patients in the study . the decision to close the sonar study early was not related to any safety concerns . results of operations net revenues the comparisons presented at constant currency rates reflect comparative local currency net revenues at the prior year 's foreign exchange rates . this measure provides information on the change in net revenues assuming that foreign currency exchange rates had not changed between the prior and the current periods . abbvie believes that the non-gaap measure of change in net revenues at constant currency rates , when used in conjunction with the gaap measure of change in net revenues at actual currency rates , may provide a more complete understanding of the company 's operations and can facilitate analysis of the company 's results of operations , particularly in evaluating performance from one period to another . replace_table_token_4_th 32 | 2017 form 10-k the following table details abbvie 's worldwide net revenues : replace_table_token_5_th 2017 form 10-k | 33 the following discussion and analysis of abbvie 's net revenues by product is presented on a constant currency basis . global humira sales increased 14 % in 2017 and 16 % in 2016 . the sales increases in 2017 and 2016 were driven by market growth across therapeutic categories and geographies as well as favorable pricing in certain geographies . the sales increase in 2016 was also driven by the approval of new indications . in the united states , humira sales increased 18 % in 2017 and 24 % in 2016 . the sales increase in 2017 was driven by market growth across all indications and favorable pricing . the sales increase in 2016 was driven by market growth across all indications , higher market share and favorable pricing . story_separator_special_tag internationally , humira revenues increased 7 % in 2017 and 4 % in 2016 , driven primarily by market growth across indications . abbvie continues to pursue strategies intended to further differentiate humira from competing products and add to the sustainability and future growth of humira . net revenues for imbruvica represent product revenues in the united states and collaboration revenues outside of the united states related to abbvie 's 50 % share of imbruvica profit . net revenues for imbruvica commenced following the completion of the pharmacyclics acquisition on may 26 , 2015. global imbruvica sales increased 40 % in 2017 as a result of continued penetration of imbruvica as a first-line treatment for patients with cll as well as favorable pricing . the sales increase in 2016 was driven by market share gains following the fda and ema approval of imbruvica as a first-line treatment for patients with cll as well as having a full year of sales in 2016. global hcv sales decreased 16 % in 2017 and 6 % in 2016 . the sales decrease in 2017 and 2016 was a result of market contraction , lower market share and price erosion of viekira . these factors were partially offset for 2017 by the launch of mavyret in certain geographies during the second half of 2017. net revenues for creon increased 14 % in 2017 and 15 % in 2016 , driven primarily by continued market growth and higher market share . creon maintains market leadership in the pancreatic enzyme market . global kaletra net revenues decreased 25 % in 2017 and 17 % in 2016 , primarily due to lower market share resulting from the impact of increasing competition in the hiv marketplace . abbvie expects net revenues for kaletra to continue to decline in 2018 . net revenues for duodopa increased 20 % in 2017 and 28 % in 2016 , primarily as a result of market penetration and geographic expansion . gross margin replace_table_token_6_th gross margin as a percentage of net revenues in 2017 decreased from 2016 primarily due to an intangible asset impairment charge of $ 354 million in 2017 , as well as the unfavorable impacts of higher intangible asset amortization and the imbruvica profit sharing arrangement . these drivers were partially offset by lower amortization of the fair market value step-up of acquisition-date inventory of pharmacyclics as well as favorable changes in product mix and operational efficiencies . gross margin as a percentage of net revenues in 2016 decreased from 2015 primarily due to unfavorable foreign exchange rates as well as unfavorable impacts of higher intangible asset amortization , the imbruvica profit sharing arrangement and higher amortization of the fair market value step-up of acquisition-date inventory of pharmacyclics . additionally , 2016 gross margin included an intangible asset impairment charge of $ 39 million and 2015 gross margin included milestone revenue of $ 40 million from an oncology collaboration partner . these drivers were partially offset by favorable changes in product mix and operational efficiencies . 34 | 2017 form 10-k selling , general and administrative replace_table_token_7_th sg & a expenses as a percentage of net revenues in 2017 decreased from 2016 due to continued leverage from revenue growth partially offset by litigation reserve charges of $ 370 million in 2017 and new product launch expenses . sg & a expenses as a percentage of net revenues in 2016 decreased from 2015 due to continued leverage from revenue growth and lower costs in 2016 . sg & a expenses in 2015 included costs associated with the separation from abbott of $ 265 million , pharmacyclics acquisition and integration costs of $ 294 million and litigation reserve charges of $ 165 million . additionally , sg & a expense in 2015 reflected marketing support for the global launch of viekira . research and development and acquired in-process research and development replace_table_token_8_th research and development ( r & d ) expenses in 2017 increased from 2016 principally due to increased funding to support the company 's emerging mid- and late-stage pipeline assets , the impact of the post-acquisition r & d expenses of stemcentrx and boehringer ingelheim ( bi ) compounds and an increase in development milestones of $ 63 million . these factors were partially offset by a decrease in acquisition related costs of $ 135 million . r & d expenses in 2016 increased from 2015 due primarily to increased funding to support the company 's emerging mid- and late-stage pipeline assets . this increase was partially offset by the following factors : ( i ) 2015 r & d expenses included a $ 350 million charge related to the purchase of a priority review voucher from a third party ; ( ii ) development milestones decreased by $ 53 million ; and ( iii ) 2015 results included restructuring charges of $ 32 million . acquired in-process research and development ( ipr & d ) expenses reflect upfront payments related to various collaborations . acquired ipr & d expense in 2017 included a charge of $ 205 million as a result of entering into a global strategic collaboration with alector , inc. ( alector ) to develop and commercialize medicines to treat alzheimer 's disease and other neurodegenerative disorders . there were no individually significant transactions or cash flows during 2016 . acquired ipr & d expense in 2015 included a charge of $ 100 million as a result of entering into an exclusive worldwide license agreement with c 2 n diagnostics ( c 2 n ) to develop and commercialize anti-tau antibodies for the treatment of alzheimer 's disease and other neurological disorders . see note 5 to the consolidated financial statements for additional information regarding the alector and c 2 n agreements . other non-operating expenses replace_table_token_9_th interest expense in 2017 increased compared to 2016 due to a full year of expense associated with the may 2016 issuance of $ 7.8 billion aggregate principal amount of senior notes which were issued primarily to finance the acquisition of stemcentrx and to repay an outstanding term loan .
| 2017 financial results also reflected continued added funding to support abbvie 's emerging mid- and late-stage pipeline assets and continued investment in abbvie 's growth brands . in 2017 , the company generated cash flows from operations of $ 10.0 billion , which abbvie utilized to continue to enhance its pipeline through licensing and collaboration activities , pay cash dividends to stockholders of $ 4.1 billion and repurchase approximately 13 million shares for $ 1.0 billion in the open market . in october 2017 , abbvie 's board of directors declared a quarterly cash dividend of $ 0.71 per share of common stock payable in february 2018 . this reflected an increase of approximately 11 % over the previous quarterly dividend of $ 0.64 per share of common stock . 28 | 2017 form 10-k 2018 strategic objectives abbvie 's mission is to be an innovation-driven , patient-focused specialty biopharmaceutical company capable of achieving top-tier financial performance through outstanding execution and a consistent stream of innovative new medicines . abbvie intends to continue to advance its mission in a number of ways , including : ( i ) growing revenues by diversifying revenue streams , driving late-stage pipeline assets to the market and ensuring strong commercial execution of new product launches ; ( ii ) continued investment and expansion in its pipeline in support of opportunities in immunology , oncology and neurology as well as continued investment in key on-market products ; ( iii ) expanding operating margins ; and ( iv ) returning cash to shareholders via dividends and share repurchases . in addition , abbvie anticipates several regulatory submissions and key data readouts from key clinical trials in the next twelve months . abbvie expects to achieve its strategic objectives through : humira sales growth by driving biologic penetration across disease categories , maintaining market leadership and effectively managing biosimilar erosion . imbruvica revenue growth driven by increasing market share with its eight currently approved indications in six different disease areas . the strong execution of new
| 11,663 |
in conducting this service model initiative , the company is incurring significant expenses for items such as employee severances , the closure of offices and the fees of outside advisors . the company 's recently announced exploration of strategic alternatives is not expected to negatively impact the timing for completion of the company 's strategic business initiatives work . other developments potential settlement of class action lawsuit on february 8 , 2005 , the company entered into a stipulation of settlement ( settlement ) with plaintiffs ' counsel , on behalf of all putative class members , pursuant to which it preliminarily agreed to settle the consolidated class action for $ 6.75 million , which payment is expected to be made by the insurance carrier for the company . on february 10 , 2005 , the court preliminarily approved the terms of the settlement . 23 consistent with the federal rules of civil procedure , the class will be provided notice of the settlement and given the right to object or opt-out of the settlement . the court will hold a final approval hearing on may 26 , 2005. final settlement of the consolidated class action is subject to final approval by the court . settlement of warranty claims pertaining to a business sold in 2001 on december 14 , 2001 , the company consummated the sale of its french taxation services business ( alma ) , as well as certain notes payable due to the company , to chequers capital , a paris-based private equity firm . in conjunction with this sale , the company provided the buyer with certain warranties . effective december 30 , 2004 , the company , meridian and alma ( the parties ) entered into a settlement agreement ( the agreement ) requiring the company to pay a total of 3.4 million euros ( $ 4.7 million at january 3 , 2005 exchange rates , the payment date ) , to resolve the buyer 's warranty claims and a commission dispute with meridian . during 2004 , the company recognized a loss on discontinued operations of $ 3.1 million for amounts not previously accrued to provide for these claims . no tax benefit was recognized in relation to the expense . the agreement settles all remaining indemnification obligations and terminates all contractual relationships between the parties and further specifies that the parties will renounce all complaints , grievances and other actions . new senior credit facility on november 30 , 2004 , the company entered into an amended and restated credit agreement ( the senior credit facility ) with bank of america , n.a . ( the lender ) . the senior credit facility amends and restates the company 's previous senior credit facility , which was maintained by a syndicate of banking institutions led by the lender . the senior credit facility currently provides for revolving credit loans ( the revolver ) up to a maximum amount of $ 25.0 million , subject to certain borrowing base limitations ; provided , however , that the maximum amount of loans outstanding may be increased to $ 30.0 million as early as july 1 , 2005 upon achievement of certain performance milestones . the senior credit facility provides for the availability of letters of credit subject to a $ 10.0 million sublimit . the occurrence of certain stipulated events , as defined in the senior credit facility , including but not limited to the event that the company 's outstanding borrowings exceed the prescribed borrowing base , would require accelerated principal payments . otherwise , so long as there is no violation of any of the covenants ( or any such violations are waived ) , no principal payments are due until the maturity date on may 26 , 2006. the senior credit facility is secured by substantially all assets of the company . revolving loans under the senior credit facility bear interest at either ( 1 ) the lender 's prime rate plus 0.5 % , or ( 2 ) the london interbank offered rate ( libor ) plus 3.0 % . the senior credit facility requires a fee for committed but unused credit capacity of .50 % per annum . the senior credit facility contains customary financial covenants relating to the maintenance of a maximum leverage ratio and minimum consolidated earnings before interest , taxes , depreciation and amortization as defined in the senior credit facility . covenants in the previous senior credit facility related to senior leverage , fixed charge coverage , and minimum net worth were eliminated . at december 31 , 2004 , the company was in compliance with all such covenants . revision to previously reported 2004 results from continuing operations on march 3 , 2005 , the company filed under form 8-k its press release announcing the results for the quarter and year ended december 31 , 2004. the company has revised its results from continuing operations for a non-cash reduction of $ 0.9 million from the previously announced income tax expense for the year ended december 31 , 2004. this 1.1 % reduction from $ 76.2 million to $ 75.3 million resulted from an increase in the amount recorded for the company 's foreign income tax receivables , and increased results from continuing operations by $ 0.9 million , or $ 0.01 per share , for the fourth-quarter and full-year 2004 , as compared to the results initially reported in the company 's press release dated march 3 , 2005 . 24 critical accounting policies 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 consolidated 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 . story_separator_special_tag the company 's significant accounting policies are more fully described in note 1 of notes to consolidated financial statements included in item 8. of this form 10-k. however , certain of the company 's accounting policies are particularly important to the portrayal of its financial position and results of operations and require the application of significant judgment by management . as a result , they are subject to an inherent degree of uncertainty . accounting policies that involve the use of estimates that meet both of the following criteria are considered by management to be critical accounting policies . first , the accounting estimate requires the company to make assumptions about matters that are highly uncertain at the time that the accounting estimate is made . second , alternate estimates in the current period , or changes in the estimate that are reasonably likely in future periods , would have a material impact on the presentation of the company 's financial condition , changes in financial condition or results of operations . in addition to estimates that meet the critical estimate criteria , the company also makes many other accounting estimates in preparing its consolidated financial statements and related disclosures . all estimates , whether or not deemed critical , affect reported amounts of assets , liabilities , revenues and expenses , as well as disclosures of contingent assets and liabilities . on an on-going basis , management evaluates its estimates and judgments , including those related to revenue recognition , accounts receivable allowance for doubtful accounts , goodwill and other intangible assets and income taxes . management bases its estimates and judgments on historical experience , information available prior to the issuance of the consolidated financial statements and on various other factors that are believed to be reasonable under the circumstances . this information forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . materially different results can occur as circumstances change and additional information becomes known , including changes in those estimates not deemed critical . management believes the following critical accounting policies , among others , involve its more significant estimates and judgments used in the preparation of its consolidated financial statements . the development and selection of accounting estimates , including those deemed critical , and the associated disclosures in this form 10-k have been discussed with the audit committee of the board of directors . revenue recognition . the company recognizes revenue on the accrual basis except with respect to its meridian business unit , channel revenue , a division of accounts payable services , and certain international accounts payable services units where revenue is recognized on the cash basis in accordance with guidance issued by the securities and exchange commission in staff accounting bulletin ( sab ) no . 104 , revenue recognition . revenue is generally recognized for a contractually specified percentage of amounts recovered when it has been determined that our clients have received economic value ( generally through credits taken against existing accounts payable due to the involved vendors or refund checks received from those vendors ) , and when the following criteria are met : ( a ) persuasive evidence of an arrangement exists ; ( b ) services have been rendered ; ( c ) the fee billed to the client is fixed or determinable ; and ( d ) collectibility is reasonably assured . the determination that each of the aforementioned criteria are met , particularly the determination of the timing of economic benefit received by the client and the determination that collectibility is reasonably assured , requires the application of significant judgment by management and a misapplication of this judgment could result in inappropriate recognition of revenue . accounts receivable allowance for doubtful accounts . the company maintains allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of its clients to make required payments . the company evaluates the adequacy of the allowances on a periodic basis . the valuation includes , but is not limited to , historical loss experience , the aging of current accounts 25 receivable balances and provisions for adverse situations that may affect a client 's ability to pay . if the evaluation of allowance requirements differs from the actual aggregate allowance , adjustments are made to the allowance . this evaluation is inherently subjective , as it requires estimates that are susceptible to revision as more information becomes available . if the financial condition of any of the company 's clients were to deteriorate , or their operating climates were to change , resulting in an impairment of either their ability or willingness to make payments , additional allowances may be required . if the company 's estimate of required allowances for doubtful accounts is determined to be insufficient , it could result in decreased operating income in the period such determination is made . conversely , if a client subsequently remits cash for an accounts receivable balance which has previously been written off , it could result in increased operating income in the period in which the payment is received . a hypothetical 0.1 % change in the allowance for doubtful accounts would have a $ 0.1 million impact on operating income . paybacks and chargebacks . the company has calculated an estimate of amounts that could be potentially paid back to customers in the form of a cash payment or credit against future invoicings to that customer . historically , there has been a certain amount of revenues that , even though meeting all requirements of the company 's revenue recognition policy , our customers ' vendors have ultimately rejected the claims underlying such revenues . in that case , our customers , even though cash may have been collected by the company , may request a refund of such amount . the company has recorded such refunds as a reduction of revenue .
