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already , shipments of products incorporating our bluetooth ip are sizeable , with more than 47 million ceva-powered bluetooth chips reported by our customers for the fourth quarter of 2016 , and reaching 138 million units for the full year 2016. the market potential for intelligent audio processing required , as voice is becoming the primary user interface for iot applications , including mobile , automotive and consumer devices , offers an additional growth segment for the company . our proven track record in audio/voice , with more than 6 billion audio chips shipped to date , puts us in a strong position to power audio roadmaps across this new range of addressable end markets . the market potential for machine learning and deep networks for camera-related use cases in automotive , mobile , consumer and iot applications offers another growth segment for the company . our ceva-xm4 intelligent vision processor and our new ceva-xm6 vision processor and platform for deep learning provide highly compelling offerings for any camera-enabled device such as smartphones , tablets , automotive safety ( adas ) , drones , robotics , security and surveillance , augmented reality ( ar ) and virtual reality ( vr ) , drones , and signage . per abi research , camera shipments are expected to exceed 2.7 billion units by 2018. we have already signed more than 30 licensing agreements for our imaging and vision dsps across those markets , where our customers can add camera-related enhancements such as smarter autofocus , better picture using super resolution algorithms , and better image capture in low-light environments . other customers can add video analytics support to enable new services like augmented reality , gesture recognition and advanced safety capabilities in cars . this revolution in vision processing is an opportunity for us to expand our footprint in smartphones and further into tablets , drones , surveillance and automotive applications . as a result of our diversification strategy beyond baseband for handsets and our progress in addressing these new markets under the iot umbrella , we expect significant growth in our unit shipments for non-handset baseband applications over the next few years , up from approximately 210 million royalty-bearing units annually in 2016 to 700 to 900 million units annually by 2018. notwithstanding the various growth opportunities we have outlined above , our business operates in a highly competitive and cyclical environment . the maintenance of our competitive position and our future growth are dependent on our ability to adapt to ever-changing technologies , short product life cycles , evolving industry standards , changing customer needs and the trend towards internet-of-things , handset baseband , connectivity , 32 and voice , audio and video convergence in the markets that we operate . also , our business relies significantly on revenues derived from a limited number of customers . the discontinuation of product lines or market sectors that incorporate our technology by our significant customers or a change in direction of their business and our inability to adapt our technology to their new business needs could have material negative implications for our future royalty revenues . moreover , competition has historically increased pricing pressures for our products and decreased our average selling prices . royalty payments under our existing license agreements also could be lower than currently anticipated for a variety of reasons , including decreased royalty rates triggered by larger volume shipments , lower royalty rates negotiated with customers due to competitive pressure or consolidation among our customers . some of our competitors have reduced their licensing and royalty fees to attract customers and expand their market share . in order to penetrate new markets and maintain our market share with our existing products , we may need to offer our products in the future at lower prices which may result in lower profits . in addition , our future growth is dependent not only on the continued success of our existing products but also the successful introduction of new products , which requires the dedication of resources into research and development which in turn may increase our operating expenses . furthermore , since our products are incorporated into end products of our oem and semiconductor customers , our business is very dependent on their ability to achieve market acceptance of their end products in the handset and consumer electronic markets , which are similarly very competitive . in addition , macroeconomic trends may significantly affect our operating results . for example , consolidation among our customers may negatively affect our revenue source , increase our existing customers ' negotiation leverage and make us more dependent on a limited number of customers . also , since we derive a significant portion of our revenues from the handset baseband market , any negative trends in that market would adversely affect our financial results . moreover , the semiconductor and consumer electronics industries remain volatile , which makes it extremely difficult for our customers and us to accurately forecast financial results and plan for future business activities . our license arrangements have not historically provided for substantial ongoing license payments so revenue recognized from licensing arrangements vary significantly from period to period , depending on the number and size of deals closed during a quarter , and is difficult to predict . moreover , our royalty revenues are based on the sales of products incorporating the semiconductors or other products of our customers , and as a result we do not have direct access to information that will help us anticipate the timing and amount of future royalties . we have very little visibility into the timetable of product shipments incorporating our technology by our customers . as a result , our past operating results should not be relied upon as an indication of future results . critical accounting policies , estimates and assumptions our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the united states ( u.s. gaap ) . these accounting principles require us to make certain estimates , judgments and assumptions . story_separator_special_tag we believe that the estimates , judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates , judgments and assumptions are made . these estimates , judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements , as well as the reported amounts of revenues and expenses during the periods presented . to the extent there are material differences between these estimates , judgments or assumptions and actual results , our financial statements will be affected . the significant accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following : revenue recognition ; business combinations and valuation of goodwill and other acquired intangible assets ; income taxes ; equity-based compensation ; and impairment of marketable securities ; 33 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 . revenue recognition significant management judgments and estimates must be made and used in connection with the recognition of revenue in any accounting period . material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management 's estimates change on the basis of development of business or market conditions . management 's judgments and estimates have been applied consistently and have been reliable historically . we generate our revenues from ( 1 ) licensing intellectual property , which in certain circumstances is modified for customer-specific requirements , ( 2 ) royalty revenues and ( 3 ) other revenues , which include revenues from support , training and sale of development systems . we license our ip to semiconductor companies throughout the world . these semiconductor companies then manufacture , market and sell custom-designed chipsets to oems of a variety of consumer electronics products . we also license our technology directly to oems , which are considered end users . we account for our ip license revenues and related services in accordance with financial accounting standards board ( fasb ) accounting standards codification ( asc ) no . 985-605 , software revenue recognition. revenues are recognized when persuasive evidence of an arrangement exists and no further obligation exists , delivery has occurred , the license fee is fixed or determinable , and collection is reasonably assured . a license may be perpetual or time limited in its application . revenue earned on licensing arrangements involving multiple elements are allocated to each element based on the residual method when vendor specific objective evidence ( vsoe ) of fair value exists for all undelivered elements and vsoe does not exist for one of the delivered elements . vsoe of fair value of the undelivered elements is determined based on the substantive renewal rate as stated in the agreement . extended payment terms in a licensing arrangement may indicate that the license fees are not deemed to be fixed or determinable . if the fee is not fixed or determinable , revenue is recognized as payments become due from the customer unless collection is not considered reasonably assured , then revenue is recognized as payments are collected from the customer , provided all other revenue recognition criteria have been met . revenues from license fees that involve significant customization of our ip to customer-specific specifications are recognized in accordance with the principles set out in fasb asc no . 605-35-25 , construction-type and production-type contracts recognition , using contract accounting on a percentage of completion method . the amount of revenue recognized is based on the total license fees under the agreement and the percentage of completion achieved . the percentage of completion is measured by the actual time incurred to date on the project compared to the total estimated project requirements , which correspond to the costs related to earned revenues . provisions for estimated losses on uncompleted contracts are made during the period in which such losses are first determined , in the amount of the estimated loss on the entire contract . revenues that are derived from the sale of a licensee 's products that incorporate our ip are classified as royalty revenues . royalty revenues are recognized during the quarter in which we receive a report from the licensee detailing the shipment of products that incorporate our ip , which receipt is in the quarter following the licensee 's sale of such products to its customers . royalties are calculated either as a percentage of the revenues received by our licensees on sales of products incorporating our ip or on a per unit basis , as specified in the agreements with the licensees . non-refundable payments on account of future royalties ( prepaid royalties ) are included within our licensing and related revenue line on the consolidated statements of operations . we may engage a third party to perform royalty audits of our licensees , and if these audits indicate any over- or under-reported royalties , we account for the results when the audits are resolved . 34 in addition to license fees , contracts with customers generally contain an agreement to provide for post contract support and training , which consists of telephone or e-mail support , correction of errors ( bug fixing ) and unspecified updates and upgrades . fees for post contract support , which takes place after delivery to the customer , are specified in the contract and are generally mandatory for the first year . after the mandatory period , the customer may extend the support agreement on similar terms on an annual basis . we recognize revenue for post contract support on a straight-line basis over the period for which technical support is contractually agreed to be provided to the licensee , typically 12 months .
| the following table sets forth the products and services as percentages of our total revenues in each of the periods set forth below : replace_table_token_10_th we expect to continue to generate a significant portion of our revenues for 2017 from the above products and services . licensing and related revenue replace_table_token_11_th the slight decrease in licensing and related revenues from 2015 to 2016 is explained by lower revenues from the handset baseband markets , partially offset by positive licensing demand and a continuation of an increase in a number of deals for our connectivity ips , in particular bluetooth ips , and our vision-related products . the increase in licensing and related revenues from 2014 to 2015 principally reflected higher revenues from our connectivity ip products , mainly from bluetooth ip , due to our acquisition of rivierawaves , and from higher revenues of our imaging and vision dsp cores and platforms , partially offset by lower revenues from our non- handset baseband dsp cores and platforms . our higher licensing and related revenue in 2016 and 2015 illustrate that we have successfully transformed ceva into a vertically integrated , one-stop ip house for wireless broadband and iot-related technologies . our unique portfolio of lte-advanced and 5g baseband , bluetooth , wi-fi , imaging , vision and voice platforms continue to set new milestones in innovation and customer traction . in 2016 , we concluded a record 49 licensing agreements ( 45 of which were for non-handset baseband and 17 were with first-time customers ) , compared to 47 and 36 in 2015 and 2014 , respectively . our technologies are now designed in by leading semiconductor companies and oems in their base stations , smartphone application processors , imaging chips , drones , surveillance systems , audio chips , as well as automotive , smart grid , wi-fi , satellite communication , connectivity , gps devices and connectivity for internet-of-things . licensing and related revenue accounted for 43.9 % of our total revenues for 2016 , compared with 54.0 % and 55.8 % of our total revenues for 2015 and 2014 ,
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we introduced our entre system in the united states in february 2013. the entre system is sold or rented to patients who need a more basic pump or who do not yet qualify for insurance reimbursement for an advanced compression device such as our flexitouch system . for the years ended december 31 , 2020 and 2019 , sales and rentals of our entre system and other products ( that have since been discontinued ) represented 12 % and 10 % of our revenue , respectively . we previously sold and rented another proprietary product , the actitouch system . during fiscal year 2018 , we recorded a $ 2.5 million non-cash impairment charge to fully impair the inventory and intangible assets related to our actitouch system due to the lack of market demand for the product . we formally discontinued this product line in the first quarter of 2020. see note 8 - “ intangible assets ” to the consolidated financial statements in this report for more information regarding this impairment charge and discontinuation . in october 2018 , we licensed the intellectual property rights related to the airwear gradient compression wrap , or the airwear wrap , in the u.s. and canada , for use in all medical applications , including but not limited to swelling/edema and ulcers ( including lymphedema and chronic venous insufficiency conditions ) , but excluding the use of the intellectual property in the field of prophylaxis for deep vein thrombosis . the airwear wrap is indicated for the management of venous insufficiency , venous hypertension , venous ulcerations and lymphedema . we began selling the airwear wrap in a limited market in the fourth quarter of 2019. we subsequently made the strategic decision to discontinue the airwear wrap in the second quarter of 72 2020 and , effective july 31 , 2020 , sun scientific , inc. terminated the license agreement with us related to the airwear wrap . see note 8 - “ intangible assets ” to the consolidated financial statements in this report for more information regarding the related impairment charge . to support the growth of our business , we invest heavily in our commercial infrastructure , consisting of our direct sales force , training resources , reimbursement capabilities and clinical expertise . we market our products in the united states using a direct-to-patient and -provider model . our direct sales force has grown to a team of over 250 employees as of december 31 , 2020 , compared to over 240 employees as of december 31 , 2019. this model allows us to directly approach patients and clinicians , whereby we disintermediate the traditional durable medical equipment channel , allowing us to capture both the manufacturer and distributor margins . furthermore , in concert with covid-19 social distancing requirements and recommendations , we temporarily moved to a “ no contact ” virtual patient training model . this new model substantially reduced the need for in-person contact and visits to patients ' homes and clinics in order to protect the health and limit the exposure of both our trainers and patients . accordingly in the second quarter of 2020 , we inactivated our independent healthcare practitioners , who acted as at-home trainers to educate patients on the proper use of our systems , in order to allow these individuals to have access to specific covid related financial relief . we have since reactivated a small number of healthcare practitioners in the same capacity as trainers who educate patients on the proper use of our solutions . we invest substantial resources in our reimbursement department , which was reorganized in 2018 to improve operational efficiencies and enhance individual payer expertise , while continuing our strategic focus of payer development . our reimbursement function includes payer relations and reimbursement operations . our payer relations function focuses on payer policy development , education , contract negotiations , and data analysis . our reimbursement operations function is responsible for verifying patient insurance benefits , individual patient case development , prior authorization submissions , case follow-up , and appeals when necessary . our clinical function , consisting of a scientific advisory board , in-house therapists and nurses , and our chief medical officer ( part-time ) , serves as a resource to clinicians and patients and guides our development of clinical evidence in support of our products . we believe these investments are critical to driving payer , clinician and patient adoption of our technologies , and together with our commercial infrastructure , represent a significant competitive advantage . we rely on third-party contract manufacturers for the sourcing of parts , the assembly of our controllers and the manufacturing of the garments used with our systems . we conduct final assembly of the garments used with our flexitouch system , perform quality assurance , and ship our products from our facility in minneapolis , minnesota . for the year ended december 31 , 2020 , we generated revenue of $ 187.1 million and had net loss of $ 0.6 million , compared to revenue of $ 189.5 million and net income of $ 11.0 million for the year ended december 31 , 2019 , and revenue of $ 143.8 million and net income of $ 6.6 million for the year ended december 31 , 2018. our primary sources of capital to date have been from operating income and private placements of our capital stock , as well as our initial public offering , which closed on august 2 , 2016. in august 2017 , we filed a shelf registration statement on form s-3 with the sec . under the shelf registration statement , we may offer and sell from time to time up to $ 200 million of common stock , preferred stock , debt securities , warrants , rights or units . the shelf registration statement also registered for resale from time to time up to 5,703,534 shares of our common stock held by the selling stockholders named therein . story_separator_special_tag in september 2017 , certain of the selling stockholders completed a secondary offering of 3,795,000 shares of our common stock at a public offering price of $ 33.00 per share . we did not receive any proceeds from the sale of the shares by the selling stockholders . we operate in one segment for financial reporting purposes . 73 components of our results of operations revenue we derive our revenue from sales and rentals of our flexitouch and entre systems to patients in the united states . revenue growth has been driven by increased clinician , patient and payer awareness of lymphedema and the clinical efficacy of our flexitouch system , and the launch of our entre system in 2013. we have expanded our direct sales force , which helps us drive and support our revenue growth and intend to continue this expansion . however , any reversal in these recent trends could have a negative impact on our future revenue . our revenue has fluctuated , and we expect our revenue to continue to fluctuate , from quarter to quarter due to a variety of factors . for instance , our fourth quarter is consistently our strongest quarter of the year . see item 7 . “ management 's discussion and analysis of financial condition and results of operations – seasonality ” for a further discussion of factors contributing to our seasonality . further , our revenue is impacted by fluctuations in the mix of products being sold and rented during each period and changes in the mix of our payers and contract pricing . we sell or rent our products either directly to patients or to the veterans administration on behalf of patients , who are referred to us by physicians , therapists or nurses . we bill payers , such as private insurers , medicare , or medicaid , on behalf of our patients and bill patients directly for their cost-sharing amounts , including any portion of an unsatisfied deductible and any copayments or co-insurance . we bill the veterans administration directly for the purchase or lease of our product on behalf of the patient . approximately 13 % of our revenue in 2020 and 17 % of our revenue in 2019 came from the veterans administration . approximately 16 % of our revenue in 2020 and 11 % of our revenue in 2019 came from medicare patients . changes to the level of medicare coverage for our products , including the 2015 lcd modification to the criteria for medicare coverage , could reduce the number of medicare patients who have access to our products . our products currently are not subject to the competitive bidding process for supplying covered items to medicare recipients . we expect our revenue to continue to increase in the future as a result of increased awareness of our solutions , expansion of our direct sales force , enhanced marketing and customer support efforts , continued focus on developing clinical and economic outcomes data , efforts related to expanded third-party reimbursement and longer term , potential introduction of our solutions outside the united states . we also anticipate pricing pressure from private insurers , which will result in continued downward pressure on our revenue growth rate . cost of revenue and gross margin cost of revenue consists primarily of component costs , direct labor , overhead costs , product warranties , provisions for slow-moving and obsolete inventory , delivery costs for items sold or rented , and amortization related to the intangible assets related to our products . a significant portion of our cost of revenue consists of manufacturing overhead costs . these overhead costs include the cost of quality assurance , material procurement , inventory control , facilities , equipment and operations supervision and management . cost of revenue also includes depreciation expense for product tooling and equipment as well as shipping costs . we expect overhead costs as a percentage of revenue to decrease as a result of expected increases in production volume and yields . we expect cost of revenue to increase in absolute dollars primarily if , and to the extent , our revenue grows . we provide a warranty on our device controllers ranging from one to two years for commercially insured patients and five years for medicare patients , as required by centers for medicare and medicaid services . we also provide replacement garments to our patients for up to five years after purchase . we establish a reserve for warranty claims based on historical warranty replacement costs incurred . provisions for warranty obligations , which are included in cost of revenue , are recorded at the time of shipment . we calculate gross margin as gross profit divided by revenue . our gross margin has been and will continue to be affected by a variety of factors , including product and payer mix , production volumes , manufacturing costs and cost-reduction strategies . we expect our gross margin to decrease slightly over the 74 near term as we experience pricing pressure from third-party payers . we continue to work to reduce product manufacturing cost through enhanced product design efforts as well as supply chain initiatives in an effort to offset anticipated price erosion . our gross margin will likely fluctuate from quarter to quarter . sales and marketing expenses our sales and marketing expenses support our direct-to-patient and -provider model . these expenses consist primarily of personnel-related expenses , including salaries , bonuses , commissions and benefits for employees . they also include expenses for patient training , social media and advertising , informational kits , public relations and other promotional and marketing activities , field sales travel and entertainment expenses , trade shows and conferences , stock-based compensation , as well as customer service . we expect sales and marketing expenses to continue to increase in absolute dollars as we expand our commercial infrastructure to drive and support our planned revenue growth . to the extent our revenue grows , we expect sales and marketing expenses to decrease as a percentage of revenue over time .
| the actitouch system and the airwear wrap contributed immaterial amounts of revenue for the years ended december 31 , 2020 and 2019. cost of revenue and gross margin cost of revenue decreased $ 0.9 million , or 2 % , to $ 54.3 million during the year ended december 31 , 2020 , compared to $ 55.3 million during the year ended december 31 , 2019. the decrease in cost of revenue was primarily attributable to a decrease in the number of flexitouch systems sold or rented slightly offset by an increase in other products sales and rentals , and the $ 0.4 million inventory impairment charge recorded in the second quarter of 2020 related to discontinuing the airwear wrap product line . gross margin was 71 % for both of the years ended december 31 , 2020 and 2019. sales and marketing expenses sales and marketing expenses increased $ 0.7 million , or 1 % , to $ 79.6 million during the year ended december 31 , 2020 , compared to $ 78.9 million during the year ended december 31 , 2019. the increase was primarily attributable to our continued investment in our field sales team and marketing initiatives to increase clinician awareness , resulting in an increase of $ 9.2 million in personnel-related compensation expenses , including $ 0.7 million of incremental stock-based compensation expense , partially offset by a reduction of $ 4.3 million in our external patient training expense as a result of moving to increased virtual patient trainings , $ 2.3 million in reduced travel and entertainment expense due to decreased travel activities and a $ 1.8 million decrease from reduced tradeshows , professional services and other sales expense . research and development expenses r & d expenses increased $ 0.1 million , or 2 % , to $ 5.3 million during the year ended december 31 , 2020 , compared to $ 5.2 million during the year ended december 31 , 2019. the increase in r & d expenses was primarily attributable to investments in our r & d team and clinical studies projects . reimbursement , general and administrative expenses reimbursement , general and administrative expenses increased $ 11.9 million , or 30 % , to $ 51.5 million during the year ended december 31 , 2020 , compared to $ 39.6 million during the year ended december 31 , 2019. the increase in reimbursement , general and administrative expenses for the year ended december 31 , 2020 , was primarily attributable to a $ 4.1 million increase in personnel-related expenses , resulting from increased headcount in our reimbursement operations ,
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million and $ 81.7 million . the increase in securities in 2002 was primarily due to the investment of funds generated from increases in deposits and federal home loan bank advances in excess of loan growth . common shareholders ' equity was $ 34.6 million and $ 31.8 million at december 31 , 2002 and 2001 , respectively . the increase in common shareholder 's equity for the year ended december 31 , 2002 reflects earnings retention and an increase in the unrealized gain on securities available for sale , partially offset by the purchase of treasury stock and payment of dividends . story_separator_special_tag 6.2 million in 2001 but up from $ 3.7 million in 2000. the decrease is primarily due to a nonrecurring gain of $ 3.0 million in 2001 in connection with the settlement of the guaranty federal lawsuit . this gain represents the amount received in january 2002 in connection with the november 2001 settlement and concurrent transfer of the company 's rights to certain intangible assets . this income was partially offset by a nonrecurring impairment charge during 2001 of $ 1.5 million associated with the aft lease transaction . - 23 - during 2000 , guaranty leasing , acquired a 2.5 % ownership interest in aft for approximately $ 2.8 million . the aft ownership interest is classified as an other asset on the company 's balance sheet . as of december 31 , 2002 and 2001 , the book value of the aft ownership was $ 1.6 million . during the fourth quarter of 2001 , on belief that the company 's investment in aft was impaired by declines in air travel and reduced demand for commercial aircraft , an impairment charge of $ 1.5 million was recorded and the carrying amount of the investment was reduced to $ 1.6 million . during the third quarter of 2001 , aft recorded an impairment charge of $ 18.2 million related to two airplanes . in addition , management received indications the apprised value of aft 's fleet of airplanes had declined approximately 9 % from their value the past year . based on these factors , the limited marketability of the investment , the uncertainty surrounding the air transport industry and general economic conditions , management believed that the value of its investment in aft was permanently impaired . excluding the gain on settlement of litigation and the impairment charge of the aft , recurring noninterest income for 2001 totaled $ 4.6 million . excluding these items in 2001 , noninterest income for 2002 reflects an increase of $ 495,000 , or 10.9 % , over 2001. the year ended december 31 , 2002 reflected an increase in service charge income of $ 279,000 over the same period in 2001 and $ 561,000 over the same period in 2000 , representing a 10.4 % and a 23.4 % increase , respectively . securities gains decreased $ 36,000 , from $ 416,000 in 2001 to $ 380,000 in 2002. as to normal and recurring noninterest income , the company experienced a 10.9 % increase to $ 5.1 million for the twelve months ended december 31 , 2002 and a 22.5 % increase to $ 4.6 million for the same period in 2001. the following table presents for the periods indicated the major categories of noninterest income : replace_table_token_7_th the increase in noninterest income in both 2002 to 2001 , excluding the gain on settlement of litigation and the impairment charge taken in aft , resulted primarily from service charges and fee income due to an increase in the number of deposit accounts . additionally , the company continued to emphasize fee-based services resulting in greater income from check cashing , atm fees , appraisal fees and wire transfer fees . noninterest expense for the years ended december 31 , 2002 , 2001 and 2000 , noninterest expense totaled $ 14.7 million , $ 13.5 million and $ 12.1 million , respectively . the $ 1.2 million , or 8.9 % , increase in 2002 was primarily the result of increases in employee compensation and benefits . employee compensation and benefits increased from $ 7.6 million in 2001 to $ 8.7 million in 2002 , an increase of $ 1.1 million , or 14.5 % . this increase was due to an increase in full time equivalent employees from 199 at december 31 , 2001 to 212 at december 31 , 2002 , normal salary adjustments , increased bonus incentives , profit sharing contributions , and payroll taxes . - 24 - the increase in total noninterest expense for 2001 over 2000 of $ 1.4 million , or 11.4 % , was primarily the result of increases in employee compensation and benefits , fixed asset expense , and increased litigation expense . employee compensation and benefits increased from $ 6.8 million in 2000 to $ 7.6 million in 2001 , an increase of $ 801,000 , or 11.8 % . this increase was due to an increase in full time equivalent employees from 192 at december 31 , 2000 to 199 at december 31 , 2001 , an increase in incentive compensation , and normal salary adjustments . legal and professional fees increased $ 218,000 or 33.7 % primarily due to litigation involving the lawsuit with guaranty federal . the company 's efficiency ratios , calculated by dividing total noninterest expense ( excluding securities gains and losses ) by net interest income plus noninterest income , were 68.79 % in 2002 , 70.10 % in 2001 , and 75.72 % in 2000. the following table presents for the periods indicated the major categories of noninterest expense : replace_table_token_8_th income taxes federal income tax is reported as income tax expense and is influenced by the amount of taxable income , the amount of tax-exempt income , the amount of non-deductible interest expense and the amount of other non-deductible expense . the company utilized tax benefits on leveraged lease transactions in the amounts of $ 960,000 , $ 763,000 and $ 650,000 for 2002 , 2001 and 2000 , respectively . story_separator_special_tag the effective tax rates for 2002 , 2001 and 2000 were 24.37 % , 31.39 % and 23.14 % , respectively . income taxes for financial purposes in the consolidated statements of earnings differ from the amount computed by applying the statutory income tax rate of 34 % to earnings before income taxes . the difference in the statutory rate is primarily due to the tax benefits on the leveraged lease transactions and non-taxable income . additionally , the state of texas imposes a texas franchise tax . taxable income for the income tax component of the texas franchise tax is the federal pre-tax income , plus certain officers ' salaries , less interest income from federal securities . total franchise tax expense was $ 41,000 in 2002 , $ 50,000 in 2001 and $ 56,000 in 2000. such expense was included as a part of other noninterest expense . impact of inflation the effects of inflation on the local economy and on the company 's operating results have been relatively modest for the past several years . since substantially all of the company 's assets and liabilities are monetary in nature , such as cash , securities , loans and deposits , their values are less sensitive to the effects of inflation than to changing interest rates , which do not necessarily change in accordance with inflation rates . the company tries to control the impact of interest rate fluctuations by managing the relationship between its interest rate sensitive assets and liabilities . see quantitative and qualitative disclosures about market risk below . - 25 - financial condition loan portfolio ( including loans held for sale ) the company provides a broad range of commercial , real estate and consumer loan products to small and medium-sized businesses and individuals in its market areas . the company aggressively pursues qualified lending customers in both the commercial and consumer sectors , providing customers with direct access to lending personnel and prompt , professional service . the 86.0 % gross loan to deposit ratio as of december 31 , 2002 , reflects the company 's commitment as an active lender in the local communities it serves . total loans were $ 365.6 million at december 31 , 2002 , an increase of $ 34.3 million , or 10.4 % compared with $ 331.3 million at december 31 , 2001. in 2001 , total loans increased by $ 43.9 million , or 15.3 % to $ 331.3 million from $ 287.3 million at december 31 , 2000. in 2000 , total loans increased by $ 32.1 million , or 12.6 % from $ 255.2 million at december 31 , 1999. the growth in loans reflects the stable local economy , an aggressive advertising campaign , the company 's pro-lending reputation and the solicitation of new companies and individuals entering the company 's market areas . the following table summarizes the loan portfolio ( including loans held for sale ) of the company by type of loan as of the dates indicated : replace_table_token_9_th the primary lending focus of the company is on loans to small and medium-sized businesses and one-to-four family residential mortgage loans . the company 's commercial lending products include business loans , commercial real estate loans , equipment loans , working capital loans , term loans , revolving lines of credit and letters of credit . most commercial loans are collateralized and on payment programs . the purpose of a particular loan generally determines its structure . in almost all cases , the company requires personal guarantees on commercial loans to help assure repayment . commercial the company 's commercial loans are primarily made within its market area and are underwritten on the basis of the borrower 's ability to service such debt from income . as a general practice , the company takes as collateral a lien on any available real estate , equipment , or other assets obtained owned by the borrower and obtains a personal guaranty of the borrower . in general , commercial loans involve more credit risk than residential mortgage loans and commercial mortgage loans and , therefore , usually yield a higher return . the increased risk for commercial loans is due to the type of collateral securing these loans . the increased risk also derives from the expectation that commercial loans generally will be serviced principally from the business ' operations , and those operations may not be successful . as a result of these additional complexities , variables and risks , commercial loans require more thorough underwriting and servicing than other types of loans . - 26 - in addition to commercial loans secured by real estate , the company makes commercial mortgage loans to finance the purchase of real property , which generally consists of real estate with completed structures . commercial mortgage lending typically involves higher loan principal amounts and the repayment of loans is dependent , in large part , on sufficient income from the properties securing the loans to cover operating expenses and debt service . as a general practice , the company requires its commercial mortgage loans to be secured by well-managed income producing property with adequate margins and to be guaranteed by responsible parties . the company 's commercial mortgage loans are generally secured by first liens on real estate . loans with fixed interest rates typically amortize over a 10 to 15 year period with balloon payments due at the end of one to five years . in underwriting commercial mortgage loans , consideration is given to the property 's operating history , future operating projections , current and projected occupancy , location and physical condition . the underwriting analysis also includes credit checks , appraisals and a review of the financial condition of the borrower and guarantor . construction the company makes loans to finance the construction of residential and , to a limited extent , nonresidential properties . construction loans generally are secured by first liens on real estate .