| cash provided by operations for the year ended december 31 , 2004 was primarily attributable to the offset of a loss from continuing operations by a non-cash charge to provide a valuation allowance against the company 's remaining deferred tax assets as of december 31 , 2004 , in addition to a release of restricted cash as a result of the company 's new senior credit facility . cash provided by operating activities during the year ended december 31 , 2003 was principally influenced by a loss from continuing operations combined with a reduction in accrued payroll and related expenses offset by non-cash impairment charges and an overall decline in accounts receivable balances . the overall change in accrued payroll and related expenses and accounts receivable balances was the result of normal operations . net cash provided by ( used in ) investing activities was $ 7.6 million , $ ( 11.7 ) million and $ ( 9.3 ) million during the years ended december 31 , 2004 , 2003 and 2002 , respectively . cash provided by investing activities during the year ended december 31 , 2004 related primarily to proceeds of $ 19.1 million from the sale of the remaining communications services business in january 2004 partially offset by capital expenditures of $ 11.3 million . during the year ended december 31 , 2003 , cash used in investing activities related primarily to capital expenditures . cash used in investing activities during the year ended december 31 , 2002 related primarily to capital expenditures of approximately $ 23.3 million partially offset by $ 4.0 million in net cash on hand provided by hsa-texas at the time of its acquisitions . net cash used in financing activities was $ 31.3 million , $ 6.9 million and $ 42.1 million for the years ended december 31 , 2004 , 2003 and 2002 , respectively . net cash used in financing activities during the year ended december 31 , 2004 related primarily to repayment of amounts outstanding under the company 's previous senior credit facility . net cash used in financing activities during the year ended december 31 , 2003 related primarily to the repurchase of treasury
| 11,664 |
our development efforts from inception through december 31 , 2020 were principally related to the acquisition and development of our clinical programs . all research and development expenses are charged to operations as incurred in accordance with asc 730 , research and development . we account for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received , rather than when the payment is made . general and administrative expenses general and administrative expenses consist primarily of salaries , benefits and other related costs , including stock-based compensation , for our personnel serving in our executive , business development , pre-commercial and finance and accounting functions . general and administrative expenses also include professional fees for marketing and other pre-commercial activities , legal , including patent-related expenses , consulting , insurance , board of director fees , tax and accounting services . we expect that our general and administrative expenses will increase significantly in the future as a result of the build out of our commercial organization and pre-commercial activities for teplizumab . 89 interest income interest income consists of interest income earned on our cash , cash equivalents and marketable securities . change in fair value of warrant liability change in fair value of warrant liability represents the re-measurement of liability classified warrants using the black-scholes option-pricing model at each financial reporting period . the fair value was affected by changes in inputs to the model including the fair value of our series a convertible redeemable preferred stock , expected stock price volatility , the estimated term until exercise , and the risk-free interest rate . upon the completion of the ipo in july 2018 , the warrants issued in connection with the series a convertible redeemable preferred stock converted to warrants for the purchase of 558,740 shares of our common stock . the liability associated with these warrants was revalued just prior to the completion of the ipo , with the change in the fair value of the warrant liability charged to earnings . the warrant liability was then reclassified to additional paid-in capital upon the completion of the ipo in july 2018 , as the warrants no longer contain redemption provisions outside our control . story_separator_special_tag serif '' > replace_table_token_5_th research and development expenses research and development expenses were $ 36.4 million for the year ended december 31 , 2019 , an increase of $ 13.8 million , compared to $ 22.6 million for the year ended december 31 , 2018. research and development expenses for the year ended december 31 , 2019 primarily included external clinical development expenses of $ 22.6 million for teplizumab , prv-6527 , prv-300 , and prv-3279 , development costs of $ 6.4 million for prv-101 and internal personnel costs of $ 5.1 million , including stock-based compensation of $ 1.3 million . research and development expenses for the year ended december 31 , 2018 included external clinical development expenses of $ 10.7 million for prv-6527 , prv-300 and teplizumab , development costs of $ 4.1 million for prv-101 , non-cash product acquisition costs of $ 4.0 million , which represented the fair value of warrants issued in connection with the acquisition of teplizumab and prv-3279 in may 2018 , and internal personnel costs of $ 2.9 million , including stock-based compensation of $ 0.6 million . general and administrative expenses general and administrative expenses were $ 8.0 million for the year ended december 31 , 2019 , an increase of $ 3.8 million , compared to $ 4.2 million for the year ended december 31 , 2018. general and administrative expenses for the year ended december 31 , 2019 primarily included $ 3.5 million in personnel costs , including stock-based compensation of $ 1.5 million , $ 2.7 million in professional fees and legal expenses , and $ 1.3 million in insurance and other public company costs . general and administrative expenses were $ 4.2 million for the year ended december 31 , 2018 and were primarily comprised of $ 1.7 million in personnel costs , including stock-based compensation of $ 0.5 million , $ 1.5 million in professional fees and legal expenses , and $ 0.6 million in insurance and other costs associated with being a public company . change in fair value of warrant liability change in fair value of warrant liability was a loss of approximately $ 0.5 million during the year ended december 31 , 2018. this loss represents the change in fair value of our warrant liability using a black-scholes option-pricing model with updated assumptions as of july 18 , 2018 , the date just prior to the completion of our ipo , and was primarily impacted by a change in the fair value of our series a convertible redeemable preferred stock . upon the completion of the ipo in july 2018 , the warrants issued in connection with the series a convertible redeemable preferred stock converted to warrants for the purchase of 558,740 shares of our common stock . the warrant liability was then reclassified to additional paid-in capital upon the completion of the ipo in july 2018 , as the warrants no longer contain redemption provisions outside our control . as such , we did not record any gain or loss related to the warrant liability during the year ended december 31 , 2019 . 92 interest income interest income was $ 1.1 million during the year ended december 31 , 2019 compared to $ 0.7 million during the year ended december 31 , 2018. the increase in interest income in 2019 related primarily to an increase in average cash , cash equivalents and marketable securities balances that resulted from the net proceeds from our ipo in july 2018 and our underwritten public offering and concurrent private placement in september 2019. income tax benefit we did not record any income tax benefit or provision during the year ended december 31 , 2019. we recorded an income tax benefit of $ 0.2 story_separator_special_tag million during the year ended december 31 , 2018 , which related to the proceeds from the sale of certain of our prior year new jersey net operating losses . liquidity and capital resources overview there is considerable time and cost associated with developing a potential drug or pharmaceutical product to the point of regulatory approval and commercialization . we have funded our operations to date through offerings of equity securities . we expect to continue to incur losses , as we plan to continue to fund development activities . as of december 31 , 2020 , we had cash , cash equivalents and marketable securities of $ 121.8 million . we currently have invested our cash , cash equivalents and marketable securities primarily in money market funds and corporate debt securities . in january 2021 , we completed an underwritten public offering in which we sold 6,250,000 shares of common stock at a public offering price of $ 16.00 per share . in february 2021 , the underwriters partially exercised their option to purchase an additional 587,500 shares at a price of $ 16.00 per share . in the aggregate , total net proceeds from this underwritten public offering was $ 102.3 million , after deducting underwriting discounts and commissions of approximately $ 6.6 million and other offering expenses of $ 0.5 million . we will need to raise additional capital to fund our operations , to develop and commercialize teplizumab , prv-015 , prv-3279 and prv-101 and to develop , acquire , or in-license other products . we currently plan to raise additional capital through equity offerings , debt , or potential out-licensing transactions . such additional funding will be necessary to continue to develop our product candidates , to pursue the license or purchase of other technologies , to commercialize our product candidates or to purchase other products . we may seek to sell common or preferred equity or convertible debt securities , enter into a credit facility or another form of third-party funding , or seek other debt financing . in addition , we may consider raising additional capital to fund operating activities , to expand our business , to pursue strategic investments , to take advantage of financing opportunities , or for other reasons . the sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common stock . if we raise additional funds through the issuance of preferred stock , convertible debt securities or other debt financing , these securities or other debt could contain covenants that would restrict our operations . any other third-party funding arrangement could require us to relinquish valuable rights . we may require additional capital beyond our currently anticipated amounts . additional capital may not be available on reasonable terms , or at all . if we are unable to obtain sufficient additional funds when required , we may be forced to delay , restrict or eliminate all or a portion of our development programs , dispose of assets or technology or cease operations . our cash requirements for 2021 will be impacted by a number of factors , the most significant of which are expenses related to teplizumab , including costs to build out our commercial infrastructure and other pre-commercial activities for teplizumab , the protect clinical trial , manufacturing activities for teplizumab and any potential milestone payments that may become due upon a potential regulatory approval of teplizumab by the fda . other factors include costs related to our phase 2b clinical study of prv-015 , our first-in-human safety study of prv-101 and the timing of our planned phase 2a study of prv-3279 . based on our current business plans , management believes that our cash , cash equivalents and marketable securities on hand at december 31 , 2020 , coupled with the funds raised in our january 2021 common stock offering , are sufficient to meet our obligations for at least the next 12 months from the issuance of these financial statements . 93 cash flows the following table shows a summary of our cash flows for the years ended december 31 , 2020 , 2019 and 2018 : replace_table_token_6_th cash flows from operating activities net cash used in operating activities was $ 76.3 million for the year ended december 31 , 2020 and primarily related to cash used to fund clinical development , manufacturing , and pre-commercial activities for teplizumab , clinical development activities for prv-015 , development activities for prv-101 , and increased personnel costs to support our clinical programs and the build out of our corporate and commercial infrastructure . our working capital was $ 109.8 million as of december 31 , 2020. net cash used in operating activities was $ 36.1 million for the year ended december 31 , 2019 and primarily related to cash used to fund clinical development activities for teplizumab , prv-6527 , prv-3279 and prv-300 , development activities for prv-101 , and increased personnel costs to support our clinical programs and our public company infrastructure . net cash used in operating activities was $ 22.6 million for the year ended december 31 , 2018 and primarily related to cash used to fund clinical development activities for prv-6527 , prv-300 and teplizumab , development activities for prv-101 , and increased personnel costs to support our recently acquired programs and our new public company infrastructure . cash flows from investing activities net cash provided by investing activities was $ 25.2 million for the year ended december 31 , 2020 and primarily related to the proceeds received from the maturity of marketable securities totaling $ 55.0 million offset by purchases of marketable securities totaling $ 28.7 million and net capital expenditures associated with the build out of our new corporate headquarters and information systems infrastructure of $ 1.1 million . net cash used in investing activities for the year ended december 31 , 2019 was $ 46.2 million and relates to the purchase of marketable securities during the period .
| 90 general and administrative expenses general and administrative expenses were $ 33.3 million for the year ended december 31 , 2020 , an increase of $ 25.3 million , compared to $ 8.0 million for the year ended december 31 , 2019. general and administrative expenses for the years ended december 31 , 2020 and 2019 were comprised of the following : replace_table_token_4_th pre-commercial expenses were $ 16.3 million for the year ended december 31 , 2020 and primarily consisted of $ 11.7 million in external costs for our pre-commercial activities such as marketing and market access , and $ 4.6 million in personnel costs , including stock-based compensation of $ 1.7 million . there were no pre-commercial expenses during the year ended december 31 , 2019. other general and administrative expenses were $ 17.0 million for the year ended december 31 , 2020 and primarily consisted of $ 9.0 million in personnel costs , including stock-based compensation of $ 5.9 million , $ 5.0 million in professional fees and legal expenses , and approximately $ 2.0 million in insurance and other public company costs . other general and administrative expenses were $ 8.0 million for the year ended december 31 , 2019 and were primarily comprised of $ 3.5 million in personnel costs , including stock-based compensation of $ 1.5 million , $ 2.7 million in professional fees and legal expenses , and approximately $ 1.3 million in insurance and other public company costs . the increase in general and administrative stock-based compensation in 2020 relates to the increase in headcount as well as the vesting of certain performance-based metrics related primarily to the completion of cmc activities and submission of the bla for teplizumab . interest income interest income was $ 0.6 million for the year ended december 31 , 2020 , compared to $ 1.1 million for the year ended december 31 , 2019. the decrease in interest income during the year ended december 31 , 2020 primarily related to an overall reduction in interest rates in 2020 , which is largely a result of changes in the economic environment related to the covid-19 pandemic . income tax benefit we recorded an income tax benefit of $ 0.5 million during the year ended december 31 , 2020 , which related to proceeds from the sale of certain of our prior year new jersey net operating losses . we did not
| 11,665 |
we do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses . however , if actual results are not consistent with our estimates and assumptions , our operating results could be adversely affected . share-based payments . we account for share-based payments in accordance with asc 718 , compensation – stock compensation ( “ asc 718 ” ) . to determine the fair value of our stock option awards , we use the black-scholes option-pricing model , which requires management to apply judgment and make assumptions to determine the fair value of our awards . these assumptions include estimating the length of time employees will retain their vested stock options before exercising them ( the “ expected term ” ) and the estimated volatility of the price of our common stock over the expected term . we calculate a weighted-average expected term based on historical experience . expected stock price volatility is based on historical volatility of our common stock . changes in these assumptions can materially affect the estimate of the fair value of our share-based payments and the related amount recognized in our consolidated financial statements . income taxes . we calculate income taxes in accordance with asc 740 , income taxes ( “ asc 740 ” ) , which requires the use of the asset and liability method . under this method , deferred tax assets and liabilities are recognized based on the difference between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to asc 740. deferred tax assets and liabilities are measured using the tax rates , based on certain judgments regarding enacted tax laws and published guidance , in effect in the years when those temporary differences are expected to reverse . a valuation allowance is established against the deferred tax assets when it is more likely than not that some portion or all of the deferred taxes may not be realized . changes in our level and composition of earnings , tax laws or the deferred tax valuation allowance , as well as the results of tax audits , may materially impact the effective income tax rate . we evaluate our income tax positions in accordance with asc 740 , which prescribes a comprehensive model for recognizing , measuring , presenting , and disclosing in the financial statements tax positions taken or expected to be taken on a tax return , including a decision whether to file or not to file in a particular jurisdiction . under asc 740 , a tax benefit from an uncertain position may be recognized only if it is more likely than not that the position is sustainable based on its technical merits . the calculation of the deferred tax assets and liabilities , as well as the decision to recognize a tax benefit from an uncertain position and to establish a valuation allowance require management to make estimates and assumptions . we believe that our assumptions and estimates are reasonable , although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities , valuation allowances or net income . key performance indicators our management evaluates the following items , which are considered key performance indicators , in assessing our performance : comparable sales — comparable sales and comparable sales changes provide a measure of sales growth for stores and channels open at least one year over the comparable prior year period . in fiscal years following those with 53 weeks , including fiscal 2018 , the prior year period is shifted by one week to compare similar calendar weeks . a store is included in comparable sales in its thirteenth month of operation . when stores have a gross square footage increase of 25 % or greater due to a remodel , they are removed from the comparable sales base , but are included in total sales . these stores are returned to the comparable sales base in the thirteenth month following the remodel . 23 sales from company-owned stores , as well as sales from aeo direct , are included in total comparable sales . sales from licensed stores are not included in comparable sales . individual american eagle and aerie brand comparable sales disclosures represent sales from stores and aeo direct . aeo direct sales are included in the individual american eagle and aerie brand comparable sales metric for the following reasons : our approach to customer engagement is “ omni-channel , ” which provides a seamless customer experience through both traditional and non-traditional channels , including four wall store locations , web , mobile/tablet devices and apps , social networks , email , in-store displays and kiosks . additionally , we fulfill online orders at stores through our buy online , ship from store capability , maximizing store inventory exposure to digital traffic and accept digital returns in stores ; and shopping behavior has continued to evolve across multiple channels that work in tandem to meet customer needs . management believes that presenting a brand level performance metric that includes all channels ( i.e. , stores and aeo direct ) to be the most appropriate given customer behavior . our management considers comparable sales to be an important indicator of our current performance , and investors may find it useful as such . comparable sales results are important to achieve leveraging of our costs , including store payroll , store supplies , rent , etc . comparable sales also have a direct impact on our total net revenue , cash , and working capital . gross profit — gross profit measures whether we are optimizing the profitability of our sales . gross profit is the difference between total net revenue and cost of sales . story_separator_special_tag cost of sales consists of merchandise costs , including design , sourcing , importing , and inbound freight costs , as well as markdowns , shrinkage and certain promotional costs ( collectively “ merchandise costs ” ) and buying , occupancy and warehousing costs . design costs consist of compensation , rent , depreciation , travel , supplies , and samples . buying , occupancy and warehousing costs consist of : compensation , employee benefit expenses and travel for our buyers and certain senior merchandising executives ; rent and utilities related to our stores , corporate headquarters , distribution centers and other office space ; freight from our distribution centers to the stores ; compensation and supplies for our distribution centers , including purchasing , receiving and inspection costs ; and shipping and handling costs related to our e-commerce operations . the inability to obtain acceptable levels of sales , initial markups or any significant increase in our use of markdowns could have an adverse effect on our gross profit and results of operations . operating income — our management views operating income as a key indicator of our performance . the key drivers of operating income are comparable sales , gross profit , our ability to control selling , general , and administrative expenses , and our level of capital expenditures . omni-channel sales performance — our management utilizes the following quality of sales metrics in evaluating our omni-channel sales performance : comparable sales , average unit retail price , total transactions , units per transaction , and consolidated comparable traffic . we include these metrics in our discussion within item 7 of this report when we believe they enhance the understanding of the matter being discussed . investors may find them useful as such . each of these metrics is defined as follows ( except comparable sales , which is defined separately above ) : average unit retail price represents the selling price of our goods . it is the cumulative net sales divided by the net units sold for a period of time . total transactions represents the count of customer transactions over a period of time ( inclusive of company-owned stores and aeo direct , unless specified otherwise ) . units per transaction represents the number of units sold divided by total transactions over a period of time ( inclusive of company-owned stores and aeo direct , unless specified otherwise ) . consolidated comparable traffic represents visits to our company-owned stores , limited to those stores that qualify to be included in comparable sales as defined above , including aeo direct , over a period of time . cash flow and liquidity — our management evaluates cash flow from operations , investing and financing in determining the sufficiency of our cash position and capital allocation strategies . cash flow has historically been sufficient to cover our uses of cash . our management believes that cash flow will be sufficient to fund anticipated capital expenditures , dividends , and working capital requirements . 24 story_separator_special_tag style= '' background-color : # ffffff ; padding-left:0pt ; padding-right:0.75pt ; padding-top:0.75pt ; padding-bottom:0pt ; width:1 % ; border-bottom : solid 0.75pt # 000000 ; white-space : nowrap ; '' valign= '' bottom '' > 0.01 net income per diluted share - non-gaap basis $ 1.48 ( 1 ) $ 1.6 million of pre-tax restructuring charges , primarily consisting of corporate severance charges . 25 we ended the year with $ 416.9 million in cash and short-term investments , a 2 % decrease from $ 425.5 million in cash and short-term investments as of the end of th e prior fiscal year . during fiscal 2019 , we generated $ 415.4 million of cash from operations , which was off set by $ 210.4 million of capital expenditures , the repurchase of 6.3 million shares for $ 112.4 millio n and dividend payments of $ 92.8 million . merchandise inv entory at the end of fiscal 2019 was $ 446.3 million , an increase of 5 % as compared to fiscal 201 8 . w e ended fiscal 2019 with no short or long-term debt . the following table shows , for the periods indicated , the percentage relationship to total net revenue of the listed items included in our consolidated statements of operations . replace_table_token_6_th comparison of fiscal 2019 to fiscal 2018 total net revenue total net revenue for fiscal 2019 increased 7 % to $ 4.308 billion compared to $ 4.036 billion for fiscal 2018. for fiscal 2019 , total comparable sales increased 3 % compared to an 8 % increase for fiscal 2018. included in total net revenue this year is $ 40.0 million recognized for license royalties from a third-party operator of ae stores in japan . by brand , including the respective aeo direct sales , american eagle brand comparable sales were up slightly , or $ 3.5 million , and aerie brand comparable sales increased 20 % , or $ 107.7 million . for the year , consolidated comparable traffic increased in the high single digits and total transactions increased in the high-single digits . units per transaction increased slightly and average unit retail price decreased in the low-single digits . gross profit gross profit increased 2 % to $ 1.522 billion for fiscal 2019 from $ 1.488 billion for fiscal 2018. the gross profit margin declined 160 basis points to a 35.3 % of total net revenue . higher markdowns were the primary cause of the decline compared to last year . increased distribution center and delivery costs also contributed to the decline . there was $ 11.2 million of share-based payment expense , consisting of both time and performance-based awards , included in gross profit this year . this is compared to $ 13.5 million of share-based payment expense included in gross profit last year .
| we believe that this non-gaap information more clearly reflects our financial results and is useful as an additional means for investors to evaluate our operating performance , when reviewed in conjunction with our gaap financial statements . these amounts are not determined in accordance with gaap and , therefore , should not be used exclusively in evaluating our business and operations . the table below reconciles the gaap financial measure to the non-gaap financial measure discussed above . earnings per share for the fiscal year ended february 1 , 2020 net income per diluted share - gaap basis $ 1.12 add : asset impairment & restructuring ( 1 ) 0.36 net income per diluted share - non-gaap basis $ 1.48 ( 1 ) $ 80.5 million of pre-tax impairment and restructuring charges , which includes : - $ 64.5 million of leasehold improvements , store fixtures , and operating lease right of use assets and a $ 1.7 million goodwill impairment charge . - $ 14.2 million of restructuring charges including $ 6.7 million of corporate and field severance , $ 4.2 million of joint business venture exit charges , $ 1.8 million of market transition costs in japan and $ 1.5 million of china severance and closure costs related to company-owned and operated stores . - gaap tax rate included the impact of valuation allowances on impairment and restructuring charges . excluding the impact of those items resulted in a 22.5 % tax rate for the year . earnings per share for the fiscal year ended february 2 , 2019 net income per diluted share - gaap basis $ 1.47 add : restructuring ( 1 ) < td
| 11,666 |
for financial statement presentation load king is presented as a discontinued operation . see note 25. asv segment a.s.v. , llc ( “ asv ” ) manufactures a line of high quality compact rubber tracked and skid steer loaders . the asv products are distributed through terex corporation ( “ terex ” ) distribution channels as well as through the company and other independent dealers . this independent dealer network now has over 100 locations . the products are used in the site clearing , general construction , forestry , golf course maintenance and landscaping industries , with general construction being the largest market . equipment distribution segment the equipment distribution segment located in bridgeview , illinois , comprises the operations of crane & machinery ( “ c & m ” ) , a division of manitex international , north american equipment , inc. ( “ nae ” ) and north american distribution , inc. ( “ nad ” ) . the segment markets products used primarily for infrastructure development and commercial construction applications that include road and bridge construction , general contracting , roofing , scrap handling and sign construction and maintenance . c & m is a distributor of terex rough terrain and truck cranes products and supplies repair parts for a wide variety of medium to heavy duty construction equipment and sells domestically and internationally , predominately to end users , including the rental market . it also provides crane equipment repair services in the chicago area . the segment markets previously-owned construction and heavy equipment and trailers both domestically and internationally through north american equipment , inc. , a subsidiary of the company . the segment purchase previously owned equipment of various ages and conditions and often refurbishes the equipment before resale . the segment also sells valla products through nad . economic conditions historically a significant portion of the company 's revenues has been attributed to demand from niche market segments , particularly the north american energy sector . in our annual report on form 10-k/a for the year ended december 31 , 2013 , we stated that , there had been a softening in the demand for our products which was related to the energy sector . this softness continued through much of the first quarter 2014 , which together with slower construction market demand caused a decrease in revenues from our existing products which was more than offset by additional revenues related to our acquisitions . towards the end of the first quarter 2014 , the company received significant new orders , which increased our backlog to $ 95 million from $ 72 million at december 31 , 2013. during the second , third and fourth quarters of 2014 order intake remained at a level consistent with our output and the backlog at december 31 , 2014 was $ 98.2 million . although order remained level , the demand for cranes with higher lifting capacity , which are often used by the energy sector , declined at the end of the second quarter 2014. the decline in demand for cranes with higher capacity was offset by cranes with lower lifting capacity and other product , both of which have lower margins . crude oil prices fell sharply during the fourth quarter of 2014 and remained in the fifty dollar per barrel range through june 2015. after that point oil prices began again to erode significantly decreasing to under $ 30 dollar a barrel . as result , the number of oil rigs in service has dropped from approximately from 1,600 in january 2015 to 500 at the end of the year . as a result of this decrease in rig count , the oil and gas industry further curtailed purchasing and began selling excess equipment into the general construction market , which further depressed the demand for boom trucks . the rig count between july 2015 and december 2015 continued to decline and oil companies continued to sell excess equipment . we have recently observed a slight moderating of the sell-off of excess equipment by the energy sector and are hopeful that the selloff of excess equipment by the energy 23 sector will be largely completed by the end of 2016. the aforementioned factors resulted in a significant decrease in revenues during the year from the sale of boom trucks , mobile tanks and used equipment . the market for a number of the company products , including the pm knuckle boom cranes , asv compact track loader skid steer loaders , military forklifts , port handling equipment have not been significantly affected by decrease in oil prices . the markets for these products have either been stable or growing . in particular the market for knuckle boom cranes , including the north american market , is continuing to grow . pm currently has a very small share of the market for knuckle boom cranes in north america . the company has started to manufacture knuckle boom cranes in the united state and is marketing them through the company 's current distribution channels . the company currently has a strong presence in north america for its boom trucks . the company believes that it can significantly increase the company 's share for knuckle boom cranes in north american . the company believes this is an immediate opportunity that will continue grow over time . the strengthening of the u.s. dollar against other currencies , including the euro and the canadian dollar also had an adverse impact on the company 2015 results as a substantial portion of our revenues and profits are generated by our foreign subsidiaries . foreign revenues and profit contribute less when they are converted at a lower exchange rate . factors affecting revenues and gross profit the company derives most of its revenue from purchase orders from dealers and distributors . the demand for the company 's products depends upon the general economic conditions of the markets in which the company competes . the company 's sales depend in part upon its customers ' replacement or repair cycles . story_separator_special_tag adverse economic conditions , including a decrease in commodity prices , may cause customers to forego or postpone new purchases in favor of repairing existing machinery . additionally , our manitex liftking and asv subsidiaries are impacted by residential housing starts . liftking is further impacted by the timing of orders received for military . cvs revenues are impacted in part by the timing of contract awards related to major port projects . gross profit varies from period to period . factors that affect gross profit include product mix , production levels and cost of raw materials . margins tend to increase when production is skewed towards larger capacity cranes , special mission oriented vehicles , specialized carriers and heavy material transporters . 24 the following table sets forth certain financial data for the three years ended december 31 , 2015 , 2014 and 2013 : story_separator_special_tag roman ; font-size:10pt ; font-style : normal ; text-transform : none ; font-variant : normal ; '' > foreign currency transaction gains and loss —the company attempts to purchase forward currency exchange contracts such that the exchange gains and losses on the assets and liabilities denominated in other than the reporting units ' functional currency will be offset by the changes in the market value of the forward currency exchange contracts it holds . the company records at the balance sheet date the forward currency exchange contracts at their market value with any associated gain or loss being recorded in current earnings as a currency gain or loss . for the year ended december 31 , 2015 , the company had a foreign currency gain of $ 0.03 million compared to a loss of $ 0.1 million for 2014. as stated above , the company attempts to purchase forward exchange contracts such that the exchange gains and losses on the assets and liabilities denominated in other than the reporting units ' functional currency will be offset . there are still certain risks at pm for which an effective hedging strategy may not be available which may result in future gains or loss that are not offset . income tax — income tax expense ( benefit ) for continuing operations was $ ( 0.7 ) million and $ 4.5 million for the years ended december 31 , 2015 and 2014 , respectively . the income tax benefit is attributed to a pre-tax loss of $ 4.7 million from continuing operations for the year ended december 31 , 2015. the company 's effective rate decreased to 15.4 % for 2015 from 35.5 % for 2014. the decrease in the effective tax rate is due primarily to income tax expense and rate differences in foreign jurisdictions , income tax expense related settlements of u.s. and foreign income tax examinations , adjustments to tax credits in connection with the finalization 26 of income tax filings , and a p artial reduction in the domestic production activity deduction in connection with the carryback of the 2015 u.s. federal net operating loss for a refund of income taxes previously paid . net ( loss ) income from continuing operations —net loss for the year ended december 31 , 2015 was $ 4.0 million . this compares with a net income for the year ended december 31 , 2014 of $ 8.1 million . year ended december 31 , 2014 from continuing operations compared to year ended december 31 , 2013 from continuing operations the above results include the results for companies acquired from their respective effective dates of acquisition : august 19 , 2013 for sabre , november 30 , 2013 for valla , december 16 , 2014 for lift ventures and december 20 , 2014 for asv . the results for 2015 , 2014 and 2013 have been restated to remove discontinued operations . net income from continuing operations for the year ended december 31 , 2014 , net income was $ 8.1 million , which consists of revenue of $ 247.2 million , cost of sales of $ 199.7 million , research and development costs of $ 2.1 million , sg & a costs of $ 29.9 million , interest expense of $ 2.8 million , foreign currency transaction loss of $ 0.1 million and income tax expense of $ 4.5 million . for the year ended december 31 , 2013 , net income was $ 11.3 million , which consists of revenue of $ 229.8 million , cost of sales of $ 184.1 million , research and development costs of $ 2.3 million , sg & a costs of $ 24.4 million , interest expense of $ 2.5 million , foreign currency transaction loss of $ 0.1 million and income tax expense of $ 5.1 million . net revenue and gross profit —for the year ended december 31 , 2014 , net revenue and gross profit were $ 247.2 million and $ 47.4 million , respectively . gross profit as a percent of sales was 19.2 % for the year ended december 31 , 2014. for the year ended december 31 , 2013 net revenue and gross profit were $ 229.8 million and $ 45.7 million , respectively . gross profit as a percent of sales was 19.9 % for the year ended december 31 , 2013. for 2014 revenues increased $ 17.3 million or 7.5 % from 2013 to $ 247.2 million , including $ 2.3 million from the asv that commenced operations in mid-december of 2014. excluding asv , 2014 revenues increased $ 15.0 million or 6.5 % , driven substantially by growth in container handling equipment , material handling equipment and equipment distribution revenues that grew year over year by 20 % , 14 % and 24 % respectively . crane revenues decreased in line with the reduction in our largest market , the boom and truck crane market that was down almost 8 % year over year and shipments of larger tonnage cranes being down approximately 19 % reflecting a softer oil and gas market . our cvs container handling products benefited from a modest strengthening in europe as well as expansion and improved distribution into overseas markets .