| - 20 - 2001 versus 2000. net interest income increased from $ 12.3 million in 2000 to $ 13.5 million in 2001 , an increase of $ 1.2 million , or 10.0 % primarily due to a growth in interest income of $ 844,000 , or 2.9 % , and a decrease in interest expense of $ 379,000 , or 2.3 % . this resulted in net interest margins of 3.46 % and 3.44 % and net interest spreads of 2.85 % and 2.72 % for the years ended december 31 , 2001 and 2000 , respectively . the increase in total interest income for 2001 was primarily due to growth in average loans of $ 34.7 million , or 12.9 % and growth in federal funds sold of $ 9.3 million , or 270.4 % , which contributed an additional $ 1.4 million and $ 367,000 , respectively , to total interest income . total interest income was negatively affected by a reduction in average securities of $ 10.1 million , or 11.9 % as well as lower yields on loans , securities , and federal funds sold . the decrease in total interest expense was primarily due to a decrease in the cost of funds from 5.42 % in 2000 to 4.80 % in 2001 , which offset increases in average interest-bearing liabilities of $ 32.3 million , or 10.5 % . - 21 - the following table presents for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resultant yields , as well as the interest expense on average interest-bearing liabilities , expressed both in dollars and rates . no tax equivalent adjustments were made and all average balances are derived from average daily balances . nonaccruing loans have been included in the tables as loans carrying a zero yield . replace_table_token_5_th - 22 - the following schedule presents the dollar amount of changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities and distinguishes between the changes in interest income and interest expense related to changes in average outstanding balances and the volatility of interest rates . for purposes of this table , changes attributable to both rate and volume , which
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in addition , global and north american crude oil prices on which such activity levels are strongly predicated have significantly declined since a high of $ 106.57 in 2013 to a low of $ 30.32 in 2016. this oil price volatility and future price uncertainty has resulted in lower customer spending and activity levels which have negatively impacted the business ' results . to mitigate the decrease in demand experienced in the manufacturing operation of our lodging business , we have targeted more non-traditional markets such as schools , hospitals , and other municipal structures to offer our modular unit accommodations and related services . the majority of the segment 's operations are in canada , and therefore the impact of us to canadian dollar foreign currency translation also significantly impacts the segment 's results . story_separator_special_tag style= '' padding-left:0px ; text-indent:0px ; line-height : normal ; padding-top:10px ; '' > replace_table_token_9_th safety-kleen direct revenues for the year ended december 31 , 2016 increased $ 54.4 million from the comparable period in 2015 . this increase was derived from acquisitions which accounted for $ 72.9 million of incremental revenue and a continued shift from a pay-for-oil to a charge-for-oil program which began in 2015 and accounted for $ 56.6 million of incremental revenue in 2016 . these items were partially offset by decreases in base and blended oil pricing , which accounted for a $ 73.0 million decrease to direct revenues in the year ended december 31 , 2016 from the comparable period in 2015 . inclusive in the year-over-year changes within the safety-kleen segment was also the negative impact of foreign currency translation on our canadian operations of approximately $ 4.6 million in the year ended december 31 , 2016 from the comparable period in 2015 . safety-kleen direct revenues for the year ended december 31 , 2015 decreased $ 137.8 million from the comparable period in 2014 primarily due to a decrease in base and blended pricing of $ 134.1 million . inclusive in the year-over-year changes within this segment was also the negative impact of foreign currency translation on our canadian operations of approximately $ 19.6 million as a result of the weakening canadian dollar in the year ended december 31 , 2015 from the comparable period in 2014 . oil , gas and lodging services replace_table_token_10_th oil , gas and lodging services direct revenues for the year ended december 31 , 2016 decreased $ 87.3 million from the comparable period in 2015 primarily due to lower pricing , business activity and rig counts serviced consistent with overall market conditions . lower exploration budgets of our customers , project cancellations , and reduced customer spending also negatively impacted results in 2016 . rig count serviced decreased approximately 40 % for the year ended december 31 , 2016 from the comparable period in 2015 . inclusive in the year-over-year changes within this segment was also the negative impact of foreign currency translation on our canadian operations of approximately $ 3.5 million for the year ended december 31 , 2016 from the comparable period in 2015 . oil , gas and lodging services direct revenues for the year ended december 31 , 2015 decreased $ 166.1 million from the comparable period in 2014 primarily due to decreases in the occupancy rates at our fixed lodges , business activity and rig counts serviced consistent with overall market conditions . occupancy rates at our primary fixed lodges for the year ended december 31 , 2015 were 33 % , compared to 61 % in the comparable period in 2014 . rig count serviced by our oil and gas field services segment decreased approximately 32 % in the year ended december 31 , 2015 from the comparable period in 2014 . inclusive in the year-over-year changes within this segment was also the negative impact of foreign currency translation on our canadian operations of approximately $ 23.5 million as a result of the weakening canadian dollar in the year ended december 31 , 2015 from the comparable period in 2014 . cost of revenues we believe that our ability to manage operating costs is important to our ability to remain price competitive . we continue to upgrade the quality and efficiency of our services through the development of new technology and continued modifications at our facilities , and implementation of strategic sourcing and logistics solutions as well as other cost reduction initiatives in an effort to improve our operating margins . technical services replace_table_token_11_th 32 technical services cost of revenues for the year ended december 31 , 2016 decreased $ 59.3 million from the comparable period in 2015 primarily due to lower overall activity levels . specific cost reductions included decreases in equipment and supply costs of $ 25.0 million , labor and transportation related cost of $ 23.6 million , and $ 10.7 million of costs spread across multiple expense categories . as a percentage of direct revenue , our costs remained consistent for the year ended december 31 , 2016 as compared to 2015 . technical services cost of revenues for the year ended december 31 , 2015 decreased $ 22.2 million from the comparable period in 2014 primarily due to decreases in transportation related costs of $ 22.5 million . as a percentage of direct revenue , our costs increased 1.9 % for the year ended december 31 , 2015 as compared to 2014 , primarily due to lower revenue levels associated with higher margin businesses such as landfills in 2015 . industrial and field services replace_table_token_12_th industrial and field services cost of revenues for the year ended december 31 , 2016 decreased $ 294.4 million from the comparable period in 2015 primarily due to the costs associated with large emergency response projects which did not reoccur in 2016. costs of revenues as a percentage of direct revenue increased 3.4 % for the year ended december 31 , 2016 from the comparable period in 2015 . the increase as a percentage of direct revenue was primarily attributable to the lack of large emergency response projects in 2016. story_separator_special_tag when such large projects occur , the business is able to greater leverage its costs structure , resulting in higher profit margins . industrial and field services cost of revenues for the year ended december 31 , 2015 increased $ 170.5 million from the comparable period in 2014 primarily due to the costs associated with large scale emergency response projects which did not occur in 2014. costs of revenues as a percentage of direct revenue decreased 2.0 % for the year ended december 31 , 2015 from the comparable period in 2014 primarily due to the increased overall revenue levels experienced during 2015 , which outpaced increases in cost structure , as well as improved margin on emergency response and unplanned turnaround projects in our industrial and field services business . safety-kleen replace_table_token_13_th safety-kleen cost of revenues for the year ended december 31 , 2016 decreased $ 4.0 million from the comparable period in 2015 primarily due to decreased costs of used oil inventory consumed during 2016. during 2015 , the segment recognized $ 27.1 million of charges for high-priced inventory relating to used oil collected prior to the full implementation of our charge-for-oil program which did not reoccur in 2016. this decrease was partially offset by increased labor related costs of $ 21.6 million primarily related to our recent acquisitions and implementation of the closed loop initiative . as a percentage of direct revenue , these costs decreased 4.2 % in the year ended december 31 , 2016 from the comparable period in 2015 primarily due to successful management of our charge-for-oil program . safety-kleen cost of revenues for the year ended december 31 , 2015 decreased $ 139.4 million from the comparable period in 2014 primarily due to decreases in costs attributable to used oil collections in the amounts of $ 176.9 million . this cost reduction was partially offset by the increased cost of used oil inventory consumed during 2015 . during 2015 , the segment recognized charges for high priced inventory relating to used oil collected , which increased $ 32.0 million in 2015 from 2014. as a percentage of direct revenue , this cost decreased 4.1 % in the year ended december 31 , 2015 from 2014 . the improved margins were most significantly impacted by the lower used oil collection costs implemented in 2015 . 33 oil , gas and lodging services replace_table_token_14_th oil , gas and lodging services cost of revenues for the year ended december 31 , 2016 decreased $ 65.6 million from the comparable period in 2015 . this change was primarily due to decreases in labor and equipment related costs of $ 48.4 million and catering and material costs of $ 13.8 million during the year ended december 31 , 2016 from the comparable period in 2015 . these decreases were the result of overall lower demand for our services as overall activity in the regions in which this business operates declined . as a percentage of direct revenue , these costs increased 6.6 % in the year ended december 31 , 2016 from the comparable period in 2015 , as certain fixed costs incurred in the operations of these businesses could not be reduced proportionately to the pricing and activity declines which occurred . oil , gas and lodging services cost of revenues for the year ended december 31 , 2015 decreased $ 85.3 million from the comparable period in 2014 . this change was primarily due to decreases in labor and equipment related costs of $ 57.9 million and catering and material costs of $ 21.8 million during the year ended december 31 , 2015 from the comparable period in 2014 . these decreases were the result of overall lower demand for our services as overall activity in the regions in which this business operates declined . as a percentage of direct revenue , these costs increased 14.6 % as certain fixed costs incurred in the operations of these businesses could not be reduced proportionate to the pricing and activity declines which occurred . selling , general and administrative expenses selling , general and administrative expenses represent costs incurred in aspects of our business which are not directly attributable to the sale of our services and or products . we strive to manage such costs commensurate with the overall performance of our segments and corresponding revenue levels . we believe that our ability to properly align these costs with overall business performance is reflective of our strong management of the businesses and further promotes our ability to remain competitive in the marketplace . technical services replace_table_token_15_th technical services selling , general and administrative expenses for the year ended december 31 , 2016 decreased $ 2.5 million from the comparable period in 2015 primarily due to a decrease in variable compensation of $ 2.1 million . as a percentage of direct revenue , our costs remained consistent for the year ended december 31 , 2016 as compared to 2015 . technical services selling , general and administrative expenses for the year ended december 31 , 2015 decreased $ 7.7 million from the comparable period in 2014 primarily due to decreases in variable compensation of $ 2.7 million and changes in estimates for environmental liabilities of $ 3.6 million which did not reoccur in 2015 . as a percentage of direct revenue , our costs remained consistent for the year ended december 31 , 2015 as compared to 2014 . industrial and field services replace_table_token_16_th industrial and field services selling , general and administrative expenses for the year ended december 31 , 2016 decreased $ 3.1 million from the comparable period in 2015 primarily due to decreases in professional fees and variable compensation of approximately $ 2.5 million . as a percentage of direct revenue , selling , general and administrative expenses increased 4.1 % in the year ended december 31 , 2016 from the comparable period in 2015 primarily due to the decreased overall revenue level experienced during 2016 .
| the decreased levels of adjusted ebitda in 2016 was attributable to lower revenue amounts as described above , partially offset by significant cost reduction initiatives we successfully undertook in fiscal year 2016. additional information , including a reconciliation of adjusted ebitda to net ( loss ) income , appears below under the heading `` adjusted ebitda . '' 29 segment performance the primary financial measure by which we evaluate the performance of our segments is adjusted ebitda . the following table sets forth certain financial information associated with our results of operations for the years ended december 31 , 2016 , 2015 and 2014 . replace_table_token_6_th _ ( 1 ) direct revenue is revenue allocated to the segment performing the provided service . ( 2 ) cost of revenue is shown exclusive of items presented separately on the statements of operations , which consist of ( i ) accretion of environmental liabilities and ( ii ) depreciation and amortization . 30 direct revenues there are many factors which have impacted and continue to impact our revenues . these factors include , but are not limited to : overall industrial activity , general conditions of the energy related industries , competitive industry pricing , the effects of fuel prices on our fuel recovery fees , acquisitions , the level of emergency response projects and foreign currency translation . technical services replace_table_token_7_th technical services direct revenues for the year ended december 31 , 2016 decreased $ 82.3 million from the comparable period in 2015 primarily due to decreased revenues associated with our waste disposal services whereby waste is disposed of through our incinerator and landfill facilities network . this direct revenue decrease was impacted by lower waste volumes in our landfills , which decreased 34 % primarily due to lower industrial and energy related waste streams , as well as project deferrals and lower customer spending related to waste projects and remediation activities . the utilization rate at our incinerators was 88.8 % for the year ended december 31 , 2016 , compared with 90.9 % in the comparable period of 2015 . the decrease in utilization rate was primarily due
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acre amended the wells fargo facility ( as defined below ) to increase the facility 's commitment amount from $ 325.0 million to $ 500.0 million and extend the initial maturity date to december 14 , 2018. acre amended the baml facility ( as defined below ) , which has a commitment amount of $ 125.0 million , to extend the period during which acre may request individual loans under the facility to may 24 , 2018. in addition , the final maturity date of individual loans under the baml facility was extended to may 25 , 2021. acre amended the u.s. bank facility ( as defined below ) to increase the facility 's commitment amount from $ 125.0 million to $ 186.0 million and extend the initial maturity date to july 31 , 2020. developments during the third quarter of 2017 : acre originated an $ 18.1 million senior mortgage loan on a multifamily property located in california . acre originated a $ 39.7 million senior mortgage loan on a student housing property located in north carolina . acre originated a $ 27.5 million senior mortgage loan on a multifamily property located in texas . acre amended the metlife facility ( as defined below ) to extend the initial maturity date to august 12 , 2020 and decrease the interest rate on advances under the metlife facility to a per annum rate equal to one-month libor plus a spread of 2.30 % . the initial maturity date of the metlife facility is subject to two 12 -month extensions , each of which may be exercised at acre 's option , subject to the satisfaction of certain conditions , including payment of an extension fee , which , if both were exercised , would extend the maturity date of the metlife facility to august 12 , 2022. developments during the fourth quarter of 2017 : acre originated a $ 19.2 million senior mortgage loan on a multifamily property located in florida . acre originated a $ 17.3 million senior mortgage loan on a multifamily property located in new york . acre originated a $ 3.1 million mezzanine mortgage loan on an office property located in california . acre originated an $ 82.0 million senior mortgage loan on an office property located in illinois . acre originated a $ 52.9 million senior mortgage loan on an industrial property located in minnesota . acre originated a $ 63.8 million senior mortgage loan on a multifamily property located in utah . acre originated a $ 30.2 million senior mortgage loan on a multifamily property located in new york . acre originated a $ 40.0 million senior mortgage loan on a hotel property located in california . acre originated a $ 42.7 million senior mortgage loan on a multifamily property located in texas . acre originated a $ 41.0 million senior mortgage loan on a student housing property located in texas . acre originated a $ 24.0 million senior mortgage loan on a student housing property located in texas . acre amended the baml facility ( as defined below ) to decrease the interest rate on advances under the facility from a per annum rate equal to one-month libor plus a spread ranging from 2.25 % to 2.75 % depending upon the type of asset securing such advance to a per annum rate equal to one-month libor plus a spread of 2.00 % . acre sold a senior mortgage loan and a b-note mortgage loan with outstanding principal of $ 63.9 million and $ 10.0 million , respectively , which were both collateralized by an office property located in texas , to a third party . no gain or loss was recognized on the sale . acre voluntarily elected to repay $ 45.0 million of outstanding principal on the secured term loan ( as defined below ) prior to the scheduled maturity as permitted by the contractual terms of the secured term loan . in addition , acre amended the secured term loan to , among other things , ( 1 ) decrease the interest rate on advances under the secured term loan from a per annum rate equal to one-month libor plus a spread of 6.00 % ( with a 1.00 % libor floor ) to a per annum rate equal to one , two , three or six-month libor plus a spread of 5.00 % ( with no libor floor ) , ( 2 ) extend the initial maturity date to december 22 , 53 2020 , ( 3 ) decrease the commitment amount from $ 155.0 million to $ 110.0 million and ( 4 ) add one 12-month extension to the initial maturity date , which may be exercised at acre 's option , provided there are no existing events of default under the secured term loan , which , if exercised , would extend the maturity date of the secured term loan to december 22 , 2021. factors impacting our operating results the results of our operations are affected by a number of factors and primarily depend on , among other things , the level of our net interest income , the market value of our assets and the supply of , and demand for , commercial mortgage loans , cre debt and other financial assets in the marketplace . our net interest income , which reflects the amortization of origination fees and direct costs , is recognized based on the contractual rate and the outstanding principal balance of the loans we originate . interest rates will vary according to the type of investment , conditions in the financial markets , creditworthiness of our borrowers , competition and other factors , none of which can be predicted with any certainty . our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers . changes in fair value of our assets . we generally hold our target investments as long-term investments . story_separator_special_tag we evaluate our investments for impairment on at least a quarterly basis and impairments will be recognized when it is probable that we will not be able to collect all amounts due according to the contractual terms of the loan . if a loan is considered to be impaired , we will record an allowance to reduce the carrying value of the loan to the present value of expected future cash flows discounted at the loan 's contractual effective rate , or if repayment is expected solely from the collateral , the fair value of the collateral . loans are generally collateralized by real estate and as a result , the extent and impact of any credit deterioration associated with the performance and or value of the underlying collateral property , as well as the financial and operating capability of the borrower , are regularly evaluated . we monitor performance of our investment portfolio under the following methodology : ( 1 ) borrower review , which analyzes the borrower 's ability to execute on its original business plan , reviews its financial condition , assesses pending litigation and considers its general level of responsiveness and cooperation ; ( 2 ) economic review , which considers underlying collateral ( i.e. , leasing performance , unit sales and cash flow of the collateral and its ability to cover debt service as well as the residual loan balance at maturity ) ; ( 3 ) property review , which considers current environmental risks , changes in insurance costs or coverage , current site visibility , capital expenditures and market perception ; and ( 4 ) market review , which analyzes the collateral from a supply and demand perspective of similar property types , as well as from a capital markets perspective . such impairment analyses are completed and reviewed by asset management and finance personnel who utilize various data sources , including periodic financial data such as property occupancy , tenant profile , rental rates , operating expenses , and the borrower 's exit plan , among other factors . as of december 31 , 2017 and 2016 , all loans were paying in accordance with their contractual terms . there were no impairments during the years ended december 31 , 2017 , 2016 and 2015 . although we generally hold our target investments as long-term investments , we may occasionally classify some of our investments as held for sale . investments held for sale will be carried at fair value within loans held for sale in our consolidated balance sheets , with changes in fair value recorded through earnings . the fees received are deferred and recognized as part of the gain or loss on sale . at this time , we do not expect to hold any of our investments for trading purposes . changes in market interest rates . with respect to our business operations , increases in interest rates , in general , may over time cause : the interest expense associated with our borrowings to increase , subject to any applicable ceilings ; the value of our mortgage loans to decline ; coupons on our floating rate mortgage loans to reset to higher interest rates ; and to the extent we enter into interest rate swap agreements as part of our hedging strategy where we pay fixed and receive floating interest rates , the value of these agreements to increase . conversely , decreases in interest rates , in general , may over time cause : the interest expense associated with our borrowings to decrease , subject to any applicable floors ; the value of our mortgage loan portfolio to increase , for such mortgages with applicable floors ; 54 coupons on our floating rate mortgage loans to reset to lower interest rates , subject to any applicable floors ; and to the extent we enter into interest rate swap agreements as part of our hedging strategy where we pay fixed and receive floating interest rates , the value of these agreements to decrease . credit risk . we are subject to varying degrees of credit risk in connection with our target investments . our manager seeks to mitigate this risk by seeking to originate or acquire investments of higher quality at appropriate prices with appropriate risk adjusted returns given anticipated and unanticipated losses , by employing a comprehensive review and selection process and by proactively monitoring originated or acquired investments ( see the performance monitoring methodology above in changes in fair value of our assets ) . nevertheless , unanticipated credit losses could occur that could adversely impact our operating results and stockholders ' equity . market conditions . we believe that our target investments currently present attractive risk-adjusted return profiles , given the underlying property fundamentals and the competitive landscape for the type of capital we provide . we believe that growth in commercial real estate valuations has been supported by a lower supply of new properties , which broadly have remained below the long-term average since the onset of the global financial crisis . new additions to inventory have been limited given that new construction financing has been constrained by post-recession financial regulations . while the availability of debt capital for high quality assets has increased and led to more competitive pricing and terms , we continue to anticipate rising demand for the type of customized debt financing we provide from borrowers or sponsors . we also envision that demand for financing will be strong for situations in which a property is being acquired with plans to improve the net operating income through capital improvements , leasing , cost savings or other key initiatives and realize the improved value through a subsequent sale or refinancing . we believe market conditions continue to be favorable for disciplined and scaled direct lending with broad and flexible product offerings . however , we are mindful that rising interest rates and the removal of certain central banking monetary policies may impact asset values and could lead to periods of volatility .