| gross profit as a percent of sales was 19.2 % for the year ended december 31 , 2014. for 2015 revenues increased $ 139.6 million or 56.5 % from $ 247.2 million for 2014 to $ 386.7 million for 2015. without the asv and pm transactions , revenues would have decreased , as these two acquisitions resulted in an increase in revenues of approximately $ 200 million for the year ended december 31 , 2015. the impact of the stronger dollar ( vs. the canadian dollar and the euro ) resulted in a decrease in revenues from our cvs and liftking operations that aggregated approximately $ 13.3 million . the remaining decrease is primarily attributed a decline in crane products sales . this decline is attributed to a decrease in demand from the energy sector the result of significant decline in oil prices . the demand for new cranes from the general construction market has also declined significantly as used cranes from the energy sector are being redeployed due to surpluses into the general construction market . finally , revenues from the sale of used construction equipment were also lower in part due to the weak canadian dollar which made it harder to sell product into canada . gross profit as a percent of net revenues decreased 1.2 % to 18 % for the year ended december 31 , 2015 from 19.2 % for the comparable 2014 period . the decrease in margin percent is principally attributed to product mix , including the unfavorable impact of decreased sales of crane products which generally have higher margins partially offset by the increase in parts sales as a percent of total revenues . part sales , which have significantly higher margins , increased from 11 % to 15 % of total revenues from 2014 to 2015. research and development —research and development for the year ended december 31 , 2015 was $ 5.8 million compared to $ 2.1 million for the comparable period in 2014. excluding $ 4.1 million additional expenses
| 11,667 |
costs of revenues , excluding amortization of acquired intangibles costs of revenues , excluding amortization of acquired intangibles consists of the costs of copiktra on which product revenue was recognized and royalties we incur as a result of sales of copiktra . our costs of revenue initially consists of capsule production , packaging , and product shipment . during the third quarter of 2018 , we began capitalizing inventory costs of copiktra based on our evaluation of the ability of our third-party suppliers to successfully manufacture commercial quantities of copiktra and the likelihood of approval of the new drug application ( nda ) in the united states . any production costs for copiktra prior to this time , which included the costs to manufacture drug product , in addition to the costs noted above , were included in research and development costs . to date , any api and raw starting materials used in the manufacturing of copiktra was inherited pursuant to the license agreement executed with infinity and , as such , the company has not recorded any inventory or expenses related to api or raw starting materials . we expect costs of revenue to increase as net product revenues increase and as a result of increased capitalized costs , which will include the cost of api and drug substance , associated with the production of copiktra in future periods . research and development expenses research and development expenses consist of costs associated with our research activities , including the development of our product candidates . our research and development expenses consist of : · employee‑related expenses , including salaries , benefits , travel and stock‑based compensation expense ; · external research and development expenses incurred under arrangements with third parties , such as contract research organizations ( cros ) , clinical sites , manufacturing organizations and consultants , including our scientific advisory board ; · license fees ; · facilities , depreciation and other allocated expenses , which include direct and allocated expenses for rent and maintenance of facilities , depreciation of leasehold improvements and equipment , and laboratory and other supplies ; and · costs associated with copiktra prior to us concluding that regulatory approval is probable and that its net realizable value is recoverable . we expense research and development costs to operations as incurred . we account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received , rather than when the payment is made . 77 on september 24 , 2018 , copiktra was approved by the fda and is now indicated for the treatment of adult patients with relapsed or refractory cll/sll after at least two prior therapies and relapsed or refractory fl after at least two prior systemic therapies . due to long-lead time requirements for manufacturing our product , manufacturing constraints and the desire to have copiktra commercially available as soon as possible following regulatory approval , we contracted with our third-party supplier to manufacture commercial quantities of copiktra drug substance prior to final approval by regulators . to date , any api and raw starting materials used in the manufacturing of copiktra was inherited pursuant to the license agreement executed with infinity and , as such , we have not recorded any inventory or expenses related to api or raw starting materials . we expensed all pre-validation and validation manufacturing costs of drug product as research and development expenses in the periods prior to july 1 , 2018. total costs of manufacturing copiktra drug product expensed as research and development through june 30 , 2018 was approximately $ 1.8 million . beginning july 1 , 2018 , we began capitalizing copiktra related drug product costs for validation and post-validation ( i.e . commercial ) lots as regulatory approval became probable . for the periods beginning on july 1 , 2018 and beyond , we have capitalized any copiktra drug product costs incurred for commercial use as inventory . we allocate the expenses related to external research and development services , such as cros , clinical sites , manufacturing organizations and consultants by project . the table below summarizes our external allocation of research and development expenses to our clinical programs , including copiktra and defactinib , for the years ended december 31 , 2018 , 2017 and 2016. we use our employee and infrastructure resources across multiple research and development projects . our project costing methodology does not allocate personnel and other indirect costs to specific clinical programs . these unallocated research and development expenses are summarized in the table below and include $ 9.2 million , $ 5.8 million and $ 3.9 million of personnel costs for the years ended december 31 , 2018 , 2017 and 2016 , respectively . replace_table_token_7_th we anticipate that our research and development expenses will increase significantly in future periods as we undertake costlier development activities for our existing and future product candidates , including larger and later‑stage clinical trials . the successful development of our product candidates is highly uncertain . at this time , we can not reasonably estimate or know the nature , timing and estimated costs of the efforts that will be necessary to complete development of our product candidates or the period , if any , in which material net cash inflows from our product candidates may commence . story_separator_special_tag this is due to the numerous risks and uncertainties associated with developing drugs , including the uncertainty of : · clinical trial results ; · the scope , rate of progress and expense of our research and development activities , including preclinical research and clinical trials ; · the potential benefits of our product candidates over other therapies ; · our ability to market , commercialize and achieve market acceptance for copiktra or any of our other product candidates that we receive regulatory approval for ; · the terms and timing of regulatory approvals ; and · the expense of filing , prosecuting , defending and enforcing patent claims and other intellectual property rights . 78 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 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 stock‑based compensation expense , in our executive , finance , commercial and business development functions . other selling , general and administrative expenses include allocated facility costs , commercial supply costs not capitalized as inventory , 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 income consists entirely of the mark-to-market adjustment of the bifurcated conversion option derivative liability related to the 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 , stock‑based 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 10‑k . 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 . 79 revenue recognition effective january 1 , 2018 , we adopted accounting standards codification ( asc ) 606 revenue from contracts with customers . this standard applies to all contracts with customers , except for contracts that are within the scope of other standards , such as leases , insurance , collaboration arrangements and financial instruments . under asc 606 , an entity recognizes revenue when its customer obtains control of promised goods or services , in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services . 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 – 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 .
| certain of the costs of copiktra units recognized as revenue during the 2018 period were expensed prior to the september 2018 fda marketing approval and , therefore , are not included in cost of sales during this period . we had no cost of revenues during the 2017 period . research and development expense . research and development expense for the 2018 period was $ 43.6 million compared to $ 46.4 million for the 2017 period . the $ 2.8 million decrease from the 2017 period to the 2018 period was primarily related to a decrease of $ 6.0 million in license fees related to a one-time milestone payment pursuant to the infinity license agreement that was recognized in the 2017 period and a decrease of approximately $ 3.2 million in consulting fees , partially offset by increases of $ 4.0 million in personnel related costs , including non-cash stock-based compensation , and $ 1.9 million in cro expense for outsourced biology , development and clinical services , which includes our clinical trial costs , and approximately $ 0.5 million of other costs . 86 selling , general and administrative expense . selling , general and administrative expense for the 2018 period was $ 77.3 million compared to $ 21.4 million for the 2017 period . the increase of $ 55.9 million from the 2017 period to the 2018 period primarily resulted from an increase in personnel related costs , including non-cash stock-based compensation , of $ 26.9 million , primarily related to the hiring and staffing of our sales and commercial teams , an increase in consulting and professional fees of $ 24.4 million , primarily related to the support of the commercial launch preparation activities , and an increase in travel and other costs of $ 4.6 million . amortization of acquired intangible assets . amortization of acquired intangible assets for the 2018 period of approximately $ 0.4 million was related to the copiktra finite-lived intangible asset which we recognized and began amortizing in september 2018. there was no amortization of acquired intangible assets in the 2017 period . other income . other income for the
| 11,668 |
overall north american production of passenger cars and light-duty trucks in 2016 was reported by industry publications as increasing by 2.5 percent versus 2015 with production of light-duty trucks , which includes pick-up trucks , suv 's , vans and `` crossover vehicles '' , increasing 6 percent and production of passenger cars decreasing 3 percent . current production levels of 16 the north american automotive industry now have reached the highest level in the past decade . results for 2016 , 2015 and 2014 reflect the continuing trend of growth since the 2009 recession . current economic conditions and low consumer interest rates have been generally supportive of market growth and , in addition , the continuing high levels in the average age of vehicles on the road appears to be contributing to higher rates of vehicle replacement . during the last three years we have seen a significant increase in cash from operations . we have utilized the cash from operations to continue enhancing the operational efficiencies of the company and enhance shareholder value . as part of our commitment to enhancing shareholder value , we have been repurchasing our common stock . in october 2014 , our board of directors approved the 2014 repurchase program , authorizing the repurchase of up to $ 30.0 million of our common stock . under the 2014 repurchase program , we repurchased 1,056,954 shares of company stock at a cost of $ 19.6 million in 2015 and 585,970 shares for $ 10.3 million in january 2016. in january of 2016 , our board of directors approved the 2016 repurchase program , authorizing the repurchase of up to $ 50.0 million of common stock . under the 2016 repurchase program , we repurchased 454,718 shares of company stock at a cost of $ 10.4 million in 2016. the enhancements to shareholder value have resulted in an increase in share price over the last three years . the chart below highlights the cash from operations and the stock performance in the last three years . historical stock price - the chart shows the historical stock price from january 1 , 2014 to december 31 , 2016. listed in the table below are several key indicators we use to monitor our financial condition and operating performance . story_separator_special_tag 18 2016 versus 2015 net sales the following table summarizes the impact that volume , aluminum and product mix had on the change in sales from 2015 to 2016 : net sales comparison year ended ( dollars in thousands ) year ended december 31 , 2015 $ 727,946 volume 60,827 aluminum prices ( 61,460 ) other 5,364 year ended december 31 , 2016 $ 732,677 net sales in 2016 increased $ 4.8 million to $ 732.7 million from $ 727.9 million in 2015. wheel shipments increased by 9 percent in 2016 compared to 2015 resulting in $ 60.8 million higher sales compared to 2015. net sales were unfavorably impacted by a decline in the value of the aluminum component of sales which we generally pass through to our customers and resulted in $ 61.5 million lower revenues . the average selling price of our wheels decreased 8 percent due to the unfavorable impact of the decline in aluminum value . increases in unit shipments to gm , nissan , toyota and subaru were partially offset by decreases in unit shipments to ford and fca . wheel program development revenues totaled $ 10.0 million in 2016 and $ 6.9 million in 2015. u.s. operations net sales of our u.s. plants in 2016 decreased 32 percent , to $ 120.4 million from $ 177.2 million in 2015 , reflecting a decrease in unit shipments and a decrease in the average selling price of our wheels . unit shipments from our u.s. plants decreased 28 percent in 2016 , primarily reflecting the reallocation of production volume to our plants in mexico . the decline in volume resulted in $ 50.5 million lower sales . the average selling price of our wheels decreased 7 percent primarily due to the decline in the value of the aluminum component coupled with the mix of wheel sizes and finishes sold . the lower aluminum value decreased revenues by approximately $ 9.4 million when compared to 2015. mexico operations net sales of our mexico plants in 2016 increased 11 percent , to $ 612.3 million from $ 550.7 million in 2015 , reflecting a 20 percent increase in unit shipments offset partially by an 8 percent decrease in the average selling prices of our wheels . the unit shipment volume increase in 2016 resulted in $ 111.3 million higher sales . the 8 percent decrease in the average selling price of our wheels was primarily a result of the lower pass-through price of aluminum partially offset by a favorable mix of wheel sizes and finishes sold . the lower aluminum value decreased revenues by approximately $ 52.1 million when compared to 2015. our major customer mix , based on unit shipments , is shown below : replace_table_token_7_th according to ward 's auto info bank , overall north american production of passenger cars and light-duty trucks in 2016 increased approximately 3 percent , while production of the specific passenger car and light-duty truck programs using our wheels increased 1 percent . in contrast to the overall market , our total shipments increased by 9 percent , resulting in our share of the north american aluminum wheel market increasing by 1 percentage point on a year-over-year basis . the increase in market share was 4 percentage points in passenger car programs , offset by a 3 percentage point decline in light-duty trucks . 19 according to ward 's automotive group , the aluminum wheel penetration rate on passenger cars and light-duty trucks in the u.s. was 81 percent for the 2016 model year and 79 percent for the 2015 model year , compared to 81 percent for the 2014 model year . we expect the ratio of aluminum to steel wheels to remain relatively stable . story_separator_special_tag at the customer level , shipments in 2016 to ford decreased 7 percent compared to 2015 , as shipments of passenger car wheels decreased 20 percent and light-duty truck wheels decreased 2 percent . at the program level , the major unit shipment decreases for the f-series trucks , fiesta , escape , focus , fusion and taurus were offset partially by increases for the edge , explorer , mkz , flex , mks , expedition and mkc . shipments to gm in 2016 increased 28 percent compared to 2015 , as the unit volume of passenger car wheels increased nearly 4 times and light-duty truck wheel shipments increased less than 1 percent . the major unit shipment increases to gm were for the k2xx platform vehicles , malibu , traverse and volt , partially offset by shipment decreases for the srx , terrain , enclave , impala , ats and colorado . shipments to toyota in 2016 increased 7 percent compared to 2015 , as shipments of light-duty truck wheels increased 24 percent and passenger car wheels decreased 24 percent . the major unit shipment increases to toyota were for the tacoma , highlander and sienna , partially offset by unit shipment decreases for the avalon , venza and tundra . shipments to fca in 2016 decreased 15 percent compared to 2015 , as passenger car wheel shipments increased 82 percent and the unit volume of light-duty truck wheels decreased 23 percent . the major unit shipment decreases to fca were for the town and country , durango , journey and magnum/charger which were partially offset by unit shipment increases for the dodge-ram trucks and dodge challenger . shipments to other international customers in 2016 increased 45 percent compared to 2015 , as shipments of passenger car wheels increased 39 percent and shipments of light-duty truck wheels increased 66 percent . the higher unit volumes included increases of 86 percent to nissan , 17 percent to mazda , 16 percent to subaru and 20 percent to bmw , while unit volumes decreased 20 percent to vw . at the program level , major unit shipment increases to international customers were for nissan 's sentra , kicks , altima and note , toyota scion ia which is manufactured by mazda , bmw x3 and subaru 's impreza and legacy , offset partially by unit shipment decreases for the nissan titan , mazda 2 , nissan versa and vw jetta . cost of sales aluminum , natural gas and other direct material costs are a significant component of our costs to manufacture wheels . these costs are substantially the same for all of our plants since many common suppliers service both our u.s. and mexico operations . consolidated cost of sales includes costs for both our u.s. and international operations , which are principally our wheel manufacturing operations in mexico , and certain costs that are not allocated to a specific operation . these unallocated expenses include corporate services that are primarily incurred in the u.s. but are not charged directly to our world-wide operations , such as engineering services for wheel program development and manufacturing support , environmental and other governmental compliance services . in 2016 , consolidated cost of goods sold decreased $ 10.2 million to $ 646.5 million , or 88 percent of net sales , compared to $ 656.7 million , or 90 percent of net sales , in 2015. cost of sales in 2016 primarily reflects a decline in aluminum prices of approximately $ 53.8 million , which we generally pass through to our customers , offset by an increase in freight , maintenance and supply costs . freight costs increased $ 16.4 million to $ 20.4 million in 2016 , compared to $ 4.0 million in 2015 due mainly to expedited shipments of approximately $ 13 million to customers arising from the operating inefficiencies discussed in the executive overview section . repair and maintenance costs increased $ 4.3 million and supply costs increased $ 3.4 million in 2016 when compared to 2015. cost of sales associated with corporate services such as engineering support for wheel program development and manufacturing support increased $ 2.4 million in 2016 when compared to 2015 primarily due to pre-production charges incurred on new product platforms and increased compensation costs . u.s. operations cost of sales for our u.s. operations decreased in 2016 by $ 61.6 million , or 30 percent when compared to 2015. the 2016 decline in cost of sales for our u.s. plant primarily reflects the effect of reallocating production volume to our mexico facilities which resulted in a 28 percent decline in unit shipments and the reduction of labor and aluminum costs by $ 6.1 million and $ 10.9 million , respectively , when compared to 2015. lower aluminum prices also contributed to the decline . mexico operations cost of sales for our mexico operations increased by $ 51.4 million in 2016 when compared to 2015 , which is mainly driven by a 20 percent increase in wheel shipments . during 2016 , plant labor and benefit costs , including overtime premiums , increased 20 approximately $ 4.6 million , primarily as a result of higher average headcount and wage increases . direct material and contract labor costs increased approximately $ 1.9 million from 2015 primarily due to the 20 percent rise in unit shipments . the increase in direct material costs was more than offset by a decrease of approximately $ 42.9 million of aluminum purchase costs which we generally pass through to our customers . depreciation increased $ 0.8 million in 2016 compared to 2015. supply and small tool costs increased $ 4.5 million and plant repair and maintenance expenses increased $ 4.9 million in 2016 compared to 2015. gross profit consolidated gross profit increased $ 15.0 million for 2016 to $ 86.2 million , or 12 percent of net sales , compared to $ 71.2 million , or 10 percent of net sales , last year .