| f or the years ended december 31 , 2016 and 2015 , net interest margin wa s approximately $ 45.1 million and $ 50.0 million , respectively . for the years ended december 31 , 2016 and 2015 , interest income from loans held for investment of $ 82.0 million and $ 86.3 million , respectively , was generated by weighted average earning assets of $ 1.3 billion and $ 1.2 billion , respectively , offset by $ 36.9 million and $ 36.3 million , respectively , of interest expense , unused fees and amortization of deferred loan costs . the weighted average borrowings under the secured funding agreements , securitization debt and the secured term loan in aggregate were $ 889.5 million and $ 929.0 million for the years ended december 31 , 2016 and 2015 , respectively . the decrease in net interest margin for the year ended december 31 , 2016 compared to the year ended december 31 , 2015 primarily relates to a $ 4.5 million decrease in interest income from non-controlling interests for the year ended december 31 , 2016 as a result of a $ 36.7 million and a $ 36.0 million prepayment in november 2015 and november 2016 , respectively , on the non-controlling interest investment held by third parties . 58 operating expenses the operating expenses below do not include expenses of acre capital . see note 13 to our consolidated financial statements included in this annual report on form 10-k for more information about the operating expenses of acre capital . replace_table_token_7_th for the years ended december 31 , 2017 and 2016 , we incurred operating expenses of $ 15.0 million an d $ 14.4 million , respectively . as discussed below , the increase in operating expens es for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 primarily relates to an increase in management fees and general and administrative expenses due to our manager that were allocated to continuing operations for the year ended december 31 , 2017 and partially offset by a decrease in our use of third party professionals due to changes
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cost of product is computed as a percent of product revenues . ( 2 ) excludes depreciation and amortization expense . ( 3 ) computed as a percent of income ( loss ) from continuing operations before income taxes . the income taxes basis point change is noted as not applicable ( n/a ) as the discussion below is related to the effective income tax rate . 29 fluctuations in major revenue categories , operating expenses and other income and expense were as follows : consolidated revenues consolidated revenues primarily include revenues of company-owned salons , product and equipment sales to franchisees and franchise royalties and fees . the following tables summarize revenues and same-store sales by concept : replace_table_token_13_th _ ( 1 ) same-store sales are calculated on a daily basis as the total change in sales for company-owned locations which were open on a specific day of the week during the current period and the corresponding prior period . fiscal year same-store sales are the sum of the same-store sales computed on a daily basis . locations relocated within a one mile radius are included in same-store sales as they are considered to have been open in the prior period . same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation . ( 2 ) franchise same-store sales are calculated as the total change in sales for salons that have been a franchise location for more than one year that were open on a specific day of the week during the current period and the corresponding prior period . franchise same-store sales are the sum of the franchise same-store sales computed on a daily basis . franchise salons that do not report daily sales are excluded from same-store sales . locations relocated within a one-mile radius are included in same-store sales as they are considered to have been open in the prior period . franchise same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation . tbg is not included in 2018 same-store sales as it was not a franchise location in the previous year . as of june 27 , 2019 , tbg north american mall locations are no longer franchise locations so they will not be included in same store sales going forward . 30 decreases in consolidated revenues were driven by the following : replace_table_token_14_th ( 1 ) franchise same-store sales increase ( decrease ) franchise royalties . as we transition to the asset-light franchise platform , franchise same-store sales will become more significant to consolidated revenues . fiscal year ended june 30 , 2019 compared with fiscal year ended june 30 , 2018 consolidated revenues consolidated revenues are primarily comprised of service and product revenues , as well as franchise royalties and fees . service revenue declined $ 149.7 million , or 16.6 % , primarily due to the sale of salons to franchisees and a decline in company-owned same-store service sales of 0.3 % . we closed 133 company-owned salons , constructed ( net of relocations ) 10 company-owned salons and sold ( net of buybacks ) 735 company-owned salons during fiscal year 2019 ( 2019 net salon count changes ) . product revenue decreased $ 33.1 million or 12.8 % due to lower sales to tbg and a system-wide decline of retail sales of 2.4 % excluding tbg . partially offsetting these decreases was an increase in royalty and fee revenue of $ 16.4 million , or 21.1 % , due to the net addition of 644 non-tbg franchisees during the year . service revenues the $ 149.7 million decrease in service revenues during fiscal year 2019 was primarily due to the 2019 net salon count changes and a decrease in company-owned same-store service sales of 0.3 % which was primarily a result of a 4.7 % decrease in same-store guest visits , partially offset by a 4.4 % increase in average ticket price . service revenues were also unfavorably impacted by a cumulative adjustment in the prior year related to discontinuing a piloted loyalty program that occurred in the prior year . product revenues the $ 33.1 million decrease in product revenues during fiscal year 2019 was primarily due to 2019 net salon count changes , a decline in product sold to tbg , the lapping of a one-time benefit related to discounted close-out product sales as part of the smartstyle operational restructuring in the prior year and a decline in system-wide same-store product sales excluding tbg of 2.4 % . the decrease in system-wide same-store product sales excluding tbg was primarily a result of a 6.0 % decrease in transactions , partially offset by an increase in average ticket price of 3.6 % . royalties and fees the increase of $ 16.4 million in royalties and fees during fiscal year 2019 was primarily due to higher royalties and advertising fund revenue due to an increase of 644 non-tbg franchisees in fiscal year 2019 and an increase of 0.3 % in same-store sales at franchised locations excluding tbg . cost of service the 140 basis point increase in cost of service as a percent of service revenues during fiscal year 2019 was primarily due to state minimum wage increases , a favorable shrink adjustment in the prior year and a one-time benefit from a settlement in fiscal year 2018 . 31 cost of product the 280 basis point increase in cost of product as a percent of product revenues during fiscal year 2019 was primarily due to higher discounting , the shift to lower margin wholesale product sales , favorable shrink adjustment in the prior year and a one-time benefit from a settlement in the prior year , partially offset by inventory reserves in the prior year related to the january 2018 smartstyle portfolio restructure and lower franchise product sold to tbg . margins on retail product sales were 50.8 % and 52.0 % in fiscal years 2019 and 2018 , respectively . story_separator_special_tag margins on wholesale product sales were 21.2 % and 21.6 % in fiscal years 2019 and 2018 , respectively . site operating expenses site operating expenses decreased $ 13.0 million during fiscal year 2019 due primarily to the 2019 net salon count changes , partially offset by higher advertising fund expense due to the increase in franchise salon counts , higher employment litigation reserves and higher contract maintenance , repairs and services costs related to open salons . general and administrative general and administrative expense ( g & a ) increased $ 3.0 million during fiscal year 2019 primarily due to an $ 8.0 million gain in the prior year associated with life insurance proceeds , increased stock compensation and professional fees , partially offset by lower administrative , corporate and field salaries and bonuses . rent rent expense decreased by $ 51.3 million during fiscal year 2019 primarily due to lease termination fees and other related closure costs associated with the january 2018 smartstyle portfolio restructure and the 2019 net salon count changes , partially offset by rent inflation . depreciation and amortization depreciation and amortization expense ( d & a ) decreased $ 20.4 million during fiscal year 2019 , primarily due to costs in the prior year associated with returning certain smartstyle locations to their pre-occupancy condition in connection with the january 2018 smartstyle restructuring and lower depreciation due to a reduced salon base and lower salon asset impairments . tbg mall location restructuring in fiscal year 2019 , the company recorded a reserve against a note receivable of $ 8.0 million and accounts receivables of $ 12.7 million due from tbg based on tbg 's inability to meet the requirements of the promissory notes , including non-payment of amounts due to the company . the $ 8.0 million note relates to prior year inventory shipments and the $ 12.7 million of receivables primarily relates to current year inventory shipments . the remaining charge relates to reserves in connection with the settlement agreement with tbg in june 2019. there were no related tbg mall restructuring charges in fiscal year 2018. interest expense interest expense decreased by $ 5.7 million during fiscal year 2019 primarily due to a lower outstanding principal and lower interest rates associated with the revolving credit facility compared to the retired senior term note and the lapping of the premium and unamortized debt discount expense associated with retirement of the senior term note in march 2018. gain from sale of salon assets to franchisees , net in fiscal year 2019 , the gain from sale of salon assets to franchisees was $ 2.9 million , including non-cash goodwill derecognition of $ 67.1 million . in fiscal year 2018 , the gain from the sale of salons assets to franchisees was $ 0.2 million , including $ 3.9 million of non-cash goodwill derecognition . interest income and other , net the $ 3.5 million decrease in interest income and other , net during fiscal year 2019 was primarily due to prior year income from transition services related to tbg and the lapping of interest income associated with life insurance contracts settled in june 2018 . 32 income taxes during fiscal year 2019 , the company recognized an income tax benefit of $ 2.1 million on $ 22.3 million of loss from continuing operations before income taxes as compared to recognizing income tax benefit of $ 69.8 million on $ 10.2 million of loss from continuing operations before income taxes during fiscal year 2018. the recorded tax provision and effective tax rate for the twelve months ended june 30 , 2019 were different than what would normally be expected primarily due to the deferred tax valuation allowance . additionally , the company is currently paying taxes in canada and certain states in which it has profitable entities . see note 9 to the consolidated financial statements in part ii , item 8 , of this form 10-k. income ( loss ) from discontinued operations , net of income taxes income from tbg discontinued operations was $ 5.9 million during fiscal year 2019 primarily due to tax benefits associated with the wind-down and transfer of legal entities . during fiscal year 2018 , the company recognized $ 53.2 million of loss , net of taxes from tbg discontinued operations , primarily due to asset impairment charges based on the sale prices and the carrying values of the mall-based salon business and the international segment , the recognition of net loss of amounts previously classified within accumulated other comprehensive income , professional fees associated with the transactions and losses from operations . see note 3 to the consolidated financial statements in part ii , item 8 , of this form 10-k. fiscal year ended june 30 , 2018 compared with fiscal year ended june 30 , 2017 consolidated revenues consolidated revenues are primarily comprised of service and product revenues , as well as franchise royalties and fees . service revenue declined $ 61.4 million , or 6.4 % , and product revenue declined $ 1.2 million , or 0.5 % , primarily due to salon count . royalty and fee revenue increased $ 5.3 million or 7.4 % due to the increase in franchise locations . we closed 701 company-owned salons , constructed ( net of relocations ) 3 company-owned salons and sold ( net of buybacks ) 448 company-owned salons during fiscal year 2018 ( 2018 net salon count changes ) . our franchisees closed 194 salons and constructed ( net of relocations ) 79 salons during the same period . consolidated revenues are primarily comprised of service and product revenues , as well as franchise royalties and fees . service revenues the $ 61.4 million decrease in service revenues during fiscal year 2018 was primarily due to the 2018 net salon count changes . the same-store service sales increase of 0.5 % was primarily a result of a 3.8 % increase in average ticket price , partly offset by a 3.3 % decrease in same-store guest visits .
| 36 company-owned salon operating income company-owned salon operating income decreased $ 28.4 million during fiscal year 2018 primarily due to the january 2018 smartstyle portfolio restructure consisting of lease termination and other related closure costs and costs associated with returning the salons to pre-occupancy condition . also contributing to the decrease were state minimum wage increases , costs associated with the smartstyle marketing campaign , the hurricanes in the southern united states and higher health insurance costs , partly offset by improved stylist productivity , the 2018 net salon count changes and prior year inventory expense related to salon tools . franchise salons replace_table_token_17_th _ ( 1 ) includes $ 1.6 million and $ 1.2 million of royalties related to tbg during the fiscal years 2019 and 2018 , respectively . ( 2 ) total is a recalculation ; line items calculated individually may not sum to total due to rounding . increases in franchise revenues were driven by the following : replace_table_token_18_th fiscal year ended june 30 , 2019 compared with fiscal year ended june 30 , 2018 franchise salon revenues franchise salon revenues increased $ 22.6 million during fiscal year 2019 due to a $ 8.3 million increase in franchise product sales and a $ 16.4 million increase in royalties and fees as a result of higher franchise salons counts , partially offset by lower product sales to tbg . our franchisees constructed ( net of relocations ) 65 salons , purchased ( net of company buybacks ) 735 salons from the company and closed 156 salons ( excluding tbg mall locations ) . 37 franchise salon operating income franchise salon operating income excluding tbg increased $ 2.4 million due to higher product and royalty revenue as a result of the increase in franchise salon count . franchise salon operating income including tbg , decreased $ 19.5 million during fiscal year 2019 due to the tbg restructuring charge of $ 21.8 million related primarily related to notes and accounts receivable reserves . cash generated from salons sold to franchisees during fiscal years 2019 and 2018 ,
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the main factors that affect other businesses revenue are demand for brokerage and logistics services and the number of owner-operators leasing equipment from us . expenses the most significant expenses in our business vary with miles traveled and include fuel , driver-related expenses ( such as wages and benefits ) , and services purchased from owner-operators and other transportation providers , such as the railroads , drayage providers , and other trucking companies ( which are recorded on the purchased transportation line of our consolidated statements of operations ) . expenses that have both fixed and variable components include maintenance and tire expense and our total cost of insurance and claims . these expenses generally vary with the miles we travel , but also have a controllable component based on safety improvements , fleet age , efficiency , and other factors . our main fixed costs are depreciation of long-term assets , such as tractors , trailers , containers , and terminals , interest expense , and the compensation of non-driver personnel . because a significant portion of our expenses are either fully or partially variable based on the number of miles traveled , changes in weekly trucking revenue per tractor caused by increases or decreases in deadhead miles percentage , rate per mile , and loaded miles have varying effects on our profitability . in general , changes in deadhead miles percentage have the largest proportionate effect on profitability because we still bear all of the expenses for each deadhead mile but do not earn any revenue to offset those expenses . changes in rate per mile have the next largest proportionate effect on profitability because incremental improvements in rate per mile are not offset by any additional expenses . changes in loaded miles generally have a smaller effect on profitability because variable expenses increase or decrease with changes in miles . however , items such as driver and owner-operator satisfaction and network efficiency are affected by changes in mileage and have significant indirect effects on expenses . in general , our miles per tractor per week , rate per mile , and deadhead miles percentage are affected by industry-wide freight volumes , industry-wide trucking capacity , and the competitive environment , which factors are beyond our control , as well as by our service levels , planning , and discipline of our operations , over which we have significant control . items affecting comparability story_separator_special_tag 35 in 2011 , truckload operating income increased to $ 223.0 million . this increase in operating income and correspondingly , the 100 basis point improvement in adjusted operating ratio was primarily to the result of the 3.7 % increase in truckload weekly trucking revenue xfsr per tractor and the 80 basis point improvement in our truckload deadhead percentage in 2011 as compared to 2010. dedicated replace_table_token_13_th a reconciliation of our adjusted operating ratio for each of the periods indicated is as follows : replace_table_token_14_th revenue during 2012 , our dedicated segment operating revenue increased by $ 99.1 million , or 15.9 % compared with 2011. dedicated revenue xfsr increased 14.9 % due primarily to the addition of new business with several large customers late in 2011 and throughout 2012. additionally , our weekly average trucking revenue xfsr per truck increased 1.6 % as we continue to focus on the efficient utilization of our assets . for 2011 , our dedicated operating revenue increased by $ 111.3 million , or 21.6 % , compared with 2010. dedicated revenue xfsr increased 14.1 % from 2010 to 2011. this increase in dedicated revenue xfsr was primarily the result of the 5.7 % increase in dedicated revenue xfsr per loaded mile and a 7.9 % increase in total loaded miles for the year . despite the increase in our dedicated revenue xfsr , our dedicated weekly trucking revenue xfsr per tractor remained relatively flat as our dedicated average operational truck count increased 14.4 % from 2010 to 2011. operating income our dedicated operating income increased to $ 74.0 million in 2012 from $ 69.8 million in 2011. the adjusted operating ratio increased to 87.5 % in 2012 from 86.4 % in 2011. this increase was primarily due to an increase in insurance and workers compensation claims for the year partially offset by an increase in dedicated revenue xfsr per total mile , improved fuel efficiency and improved fuel surcharge recovery . in many cases , we have been growing dedicated business with customers who provide their own trailing equipment which reduces our capital investment , and therefore reduces our required margins to achieve our targeted return on net assets . during 2011 , dedicated operating income increased by 4.8 % to $ 69.8 million from $ 66.6 million in 2010. however , despite the increase in operating income , our dedicated adjusted operating ratio increased 120 basis points from 85.2 % in 2010 to 86.4 % in 2011. this increase in adjusted operating ratio was primarily the result of increased fuel expense and operating supplies primarily due to increased tractor and trailer maintenance costs . increases in these operating expenses were partially offset by the 5.7 % increase in dedicated revenue xfsr per loaded mile from 2010 to 2011 . 36 intermodal replace_table_token_15_th ( 1 ) during 2012 , our intermodal reportable segment incurred an increase in its insurance and claims expense primarily related to one claim associated with a drayage accident , which increased the intermodal operating ratio by approximately 310 to 350 basis points for the year ended december 31 , 2012 , respectively and increased the intermodal adjusted operating ratio by approximately 400 to 440 basis points for year ended december 31 , 2012 , respectively , as compared to the two preceding years . story_separator_special_tag a reconciliation of our adjusted operating ratio for each of the periods indicated is as follows : replace_table_token_16_th revenue for the year ended december 31 , 2012 , our intermodal operating revenue increased 40.4 % from $ 237.9 million in 2011 to $ 333.9 million in 2012. the increase in intermodal operating revenue was driven by a 36.4 % increase in the number of loads and a 2.8 % increase in revenue xfsr per load . for 2011 , intermodal operating revenue increased by 12.1 % or $ 25.6 million from 2010. this increase was primarily driven by the $ 15.2 million increase in fuel surcharge revenue and the 5.5 % increase in revenue xfsr per load . operating income ( loss ) for the year ended december 31 , 2012 , our intermodal segment experienced an operating loss of $ 6.9 million as compared to operating income of $ 3.1 million in 2011. correspondingly , our intermodal adjusted operating ratio increased from 98.3 % in 2011 to 102.6 % in 2012. this deterioration was primarily due to increased insurance and claims expense in 2012 related to one claim associated with a drayage accident , which increased the 2012 adjusted operating ratio by approximately 440 basis points compared to 2011. in addition , the adjusted operating ratio was impacted by higher purchased transportation costs , partially offset by higher revenue xfsr per load and improved management of chassis expenses . during 2011 , our intermodal operating income decreased $ 2.7 million , or 46.0 % compared with 2010. additionally , our intermodal adjusted operating ratio increased from 96.7 % in 2010 to 98.3 % in 2011. the increase in adjusted operating ratio and correspondingly , the decrease in operating income , was primarily due to increased purchase transportation expense , chassis rental expense and increased depreciation expense associated with the 27.3 % increase in our average container count . 37 other-nonreportable segments replace_table_token_17_th revenue our other nonreportable segment revenue is generated primarily by our logistics and brokerage services , and revenue generated by our subsidiaries offering support services to customers and owner-operators , including shop repair and maintenance services , equipment leasing , and insurance . the main factors that impact our other nonreportable segment revenue are the demand for our brokerage and logistics services and the number of owner-operators leasing equipment and purchasing insurance coverage from us . for the year ended december 31 , 2012 , other nonreportable segment revenue increased by 9.4 % compared to the full year 2011 , which was primarily driven by modest growth in each of the aforementioned areas . for 2011 , other nonreportable segment revenue increased by $ 50.0 million , or 35.0 % , compared with 2010. this increase was primarily related to our growth in our brokerage and logistics business . additionally , our tractor leasing revenue generated from our subsidiary iel , increased $ 3.9 million from 2010 to 2011. consolidated operating expenses salaries , wages , and employee benefits salaries , wages , and employee benefits consist primarily of compensation for all employees . salaries , wages , and employee benefits are primarily affected by the total number of miles driven by company drivers , the rate per mile we pay our company drivers , employee benefits including but not limited to health care and workers ' compensation , and to a lesser extent by the number of , and compensation and benefits paid to , non-driver employees . the following is a summary of our salaries , wages , and employee benefits for the years indicated : replace_table_token_18_th for the year ended 2012 , salaries , wages , and employee benefits increased by $ 14.1 million , or 1.8 % , compared with 2011. the dollar increase was primarily an increase in the number of non-driving employees to support business growth , and an increase in the employee bonus accrual reflecting our better than expected operating results for the year , partially offset by a 3.1 % decrease in the total miles driven by company drivers during 2012 as compared to 2011. additionally , in july 2012 , we implemented a driver incentive bonus program that enables our drivers to earn a bonus if they met certain performance criteria . as a percentage of revenue xfsr salaries , wages , and employee benefits decreased by 80 basis points compared with 2011 as a result of a 2.6 % increase in our average consolidated trucking revenue xfsr per loaded mile and continued growth in our intermodal business . for 2011 , salaries , wages , and employee benefits increased by $ 25.9 million , or 3.4 % , compared with 2010. total driver wages increased from 2010 to 2011 primarily as a result of the 2.3 % year-over-year increase in total miles driven by company drivers . additionally , salaries , wages , and employee benefits increased in 2011 as a result of increases in our health care costs and other employee benefits in addition to increases in our non-driver support personnel to support our business growth in 2011. these increases were partially offset by the reduction in our stock compensation expense in 2011. included in salaries , wages and employee benefits in 2010 was a $ 22.6 million one-time non-cash equity compensation charge related to stock options that vested and became exercisable upon the completion of our ipo . during 2011 , we recognized $ 6.8 million in on-going non-cash stock compensation expense related to stock options outstanding . excluding the impact of our stock compensation expense in 2010 and 2011 , salaries , wages and employee benefits as a percentage of revenue xfsr was essentially flat . the compensation paid to our drivers and other employees has increased and may need to increase further in future periods as the economy strengthens and other employment alternatives become more available . furthermore , because we believe that the market for drivers has tightened , we expect hiring expenses , including recruiting and advertising , to increase in order to attract sufficient numbers of qualified drivers to operate our fleet .
| items impacting comparability between 2011 and prior periods include the following : $ 105.2 million reduction in interest expense in the 2011 period resulting from our ipo and refinancing transactions that occurred in december 2010 ; and $ 55.3 million reduction in derivative interest expense in the 2011 period resulting from our termination of our previous interest rate swaps in december 2010 in conjunction with our ipo and refinancing transactions . 2010 results of operations our net loss for the year ended december 31 , 2010 was $ 125.4 million . items impacting comparability between 2010 and other periods include the following : $ 1.3 million of pre-tax impairment expense for trailers reclassified to assets held for sale during the first quarter ; $ 7.4 million of incremental pre-tax depreciation expense reflecting management 's decision in the first quarter to sell as scrap approximately 7,000 dry van trailers over the course of the next several years and the corresponding revision to estimates regarding salvage and useful lives of such trailers ; $ 43.4 million of income tax benefit as a result of recognition of subchapter c corporation tax benefits after our becoming a subchapter c corporation in the fourth quarter of 2009 ; $ 22.6 million of one-time pre-tax non-cash equity compensation charge related to certain stock options that vested upon our initial public offering in december 2010 ; and $ 95.5 million of pre-tax loss on debt extinguishment related to the premium and fees we paid to tender for our old notes and the non-cash write-off of the deferred financing costs associated with our previous indebtedness that was repaid in december 2010 as a result of our refinancing transactions . results of operationssegment review during 2012 , we operated three reportable segments : truckload , dedicated and intermodal . the descriptions of the operations of these reportable segments are described in note 28 in our consolidated financial statements . the following tables reconcile our operating revenues and operating income by reportable segment to our consolidated operating revenue and operating income for the years ended december 31 , 2012 , 2011 and 2010 . 33 replace_table_token_10_th ( 1 ) during 2012 , our intermodal reportable segment incurred an increase in its insurance and claims expense primarily related to one claim associated with a drayage accident , which increased the intermodal
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the vision design elevates the brand image with exterior and interior features that embrace the brand 's authentic roots with warm textures , rustic elements and a focus on the signature open kitchen layout established in previous designs . as of december 25 , 2019 , including new builds and remodels , we had 119 restaurants open with the `` vision '' design in our system . remodeling is a use of cash and has implications for our net property and depreciation line items on our consolidated balance sheets and statements of operations , among others . the cost of our restaurant remodels varies depending on the scope of work required , but on average the investment is $ 0.3 to $ 0.4 million per restaurant . we believe that our remodeling program will result in higher restaurant revenue and a strengthened brand . in addition , we are currently working on a new asset design that we believe will clearly differentiate and communicate our brand , both on the exterior and interior . we believe that this new design will deliver good new unit volumes and cash on cash returns in both existing and new markets . we also believe that our remodels using this new design will result in higher restaurant revenue and a strengthened brand . this new design replaces our “ vision ” design , which was implemented in 2016. loco rewards during the second quarter of 2017 , we introduced a new loyalty rewards points program in an effort to increase sales and loyalty among our customers , by offering rewards that incentivize customers to visit our restaurants more often each month . customers earn 1 point for each $ 1 spent and 100 points can be redeemed for a $ 10 reward to be used for a future purchase . if a customer does not earn or use points within a one-year period , their account is deactivated and all points expire . additionally , if a $ 10 reward is not used within six months , it expires . when a customer is part of the rewards program , the obligation to provide future discounts related to points earned is considered a separate performance obligation , to which a portion of the transaction price is allocated . the performance obligation related to loyalty points is deemed to have been satisfied , and the amount deferred in the balance sheet is recognized as revenue , when the points are transferred to a $ 10 reward and redeemed , the reward or points have expired , or the likelihood of redemption is remote . a portion of the transaction price is allocated to loyalty points , if necessary , on a pro-rata basis , based on stand-alone selling price , as determined by menu pricing and loyalty point 's terms . in addition , customers can earn additional points and free entrées for a variety of engagement activities . as points are available for redemption past the quarter earned , a portion of the revenue associated with the earned points will be deferred until redemption or expiration . as of december 25 , 2019 , the amount of revenue deferred related to the earned points , net of redemptions , is $ 1.1 million . the company had more than 1.5 million loyalty program members as of december 25 , 2019 . key financial definitions revenue 37 our revenue is derived from two primary sources : company-operated restaurant revenue and franchise related revenue . beginning in fiscal 2018 with the adoption of accounting standards update ( `` asu '' ) asu 2014-09 , franchise related revenue includes franchise advertising fee revenue representing advertising contributions received from franchisees and franchise revenue , which is comprised primarily of franchise royalties and , to a lesser extent , franchise fees and sublease rental income . food and paper costs food and paper costs include the direct costs associated with food , beverage and packaging of our menu items . the components of food and paper costs are variable in nature , change with sales volume , are impacted by menu mix , and are subject to increases or decreases in commodity costs . labor and related expenses labor and related expenses include wages , payroll taxes , workers ' compensation expense , benefits , and bonuses paid to our restaurant management teams . like other expense items , we expect labor costs to grow proportionately as our restaurant revenue grows . factors that influence labor costs include minimum wage and payroll tax legislation , the frequency and severity of workers ' compensation claims , health care costs , and the performance of our restaurants . occupancy costs and other operating expenses occupancy costs include rent , common area maintenance , and real estate taxes . other restaurant operating expenses include the costs of utilities , advertising , credit card processing fees , restaurant supplies , repairs and maintenance , and other restaurant operating costs . general and administrative expenses general and administrative expenses are comprised of expenses associated with corporate and administrative functions that support the development and operations of our restaurants , including compensation and benefits , travel expenses , stock compensation costs , legal and professional fees , and other related corporate costs . also included are pre-opening costs , and expenses above the restaurant level , including salaries for field management , such as area and regional managers , and franchise field operational support . legal settlements legal settlements include expenses such as judgments or settlements related to legal matters , legal claims and class action lawsuits . franchise expenses franchise expenses prior to fiscal 2018 were primarily comprised of rent expenses incurred on properties leased by us and then sublet to franchisees , and expenses incurred in support of franchisee information technology systems . beginning in fiscal 2018 with the adoption of asu 2014-09 , franchise expenses also include all expenses of the advertising fund representing the franchised restaurants portion of advertising expenses . story_separator_special_tag depreciation and amortization depreciation and amortization primarily consist of the depreciation of property and equipment , including leasehold improvements and equipment . loss on disposal of assets loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment . impairment and closed-store reserves we review long-lived assets such as property , equipment , and intangibles , as well as rou assets in a net asset position , on a unit-by-unit basis for impairment when events or circumstances indicate a carrying value of the assets that may not be 38 recoverable . we determine if there is impairment at the restaurant level by comparing undiscounted future cash flows from the related long-lived assets to their respective carrying values , and record an impairment charge when appropriate . in determining future cash flows , significant estimates are made by us with respect to future operating results of each restaurant over its remaining lease term , including sales trends , labor rates , commodity costs and other operating cost assumptions . if assets are determined to be impaired , the impairment charge is measured by calculating the amount by which the asset carrying amount exceeds its fair value . this process of assessing fair values requires the use of estimates and assumptions , including our ability to sell or reuse the related assets and market conditions , which are subject to a high degree of judgment . if these assumptions change in the future , we may be required to record impairment charges for these assets and these charges could be material . prior to the adoption of topic 842 `` leases , '' closure costs include non-cash restaurant charges such as up-front expensing of the net present value of unpaid rent remaining on the life of a lease , offset by assumed sublease income . upon the adoption of topic 842 , the company no longer recognizes a closed-store reserve when the company closes a restaurant , as a lease liability related to the future lease payments is already recognized . rather , when a restaurant is closed , the company will evaluate the rou asset for impairment , based on anticipated sublease recoveries . the remaining value of the rou asset is amortized on a straight-line basis , with the expense recognized in closed-store reserve expense . loss on disposition of restaurants loss on disposal of restaurants includes the loss on the sale of restaurants to franchisees , or other third parties , and includes the difference between carrying value and sales price of leasehold improvements , equipment and other assets included in the sale . interest expense , net interest expense , net , consists primarily of interest on our outstanding revolving debt . debt issuance costs are amortized on a straight-line basis over the life of the related debt . provision ( benefit ) for income taxes provision ( benefit ) for income taxes consists of federal and state tax expense ( recoveries ) on our income ( loss ) , and changes to our deferred tax asset and deferred tax liability . story_separator_special_tag these closures resulted in closed-store reserve expenses of $ 4.5 million during fiscal 2018. subsequent to the adoption of topic 842 , the company no longer recognizes a closed-store reserve when the company closes a restaurant , as there is already a lease liability on its books related to the future lease payments . rather , when a restaurant is closed , the company will evaluate the rou asset for impairment , based on anticipated sublease recoveries . the remaining value of the rou asset is amortized on a straight-line basis , with the expense recognized in closed-store reserve expense . during the fiscal 2019 , the company closed two restaurants in california and two in texas and recognized $ 1.3 million of closed-store reserve expense for fiscal 2019 , primarily related to the amortization of rou assets for the closed stores . the company continues to monitor the recoverability of the carrying value of the assets of several other restaurants . interest expense , net for fiscal 2019 , net interest expense , increased by $ 0.2 million , primarily due to higher outstanding balances on our 2018 revolver ( as defined below ) , partially offset by interest income received related to the interest rate swap entered into during fiscal 2019 . see `` note 6 , long-term debt , interest rate swap . '' income tax receivable agreement in fiscal 2019 we recognized income tax receivable agreement expense of $ 0.1 million as a result of changes to future forecasted results . in 2018 , we incurred income tax receivable agreement income of $ 0.8 million , resulting from changes to future forecasted results and timing of the deductibility of certain temporary differences including the current year legal settlement accrual . in fiscal 2019 and 2018 , we paid $ 5.8 million and $ 7.3 million , respectively , to our pre-ipo stockholders under the tra . provision for income taxes in fiscal 2019 , we recorded an income tax expense of $ 9.7 million , compared to income tax benefit of $ 3.2 million in fiscal 2018 , reflecting an estimated effective tax rate of 28.0 % and 26.3 % , respectively . the higher effective tax rate in 2019 resulted primarily from an increase in disallowed executive compensation under section 162 ( m ) and a decrease in benefit from workers opportunity tax credit relative to pretax book income . in addition , there was a $ 1.0 million valuation allowance against our deferred tax assets recorded in each of fiscal 2018 and fiscal 2017. the valuation allowance against our deferred tax assets resulted from certain tax credits that may not be realizable prior to the time the credits expire .