| we believe the adjusted ebitda financial measure assists in providing a more complete understanding of our underlying operational measures to manage our business , to evaluate our performance compared to prior periods and the marketplace and to establish operational goals . we believe that these non-gaap financial measures are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making . adjusted ebitda is a non-gaap financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with gaap . this non-gaap financial measure may not be computed in the same manner as similarly titled measures used by other companies . see the non-gaap financial measures section of this annual report for a reconciliation of our adjusted ebitda to net income . ( 3 ) adjusted ebitda : percentage of net sales is a key measure that is not calculated according to gaap . adjusted ebitda as a percentage of net sales is defined as adjusted ebitda divided by net sales . see the non-gaap financial measures section of this annual report for a reconciliation of adjusted ebitda . ( 4 ) adjusted ebitda : percentage of value added sales is a key measure that is not calculated according to gaap . adjusted ebitda as a percentage of value added sales is defined as adjusted ebitda divided by value added sales . see the non-gaap financial measures section of this annual report for a reconciliation of adjusted ebitda and value added sales . 2014 restructuring actions and ongoing cost during the third quarter of 2014 , we completed a review of initiatives to reduce costs and enhance our competitive position . based on this review , we committed to a plan to close operations at our rogers , arkansas facility , which was completed during the fourth quarter of 2014. the closure resulted in a reduction of workforce of approximately 500 employees and a shift in production to other
| 11,669 |
each of these segments is organized and managed based upon the nature of the products and services they offer . see item 1. business for additional information on our segments . refining & marketingrefines crude oil and other feedstocks at our six refineries in the gulf coast and midwest regions of the united states , purchases ethanol and refined products for resale and distributes refined products through various means , including barges , terminals and trucks that we own or operate . we sell refined products to wholesale marketing customers domestically and internationally , to buyers on the spot market , to our speedway business segment and to dealers and jobbers who operate marathon ® retail outlets ; speedwaysells transportation fuels and convenience products in the retail market in the midwest , primarily through speedway ® convenience stores ; and pipeline transportationtransports crude oil and other feedstocks to our refineries and other locations , delivers refined products to wholesale and retail market areas and includes , among other transportation-related assets , a majority interest in loop llc , which is the owner and operator of the only u.s. deepwater oil port . on december 1 , 2010 , we completed the sale of the minnesota assets . these assets included the 74,000 barrel per day st. paul park refinery and associated terminals , 166 convenience stores primarily branded superamerica ® ( including six stores in wisconsin ) along with the supermom 's bakery and commissary ( a baked goods and sandwich supply operation ) and certain associated trademarks , superamerica franchising llc , interests in pipeline assets in minnesota and associated inventories . our results of operations , financial position , cash flows and operating statistics for all periods prior to the disposition include amounts for the minnesota assets . we reported net income of $ 2.39 billion , or $ 6.67 per diluted share , for 2011 compared to net income of $ 623 million , or $ 1.74 per diluted share , for 2010. the increase was primarily due to our refining & marketing segment operations , which generated income from operations of $ 3.59 billion in 2011 compared to $ 800 million in 2010. the increase in refining & marketing segment income from operations was due to an improved refining and marketing gross margin , which was primarily a result of wider differentials between west texas intermediate crude oil ( wti ) and other light sweet crudes such as light louisiana sweet crude oil ( lls ) , larger lls 6-3-2-1 crack spreads and wider sweet/sour differentials . the detroit refinery heavy oil upgrading and expansion project continues to be a significant part of our capital spending . as of december 31 , 2011 , the project was approximately 85 percent complete and on schedule to complete construction in the third quarter of 2012. immediately following the completion of construction , there will be a 70-day turnaround with the expanded detroit refinery anticipated to be online by year end . in addition , 41 we continued to optimize our other refineries in 2011 , with increases in our crude oil refining capacity as of december 31 , 2011 at our garyville refinery from 464 mbpcd to 490 mbpcd , at our catlettsburg refinery from 212 mbpcd to 233 mbpcd and at our texas city refinery from 76 mbpcd to 80 mbpcd . our speedway segment generated income from operations of $ 271 million for 2011 compared to income from operations of $ 293 million for 2010. increases in light product and merchandise margins were more than offset by the decrease in income attributed to the sale of 166 convenience stores that were part of the minnesota assets disposition in december 2010. in 2011 , speedway purchased 23 convenience stores in illinois and indiana . all of the locations have been rebranded and are now integrated into speedway 's operations . we intend to grow our speedway segment through a combination of new construction and selective acquisitions . our pipeline transportation segment continued to generate steady income , with income from operations of $ 199 million for 2011 compared to income from operations of $ 183 million for 2010. as a result of the spinoff , we issued $ 3.0 billion of senior notes in february 2011. we used a portion of the proceeds to repay our long-term debt payable to marathon oil . as additional sources of liquidity , during 2011 we entered into a four-year revolving credit agreement with an initial borrowing capacity of $ 2.0 billion and a three-year trade receivables securitization facility with an aggregate principal amount not to exceed $ 1.0 billion . as of december 31 , 2011 , we had cash and cash equivalents of $ 3.08 billion and no borrowings or letters of credit outstanding under either the revolving credit agreement or the trade receivables securitization facility . the above discussion includes forward-looking statements with respect to the detroit refinery heavy oil upgrading and expansion project and speedway segment growth . factors that could cause actual results to differ materially from those forward-looking statements include transportation logistics , availability of materials and labor , unforeseen hazards such as weather conditions , delays in obtaining or conditions imposed by necessary government and third-party approvals , other risks customarily associated with construction projects , and our ability to successfully implement growth opportunities . these factors ( among others ) could cause actual results to differ materially from those set forth in the forward-looking statements . overview of segments refining & marketing refining & marketing segment income from operations depends largely on our refining and marketing gross margin and refinery throughputs . our refining and marketing gross margin is the difference between the prices of refined products sold and the costs of crude oil and other charge and blendstocks refined , including the costs to transport these inputs to our refineries , the costs of purchased products and manufacturing expenses , including depreciation and amortization . story_separator_special_tag the crack spread is a measure of the difference between market prices for refined products and crude oil , commonly used by the industry as a proxy for the refining margin . crack spreads can fluctuate significantly , particularly when prices of refined products do not move in the same relationship as the cost of crude oil . as a performance benchmark and a comparison with other industry participants , we calculate midwest ( chicago ) and u.s. gulf coast ( usgc ) crack spreads that we believe most closely track our operations and slate of products . lls prices and a 6-3-2-1 ratio of products ( 6 barrels of lls crude oil producing 3 barrels of unleaded regular gasoline , 2 barrels of ultra-low sulfur diesel and 1 barrel of 3 percent sulfur residual fuel ) are used for these crack-spread calculations . our refineries can process significant amounts of sour crude oil , which typically can be purchased at a discount to sweet crude oil . the amount of this discount , the sweet/sour differential , can vary significantly , causing our refining and marketing gross margin to differ from crack spreads based on sweet crude . in general , a larger sweet/sour differential will enhance our refining and marketing gross margin . 42 historically , wti has traded at prices similar to lls . during 2011 , wti traded at prices significantly less than lls , which favorably impacted our refining and marketing gross margin . the following table provides sensitivities showing the estimated change in net income due to potential changes in market conditions : replace_table_token_12_th ( a ) weighted 52 % chicago and 48 % usgc lls 6-3-2-1 crack spreads and assumes all other differentials and pricing relationships remain unchanged . ( b ) lls ( prompt ) - [ delivered cost of sour crude oil : arab light , kuwait , maya , western canadian select and mars ] . ( c ) assumes 25 % of crude oil throughput volumes are wti-based domestic crudes . in addition to the market changes indicated by the crack spreads , the sweet/sour differential and the discount of wti to lls , our refining and marketing gross margin is impacted by factors such as : the types of crude oil and other charge and blendstocks processed ; the selling prices realized for refined products ; the impact of commodity derivative instruments used to manage price risk ; the cost of products purchased for resale ; and changes in manufacturing costs , which include depreciation and amortization . changes in manufacturing costs are primarily driven by the cost of energy used by our refineries and the level of maintenance costs . planned major maintenance activities , or turnarounds , requiring temporary shutdown of certain refinery operating units , are periodically performed at each refinery . the following table lists the refineries that had significant planned turnaround and major maintenance activities for each of the last three years : year refinery 2011 canton and catlettsburg 2010 catlettsburg , detroit , garyville , robinson and texas city 2009 catlettsburg , garyville and robinson the table below sets forth the location and daily crude oil refining capacity of each of our refineries at december 31 of each year . replace_table_token_13_th ( a ) the st. paul park , minnesota refinery was sold in december 2010 . 43 speedway our retail marketing gross margin for gasoline and distillate , which is the price paid by consumers less the cost of refined products , including transportation and consumer excise taxes , and the cost of bankcard processing fees , impacts the speedway segment profitability . numerous factors impact gasoline and distillate demand throughout the year , including local competition , seasonal demand fluctuations , the available wholesale supply , the level of economic activity in our marketing areas and weather conditions . the demand for gasoline in the midwest region of the u.s. is estimated to have declined more than two percent in 2011 associated with higher prices , following essentially flat demand during 2010 and 2009. after decreasing in 2009 , distillate demand in the midwest region of the u.s. increased in 2010. higher prices contributed to an estimated one percent decrease in distillate demand in 2011. market demand increases for gasoline and distillates generally increase the product margin we can realize . the gross margin on merchandise sold at convenience stores historically has been less volatile . pipeline transportation the profitability of our pipeline transportation operations primarily depends on tariff rates and the volumes shipped through the pipelines . a majority of the crude oil and refined product shipments on our common carrier pipelines serve our refining & marketing segment . the volume of crude oil that we transport is directly affected by the supply of , and refiner demand for , crude oil in the markets served directly by our crude oil pipelines . key factors in this supply and demand balance are the production levels of crude oil by producers in various regions or fields , the availability and cost of alternative modes of transportation , the volumes of crude oil processed at refineries and refinery and transportation system maintenance levels . the volume of refined products that we transport is directly affected by the production levels of , and user demand for , refined products in the markets served by our refined product pipelines . in most of our markets , demand for gasoline and distillates peaks during the summer driving season , which extends from may through september of each year , and declines during the fall and winter months . as with crude oil , other transportation alternatives and system maintenance levels influence refined product movements . 44 story_separator_special_tag primarily of mpc 's corporate administrative expenses , including allocations from marathon oil for periods prior to the spinoff , and costs related to certain non-operating assets . ( b ) the impairment in 2010 was related to a maleic anhydride plant . ( c ) includes related party net interest and other financial income .
| 45 purchases from related parties decreased $ 677 million in 2011 compared to 2010. the decrease was primarily due to purchases of crude oil from marathon oil after the spinoff not being classified as related party transactions . selling , general and administrative expenses increased $ 186 million in 2011 compared with 2010. employee compensation and benefits expenses comprised $ 81 million of the increase , which is partially due to an increase in the number of administrative employees associated with being a stand-alone public company , higher incentive compensation accruals related to 2011 performance and increased pension and postretirement benefit costs . contract services expenses increased $ 62 million , primarily due to higher information technology costs associated with being a separate stand-alone company . in addition , bankcard processing fees related to marathon brand sales increased $ 41 million , primarily due to higher transportation fuel selling prices . following the spinoff , we no longer receive allocated corporate overhead costs from marathon oil . related party net interest and other financial income increased $ 11 million in 2011 compared to 2010 , primarily reflecting higher average balances of our short-term investments in preferred stock of moc portfolio delaware , inc. ( pfd ) , a subsidiary of marathon oil , prior to the spinoff . the agreement with pfd was terminated on june 30 , 2011. see item 8. financial statements and supplementary data - note 4 for further discussion of the pfd preferred stock . net interest and other financial costs increased $ 49 million in 2011 compared with 2010 , primarily reflecting increased interest expense associated with the $ 3.0 billion of long-term debt we issued in february 2011. we capitalized third-party interest of $ 104 million in 2011 compared to $ 17 million in 2010. see item 8. financial statements and supplementary data - note 18 for further details relating to our debt . provision for income taxes increased
| 11,670 |
partially offsetting these items were a reduction in royalty income of $ 155 million that was recognized in 2015 due to the termination of a licensing agreement associated with the sale of our former engineered products business and an increase in rationalization charges in 2016 , primarily related to our announced plan to close our manufacturing facility in philippsburg , germany . net sales net sales in 2016 of $ 15,158 million decreased $ 1,285 million , or 7.8 % , compared to $ 16,443 million in 2015 due primarily to lower sales of $ 531 million as a result of the deconsolidation of our venezuelan subsidiary , unfavorable foreign currency translation of $ 258 million , primarily in emea and americas , a decline in price and product mix of $ 230 million , primarily in emea and americas , driven by the impact of lower raw material costs on pricing , lower sales in other tire-related businesses of $ 188 million , primarily related to motorcycle tire sales in americas due to the dissolution of the global alliance with sri , and lower tire unit volume of $ 75 million . consumer and commercial net sales in 2016 were $ 9,414 million and $ 2,806 million , respectively . consumer and commercial net sales in 2015 were $ 9,907 million and $ 3,342 million , respectively . the following table presents our tire unit sales for the periods indicated : replace_table_token_9_th the decrease in worldwide tire unit sales of 0.1 million units , or 0.1 % , compared to 2015 , included a decrease of 1.9 million oe tire units , or 3.7 % , comprised primarily of decreases in americas , partially offset by increases in asia pacific . replacement tire units increased 1.8 million units , or 1.6 % , comprised primarily of increases in asia pacific , partially offset by decreases in americas . the volume increases in asia pacific were primarily related to replacement units in japan due to the acquisition of ngy and growth in china and india in both oe and replacement . the volume decreases in americas were primarily related to the deconsolidation of our venezuelan subsidiary , lower consumer tire sales in the united states and canada and the impact of the dissolution of the global alliance with sri . consumer and commercial unit sales in 2016 were 153.0 million and 11.6 million , respectively . consumer and commercial unit sales in 2015 were 152.4 million and 12.4 million , respectively . cost of goods sold cost of goods sold ( “ cgs ” ) was $ 10,972 million in 2016 , decreasing $ 1,192 million , or 9.8 % , from $ 12,164 million in 2015 . cgs was 72.4 % of sales in 2016 compared to 74.0 % of sales in 2015 . cgs in 2016 decreased due to lower costs of $ 373 million as a result of the deconsolidation of our venezuelan subsidiary , lower raw material costs of $ 346 million , foreign currency translation of $ 201 million , primarily in emea and americas , lower costs in other tire-related businesses of $ 127 million , primarily related to motorcycle tire sales in americas due to the dissolution of the global alliance with sri , and lower volume of $ 51 million . cgs in 2016 included an out of period adjustment of $ 24 million ( $ 15 million after-tax and minority ) of expense related to the elimination of intracompany profit in americas , primarily related to the years 2012 to 2015 , with the majority attributable to 2012. cgs in 2016 also included pension expense of $ 44 million which decreased from $ 85 million in 2015 primarily due to the deconsolidation of our venezuelan subsidiary and the change in calculating interest and service costs in the measurement of pension expense 24 effective january 1 , 2016. pension expense excluded pension settlement charges in cgs of $ 16 million ( $ 16 million after-tax and minority ) and $ 91 million in 2016 and 2015 , respectively . cgs in 2016 included accelerated depreciation of $ 20 million ( $ 20 million after-tax and minority ) , primarily related to our announced plan to close our manufacturing facility in philippsburg , germany and our plan to close our wolverhampton , u.k. mixing and retreading facility . accelerated depreciation was $ 8 million ( $ 7 million after-tax and minority ) in 2015 , primarily related to our plan to close our wolverhampton , u.k. mixing and retreading facility . selling , administrative and general expense sag was $ 2,407 million in 2016 , decreasing $ 207 million , or 7.9 % , from $ 2,614 million in 2015 . sag was 15.9 % of sales in both 2016 and 2015 . the decrease in sag was due to lower wages and benefits of $ 66 million , primarily related to lower incentive compensation and savings from rationalization plans , lower pension settlement charges of $ 49 million related to a settlement that occurred in 2015 , lower costs of $ 39 million due to the deconsolidation of our venezuelan subsidiary , foreign currency translation of $ 27 million , primarily in emea , and lower advertising costs of $ 12 million . sag in 2016 included pension expense of $ 31 million which decreased compared to $ 50 million in 2015 , primarily due to the change in calculating interest and service costs in the measurement of pension expense effective january 1 , 2016. pension expense excluded pension settlement charges in sag of $ 1 million ( $ 1 million after-tax and minority ) and $ 49 million in 2016 and 2015 , respectively . rationalizations we recorded net rationalization charges of $ 210 million in 2016 ( $ 198 million after-tax and minority ) . story_separator_special_tag net rationalization charges include charges of $ 116 million related to the announced plan to close our tire manufacturing facility in philippsburg , germany , $ 34 million related to a plan to reduce global sag headcount , and $ 25 million related to manufacturing headcount reductions in emea to improve operating efficiency . we recorded net rationalization charges of $ 114 million in 2015 ( $ 85 million after-tax and minority ) . net rationalization charges include charges of $ 38 million related to the plan to close our wolverhampton , u.k. mixing and retreading facility and a plan to transfer consumer tire production from our manufacturing facility in wittlich , germany to other manufacturing facilities in emea . we also initiated plans in 2015 for manufacturing and sag headcount reductions in emea and americas . upon completion of the 2016 plans , we estimate that annual segment operating income will improve by approximately $ 105 million ( $ 45 million cgs and $ 60 million sag ) , primarily related to the announced plan in philippsburg , germany and our plan to reduce global sag headcount . the savings realized in 2016 from rationalization plans totaled $ 43 million ( $ 11 million cgs and $ 32 million sag ) . for further information , refer to the note to the consolidated financial statements no . 2 , costs associated with rationalization programs . interest expense interest expense was $ 372 million in 2016 , decreasing $ 66 million from $ 438 million in 2015 . the decrease was due primarily to lower average debt balances of $ 5,972 million in 2016 compared to $ 6,053 million in 2015 , and a decrease in average interest rates to 6.23 % in 2016 compared to 7.22 % in 2015 . interest expense in 2016 and 2015 included $ 12 million ( $ 8 million after-tax and minority ) and $ 16 million ( $ 10 million after-tax and minority ) , respectively , of expense related to the write-off of deferred financing fees and unamortized discount related to the redemption of various debt instruments . other income other income in 2016 was $ 10 million , decreasing $ 131 million from other income of $ 141 million in 2015 . the decrease in other income was due , in part , to 2016 royalty income of $ 23 million , which decreased $ 169 million from $ 192 million of royalty income in 2015. royalty income in 2015 included a one-time pre-tax gain of $ 155 million on the recognition of deferred royalty income resulting from the termination of a licensing agreement associated with the sale of our former engineered products business . other income in 2016 included net gains on asset sales of $ 31 million ( $ 26 million after-tax and minority ) compared to net gains on asset sales of $ 71 million ( $ 60 million after-tax and minority ) in 2015. net gains on asset sales in 2016 included a gain of $ 16 million related to the sale of a former wire plant site in luxembourg and a gain of $ 9 million related to the sale of our interest in a supply chain logistics company . net gains on asset sales in 2015 included a net gain of $ 48 million ( $ 38 million after-tax and minority ) related to the dissolution of the global alliance with sri and a gain of $ 30 million ( $ 32 million after-tax and minority ) on the sale of our investment in shares of sri . net gains on asset sales in 2015 also included losses of $ 14 million in emea , primarily related to the sales of certain sub-saharan africa retail businesses . other income included net foreign currency exchange gains of $ 13 million in 2016 , an improvement of $ 90 million from net foreign currency exchange losses of $ 77 million in 2015. foreign currency exchange reflects net gains and losses resulting from the effect of exchange rate changes on various foreign currency transactions worldwide , including $ 34 million of losses in 2015 related to the devaluation of the venezuelan bolivar fuerte against the u.s. dollar . 25 other income in 2016 included charges of $ 53 million ( $ 37 million after-tax and minority ) for premiums related to the redemption of various debt instruments and $ 10 million ( $ 6 million after-tax and minority ) for legal claims unrelated to operations . other income in 2016 also included gains of $ 24 million ( $ 15 million after-tax and minority ) for the recovery of past costs from several of our asbestos insurers . other income in 2015 included charges of $ 4 million ( $ 4 million after-tax and minority ) for labor claims related to a previously closed facility in greece . for further information , refer to the note to the consolidated financial statements no . 4 , other ( income ) expense . income taxes income tax benefit in 2016 was $ 77 million on income before income taxes of $ 1,207 million . for 2015 , income tax expense was $ 232 million on income before income taxes of $ 608 million . the decrease in income taxes for 2016 compared to 2015 was primarily due to net discrete adjustments of $ 458 million ( $ 459 million after minority interest ) , due primarily to a tax benefit of $ 331 million from the december 31 , 2016 release of the valuation allowances on certain subsidiaries in england , france , luxembourg and new zealand . the release of the valuation allowances on these subsidiaries is net of 2016 tax law changes that reduced deferred tax assets by $ 23 million . as of each reporting date , management considers new evidence that could affect our view of realization of our deferred tax assets .