| this increase was primarily due to higher fees received from franchised restaurants related to their use of our point-of-sales system , a franchise comparable restaurant sales increase of 2.0 % , the opening of 11 new franchised restaurants during or after the first quarter of the prior year and 16 company-operated restaurants sold by the company to franchisees during the year . this franchise revenue increase was partially offset by the closure of five franchise locations during the same period . 40 franchise advertising fee revenue franchise advertising fee revenue increased , which is paid as a percentage of the franchise restaurants ' net sales , $ 1.2 million , or 5.5 % from the comparable period in the prior year . this increase was primarily due to an increase in the number of franchise locations and increased franchise comparable restaurant sales . food and paper costs food and paper costs decreased $ 1.9 million , or 1.7 % , in fiscal 2019 , due to a $ 1.8 million decrease in food costs and a $ 0.1 million decrease in paper costs . the decrease in food and paper costs resulted primarily from lower company transactions , partially offset by higher commodity inflation . food and paper costs as a percentage of company-operated restaurant revenue were 27.9 % in fiscal 2019 , compared to 28.6 % in fiscal 2018 . this percentage decrease was due primarily to an increase in pricing , partially offset by commodity inflation . labor and related expenses payroll and benefit expenses increased $ 4.3 million , or 3.8 % in fiscal 2019 . this increase was due primarily to additional labor needs arising from the opening of two new restaurants in fiscal 2019 and eight new restaurants in fiscal 2018 , minimum wage increases in california and , specifically , los angeles , and higher workers ' compensation expense due to increased claims activity , partially offset by a reduction in labor for restaurant closures and locations sold to franchisees in fiscal 2019 and 2018 . payroll and benefit expenses
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however , the fiscal 2020 credit loss results were negatively impacted by net provision changes of $ 9.1 million primarily as a result of the company 's decision to increase the allowance for credit losses in light of the uncertainty regarding the covid-19 impact and the fact that the company suspended certain collection activities including repossession efforts for a period of time due to the pandemic . the company uses several operational initiatives ( including credit reporting and the use of gps units on vehicles ) to improve collections and continually pushes for improvements and better execution of its collection practices . the company believes that the proper execution of its business practices is the single most important determinant of credit loss experience and that improvements in oversight and accountability provided by the company 's investments in our corporate infrastructure within the collections area and the somewhat improved macro-economic environment prior to the pandemic mitigated the competitive pressures and positively impacted credit loss results for fiscal 2020. interest expense for fiscal 2020 as a percentage of sales remained relatively consistent at 1.2 % compared to 1.3 % for fiscal 2019. although the company had a higher average borrowings in fiscal 2020 ( $ 179.9 million in fiscal 2020 compared to $ 161.0 million for fiscal 2019 ) , the lower interest rates offset the interest on the higher debt balances . 2019 compared to 2018 total revenues increased $ 56.9 million , or 9.3 % , in fiscal 2019 , as compared to revenue growth of 4.2 % in fiscal 2018 , principally as a result of ( i ) revenue growth from dealerships that operated a full twelve months in both fiscal years ( $ 50.7 million ) , and ( ii ) revenue from stores opened during or after the year ended april 30 , 2018 ( $ 11.9 million ) , partially offset by ( iii ) decreased revenue from dealerships closed during or after the year ended april 30 , 2018 ( $ 5.7 million ) . the increase in revenue for fiscal 2019 is attributable to ( i ) a 4.9 % increase in average retail sales price , ( ii ) a 4.1 % increase in retail units sold and ( iii ) a 10.6 % increase in interest and other income . cost of sales , as a percentage of sales , remained relatively consistent at 58.6 % in fiscal 2019 compared to 58.7 % in fiscal 2018. the average retail sales price for fiscal 2019 was $ 11,125 , a $ 521 increase over the prior fiscal year . in fiscal 2019 , the slight improvement in the margin in spite of increasing purchase costs was due to improvements in inventory management and lower repair costs . selling , general and administrative expenses , as a percentage of sales remained relatively consistent at 18.3 % in fiscal 2019 , compared to 18.4 % for fiscal 2018. in dollar terms , overall selling , general and administrative expenses increased $ 8.2 million from fiscal 2018. the increase was primarily focused on investments in our associates , especially general manager recruitment , training and collections support along with improvements in digital marketing , all in an effort to provide superior customer service . provision for credit losses as a percentage of sales decreased to 25.0 % for fiscal 2019 compared to 27.7 % for fiscal 2018. net charge-offs as a percentage of average finance receivables decreased to 25.7 % for fiscal 2019 compared to 28.8 % for the prior year . the decrease in net charge-offs for fiscal 2019 primarily resulted from a lower frequency of losses combined with a lower severity of losses , primarily due to improvements in collections processes and higher recovery rates on repossessions . interest expense for fiscal 2019 as a percentage of sales increased slightly to 1.3 % compared to 1.0 % for fiscal 2018 , due to higher average borrowings during the fiscal year 2019 ( $ 161.0 million compared to $ 136.7 million in the prior year ) and increased interest rates . 26 financial condition the following table sets forth the major balance sheet accounts of the company at april 30 , 2020 , 2019 and 2018 ( in thousands ) : replace_table_token_5_th the following table shows receivables growth compared to revenue growth during each of the past three fiscal years . for fiscal year 2020 , growth in finance receivables of 14.4 % exceeded revenue growth of 11.3 % . the company currently anticipates going forward that the growth in finance receivables will generally be slightly higher than overall revenue growth on an annual basis due to overall term length increases in our installment sales contracts in recent prior years , partially offset by improvements in underwriting and collection procedures in an effort to reduce credit losses . the average term for installment sales contracts at april 30 , 2020 was 33.3 months , compared to 32.1 months for april 30 , 2019. replace_table_token_6_th at fiscal year-end 2020 , inventory decreased 2.9 % ( $ 1.1 million ) , compared to fiscal year-end 2019. this decrease was primarily related to covid-19 , as the company held off on inventory purchases for a period of time to conserve cash flow and for additional clarity on restrictions and sales volumes during the pandemic . the company strives to improve the quality of the inventory and improve turns while maintaining inventory levels to ensure adequate supply of vehicles , in volume and mix , and to meet sales demand . story_separator_special_tag property and equipment , net , increased by approximately $ 1.6 million as of april 30 , 2020 as compared to fiscal 2019. the increase is attributable to approximately $ 5.5 million in additions , partially offset by depreciation expense of $ 3.8 million and disposals of almost $ 100,000. accounts payable and accrued liabilities increased slightly by approximately $ 350,000 at april 30 , 2020 as compared to april 30 , 2019 partially due to the deferral of the employer 's share of social security and payroll taxes as permitted under the coronavirus aid , relief , and economic security act , also known as the cares act . income taxes payable , net , increased approximately $ 5.8 million at april 30 , 2020 compared to april 30 , 2019 primarily due to the relief provided by the cares act , as the company elected to defer certain estimated tax payments in the fourth quarter . deferred revenue increased $ 4.2 million at april 30 , 2020 over april 30 , 2019 , primarily resulting from the increase in sales of the payment protection plan and service contract products . 27 deferred income tax liabilities , net , decreased approximately $ 1.3 million at april 30 , 2020 as compared to april 30 , 2019 due primarily to the deferred tax asset created by the disallowed interest deduction as a result of the tax cuts and jobs act of 2017. debt facilities increased primarily as a result of the $ 60 million in cash held at the end of the year due to the uncertainty related to covid-19 and to ensure financial flexibility . typically , the cash would have been used to pay down the debt facilities . borrowings on the company 's revolving credit facilities fluctuate primarily based upon a number of factors including ( i ) net income , ( ii ) finance receivables changes , ( iii ) income taxes , ( iv ) capital expenditures and ( v ) common stock repurchases . historically , income from continuing operations , as well as borrowings on the revolving credit facilities , have funded the company 's finance receivables growth , capital asset purchases and common stock repurchases . in fiscal 2020 , the company had a $ 4.8 million net increase in total debt , net of cash , used to contribute to the funding of finance receivables growth of $ 77.9 million , net capital expenditures of $ 5.5 million and common stock repurchases of $ 16.0 million . 28 liquidity and capital resources the following table sets forth certain historical information with respect to the company 's statements of cash flows ( in thousands ) : replace_table_token_7_th the primary drivers of operating profits and cash flows include ( i ) top line sales ( ii ) interest rates on finance receivables , ( iii ) gross margin percentages on vehicle sales , and ( iv ) credit losses , a significant portion of which relates to the collection of principal on finance receivables . the company generates cash flow from income from operations . historically , most or all of this cash is used to fund finance receivables growth , capital expenditures and common stock repurchases . to the extent finance receivables growth , common stock repurchases and capital expenditures exceed income from operations the company generally increases its borrowings under its revolving credit facilities . the majority of the company 's growth has been self-funded . cash flows from operations in fiscal 2020 compared to fiscal 2019 decreased primarily as a result of ( i ) an increase in finance receivable originations , ( ii ) an increase in deferred tax assets and ( iii ) accounts payable and accrued liabilities increasing at a lower rate than the prior year , offset by ( iv ) an increase in finance receivable collections and ( v ) an increase in the provision for credit losses . finance receivables , net , increased by $ 50.7 million during fiscal 2020 . 29 cash flows from operations in fiscal 2019 compared to fiscal 2018 increased primarily as a result of ( i ) net income , ( ii ) an increase in deferred taxes , ( iii ) an increase in finance receivable collections and ( iv ) an increase in stock based compensation , offset by ( v ) an increase in finance receivable originations and ( vi ) accounts payable and accrued liabilities increasing at a lower rate than the prior year . finance receivables , net , increased by $ 31.9 million during fiscal 2019. the purchase price the company pays for a vehicle has a significant effect on liquidity and capital resources . because the company bases its selling price on the purchase cost for the vehicle , increases in purchase costs result in increased selling prices . as the selling price increases , it generally becomes more difficult to keep the gross margin percentage and contract term in line with historical results because the company 's customers have limited incomes and their car payments must remain affordable within their individual budgets . several external factors can negatively affect the purchase cost of vehicles . decreases in the overall volume of new car sales , particularly domestic brands , lead to decreased supply in the used car market . also , constrictions in consumer credit , as well as general economic conditions , can increase overall demand for the types of vehicles the company purchases for resale as used vehicles become more attractive than new vehicles in times of economic instability . a negative shift in used vehicle supply , combined with strong demand , results in increased used vehicle prices and thus higher purchase costs for the company .