| partially offsetting these items were a reduction in royalty income due to the 2015 termination of a licensing agreement associated with the sale of our former engineered products business and an increase in rationalization charges , primarily related to our announced plan to close our manufacturing facility in philippsburg , germany . our total segment operating income for 2016 was $ 1,985 million , compared to $ 2,020 million in 2015 . the $ 35 million , or 1.7 % , decrease in segment operating income was due primarily to the impact of the deconsolidation of our venezuelan subsidiary of $ 119 million , lower income in other tire-related business of $ 61 million , primarily due to decreased motorcycle tire sales as a result of the dissolution of the global alliance with sri , unfavorable foreign currency translation of $ 30 million , lower volume of $ 24 million and an out of period adjustment of $ 24 million of expense related to the elimination of intracompany profit in americas , primarily related to the years 2012 to 2015 , with the majority attributable to 2012. these decreases were partially offset by lower 22 raw material costs of $ 346 million , which more than offset the effect of lower price and product mix of $ 178 million , and lower sag of $ 56 million , primarily related to lower incentive compensation and restructuring savings . refer to `` results of operations — segment information ” for additional information . pension and benefit plans at december 31 , 2016 , our unfunded global pension liability was $ 669 million , compared to $ 642 million at december 31 , 2015. our u.s. pension strategy includes the accelerated funding of pension plans in conjunction with significantly reducing exposure in the investment portfolio of those plans to future equity market movements . the fixed income investments held for these plans are designed to offset the subsequent impact of discount rate movements on the plans ' benefit obligations so that the funded status remains stable . the strategy also provides for the opportunistic settling of
| 11,671 |
among the key non-financial indicators of our success is our ability to rapidly introduce new products and deliver the latest application optimized server solutions . in this regard , we work closely with west\249206192.2 25 microprocessor and other component vendors to take advantage of new technologies as they are introduced . historically , our ability to introduce new products rapidly has allowed us to benefit from the introduction of new microprocessors and as a result we monitor the introduction cycles of intel , amd and nvidia carefully . this also impacts our research and development expenditures . for example , in fiscal year 2012 and in prior years , our results have been adversely impacted by customer order delays in anticipation of the introduction of the new lines of microprocessors and research and development expenditures necessary for us to prepare for the introduction . other financial highlights the following is a summary of other financial highlights of fiscal year 2014 : net cash provided by operating activities was $ 6.5 million , $ 13.6 million and $ 16.5 million in fiscal year 2014 , 2013 and 2012 , respectively . our cash and cash equivalents , together with our investments , were $ 99.6 million at the end of fiscal year 2014 , compared with $ 95.7 million at the end of fiscal year 2013 . the increase in our cash and cash equivalents , together with our investments at the end of fiscal year 2014 was primarily due to $ 6.5 million of cash generated from our operating activities , $ 23.9 million of proceeds from the exercise of stock options and $ 11.0 million of borrowings , net of repayments , offset in part by $ 40.6 million of purchases of property and equipment . days sales outstanding in accounts receivable ( “ dso ” ) at the end of fiscal year 2014 was 44 days , compared with 39 days at the end of fiscal year 2013 . the increase in our dso was primarily due to an increase in sales late in the quarter . our inventory balance was $ 315.8 million at the end of fiscal year 2014 , compared with $ 254.2 million at the end of fiscal year 2013 . days sales of inventory ( “ dsi ” ) at the end of fiscal year 2014 was 83 days , compared with 95 days at the end of fiscal year 2013 . the increase in our inventory was to support our anticipated level of growth in net sales in fiscal year 2015. our purchase commitments with contract manufacturers and suppliers were $ 211.1 million at the end of fiscal year 2014 and $ 249.0 million at the end of fiscal year 2013 . included in the above non-cancellable commitments are hard disk drive purchase commitments totaling approximately $ 45.2 million , which have terms expiring through december 2014 . see note 12 of notes to our consolidated financial statements in item 8 of this form 10-k for a discussion of purchase commitments . on october 31 , 2013 , we completed the purchase of real property in san jose , california for $ 30.2 million . the property consists of approximately 324,000 square feet of building space on 36 acres of land . in connection with the purchase , we also engaged several contractors for the development and construction of improvements on the property that will serve as our green computing park . we plan to develop five manufacturing buildings and remodel one existing warehouse on the land in which two of the buildings and the improvement of the warehouse will be constructed through fiscal year 2016. fiscal year our fiscal year ends on june 30. references to fiscal year 2014 , for example , refer to the fiscal year ended june 30 , 2014 . west\249206192.2 26 revenues and expenses net sales . net sales consist of sales of our server solutions , including server systems , subsystems and accessories . the main factors which impact our net sales are unit volumes shipped and average selling prices . the prices for server systems range widely depending upon the configuration , and the prices for our subsystems and accessories vary based on the type . as with most electronics-based products , average selling prices typically are highest at the time of introduction of new products which utilize the latest technology and tend to decrease over time as such products mature in the market and are replaced by next generation products . cost of sales . cost of sales primarily consists of the costs to manufacture our products , including the costs of materials , contract manufacturing , shipping , personnel and related expenses , equipment and facility expenses , warranty costs and inventory excess and obsolete provisions . the primary factors that impact our cost of sales are the mix of products sold and cost of materials , which include raw material costs , shipping costs and salary and benefits related to production . cost of sales as a percentage of net sales may increase over time if decreases in average selling prices are not offset by corresponding decreases in our costs . our cost of sales , as a percentage of net sales , is generally lower on server systems than on subsystems and accessories , but generally higher in the case of sales of server systems to internet data system customers . because we generally do not have long-term fixed supply agreements , our cost of sales is subject to change based on market conditions . research and development expenses . research and development expenses consist of the personnel and related expenses of our research and development teams , and materials and supplies , consulting services , third party testing services and equipment and facility expenses related to our research and development activities . all research and development costs are expensed as incurred . we occasionally receive non-recurring engineering , or nre , funding from certain suppliers and customers . story_separator_special_tag under these programs , we are reimbursed for certain research and development costs that we incur as part of the joint development of our products and those of our suppliers and customers . these amounts offset a portion of the related research and development expenses and have the effect of reducing our reported research and development expenses . sales and marketing expenses . sales and marketing expenses consist primarily of salaries and incentive bonuses for our sales and marketing personnel , costs for tradeshows , independent sales representative fees and marketing programs . from time to time , we receive cooperative marketing funding from certain suppliers . under these programs , we are reimbursed for certain marketing costs that we incur as part of the joint promotion of our products and those of our suppliers . these amounts offset a portion of the related expenses and have the effect of reducing our reported sales and marketing expenses . similarly , we from time to time offer our distributors cooperative marketing funding which has the effect of increasing our expenses . the timing , magnitude and estimated usage of our programs and those of our suppliers can result in significant variations in reported sales and marketing expenses from period to period . spending on cooperative marketing , either by us or our suppliers , typically increases in connection with significant product releases by us or our suppliers . general and administrative expenses . general and administrative expenses consist primarily of general corporate costs , including personnel expenses , financial reporting , corporate governance and compliance and outside legal , audit and tax fees . interest and other expense , net . interest and other expense , net represents interest expense on our term loans and line of credit , offset by interest earned on our investment and cash balances . income tax provision . our income tax provision is based on our taxable income generated in the jurisdictions in which we operate , currently primarily the united states , taiwan , the netherlands , and to a lesser extent , china and japan . our effective tax rate differs from the statutory rate primarily due to research and development tax credits , the domestic production activities deduction and lower taxes in foreign jurisdictions which were partially offset by the impact of state taxes and stock option expenses . in recent years , our effective tax rate from period to period has been significantly impacted by delays in the approval of extensions of the u.s. research and development tax credit . a reconciliation of the federal statutory income tax rate to our effective tax rate is set forth in note 11 of notes to consolidated financial statements . west\249206192.2 27 critical accounting policies our discussion and analysis of our 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 amount of assets , liabilities , revenues and expenses . we evaluate our estimates on an on-going basis , including those related to allowances for doubtful accounts and sales returns , cooperative marketing accruals , investment valuations , inventory valuations , income taxes , warranty obligations and stock-based compensation . 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 the judgments we make about the carrying values of assets and liabilities that are not readily apparent from other sources . because these estimates can vary depending on the situation , actual results may differ from the estimates . we believe the following are our most critical accounting policies as they require our more significant judgments in the preparation of our financial statements . revenue recognition . we recognize revenue from sales of products when persuasive evidence of an arrangement exists , shipment has occurred and title has transferred , the sales price is fixed or determinable , collection of the resulting receivable is reasonably assured , and all significant obligations have been met . generally this occurs at the time of shipment when risk of loss and title has passed to the customer . our standard arrangement with our customers includes a signed purchase order or contract , 30 to 60 days payment terms , ex-works terms , except for a few customers who have free-on-board destination terms , for which revenue is recognized when the products arrive at the destination . we generally do not provide for non-warranty rights of return except for products which have “ out-of-box ” failure , where customers could return these products for credit within 30 days of receiving the items . certain distributors and oems are also permitted to return products in unopened boxes , limited to purchases over a specified period of time , generally within 60 to 90 days of the purchase , or to products in the distributor 's or oem 's inventory at certain times ( such as the termination of the agreement or product obsolescence ) . to estimate reserves for future sales returns , we regularly review our history of actual returns for each major product line . we also communicate regularly with our distributors to gather information about end customer satisfaction , and to determine the volume of inventory in the channel . reserves for future returns are adjusted as necessary , based on returns experience , returns expectations and communication with our distributors . in addition , certain customers have acceptance provisions and revenue is deferred until the customers provide the necessary acceptance . at june 30 , 2014 and 2013 , we had deferred revenue of $ 7.7 million and $ 1.0 million and related deferred product costs of $ 6.7 million and $ 0.7 million , respectively , related to shipments to customers pending acceptances .
| for fiscal year 2014 , the number of subsystems and accessories units sold decreased 1.0 % to 4.5 million compared to fiscal year 2013 . sales of subsystems and accessories increased by $ 65.7 million or 9.9 % from fiscal year 2013 to fiscal year 2014 , primarily related to higher sales of hard disk drives and memory bundled with our server solutions to our distributors and system integrators who increasingly are purchasing additional accessories from us and completing the final assembly themselves . sales of subsystems and accessories represented 49.5 % of our net sales for fiscal year 2014 as compared to 56.8 % of our net sales for fiscal year 2013 . for fiscal year 2014 and 2013 , we derived 54.1 % and 56.3 % , respectively , of our net sales from products sold to distributors and we derived 45.9 % and 43.7 % , respectively , from sales to oems and to end customers . for fiscal year 2014 , customers in the united states , europe and asia accounted for 55.2 % , 21.6 % and 20.4 % , of our net sales , respectively , as compared to 54.2 % , 22.7 % and 20.5 % of our net sales , respectively , for fiscal year 2013 . cost of sales . cost of sales increased by $ 239.1 million , or 23.9 % , to $ 1,241.7 million from $ 1,002.5 million , for fiscal year 2014 and 2013 , respectively . cost of sales as a percentage of net sales was 84.6 % and 86.2 % for fiscal year 2014 and 2013 , respectively . the increase in absolute dollars of cost of sales was primarily attributable to the increase in net sales partially offset by a decrease of $ 7.5 million in provision for inventory reserve . the lower cost of sales as a percentage of net sales was primarily due to a lower provision for inventory reserve , an increase in purchasing power , an increase in the mix
| 11,672 |
we anticipate sales in 2012 will continue to increase as compared to 2011 , absent a deterioration in global economic conditions . however , we expect local currency sales growth to be reduced as global economic forecasts indicate economic growth is expected to slow , and we will face more difficult prior period comparisons . to reduce costs , we also continue to shift more of our manufacturing to china where our four facilities manufacture for the local markets as well as for export . extending our technology lead . we continue to focus on product innovation . in the last three years , we spent approximately 5 % of net sales on research and development . we seek to drive shorter product life cycles , as well as improve our product offerings and their capabilities with additional integrated technologies and software . in addition , we aim to create value for our customers by having an intimate knowledge of their processes via our significant installed product base . maintaining cost leadership . we continue to strive to improve our margins by optimizing our cost structure . for example , we significantly reduced our global cost structure during 2009 in response to the global economic slowdown and took further actions during 2011 in response to the continued economic uncertainty . we have also focused on reallocating resources and better aligning our cost structure to support higher growth areas and opportunities for margin improvement . as previously mentioned , shifting production to china has also been an important component of our cost savings initiatives . we have also implemented global procurement and supply chain management programs over the last several years aimed at lowering supply costs . our cost leadership initiatives are also focused on continuously improving our invested capital efficiency , such as reducing our working capital levels and ensuring appropriate returns on our expenditures . pursuing strategic acquisitions . we seek to pursue acquisitions that may leverage our global sales and service network , respected brand , extensive distribution channels and technological leadership . we have identified life sciences , product inspection and process analytics as three key areas for acquisitions . we also continue to pursue “ bolt-on ” acquisitions . for example , during the first and third quarters of 2011 , we acquired an x-ray inspection solutions business in the united states and a vision inspection solutions business in germany , both of which will be integrated into our end-of-line product inspection systems offering . during the first quarter of 2010 , we acquired our pipette distributor in the united kingdom and during the fourth quarter of 2009 we also acquired a leader of vision inspection technology in the united states that has been integrated with our end-of-line product inspection systems offering . results of operations — consolidated net sales net sales were $ 2,309.3 million for the year ended december 31 , 2011 , compared to $ 1,968.2 million in 2010 and $ 1,728.9 million in 2009 . this represents increases in 2011 and 2010 of 17 % and 14 % in u.s. dollars and 13 % and 14 % in local currencies , respectively . during the first and third quarters of 2011 , we acquired an x-ray inspection business in the united states and a vision inspection solutions business located in germany , both of which have been integrated into our end-of-line product inspection systems offering . during the first quarter of 2010 , we acquired our pipette distributor in the united kingdom that has been integrated into our u.k. market organization . during the fourth quarter of 2010 , we sold our retail software business for in-store item and inventory management solutions . we estimate acquisitions/divestitures , net contributed approximately 1 % to our net sales growth during 2011 . in 2011 , our net sales by geographic destination increased in u.s. dollars by 9 % in the americas , 18 % in europe and 26 % in asia/rest of world . in local currencies , our net sales by geographic destination increased in 2011 by 9 % in the americas , 11 % in europe and 20 % in asia/rest of world . a discussion of 28 sales by operating segment is included below . acquisitions/divestitures , net contributed approximately 1 % in europe to net sales growth during 2011 . while we have experienced improved business activity during 2011 , the global economic environment remains uncertain and it is currently difficult to predict the extent to which our results may be adversely affected . as described in note 18 to our audited consolidated financial statements , our net sales comprise product sales of precision instruments and related services . service revenues are primarily derived from repair and other services , including regulatory compliance qualification , calibration , certification , preventative maintenance and spare parts . net sales of products increased by 20 % and 17 % in 2011 and 2010 in u.s. dollars and by 15 % and 16 % in local currencies , respectively . service revenue ( including spare parts ) increased in 2011 and 2010 by 9 % and 5 % in u. s. dollars , respectively , and by 5 % in local currencies for both periods . net sales of our laboratory-related products , which represented approximately 45 % of our total net sales in 2011 , increased by 14 % in u.s. dollars and 9 % in local currencies during 2011 principally driven by strong results in analytical instruments , process analytics and laboratory balances . net sales of our industrial-related products , which represented approximately 45 % of our total net sales in 2011 , increased by 24 % in u.s. dollars and 19 % in local currencies during 2011 . we experienced strong sales growth across most product categories and geographies , particularly china . acquisitions contributed approximately 3 % to our industrial-related net sales growth during 2011 . story_separator_special_tag net sales in our food retailing markets , which represented approximately 10 % of our total net sales in 2011 , increased by 5 % in u.s. dollars and increased 1 % in local currencies during 2011 compared to the previous year , resulting from strong growth in europe related to increased project activity and china , offset in part by decreased sales in the united states . food retailing sales during 2011 were reduced by approximately 6 % due to product line exits . gross profit gross profit as a percentage of net sales was 52.8 % for 2011 , compared to 52.7 % for 2010 and 51.4 % for 2009 . gross profit as a percentage of net sales for products was 56.3 % for 2011 , compared to 56.5 % for 2010 and 55.2 % for 2009 . gross profit as a percentage of net sales for services ( including spare parts ) was 39.3 % for 2011 , compared to 39.5 % for 2010 and 39.8 % for 2009 . the increase in gross profit as a percentage of net sales reflects benefits from increased sales volume , pricing , favorable mix and operating efficiencies . these results were partly offset by unfavorable currency rate changes and increased material costs . research and development and selling , general and administrative expenses research and development expenses as a percentage of net sales were 5.0 % for 2011 , 4.9 % for 2010 and 5.2 % for 2009 . research and development expenses increased by 20 % and 8 % in 2011 and 2010 , respectively , in u.s. dollars and in local currencies increased by 9 % and 6 % in 2011 and 2010 , respectively . our research and development spending levels reflect changes in part due to the timing of project activity . selling , general and administrative expenses as a percentage of net sales increased to 30.5 % for 2011 , compared to 29.9 % for 2010 and 29.2 % for 2009 . selling , general and administrative expenses in u.s. dollars increased by 20 % and 17 % in 2011 and 2010 , respectively , and in local currencies increased by 13 % and 16 % in 2011 and 2010 , respectively . the increase in 2011 is primarily due to increased sales 29 and marketing investments ( especially in emerging markets ) , costs related to our blue ocean program , a program to globalize our business processes and information technology systems that includes the implementation of a company-wide enterprise resource planning system and acquisition-related expenses . restructuring charges during the fourth quarter of 2008 , we initiated a global cost reduction program which has substantially been completed . we also initiated additional cost reduction measures in the fourth quarter of 2011. charges under these programs primarily comprise severance costs . through december 31 , 2011 , total charges recognized under these programs were $ 48.6 million of which $ 5.9 million , $ 4.9 million and $ 31.4 million was recognized during 2011 , 2010 and 2009 , respectively . see note 15 to our audited consolidated financial statements for a summary of restructuring activity during 2011 . other charges ( income ) , net other charges ( income ) , net consisted of net charges of $ 2.4 million in 2011 , compared to net charges of $ 4.2 million and $ 1.4 million in 2010 and 2009 , respectively . other charges ( income ) , net consists primarily of interest income , ( gains ) losses from foreign currency transactions and other items . other charges ( income ) , net in 2010 also includes a $ 4.4 million ( $ 3.8 million after-tax ) charge associated with the sale of our retail software business for in-store item and inventory management solutions . this amount was partially offset by a benefit from unrealized contingent consideration from a previous acquisition totaling $ 1.2 million ( $ 1.2 million after-tax ) . interest expense and taxes interest expense was $ 23.2 million for 2011 , compared to $ 20.1 million for 2010 and $ 25.1 million for 2009 . the increase in interest expense for 2011 is primarily a result of additional borrowings during the fourth quarter 2010 , in order to facilitate foreign earnings repatriation . the 2010 amount reflects the benefit of lower average borrowings and lower costs associated with our interest rate swap agreements compared with the prior year . during 2011 , 2010 , and 2009 we recorded discrete tax items resulting in net tax benefits of $ 3.8 million , $ 5.2 million , and $ 8.3 million primarily related to the favorable resolution of certain prior year tax matters . our annual effective tax rate was 23 % , 25 % and 23 % for 2011 , 2010 and 2009 , respectively . the previously described discrete tax items had the effect of lowering our annual effective tax rate by 1 % in both 2011 and 2010 and 4 % in 2009 . our consolidated income tax rate is lower than the u.s. statutory rate primarily because of benefits from lower-taxed non-u.s. operations . the most significant of these lower-taxed operations are in switzerland and china . results of operations — by operating segment the following is a discussion of the financial results of our operating segments . we currently have five reportable segments : u.s. operations , swiss operations , western european operations , chinese operations and other . a more detailed description of these segments is outlined in note 18 to our audited consolidated financial statements . 30 u.s. operations ( amounts in thousands ) replace_table_token_4_th _ ( 1 ) represents u.s. dollar growth for net sales and segment profit . the increase in total net sales and net sales to external customers during 2011 reflects strong growth in most categories , especially product inspection , process analytics and core-industrial products , offset in part by reduced sales in food retailing .
| in addition to the swiss franc and major european currencies , we also conduct business in many geographies throughout the world , including asia pacific , the united kingdom , eastern europe , latin america and canada . fluctuations in these currency exchange rates against the u.s. dollar can also affect our operating results . in addition to the effects of exchange rate movements on operating profits , our debt levels can fluctuate due to changes in exchange rates , particularly between the u.s. dollar and the swiss franc . based on our outstanding debt at december 31 , 2011 , we estimate that a 10 % weakening of the u.s. dollar against the currencies in which our debt is denominated would result in an increase of approximately $ 4.4 million in the reported u.s. dollar value of the debt . taxes we are subject to taxation in many jurisdictions throughout the world . our effective tax rate and tax liability will be affected by a number of factors , such as the amount of taxable income in particular jurisdictions , the tax rates in such jurisdictions , tax treaties between jurisdictions , the extent to which we transfer funds between jurisdictions , earnings repatriations between jurisdictions and changes in law . generally , the tax liability for each taxpayer within the group is determined either ( i ) on a non-consolidated/non-combined basis or ( ii ) on a consolidated/combined basis only with other eligible entities subject to tax in the same jurisdiction , in either case without regard to the taxable losses of non-consolidated/non-combined affiliated legal entities . environmental matters we are subject to environmental laws and regulations in the jurisdictions in which we operate . we own or lease a number of properties and manufacturing facilities around the world . like many of our competitors , we have incurred , and will continue to incur , capital and operating expenditures and other costs in complying with such laws and regulations . we are
| 11,673 |
however , selling expenses as a percent of net sales actually decreased from 8.8 % in 2016 to 8.2 % in 2017. general and administrative expenses increased by $ 5,532 to $ 37,660 for the year ended december 31 , 2017 , as compared to $ 32,128 in 2016. the main drivers for the increase are driven by an increase in legal expenses related to the doj proceedings against the company of approximately $ 1,200 , expenses of $ 1,821 incurred in professional fees in connection with the product and business acquisitions completed in 2017 including ; the expense of the acquisition process , increased amortization expenses as a result of the valuation of the acquisitions , and the administrative operating expenses of such acquisitions from the closing date of the respective acquisitions . research , product development and regulatory expenses increased by $ 4,778 to $ 26,076 for the year ended december 31 , 2017 , as compared to $ 21,298 in 2016. the increase is driven by additional regulatory activity defending our expanded portfolio of products , product development studies , driven by our expanded portfolio and continued progress on the development of our simpas technology . freight , delivery and warehousing costs for the year ended december 31 , 2017 increased by $ 870 to $ 27,750 , as compared to $ 26,880 in 2016. when expressed as a percentage of sales , freight costs decreased slightly year over year to 7.8 % in 2017 , as compared to 8.6 % in 2016. this is mainly due to product mix and locations of customers . net interest expense was $ 1,941 in 2017 , as compared to $ 1,623 in 2016. interest costs are summarized in the following table : replace_table_token_8_th the company 's average overall debt for the year ended december 31 , 2017 was $ 51,103 as compared to $ 59,917 for the year ended december 31 , 2016. on a gross basis , our effective interest rate increased on our working capital revolver to 3.0 % , as compared to 2.3 % in 2016. this increase was driven by increases in the libor rate . after adjustments related to capitalized interest and including expenses related to the amortization of deferred liabilities , the overall effective rate was 3.8 % for 2017 as compared to 2.7 % in 2016. on december 22 , 2017 , the tax cuts and jobs act ( the “ tax reform act ” ) was signed into law . the legislation significantly changes u.s. tax law by , among other things , lowering corporate income tax rates , implementing a territorial tax system and imposing a tax on deemed repatriated earnings of foreign subsidiaries . the tax reform act reduces the u.s. corporate income tax rate from a maximum of 35 % to a flat 21 % rate , effective january 1 , 2018. as a result of the reduction in the u.s. corporate income tax rate , we 22 american vanguard corporation and subsidiaries ( dollars in thousands , except per share data ) revalued our ending net deferred tax assets and liabilities at december 31 , 2017 , provisionally resulting in a deferred tax benefit of $ 4,683 that is included in the provision for income taxes for the year ended december 31 , 2017. the tax reform act also provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits ( “ e & p ” ) through the year ended december 31 , 2017. we have performed a review of our foreign entities and have estimated that the amou nt of deemed repatriated income amounts to $ 30,085 , on which the company has estimated that there will be a tax expense of $ 1,250. that amount is also included in the provision for income taxes for the year ended december 31 , 2017. the net tax benefits fr om the tax reform act are reflected in our financial results in accordance with staff accounting bulletin no . 118 ( sab 118 ) , which was issued to address the application of us gaap in situations when the registrant does not have the necessary information av ailable , prepared or analyzed ( including computation ) in reasonable detail to complete the accounting for uncertain income tax effects of the tax reform act . additional work is necessary for a more detailed analysis of our deferred tax assets and liabiliti es and of the impact of the deemed repatriation . any subsequent adjustment to these amounts will be recorded to income tax expense in the quarter of 2018 when the analysis is complete . our provision for income taxes for 2017 was $ 4,443 , as compared to $ 5,540 for 2016. the effective tax rate for 2017 was 18 % , as compared to 30 % in 2016. the decrease in the effective tax rate was primarily driven by the inclusion of the one-time net tax benefit associated with the tax reform act enacted on december 22 , 2017 , in the amount of $ 3,433. the decrease is partially offset by lower percentage of earnings in jurisdictions with lower income tax rate . the company has effectively settled its examination with the internal revenue service ( “ irs ” ) for the tax years ended december 31 , 2012 through 2014. the company 's 2015 and 2016 federal income tax returns are still subject to irs examination . the company has other state and foreign income tax returns subject to examination . for the year ended december 31 , 2017 , the company recorded losses on its equity investment of $ 49. for the same period of 2016 , the company recorded losses on its equity investment of $ 353. in 2017 , our net income was reduced by $ 87 , as compared to $ 236 in 2016 , representing the share of net income of our majority owned subsidiary that was charged to the non-controlling interest . story_separator_special_tag net income attributable to american vanguard ended at $ 20,274 or $ 0.68 per diluted share in 2017 as compared to $ 12,788 or $ 0.44 per diluted share in 2016. liquidity and capital resources the company generated $ 59,001 of cash from operating activities provided during the year ended december 31 , 2017 , as compared to $ 46,406 in the prior year . included in the $ 59,001 are net income of $ 20,361 , plus non-cash depreciation , amortization of intangibles and other assets and discounted future liabilities , in the amount of $ 22,290. stock based compensation of $ 4,714 , loss from equity method investment of $ 49 and change in value of deferred income taxes of $ 398 , provided net cash inflows of $ 47,812 , as compared to $ 37,843 for the same period of 2016. during 2017 the company generated $ 11,189 from reducing working capital , as compared to generating $ 8,563 during 2016. this change excluded increases in working capital related to the products and businesses acquired during 2017. included in this change ; inventories reduced by $ 16,183 as a result of consistent efforts from our sales , inventory and operations planning team to balance manufacturing cost recovery , plant capacity and customer needs . deferred revenue as of december 31 , 2017 increased by $ 10,726 , as compared to december 31 , 2016 primarily as a result of customer decisions to make early payments in return for early cash incentive programs . our accounts payable balances increased by $ 3,322 driven by increased manufacturing activity and capital spending in the final quarter of the year . in addition accounts receivables and prepaid expenses reduced by $ 754 and $ 647 respectively . offsetting these positive changes , the company made payments to the irs following the concluding of the 2012 to 2014 audit in the amount of $ 12,073 and accrued programs reduced year-on-year by $ 4,529. finally other payables decreased by $ 3,841. with regard to program accrual , these reduced as noted above , primarily reflecting our mix of sales and customers in 2017 as compared to the prior year . the company accrues programs in line with the growing season upon which specific products are targeted . typically crop products have a growing season that ends on september 30 th of each year . during 2017 , the company made accruals for programs in the amount of $ 59,806 and made payments in the amount of $ 63,682. during the prior year , the company made accruals in the amount of $ 70,448 and made payments in the amount of $ 71,889. in 2016 , inventory reduced by $ 15,901 , accounts payables increased by $ 9,015 , other payables increased by $ 4,631 and income tax receivable reduced by $ 1,186. offsetting these positive changes , accounts receivables increased by $ 11,817 , prepaid expenses increased by $ 3,872 , deferred revenues decreased by $ 5,040 and program costs by $ 1,441 . 23 american vanguard corporation and subsidiaries ( dollars in thousands , except per share data ) cash used for investing activities was $ 89,512 for the year ended december 31 , 2017 as compared to $ 14,137 in 2016. the company spent $ 81,896 in busine ss acquisitions including intangible assets , goodwill , working capital and fixed assets . in addition , $ 6,666 was spent on fixed assets primarily focused on continuing to invest in manufacturing infrastructure and $ 950 on an investment . during the year ended december 31 , 2017 financing activities provided $ 33,935 , principally from the borrowings on the company 's senior credit facility , as compared to utilizing $ 28,545 for the year ended december 31 , 2016. this included a net borrowing of $ 37,025 from our credit facility in 2017 , as compared to a net repayment of $ 27,600 in 2016. we paid $ 751 in debt issuance costs related to the amendment of our credit facility . in 2017 , we paid dividends to stockholders amounting to $ 1,600 , as compared to $ 578 in 2016. the company has various loans in place that together constitute the long-term loan balances shown in the consolidated balance sheets as at december 31 , 2017 and 2016. these are summarized in the following table : replace_table_token_9_th the company 's main bank is bank of the west , a wholly-owned subsidiary of the french bank , bnp paribas . bank of the west has been the company 's bank for more than 30 years and is the syndication manager for the company 's loans . as of june 30 , 2017 , amvac chemical corporation ( “ amvac ” ) , the company 's principal operating subsidiary , as borrower , and affiliates ( including the company , amvac cv and amvac bv ) , as guarantors and or borrowers , entered into a third amendment to second amended and restated credit agreement ( the “ credit agreement ” ) with a group of commercial lenders led by bank of the west as agent , swing line lender and letter of credit ( “ l/c ” ) issuer . the credit agreement is a senior secured lending facility , consisting of a line of credit of up to $ 250,000 , an accordion feature of up to $ 100,000 and a maturity date of june 30 , 2022. the credit agreement contains two key financial covenants ; namely , borrowers are required to maintain a consolidated funded debt ratio of no more than 3.25-to-1 and a consolidated fixed charge covenant ratio of at least 1.25-to-1 . the company 's borrowing capacity varies with its financial performance , measured in terms of ebitda as defined in the credit agreement , for the trailing twelve month period .
| $ 107,748 ) , but down as a percentage of sales to 34 % in 2017 as compared to 35 % in 2016. top line sales performance was driven in part by growth of certain existing product lines , particularly domestic cotton products ( in light of increase cotton acreage and pest pressure ) and vector control products ( following heightened hurricane activity ) , and the addition of new sales from the four acquisitions that the company completed largely in the second half of 2017. gross profit increased as a result of continued improvement in factory performance , organic growth in the company 's sales and the addition of products and businesses acquired during 2017. operating expenses rose on an absolute basis , as the company continued to invest in the maintenance of registrations of several important products , professional fees related to acquisitions , continued development of our simpas precision application technology and litigation related to the doj proceedings against us , but dropped as a percentage of sales . due to our acquisition activities , our borrowings increased in 2017 as compared to 2016. as a result , net interest expense was $ 1,941 in 2017 , as compared to $ 1,623 in 2016. our provision for income taxes included a one-time benefit of $ 3,433 in connection with the enactment of the tax cuts and jobs act ( “ tax reform act ” ) on december 22 , 2017. our effective tax rate decreased to 18 % in 2017 , as compared to 30 % in 2016. net income increased to $ 0.68 per diluted share ( $ 0.70 per basic share ) , as compared to $ 0.44 per diluted ( and basic ) share in 2016. when considering the consolidated balance sheet , long-term debt increased by $ 36,535 to $ 77,486 at december 31 , 2017 , as compared to $ 40,951 this time last year . the increased level of debt was driven by four acquisitions completed during the financial year and particularly in the final quarter of the year . notwithstanding the increase in long term
| 11,674 |
critical accounting policies our discussion and analysis of our financial condition and the results of our operations are based upon our consolidated financial statements and the data used to prepare them . the company 's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the united states of america . on an ongoing basis we re-evaluate our judgments and estimates including those related to product returns , bad debts , inventories , and income taxes . we base our estimates and judgments on our historical experience , knowledge of current conditions , and our beliefs of what could occur in the future considering available information . actual results may differ from these estimates under different assumptions or conditions . our estimates are guided by observing the following critical accounting policies . revenue recognition the company generates revenue by selling pet medication products and pet supplies primarily to retail consumers . the company 's policy is to recognize revenue from product sales upon shipment , when the rights of ownership and risk of loss have passed to the customer . outbound shipping and handling fees are included in sales and are billed upon shipment . shipping expenses are included in cost of sales . the majority of the company 's sales are paid by credit cards and the company usually receives the cash settlement in two to three banking days . credit card sales minimize accounts receivable balances relative to sales . the company maintains an allowance for doubtful accounts for losses that the company estimates will arise from customers ' inability to make required payments , arising from either credit card charge-backs or insufficient funds checks . the company determines its estimates of the uncollectibility of accounts receivable by analyzing historical bad debts and current economic trends . the allowance for doubtful accounts was approximately $ 27,000 at march 31 , 2017 , compared to $ 13,000 at march 31 , 2016. valuation of inventory inventories consist of prescription and non-prescription pet medications and pet supplies that are available for sale and are priced at the lower of cost or net realizable value using a weighted average cost method . the company writes down its inventory for estimated obsolescence . the inventory reserve was approximately $ 51,000 and $ 64,000 at march 31 , 2017 and 2016 , respectively . advertising the company 's advertising expense consists primarily of internet marketing and direct mail/print advertising . internet costs are expensed in the month incurred and direct mail/print advertising costs are expensed when the related catalogs , brochures , and postcards are produced , distributed , or superseded . 16 accounting for income taxes the company accounts for income taxes under the provisions of asc topic 740 , ( “ accounting for income taxes ” ) , which generally requires the recognition of deferred tax assets and liabilities for the expected future tax benefits or consequences of events that have been included in the consolidated financial statements or tax returns . under this method , deferred tax assets and liabilities are determined based on differences between the financial reporting carrying values and the tax bases of assets and liabilities , and are measured by applying enacted tax rates and laws for the taxable years in which those differences are expected to reverse . story_separator_special_tag new roman , times , serif ; margin : 0pt 0 ; text-align : justify '' > as a percentage of sales , advertising expense was 7.1 % and 9.3 % for the fiscal years ended march 31 , 2017 and 2016 , respectively . the decrease in advertising expense as a percentage of total sales for the fiscal year ended march 31 , 2017 can be mainly attributed to the elimination of television advertising spending . the company currently anticipates advertising as a percentage of sales to be between approximately 7 % and 8 % for fiscal 2018. however , the advertising percentage may fluctuate quarter to quarter due to seasonality and advertising availability . depreciation depreciation increased by approximately $ 599,000 , to approximately $ 1.4 million for the year ended march 31 , 2017 , from approximately $ 770,000 for the year ended march 31 , 2016. this increase to depreciation for the fiscal year ended march 31 , 2017 can be attributed to an increase in new property and equipment additions related to the company 's new corporate headquarters and distribution facility . other income other income increased by approximately $ 262,000 , to approximately $ 441,000 for the fiscal year ended march 31 , 2017 from approximately $ 179,000 for the fiscal year ended march 31 , 2016. the increase to other income for the fiscal year ended march 31 , 2017 is related to advertising and rental revenue , offset by decreased interest income . interest income may decrease in the future as the company utilizes its cash balances on its share repurchase plan , with approximately $ 10.2 million remaining at march 31 , 2017 , on any quarterly dividend payment , or on its operating activities . provision for income taxes for the fiscal years ended march 31 , 2017 and 2016 , the company recorded an income tax provision for approximately $ 14.1 million and $ 12.0 million , respectively . the increase to the income tax provision for fiscal 2017 is related to an increase to operating income for the period due to an increase in gross profit due to increased sales and a reduction in operating expenses . the effective tax rate for the fiscal years ended march 31 , 2017 and 2016 were 37.2 % and 36.8 % , respectively . story_separator_special_tag the effective tax rate increase for the fiscal year ended march 31 , 2017 can be attributed to a one-time charge related to a fiscal 2016 income tax under-accrual , which was recognized in the quarter ended december 31 , 2016 , compared to a one-time benefit related to a fiscal 2015 income tax over-accrual , which was recognized in the quarter ended december 31 , 2015. the company estimates its effective tax rate will be approximately 37.0 % for fiscal 2018. net income net income increased by approximately $ 3.2 million , or 15.8 % , to approximately $ 23.8 million for the fiscal year ended march 31 , 2017 from approximately $ 20.6 million for the fiscal year ended march 31 , 2016. the increase was primarily due to an increase to gross profit due to increased sales and a reduction in operating expenses , offset by an increased income tax provision during fiscal 2017. fiscal 2016 compared to fiscal 2015 sales sales increased by approximately $ 5.3 million , or 2.3 % , to approximately $ 234.7 million for the fiscal year ended march 31 , 2016 , from approximately $ 229.4 million for the fiscal year ended march 31 , 2015. the increase in sales for the fiscal year ended march 31 , 2016 was primarily due to increased reorder sales , offset by a slight decrease in new order sales . the company acquired approximately 489,000 new customers for the year ended march 31 , 2016 , compared to approximately 529,000 new customers for the same period the prior year . 19 the following chart illustrates sales by various sales classifications : replace_table_token_9_th going forward sales may be adversely affected due to increased competition and consumers giving more consideration to price . no guarantees can be made that sales will grow in the future . the majority of our product sales are affected by the seasons , due to the seasonality of mainly heartworm , and flea and tick medications . for the quarters ended june 30 , september 30 , december 31 , and march 31 of fiscal 2016 , the company 's sales were approximately 30 % , 24 % , 22 % , and 24 % , respectively . for the quarters ended june 30 , september 30 , december 31 , and march 31 of fiscal 2015 , the company 's sales were approximately 32 % , 25 % , 21 % , and 22 % , respectively . cost of sales cost of sales increased by $ 5.3 million , or 3.4 % to $ 158.4 million for the fiscal year ended march 31 , 2016 , from $ 153.1 million for the fiscal year ended march 31 , 2015. the increase in cost of sales in fiscal 2016 is directly related to the increase in sales during the fiscal year . as a percentage of sales , cost of sales was 67.5 % in fiscal 2016 , as compared to 66.8 % in fiscal 2015. the cost of sales percentage increase can be mainly attributed to an increase in product costs on certain brands and additional discounts given to customers to increase sales during the fiscal year . gross profit gross profit was $ 76.3 million for both of the fiscal years ended march 31 , 2016 and 2015. gross profit as a percentage of sales for fiscal 2016 was 32.5 % compared to 33.2 % , for fiscal 2015. the gross profit percentage decrease in fiscal 2016 can be mainly attributed to an increase in product costs on certain brands and additional discounts given to customers to increase sales during the fiscal year . general and administrative expenses general and administrative expenses increased by $ 200,000 , or 1.0 % , to $ 21.3 million for the fiscal year ended march 31 , 2016 from $ 21.1 million for the fiscal year ended march 31 , 2015. the increase in general and administrative expenses for the fiscal year ended march 31 , 2016 was primarily due to the following : a $ 165,000 increase in bad debt expenses relating to increased credit card chargebacks in the period ; a $ 139,000 increase in property expenses ; and a $ 135,000 increase in bank service fees due to increased sales . offsetting the increase was a $ 62,000 decrease in payroll expenses ; a $ 53,000 decrease due to a one-time charge relating to state/county sales tax which was not collected on behalf of our customers in fiscal 2015 ; a $ 53,000 decrease in licenses and fees ; a $ 39,000 decrease in insurance expenses ; and a $ 32,000 net decrease in other expenses which included telephone , travel , and office expenses . general and administrative expenses as a percentage of sales were 9.1 % for the fiscal year ended march 31 , 2016 , compared to 9.2 % for the fiscal year ended march 31 , and 2015 , respectively . the decrease in general and administrative expenses as a percentage of sales was primarily due to an increase to sales for fiscal 2016. advertising expenses advertising expenses decreased by approximately $ 3.4 million to approximately $ 21.8 million for the year ended march 31 , 2016 , from approximately $ 25.2 million for the year ended march 31 , 2015. the decrease in advertising expenses for fiscal 2016 can be attributed to a reduction in television advertising spending .
| cost of sales cost of sales increased by $ 11.5 million , or 7.2 % to $ 169.9 million for the fiscal year ended march 31 , 2017 , from $ 158.4 million for the fiscal year ended march 31 , 2016. the increase in cost of sales in fiscal 2017 is directly related to the increase in sales during the fiscal year . as a percentage of sales , cost of sales was 68.2 % in fiscal 2017 , as compared to 67.5 % in fiscal 2016. the cost of sales percentage increase can be mainly attributed to an increase in product costs on certain brands and additional discounts given to customers to increase sales during the fiscal year . gross profit gross profit increased by $ 3.0 million , or 4.0 % , to $ 79.3 million for the fiscal year ended march 31 , 2017 , from $ 76.3 million for the fiscal year ended march 31 , 2016. the increase in gross profit in fiscal 2017 is directly related to the increase in sales during the fiscal year . gross profit as a percentage of sales for fiscal 2017 was 31.8 % compared to 32.5 % for fiscal 2016. the gross profit percentage decrease in fiscal 2017 can be mainly attributed to an increase in product costs on certain brands and additional discounts given to customers to increase sales during the fiscal year . general and administrative expenses general and administrative expenses increased by $ 1.5 million , or 7.0 % , to $ 22.8 million for the fiscal year ended march 31 , 2017 from $ 21.3 million for the fiscal year ended march 31 , 2016. the increase in general and administrative expenses for the fiscal year ended march 31 , 2017 was primarily due to the following : a $ 1.2 million increase in payroll expenses related to increased stock compensation expense and additional expenses related to the move of our corporate headquarters in december 2016 ; a $ 347,000 increase in bank service fees due to increased sales ; a $ 162,000 increase in bad debt expenses relating to increased credit card chargebacks for the year ; and a $ 174,000 increase in other
| 11,675 |
we have a significant number of registered third-party developers who create products that work well with autodesk products and extend them for a variety of specialized applications . users with expertise in our products are broadly and globally available from educational institutions and in the existing workforce . we offer extensive educational programs , including student versions of software , curricula , and faculty development . we have an extensive global community of students who are experienced with our software and poised to become the next generation of professional users – thus reducing the cost 27 of training and providing fresh talent for our customers . our global network of distributors , resellers , third party developers , customers , educational institutions and students has been developed over our twenty-nine year history . we believe it is an enduring competitive advantage that is difficult for others to replicate . we continually strive to increase the business value of our design tools to our customers in a number of ways . first , we seek to address an increasing portion of our customers ' workflow with products that extend the value of our customers ' digital design information into visualization , analysis and simulation . second , we seek to improve our product interoperability and usability , thus improving our customers ' productivity and effectiveness . third , we continue to develop new ways to deliver capability and value to our customers , such as product suites , cloud-based services , and delivery of our solutions on mobile devices and new hardware platforms . fourth , we extend our customers ' workflow with products for adjacent users and for the “ customers of our customers , ” thus increasing the value of the design information our customers produce . finally , we continue to develop new lines of consumer products and services that are delivered and experienced through the web , tablets , and mobile devices providing our advanced visualization technologies to consumers—a whole new category of autodesk customer . autodesk was founded during the platform transition from mainframes and engineering workstations to personal computers . we developed and sustained a compelling value proposition based upon desktop software for the personal computer . just as the transition from mainframes to personal computers transformed the industry thirty years ago , we believe our industry is undergoing a similar transition from the personal computer to cloud , mobile and social computing . our growth strategy is predicated upon leading the transition in the industries we serve into the cloud in three ways : grow . we believe sufficient opportunity remains in our pc-based software business and intend to continue to grow this business . in particular we are offering product suites with improved interoperability and usability to enhance our customers ' productivity . we are continuing to drive maintenance and new licensing models to better match the business needs of our customers . we will continue emphasis on developing direct relationships with large , global customers and growing in emerging economies . transform . at the same time we grow our desktop software business , we are migrating many of our products to the cloud . this entails development of new cloud computing infrastructure and restructuring our applications to leverage the cloud . we are also developing new capabilities that are enabled by the cloud such as collaborative plm and on line simulation . our goal is to lead our industry in transitioning to the cloud . expand . we believe that the combination of cloud , mobile , and social computing affords us the opportunity to expand our business into new markets . our consumer business is an example of this where we have added new customers . we intend to continue to develop businesses such as this to both add new customers and find new capabilities to incorporate in our core business . we believe that expanding our customers ' portfolios to include our suites presents a meaningful growth opportunity and is an important part of our overall strategy . as our customers in all industries adopt our design suites , we believe they will experience an increase in their productivity and the value of their design data . for fiscal 2012 , revenue from suites increased 31 % , as compared to the prior fiscal year . as a percentage of revenue , suites increased to 27 % in fiscal 2012 as compared to 23 % in fiscal 2011 . expanding our geographic coverage is another key element of our growth strategy . while emerging economies are important for all global businesses , we believe they hold special opportunity for autodesk . much of the growth in the world 's construction and manufacturing is happening in emerging economies . further , emerging economies face many of the challenges that our design technology can help address , for example infrastructure build-out . we believe that emerging economies continue to present long-term growth opportunities for us and revenue from emerging countries increased 16 % during fiscal 2012 as compared to fiscal 2011 . revenue from emerging countries represented 16 % and 15 % of fiscal 2012 and fiscal 2011 net revenue , respectively . while we believe there are long-term growth opportunities in emerging economies , conducting business in these countries presents significant challenges , including economic volatility , geopolitical risk , local competition , intellectual property protection , poorly developed business infrastructure , scarcity of talent and software piracy . our strategy includes improving our product functionality and expanding our product offerings through internal development as well as through the acquisition of products , technology and businesses . acquisitions often increase the speed at which we can deliver product functionality to our customers ; however , they entail cost and integration challenges and may , in certain instances , negatively impact our operating margins . we continually review these trade-offs in making decisions regarding acquisitions . we currently anticipate that we will acquire products , technology and businesses as compelling opportunities become available . story_separator_special_tag in fiscal 2012 , we increased the number , pace and dollars spent on acquisitions in comparison to fiscal 2011 , but our decision to acquire businesses or technology is dependent on our business needs , the availability of suitable sellers and technology , and our own financial condition . 28 our strategy depends upon a number of assumptions , including that we will be able to continue making our technology available to mainstream markets ; leverage our large global network of distributors , resellers , third-party developers , customers , educational institutions , and students ; improve the performance and functionality of our products ; and adequately protect our intellectual property . if the outcome of any of these assumptions differs from our expectations , we may not be able to implement our strategy , which could potentially adversely affect our business . for further discussion regarding these and related risks see part i , item 1a , “ risk factors . ” critical accounting policies and estimates our consolidated financial statements are prepared in conformity with u.s. generally accepted accounting principles . in preparing our consolidated financial statements , we make assumptions , judgments and estimates that can have a significant impact on amounts reported in our consolidated financial statements . we base our assumptions , judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances . actual results could differ materially from these estimates under different assumptions or conditions . we regularly reevaluate our assumptions , judgments and estimates . our significant accounting policies are described in note 1 , “ business and summary of significant accounting policies , ” in the notes to consolidated financial statements . we believe that of all our significant accounting policies , the following policies involve a higher degree of judgment and complexity . accordingly , these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations . revenue recognition . we recognize revenue when persuasive evidence of an arrangement exists , delivery has occurred or services have been rendered , the price is fixed or determinable and collection is probable . however , determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue we report . for multiple element arrangements , we allocate the sales price among each of the deliverables using the residual method , under which revenue is allocated to undelivered elements based on their vendor-specific objective evidence ( “ vsoe ” ) of fair value . vsoe is the price charged when an element is sold separately or a price set by management with the relevant authority . if we do not have vsoe of an undelivered software license , we defer revenue recognition on the entire sales arrangement until all elements for which we do not have vsoe are delivered . if we do not have vsoe for undelivered maintenance or services , the revenue for the arrangement is recognized over the longest contractual service period in the arrangement . we are required to exercise judgment in determining whether vsoe exists for each undelivered element based on whether our pricing for these elements is sufficiently consistent . our assessment of likelihood of collection is also a critical factor in determining the timing of revenue recognition . if we do not believe that collection is probable , the revenue will be deferred until the earlier of when collection is deemed probable or payment is received . our indirect channel model includes both a two-tiered distribution structure , where distributors sell to resellers , and a one-tiered structure where autodesk sells directly to resellers . our product license revenue from distributors and resellers are generally recognized at the time title to our product passes to the distributor , in a two-tiered structure , or reseller , in a one-tiered structure , provided all other criteria for revenue recognition are met . this policy is predicated on our ability to estimate sales returns , among other criteria . we are also required to evaluate whether our distributors and resellers have the ability to honor their commitment to make fixed or determinable payments , regardless of whether they collect payment from their customers . our policy also presumes that we have no significant performance obligations in connection with the sale of our product licenses by our distributors and resellers to their customers . if we were to change any of these assumptions or judgments , it could cause a material increase or decrease in the amount of revenue that we report in a particular period . marketable securities . at january 31 , 2012 we had $ 447.2 million of short and long-term marketable securities . marketable securities are stated at fair value . as described in note 2 , “ financial instruments , ” in the notes to the consolidated financial statements , we estimate the fair value of our marketable securities each quarter . fair value is defined as an exit price , representing the amount that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date . when identical or similar assets are traded in active markets , the level of judgment required to estimate their fair value is relatively low . this is generally true for our cash and cash equivalents and the majority of our marketable securities , which we consider to be level 1 assets and level 2 assets . however , determining the fair value of marketable securities when observable inputs are not available ( level 3 ) requires significant judgment .
| backlog from current software license product orders that we have not yet shipped consists of orders for currently available licensed software products from customers with approved credit status and may include orders with current ship dates and orders with ship dates beyond the current fiscal period . revenue from the sales of our services , training and support , included in “ license and other revenue , ” represented less than 3 % of net revenue for all periods presented . 33 maintenance revenue our maintenance revenue relates to a program known by our user community as the subscription program . our maintenance program provides our commercial and educational customers with a cost effective and predictable budgetary option to obtain the productivity benefits of our new releases and enhancements when and if released during the term of their contracts . under our maintenance program , customers are eligible to receive unspecified upgrades when and if available , downloadable training courses and online support . we recognize maintenance revenue ratably over the maintenance contract periods . maintenance revenue increased 10 % during fiscal 2012 , as compared to fiscal 2011 , primarily due to a 10 % increase in commercial maintenance revenue . the 10 % increase in commercial maintenance revenue was due to an 8 percentage point increase in commercial enrollment during the corresponding maintenance contract term and a 2 percentage point increase in net revenue per maintenance seat . commercial maintenance revenue represented 98 % of maintenance revenue for both fiscal 2012 and 2011 . total subscription program enrollment at january 31 , 2012 and 2011 consisted of about 3.2 million users and 2.9 million users , respectively . changes in maintenance revenue lag changes in net billings for maintenance contracts because we recognize the revenue from those contracts ratably over their contract terms . our maintenance contracts are for a term of predominantly one year , but may be two or three year , or occasionally as long as five year , terms . net maintenance billings
| 11,676 |
from our inception until december 31 , 2014 , we have funded our operations primarily through the private and public sales of preferred stock , common stock , convertible notes and warrants to purchase common stock and payments received under our collaboration agreements totaling $ 431.1 million ( net of issuance costs of $ 22.9 million ) . in february 2015 , we completed a follow-on public offering of 1,150,000 shares at a public offering price of $ 176.00 per share . after underwriting discounts and commissions and offering expenses , we estimate that the net proceeds from our february 2015 follow-on equity offering were approximately $ 191.2 million . we expect to continue to incur significant expenses and increasing operating losses for at least the next several years . we anticipate that our expenses will increase substantially as we : complete the development of our lead product candidate , oca , for the treatment of pbc , and continue the development of oca in nash , psc and other patient populations ; seek to obtain regulatory approvals for oca for pbc , nash , psc and other potential patient populations ; prepare for the potential commercialization of oca in pbc , including establishing our sales , marketing and distribution capabilities and increasing our drug manufacturing activities ; continue development of our other product candidates , such as int-767 , and engage in other research and development activities ; maintain , expand and protect our intellectual property portfolio ; increase our product development , scientific , commercial and administrative personnel and expand our facilities and operations in the united states and abroad ; and operate as a public company . we do not expect to generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for one or more of our product candidates , which is subject to significant uncertainty . accordingly , we anticipate that we will need to raise additional capital prior to the commercialization of oca or any of our other product candidates . until such time , if ever , as we can generate substantial revenue from product sales , we expect to finance our operating activities through a combination of equity offerings , debt financings , government or other third-party funding , marketing and distribution arrangements and other collaborations , strategic alliances and licensing arrangements . however , we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all . our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates . we have an administrative headquarters in new york , new york and an office in san diego , california . in february 2015 , we signed a lease for an office in london , united kingdom . the company has a wholly-owned subsidiary in italy which acts as our legal representative for our clinical trials in the european union to satisfy european union regulatory requirements , and a wholly-owned subsidiary in the united kingdom . 73 financial overview revenue to date , we have not generated any revenue from the sale of products . all our revenue has been derived from our collaborative agreements for the development and commercialization of certain of our product candidates . we have entered into an exclusive licensing agreement with sumitomo dainippon for the development of oca in japan , china and korea . under the terms of the agreement , we have received up-front payments of $ 16.0 million , including $ 1.0 million upon the exercise by sumitomo dainippon of its option to add korea to its licensed territories , and may be eligible to receive up to approximately $ 300 million in additional payments for development , regulatory and commercial sales milestones for oca in japan , china and korea . as of march 2 , 2015 , we have achieved $ 1.0 million of the development milestones . in august 2011 , we entered into a collaboration agreement with servier for the discovery , research and development of bile acid-derived agonists , or substances that bind to receptors of cells and trigger responses by those cells , for a dedicated bile acid receptor called tgr5 . under the terms of the agreement , we received an up-front payment from servier of $ 1.4 million . servier may be required to pay us up to an aggregate amount of approximately 108 million ( approximately $ 131.3 million as of december 31 , 2014 ) upon the achievement of specified development , regulatory and commercial sales milestones , as well as royalties on sales , based on the successful outcome of the collaboration . for accounting purposes , the up-front payments from both transactions are recorded as deferred revenue and amortized over time . we recognized $ 2.4 million , $ 1.6 million and $ 1.7 million in license revenue for the relevant amortization of up-front payments during the years ended december 31 , 2012 , 2013 and 2014 , respectively . we anticipate that we will recognize revenue of approximately $ 1.8 million per year through 2020 , for the amortization of the relevant up-front collaboration payments from sumitomo dainippon . we did not receive any milestone payments during 2012 , 2013 or 2014 related to our collaboration agreements . in the future , we may generate revenue from a combination of license fees and other up-front payments , research and development payments , milestone payments , product sales and royalties in connection with our collaborations . we expect that any revenue we generate will fluctuate from quarter-to-quarter as a result of the timing of our achievement of preclinical , clinical , regulatory and commercialization milestones , if at all , the timing and amount of payments relating to such milestones and the extent to which any of our products are approved and successfully commercialized by us or our collaboration partners . story_separator_special_tag if our collaboration partners fail to develop product candidates in a timely manner or obtain regulatory approval for them , our ability to generate future revenues , and our results of operations and financial position would be adversely affected . research and development expenses since our inception , we have focused our resources on our research and development activities , including conducting preclinical studies and clinical trials , manufacturing development efforts and activities related to regulatory filings for our product candidates . we recognize research and development expenses as they are incurred . our research and development expenses consist primarily of direct costs , personnel costs and indirect costs such as the following : direct costs : fees paid to consultants and clinical research organizations , or cros , including in connection with our preclinical and clinical trials , and other related clinical trial fees , such as for investigator grants , patient screening , laboratory work , clinical trial database management , clinical trial material management and statistical compilation and analysis ; costs related to activities associated with acquiring and manufacturing oca ; and costs related to compliance with regulatory requirements . personnel costs : salaries and related benefit expenses for personnel in research and development functions ; and costs related to stock compensation granted to personnel in research and development functions . 74 indirect costs : rent and other facilities-related costs ; and product-related legal costs . we plan to increase our research and development expenses for the foreseeable future as we continue the development of oca for the treatment of pbc , nash and psc and other indications and to further advance the development of our other product candidates , subject to the availability of additional funding . during the year ended december 31 , 2014 , we added 62 research and development personnel . the table below summarizes our direct research and development expenses by program for the periods indicated . we do not allocate indirect costs related to our research and development function to specific product candidates . those expenses are included in personnel costs in the table below . replace_table_token_5_th the successful development of our clinical and preclinical product candidates is highly uncertain . at this time , we can not reasonably estimate the nature , timing or costs of the efforts that will be necessary to complete the remainder of the development of any of our clinical or preclinical product candidates or the period , if any , in which material net cash inflows from these product candidates may commence . this is due to the numerous risks and uncertainties associated with developing drugs , including the uncertainty of : the scope , rate of progress and expense of our ongoing , as well as any additional , clinical trials and other research and development activities ; future clinical trial results ; and the timing and receipt of any regulatory approvals . 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 another regulatory authority were to require us to conduct clinical trials 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 any of our clinical trials , we could be required to expend significant additional financial resources and time on the completion of clinical development . oca the majority of our research and development resources are focused on completing our new drug application , or nda , and marketing authorization application , or maa , filings for oca for the treatment of pbc , which we currently plan to complete during the first half of 2015. we have incurred and expect to continue to incur significant expenses in connection with these efforts , including : we completed our poise trial of oca in patients with pbc in march 2014 and expect to continue the long-term safety extension phase of the trial through 2019. we initiated our clinical outcomes confirmatory trial for oca in pbc in december 2014 and expect the trial to be completed on a post-marketing basis . 75 we conducted numerous phase 1 clinical trials during 2014 in support of the pbc nda and maa filings . we have contracted with third-party manufacturers to produce the quantities of oca needed for regulatory approval as well as the necessary supplies for our other contemplated trials and are working to secure second manufacturers as part of our strategy to secure more than one approved supplier of oca in the future . we are building commercial supplies , including supplies of the starting material for manufacturing oca . we have contracted with and plan to engage a number of consultants and other third party vendors in relation to our seeking of regulatory approval and have implemented and will implement various electronic software and systems in relation to our regulatory activities . in addition , we are evaluating oca in other chronic liver diseases , particularly nash and psc . we plan to finalize the design of our phase 3 clinical program in nash patients in the second quarter 2015 , subject to the completion of our regulatory discussions with the fda and european medicines agency , or ema , and then initiate the clinical trial . we are planning a clinical trial characterizing lipid metabolic effects of oca and cholesterol management effects of concomitant statin administration in nash patients . for psc , we initiated a phase 2 clinical trial in december 2014. as a result , we expect that our expenditures in connection with our nash and psc programs will increase significantly in future periods . int-767 , int-777 and other tgr5 agonists we intend to continue to develop int-767 ( a dual fxr/tgr5 agonist ) and int-777 ( a pure tgr5 agonist ) .
| the increase in general and administrative expenses of $ 21.5 million was primarily due to : increased expenses related to pre-commercialization activities of approximately $ 6.8 million ; additional personnel to manage our increased operational activities , resulting in increased compensation and related benefit costs of approximately $ 5.8 million ; increased operating costs such as legal , facilities and technology-related expenses of approximately $ 5.1 million ; and increased non-cash stock-based compensation expense of approximately $ 3.7 million . warrant revaluation expense our previously outstanding warrants were deemed to be derivative instruments that required liability classification and mark-to-market accounting . as such , at the end of each period , the fair values of the warrants were determined using a black-scholes option-pricing model , resulting in the recognition of losses of $ 28.4 million and $ 170.8 million for the years ended december 31 , 2013 and 2014 , respectively . these fluctuations in value were primarily due to the increase in the price of the common stock underlying the warrants offset by declines in the estimated life of the warrants and the changes in volatility of the shares of common stock underlying the warrants . other income , net the change in other income , net reflects an increase in interest income primarily as the result of higher average investment balances during 2014 as compared to 2013 . 80 comparison of the years ended december 31 , 2012 and 2013 the following table summarizes our results of operations for the years ended december 31 , 2012 and 2013 , together with the changes in those items in dollars and as a percentage : replace_table_token_8_th licensing revenue for the years ended december 31 , 2012 and 2013 , we recorded a total of $ 2.4 million and $ 1.6 million respectively , of licensing revenue , consisting of the up-front payments from our collaboration agreements . research and development expenses research and development expenses were $ 16.2 million and $ 27.9 million for the years ended december 31 , 2012 and 2013 , respectively . the net increase in research and development expenses was
| 11,677 |
we believe the impact of past consolidation is already reflected in our occupancy rates . additional consolidation among our tenants in the wireless communication industry ( or our tenants ' sub‑lessees ) may result in lease terminations for certain existing communication sites . any additional termination of leases in our portfolio would result in lower rental revenue , may lead to impairment of our real property interests , or other adverse effects to our business . operating and maintenance expenses substantially all of our tenant sites are subject to triple net or effectively triple net lease arrangements , which require the tenant or the underlying property owner to pay all utilities , property taxes , insurance and repair and maintenance costs . our overall financial results could be impacted to the extent the owners of the fee interest in the real property or our tenants do not satisfy their obligations . ebitda , adjusted ebitda and distributable cash flow we define ebitda as net income before interest , income taxes , depreciation and amortization , and we define adjusted ebitda as ebitda before impairments , acquisition‑related costs , unrealized or realized gain or loss on derivatives , loss on early extinguishment of debt , gain on sale of real property interest , unit-based compensation , straight line rental adjustments , amortization of above‑ and below‑market lease intangibles plus cash receipts applied toward the repayments of investments in receivables , and after the deemed capital contribution to fund our general and administrative expense reimbursement . we define distributable cash flow as adjusted ebitda less cash interest paid , current cash income tax paid , maintenance capital expenditures , preferred unit distributions and net income attributable to noncontrolling interests . distributable cash flow will not reflect changes in working capital balances . during the fourth quarter 2017 , we changed our definition of adjusted ebitda by adding cash receipts applied toward the repayments of investments in receivables . we made this change to better reflect the quarterly amount of operating surplus as determined by our amended and restated partnership agreement . this change did not have a material impact on our adjusted ebitda or distributable cash flow and prior period amounts have been recast to conform to current presentation . ebitda , adjusted ebitda and distributable cash flow are non‑gaap supplemental financial measures that management and external users of our financial statements , such as industry analysts , investors , lenders and rating agencies , may use to assess : our operating performance as compared to other publicly traded limited partnerships , without regard to historical cost basis or , in the case of adjusted ebitda , financing methods ; the ability of our business to generate sufficient cash to support our decision to make distributions to our unitholders ; our ability to incur and service debt and fund capital expenditures ; and the viability of acquisitions and the returns on investment of various investment opportunities . we believe that the presentation of ebitda , adjusted ebitda and distributable cash flow in this annual report on form 10-k provides information useful to investors in assessing our financial condition and results of operations . the gaap measures most directly comparable to ebitda , adjusted ebitda and distributable cash flow are net income and net cash provided by operating activities . ebitda , adjusted ebitda and distributable cash flow should not be considered as an alternative to gaap net income , net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with gaap . each of ebitda , adjusted ebitda and distributable cash flow has important limitations as analytical tools because they exclude some , but not all , items that affect net income and net cash provided by operating activities , and these measures may vary from those of other companies . you should not consider ebitda , adjusted ebitda or distributable cash flow in isolation or as a substitute for analysis of our results as reported under gaap . as a result , because ebitda , adjusted ebitda and distributable cash flow may be defined differently by other companies in our industry , ebitda , adjusted ebitda and distributable cash flow as presented below may not be comparable to similarly titled measures of other companies , thereby diminishing their utility . for a further discussion of the non‑gaap financial measures of ebitda , adjusted ebitda and distributable cash flow , and a reconciliation of ebitda , adjusted ebitda and distributable cash flow to the most comparable financial measures calculated and presented in accordance with gaap , please read “ selected historical financial data – non‑gaap financial measures. ” 53 factors affecting the comparability of our financial results our future results of operations may not be comparable to our historical results of operations for the reasons described below : acquisitions and developments we have in the past pursued and intend to continue to pursue acquisitions of real property interests and developments of infrastructure . our significant historical acquisition activity impacts the period to period comparability of our results of operations . during the years ended december 31 , 2017 , 2016 and 2015 , the partnership completed four , five and eight drop-down acquisitions , respectively , from our sponsor and affiliates ( collectively the “ drop-down acquisitions ” or “ drop-down assets ” ) . the 2016 and 2015 drop-down acquisitions are deemed to be transactions between entities under common control , which prior to the adoption of asu no . 2017-01 on april 1 , 2017 , requires the assets and liabilities to be transferred at the historical cost of the parent of the entities , with prior periods retroactively adjusted to furnish comparative information . story_separator_special_tag accordingly , the 2016 and 2015 consolidated financial statements and related notes have been retroactively adjusted to include the historical results and financial position of the 2016 and 2015 drop-down assets prior to the acquisition dates during the periods the assets were under common control . for drop-down acquisitions that do not meet the new definition of a business under asu no . 2017-01 , the transfer of net assets will be accounted for prospectively in the period in which the transfer occurs at the net carrying value , asset acquisition costs will be capitalized instead of expensed , and prior periods will not be retroactively adjusted . all 2017 drop-down acquisitions that occurred after the adoption of march 31 , 2017 are transfers of net assets accounted for prospectively in the period . during the year ended december 31 , 2017 , the partnership completed four drop-down acquisitions of an aggregate of 155 tenant sites and two investments in receivables from landmark and affiliates in exchange for total consideration of $ 118.3 million . during the year ended december 31 , 2016 , the partnership completed five drop-down acquisitions of an aggregate of 539 tenant sites and 14 investments in receivables from landmark and affiliates in exchange for total consideration of $ 205.7 million . during the year ended december 31 , 2015 , the partnership completed eight drop-down acquisitions of an aggregate of 761 tenant sites and related real property interests from landmark and affiliates in exchange for total consideration of $ 268.2 million . included in the drop-down assets acquired by the partnership during the year ended december 31 , 2016 , 386 tenant sites and 5 investments in receivables were part of the right of first offer assets acquired from landmark dividend growth fund-g llc ( “ fund g ” ) for a total consideration of $ 140.3 million . in connection with the fund g drop-down acquisition , the partnership entered into a contractual obligation to acquire two tenant sites and related real property interests . the partnership acquired one of these tenant sites and related real property interests on march 31 , 2017 for cash consideration of $ 7.5 million and the remaining additional tenant site for $ 3.8 million on april 28 , 2017. upon completion of the full $ 11.3 million acquisition , the partnership issued 221,729 common units to fund g on april 28 , 2017. included in the drop-down assets acquired by the partnership during the year ended december 31 , 2015 , 401 tenant sites were part of the right of first offer assets acquired from the acquired funds for a total consideration of $ 140.7 million . additionally , during the years ended december 31 , 2017 and 2016 , the partnership acquired 63 tenant sites and one investment in receivables and 40 tenant sites from third parties for a total consideration of $ 41.0 million and $ 85.7 million , respectively . see note 3 , acquisitions , to the consolidated and combined financial statements for additional information . secured notes on november 30 , 2017 , the partnership completed its second securitization transaction ( the “ 2017 securitization ” ) involving a segregated pool of certain outdoor advertising sites and related property interests owned by certain special purpose subsidiaries of the partnership , through the issuance of the series 2017-1 secured tenant site contract revenue notes , class a and class b ( the “ 2017 secured notes ” ) , in an aggregate principal amount of $ 80.0 million . the class a and class b 2017 secured notes bear interest at a fixed note rate per annum of 4.10 % and 3.81 % , respectively . on june 16 , 2016 , the partnership completed a securitization transaction ( the “ 2016 securitization ” ) involving a segregated pool of wireless communication sites and related real property interests owned by certain special purpose subsidiaries of the partnership , through the issuance of the series 2016-1 secured tenant site contract revenue notes , class a and class b ( the “ 2016 secured notes ” ) , in an aggregate principal amount of $ 116.6 million . the class a and class b 2016 secured notes bear interest at a fixed note rate per annum of 3.52 % and 7.02 % , respectively . the 2017 secured notes and the 2016 secured notes described above are collectively referred to as the “ secured notes. ” see note 7 , debt to the consolidated and combined financial statements for additional information . derivative financial instruments historically we have hedged a portion of the variable interest rates under our secured debt facilities through interest rate swap agreements . we have not applied hedge accounting to these derivative financial instruments which has resulted in the change in the fair value of the interest rate swap agreements to be reflected in income as either a realized or unrealized gain ( loss ) on derivatives . 54 general and administrative expenses under the partnership 's amendment no.1 to the amended and restated agreement of limited partnership dated july 31 , 2017 ( the “ partnership agreement ” ) , we are required to reimburse our general partner and its affiliates for all costs and expenses that they incur on our behalf for managing and controlling our business and operations . except to the extent specified under our omnibus agreement with landmark ( “ omnibus agreement ” ) , our general partner determines the amount of these expenses and such determinations must be made in good faith under the terms of the partnership agreement .
| or 74 % , 20 % and 6 % of total rental revenue , respectively , during 2016. the occupancy rates in our wireless communication , outdoor advertising and renewable power generation segments were 96 % , 98 % and 100 % , respectively , as of december 31 , 2017 and 2016. additionally , our effective monthly rental rates per tenant site for wireless communication , outdoor advertising , and renewable power generation segments were $ 1,838 , $ 1,754 and $ 9,779 , respectively , during 2017 compared to $ 1,776 , $ 1,351 and $ 4,062 , respectively , during 2016. management fees to affiliates management fees to affiliates decreased $ 0.2 million during 2017 compared to 2016 due to $ 0.2 million of management fees to affiliates that are associated with fund g during the year ended december 31 , 2016. landmark 's right to receive management fees of $ 65 per asset per month for managing fund g 's assets was terminated in connection with the partnership 's acquisition of the acquired fund . pursuant to the terms of our omnibus agreement , landmark is required to reimburse the partnership for certain general and administrative services that exceed the greater of $ 162,500 or 3 % of our revenue during the preceding calendar quarter . property operating property operating expenses increased $ 0.3 million during 2017 compared to 2016 due to the increase in property taxes as a result of an increase in fee simple properties that are not leased under a triple net lease structure . substantially all of our tenant sites are subject to triple net or effectively triple net lease arrangements , which require the tenant or the underlying property owner to pay all utilities , property taxes , insurance and repair and maintenance costs . additionally , we incurred management fees in the uk that totaled $ 0.1 million in 2017. as we deploy flex grid solution , we may incur additional operating expenses associated with ground lease payments and
| 11,678 |
we enter into arrangements with customers that have multiple deliverables , such as equipment and installation , and we recognize revenues and profits on certain long-term contracts using the percentage-of-completion method of accounting . revenue recognition methods . we recognize revenue under accounting standards codification ( asc ) 605 , `` revenue recognition '' ( asc 605 ) , when the following criteria are met : persuasive evidence of an arrangement exists , delivery has occurred or service has been rendered , the sales price is fixed or determinable , and collectability is reasonably assured . under asc 605 , when the terms of sale include customer acceptance provisions , and compliance with those provisions can not be demonstrated until customer acceptance , we recognize revenues upon such acceptance . provisions for discounts , warranties , returns , and other adjustments are provided for in the period in which the related sales are recorded . 19 kadant inc. 2014 annual report most of our revenue is recognized in accordance with the accounting policies in the preceding paragraph . however , when a sale arrangement involves multiple elements , such as equipment and installation , we consider the guidance in asc 605. such transactions are evaluated to determine whether the deliverables in the arrangement represent separate units of accounting based on the following criteria : the delivered item has value to the customer on a stand-alone basis , and if the contract includes a general right of return relative to the delivered item , delivery or performance of the undelivered item is considered probable and substantially under our control . revenue is allocated to each unit of accounting or element based on relative selling prices . we determine relative selling prices by using either vendor-specific objective evidence ( vsoe ) if that exists , or third-party evidence of selling price . when neither vsoe or third-party evidence of selling price exists for a deliverable , we use our best estimate of the selling price for that deliverable . in cases in which elements can not be treated as separate units of accounting , the elements are combined into a single unit of accounting for revenue recognition purposes . the complexity of all issues related to the assumptions , risks , and uncertainties inherent in the application of asc 605 affects the amounts reported as revenues in our consolidated financial statements . under asc 605 , we may not be able to reliably predict future revenues and profitability due to the difficulty of estimating when installation will be performed or when we will meet the contractually agreed upon performance tests , which can delay or prohibit recognition of revenues . the determination of when we install the equipment or fulfill the performance guarantees is largely dependent on our customers , their willingness to allow installation of the equipment or performance of the appropriate tests in a timely manner , and their cooperation in addressing possible problems that would impede achievement of the performance guarantee criteria . unexpected changes in the timing related to the completion of installation or performance guarantees could cause our revenues and earnings to be significantly affected . percentage-of-completion . revenues recorded under the percentage-of-completion method of accounting pursuant to asc 605 were $ 19.1 million in 2014 , $ 19.8 million in 2013 , and $ 42.2 million in 2012 . we determine the percentage of completion by comparing the actual costs incurred to date to an estimate of total costs to be incurred on each contract . if a loss is indicated on any contract in process , a provision is made currently for the entire loss . our contracts generally provide for billing of customers upon the attainment of certain milestones specified in each contract . revenues earned on contracts in process in excess of billings are classified as unbilled contract costs and fees , and amounts billed in excess of revenues are classified as billings in excess of contract costs and fees . the estimation process under the percentage-of-completion method affects the amounts reported in our consolidated financial statements . a number of internal and external factors affect our percentage-of-completion and cost of sales estimates , including labor rate and efficiency variances , estimates of warranty costs , estimated future material prices from vendors , and customer specification and testing requirements . although we make every effort to ensure the accuracy of our estimates in the application of this accounting policy , if our actual results were to differ from our estimates , or if we were to use different assumptions , it is possible that materially different amounts could be reported as revenues in our consolidated financial statements . completed contract method . for long-term contracts that do not meet the criteria under asc 605-35 to be accounted for under the percentage-of-completion method , we recognize revenue using the completed contract method . when using the completed contract method , we recognize revenue when the contract has been substantially completed , the product has been delivered , and , if applicable , the customer acceptance criteria have been met . we exercise judgment in determining our allowance for bad debts , which is based on our historical collection experience , current trends , credit policies , specific customer collection issues , and accounts receivable aging categories . in determining this allowance , we look at historical writeoffs of our receivables . we also look at current trends in the credit quality of our customer base as well as changes in our credit policies . we perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and each customer 's current creditworthiness . we continuously monitor collections and payments from our customers . in addition , in some instances we utilize letters of credit as a way to mitigate credit exposure . story_separator_special_tag while actual bad debts have historically been within our expectations and the provisions established , we can not guarantee that we will continue to experience the same rate of bad debts that we have had in the past . a significant change in the liquidity or financial position of any of our customers could result in the uncollectibility of the related accounts receivable and could adversely affect our operating results and cash flows in that period . warranty obligations . we offer warranties of various durations to our customers depending upon the specific product and terms of the customer purchase agreement . we typically negotiate terms regarding warranty coverage and length of warranty depending on the products and their applications . our standard mechanical warranties require us to repair or replace a defective product during the warranty period at no cost to the customer . we record an estimate for warranty-related costs at the time of sale based on our actual historical occurrence rates and repair costs , as well as knowledge of any specific warranty problems that indicate that projected warranty costs may vary from historical patterns . these estimates are revised for variances between actual and expected claims rates . while our warranty costs have historically been within our expectations and the provisions established , we may not continue to experience the same warranty return rates or repair costs that we have in the past . 20 kadant inc. 2014 annual report a significant increase in warranty occurrence rates or costs to repair our products would lead to an increase in the warranty provision and could have a material adverse impact on our consolidated results for the period or periods in which such returns or additional costs occur . income taxes . we operate in numerous countries under many legal forms and , as a result , are subject to the jurisdiction of numerous domestic and non-u.s. tax authorities , as well as to tax agreements and treaties among these governments . determination of taxable income in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and assumptions regarding significant future events , such as the amount , timing and character of deductions , permissible revenue recognition methods under the tax law and the sources and character of income and available tax credits . changes in tax laws , regulations , agreements and treaties , currency-exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of current and deferred tax balances and our results of operations . we estimate the degree to which our deferred tax assets on deductible temporary differences and tax loss or credit carryforwards will result in an income tax benefit based on the expected profitability by tax jurisdiction , and provide a valuation allowance for these deferred tax assets if it is more likely than not that they will not be realized in the future . if it were to become more likely than not that these deferred tax assets would be realized , we would reverse the related valuation allowance . our tax valuation allowance was $ 13.0 million at year-end 2014 . should our actual future taxable income by tax jurisdiction vary from our estimates , additional allowances or reversals thereof may be necessary . when assessing the need for a valuation allowance in a tax jurisdiction , we evaluate the weight of all available evidence to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized . as part of this evaluation , we consider our cumulative three-year history of earnings before income taxes , taxable income in prior carryback years , future reversals of existing taxable temporary differences , prudent and feasible tax planning strategies , and expected future results of operations . as of year-end 2014 , we continued to maintain a valuation allowance in the u.s. against certain of our state operating loss carryforwards due to the uncertainty of future profitability in state jurisdictions in the u.s. as of year-end 2014 , we maintained valuation allowances in certain foreign jurisdictions because of the uncertainty of future profitability . in the ordinary course of business there is inherent uncertainty in quantifying our income tax positions . it is our policy to provide for uncertain tax positions and the related interest and penalties based upon our assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities . at year-end 2014 , we believe that we have appropriately accounted for any liability for unrecognized tax benefits . to the extent we prevail in matters for which a liability for an unrecognized tax benefit is established or are required to pay amounts in excess of the liability , our effective tax rate in a given financial statement period may be affected . we reinvest certain earnings of our international subsidiaries indefinitely , and accordingly , we do not provide for u.s. income taxes that could result from the remittance of such foreign earnings . through year-end 2014 , we have not provided for u.s. income taxes on approximately $ 169.2 million of unremitted foreign earnings . the u.s. tax cost has not been determined due to the fact that it is not practicable to estimate at this time . the related foreign tax withholding , which would be required if we were to remit these foreign earnings to the u.s. , would be approximately $ 3.0 million . valuation of goodwill and intangible assets . we evaluate the recoverability of goodwill and indefinite-lived intangible assets as of the end of each fiscal year , or more frequently if events or changes in circumstances , such as a significant decline in sales , earnings , or cash flows , or material adverse changes in the business climate , indicate that the carrying value of an asset might be impaired . testing goodwill for impairment involves a two-step quantitative process .
| the presentation of the changes in revenues by product line excluding the effect of currency translation and acquisitions is a non-gaap measure . we believe this non-gaap measure helps investors gain an understanding of our underlying operations , consistent with how management measures and forecasts our performance , especially when comparing such results to prior periods or forecasts . this non-gaap measure should not be considered superior to or a substitute for the corresponding gaap measure . 23 kadant inc. 2014 annual report replace_table_token_9_th revenues in our stock-preparation product line in 2014 increased $ 4.8 million , or 4 % , due to the inclusion of $ 6.0 million in revenues from acquisitions and increased demand for our products at our north american operations , offset in part by decreased demand for our products at our south american and chinese operations . revenues in our doctoring , cleaning , & filtration product line in 2014 included $ 2.5 million in revenues from acquisitions and a decrease of $ 0.9 million from the unfavorable effect of currency translation compared to 2013. excluding revenues from acquisitions and the unfavorable effect of currency translation , revenues from our doctoring , cleaning , & filtration product line in 2014 increased $ 3.3 million compared to 2013 , primarily due to increased demand for our products at our north american operations . excluding the unfavorable effect of currency translation , revenues in our fluid-handling product line increased $ 10.8 million , or 12 % , in 2014 compared to 2013 , primarily due to increased demand for our parts and consumables products at our european and north american operations . gross profit margin gross profit margins for 2014 and 2013 are as follows : replace_table_token_10_th papermaking systems segment . the gross profit margin at the papermaking systems segment decreased to 45.4 % in 2014 from 46.1 % in 2013 primarily due to lower margins achieved on our capital products . wood processing systems segment . the gross profit margin at the wood processing systems segment increased to 35.4 % in 2014
| 11,679 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.