| the company 's cost structure is more fixed in nature and is sensitive to volume changes . revenues can be affected by our level of competition , which is influenced to a large extent by the availability of funding to the sub-prime automobile industry , together with the availability and resulting purchase cost of the types of vehicles the company purchases for resale . revenues can also be affected by the macro-economic environment . down payments , contract term lengths and proprietary credit scoring are critical to helping customers succeed and are monitored closely by corporate management at the point of sale . after the sale , collections , delinquencies and charge-offs are crucial elements of the company 's evaluation of its financial condition and results of operations and are monitored and reviewed on a continuous basis . management believes that developing and maintaining a relationship with its customers and earning their repeat business is critical to the success and growth of the company and can serve to offset the effects of increased competition and negative macro-economic factors . a challenging competitive environment puts pressure on sales volumes especially at older dealerships which tend to have higher overall sales volumes and more repeat customers . additionally , as the company attempts to attract and retain target customers , increased competition can contribute to lower down payments and longer contract terms which can have a negative effect on collection percentages , liquidity and credit losses . management believes that the ultra-low interest rate environment combined with a lack of other investment alternatives has been attracting excess capital into the sub-prime automobile market and increasing competition . in an effort to combat the increased competition the company will continue to focus on the benefits of excellent customer service and its “ local ” face to face offering in an effort to help customers succeed . the company , over recent years , has focused on providing a good mix of vehicles in various price ranges to increase affordability for customers , to address sales volume challenges and to improve credit
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the merger is subject to shareholder approval , antitrust and regulatory approvals , and other customary closing conditions . key performance indicators we believe that revenue growth , adjusted ebitda ( both in dollars and margin ) , and free cash flow are key financial measures of our success . adjusted ebitda and free cash flow are financial measures that are not recognized terms under u.s. generally accepted accounting principles ( “ non-gaap ” ) . revenue growth . we review year-over-year revenue growth in our segments as a key measure of our success in addressing customer needs . we measure revenue growth in terms of organic , acquisitive , and foreign currency impacts . we define these components as follows : organic – we define organic revenue growth as total revenue growth from continuing operations for all factors other than acquisitions and foreign currency movements . we drive this type of revenue growth through value realization ( pricing ) , expanding wallet share of existing customers through up-selling and cross-selling efforts , securing new customer business , and selling new or enhanced product offerings . acquisitive – we define acquisitive revenue as the revenue generated from acquired products and services from the date of acquisition to the first anniversary date of that acquisition . this type of growth comes as a result of our strategy to purchase , integrate , and leverage the value of assets we acquire . we also include the impact of divestitures in this metric . foreign currency – we define the foreign currency impact on revenue as the difference between current revenue at current exchange rates and current revenue at the corresponding prior period exchange rates . due to the significance of revenue transacted in foreign currencies , we believe it is important to measure the impact of foreign currency movements on revenue . in addition to measuring and reporting revenue by segment , we also measure and report revenue by transaction type . understanding revenue by transaction type helps us identify and address broad changes in product mix . we summarize our transaction type revenue into the following three categories : recurring fixed revenue represents revenue generated from contracts specifying a relatively fixed fee for services delivered over the life of the contract . the initial term of these contracts is typically annual ( with some longer-term arrangements ) and non-cancellable for the term of the subscription , and may contain provisions for minimum monthly payments . the fixed fee is typically paid annually or more periodically in advance . these contracts typically consist of subscriptions to our various information offerings and software maintenance , which provide continuous access to our platforms and associated data over the contract term . subscription revenue is usually recognized ratably over the contract term or , for term-based software license arrangements , annually on renewal . recurring variable revenue represents revenue from contracts that specify a fee for services , which is typically not fixed . the variable fee is usually paid monthly in arrears . recurring variable revenue is based on , among other factors , the number of trades processed , assets under management , or the number of positions we value , and revenue is recognized based on the specific factor used ( e.g. , for usage-based contracts , we recognize revenue in line with usage in the period ) . most of these contracts have an initial term ranging from one to five years , with auto-renewal periods thereafter . recurring variable revenue was derived entirely from the financial services segment for all periods presented . non-recurring revenue represents consulting , services , single-document product sales , perpetual license sales and associated services , conferences and events , and advertising . our non-recurring products and services are an important part of our business because they complement our recurring business in creating strong and comprehensive customer relationships . 36 non-gaap measures . we use non-gaap financial measures such as ebitda , adjusted ebitda , and free cash flow in our operational and financial decision-making . we believe that such measures allow us to focus on what we deem to be more reliable indicators of ongoing operating performance ( adjusted ebitda ) and our ability to generate cash flow from operations ( free cash flow ) . we also believe that investors may find these non-gaap financial measures useful for the same reasons , although we caution readers that non-gaap financial measures are not a substitute for u.s. gaap financial measures or disclosures . none of these non-gaap financial measures are recognized terms under u.s. gaap and do not purport to be an alternative to net income or operating cash flow as an indicator of operating performance or any other u.s. gaap measure . throughout this md & a , we provide reconciliations of these non-gaap financial measures to the most directly comparable u.s. gaap measures . ebitda and adjusted ebitda . ebitda and adjusted ebitda are used by securities analysts , investors , and other interested parties to assess our operating performance . for example , a measure similar to adjusted ebitda is required by the lenders under our revolving credit agreement . we define ebitda as net income plus or minus net interest , plus provision for income taxes , depreciation , and amortization . our definition of adjusted ebitda further excludes primarily non-cash items and other items that we do not consider to be useful in assessing our operating performance ( e.g. , stock-based compensation expense , restructuring charges , acquisition-related costs and performance compensation , exceptional litigation , net other gains and losses , pension mark-to-market , settlement , and other expense , the impact of joint ventures and noncontrolling interests , and discontinued operations ) . free cash flow . we define free cash flow as net cash provided by operating activities less capital expenditures . non-gaap measures are frequently used by securities analysts , investors , and other interested parties in their evaluation of companies comparable to us , many of which present non-gaap measures when reporting their results . story_separator_special_tag these measures can be useful in evaluating our performance against our peer companies because we believe the measures provide users with valuable insight into key components of u.s. gaap financial disclosures . for example , a company with higher u.s. gaap net income may not be as appealing to investors if its net income is more heavily comprised of gains on asset sales . likewise , excluding the effects of interest income and expense moderates the impact of a company 's capital structure on its performance . however , non-gaap measures have limitations as an analytical tool . because not all companies use identical calculations , our presentation of non-gaap financial measures may not be comparable to other similarly titled measures of other companies . they are not presentations made in accordance with u.s. gaap , are not measures of financial condition or liquidity , and should not be considered as an alternative to profit or loss for the period determined in accordance with u.s. gaap or operating cash flows determined in accordance with u.s. gaap . as a result , these performance measures should not be considered in isolation from , or as a substitute analysis for , results of operations as determined in accordance with u.s. gaap . global operations approximat ely 40 percent of our revenue is transacted outside of the united states ; however , only about 20 percent of our revenue is transacted in currencies other than the u.s. dollar . as a result , a strengthening u.s. dollar relative to ce rtain currencies has historically resulted in a negative impact on our revenue ; conversely , a weakening u.s. dollar has historically resulted in a positive impact on our revenue . the largest foreign currency exposures for revenue are the british pound , euro , and canadian dollar . the impact of foreign currency movements on operating income is mitigated due to offsetting revenue and operating expense exposures denominated in currencies other than the u.s. dollar . our largest net foreign currency exposures are the indian rupee , euro , canadian dollar , and singapore dollar . see “ quantitative and qualitative disclosures about market risk – foreign currency exchange rate risk ” for additional discussion of the impacts of foreign currencies on our operations . pricing information we customize many of our sales offerings to meet individual customer needs and base our pricing on a number of factors , including various price segmentation models which utilize customer attributes , value attributes , and other data sources . attributes can include a proxy for customer size ( e.g. , barrels of oil equivalent and annual revenue ) , industry , users , usage , breadth of the content to be included in the offering , and multiple other factors . because of the level of offering customization we employ , it is difficult for us to evaluate pricing impacts on a period-to-period basis with absolute certainty . this analysis is further complicated by the fact that the offering sets purchased by customers are often not constant between periods . as a result , we are not able to precisely differentiate between pricing and volume impacts on changes in revenue comprehensively across the business . 37 other items cost of operating our business . we incur our cost of revenue primarily through acquiring , managing , and delivering our offerings . these costs include personnel , information technology , data acquisition , and occupancy costs , as well as royalty payments to third-party information providers . our selling , general and administrative expense includes wages and other personnel costs , commissions , corporate occupancy costs , and marketing costs . a large portion of our operating expenses are not directly commensurate with volume sold , particularly in our recurring revenue business model . stock-based compensation expense . we issue equity awards to our employees primarily in the form of restricted stock units and performance stock units , for which we record cost over the respective vesting periods . the typical vesting period is three years . as of november 30 , 2020 , we had approximately 6.8 million unvested rsus and 0.1 million unvested stock options outstanding . critical accounting policies and estimates our consolidated financial statements are prepared in accordance with u.s. gaap . in applying u.s. gaap , we make significant estimates and judgments that affect our reported amounts of assets , liabilities , revenue , and expense , as well as disclosure of contingent assets and liabilities . we believe that our accounting estimates and judgments are reasonable when made , but in many instances , alternative estimates and judgments would also be acceptable . in addition , changes in the accounting estimates are reasonably likely to occur from period to period . accordingly , actual results could differ significantly from our estimates . to the extent that there are material differences between these estimates and actual results , our financial condition or results of operations will be affected . we base our estimates on historical experience and other assumptions that we believe are reasonable , and we evaluate these estimates on an ongoing basis . we refer to accounting estimates of this type as critical accounting policies and estimates , which are discussed further below . revenue recognition . most of our offerings are provided under agreements containing standard terms and conditions . approximately 88 percent of our 2020 revenue was derived from recurring revenue arrangements , which generally are initially deferred and then recognized ratably over the contract term . these recurring revenue arrangements typically do not require any significant judgments about when revenue should be recognized . a limited number of recurring revenue arrangements and certain non-recurring revenue arrangements contain multiple performance obligations . we apply judgment in identifying the separate performance obligations to be delivered under the arrangement and allocating the transaction price based on the estimated standalone selling price of each performance obligation . business combinations . we apply the purchase method of accounting to our business combinations .
| the non-recurring revenue increase in 2019 was also partially due to the timing of the biennial cycle of the bpvc standard , which contributed approximately $ 8 million of growth in the 2019 results . the acquisition-related revenue decline for 2020 was primarily due to the a & d business line divestiture that we completed at the beginning of 2020 and the tmt market intelligence assets divestiture in the third quarter of 2019 , partially offset by the agribusiness acquisition in the third quarter of 2019. acquisition-related revenue growth for 2019 was primarily due to the ipreo acquisition in the third quarter of 2018 , as well as the agribusiness acquisition , partially offset by the tmt market intelligence assets divestiture in the third quarter of 2019. foreign currency movements had minimal effect on our 2020 revenue growth and a slightly negative effect on our 2019 revenue growth . due to the extent of our global operations , foreign currency movements could continue to positively or negatively affect our results in the future . 40 revenue by segment replace_table_token_1_th the percentage change in revenue for each segment is due to the factors described in the following table . replace_table_token_2_th financial services revenue experienced strong total organic growth in both 2020 and 2019. within our information product offerings , we experienced 5 percent organic revenue growth in 2020 and 4 percent organic growth in 2019 , primarily due to the solid performance of our core pricing , valuation , equities , and indices offerings . solutions organic revenue growth of 5 percent in 2020 was due to strength in global and private capital markets offerings , as well as in corporate actions offerings . solutions organic revenue growth of 8 percent in 2019 benefitted from broad-based growth across the portfolio , led by our managed loan services and edm product offerings . processing organic revenue growth of 2 percent in 2020 was primarily due to solid derivative processing activity in the second quarter of 2020 resulting from increased market volatility during that period . processing organic revenue decline of 2 percent in 2019
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correspondingly , financial results for the year ended january 1 , 2017 were negatively impacted by soft economic growth with mixed results by industry . revenue trends softened in 2016 and continue to be mixed across geographies and the industries we serve . total company gross profit as a percentage of revenue for the year ended january 1 , 2017 was 24.7 % , compared to 23.6 % in the prior year . the increase of 1.1 % was due primarily to the impact of the acquired simos and aon hewitt rpo businesses of 0.6 % , which carried higher gross margins in comparison to our blended company average , and the positive impact of a revenue mix change of 0.6 % largely driven by the decline in revenue from our largest customer which carries a lower gross margin than our blended average . we continue to experience resistance from our customers to accept price increases beyond the normal increases caused by increasing minimum wages and benefits in a sluggish economy and higher temporary worker wages in a tightening labor market . total company selling , general and administrative ( `` sg & a '' ) expense increased by $ 50 million to $ 546 million for the year ended january 1 , 2017 , compared to the prior year . the increase includes expenses related to the acquired operations of simos and the rpo business of aon hewitt of approximately $ 38 million , as well as an increase in incremental acquisition and integration costs of $ 2 million to fully integrate the rpo business of aon hewitt into the peoplescout service line in the current year . excluding the impact of these acquisitions , organic sg & a expense increased by $ 10 million or approximately $ 3 million excluding the 53rd week of fiscal 2016. the increase included approximately $ 6 million of costs incurred to exit the delivery business of our largest customer and certain other realignment costs . total company sg & a expense as a percentage of revenue increased to 19.9 % for the year ended january 1 , 2017 , from 18.4 % in the prior year . the organic revenue decline outpaced the decline in operating expenses . with the slowdown in revenue growth , we put cost control programs in place during the first quarter of 2016 and expanded those programs in subsequent quarters as the sluggish economy persisted and revenues declined from our largest customer . we have reduced costs in line with our plans . we will continue to monitor and manage our sg & a costs in the current environment of sluggish growth . total company loss from operations was $ 17 million for the year ended january 1 , 2017 , compared to income from operations of $ 98 million in the prior year . included in the operating results for the year ended january 1 , 2017 is a non-cash goodwill and intangible asset impairment charge of $ 104 million primarily driven by a change in the scope of services with our largest customer . excluding the impairment charge , net income from operations was $ 87 million , or 3.1 % as a percentage of revenue for the year ended january 1 , 2017 , compared to 3.6 % for the in the prior year . the decline in performance is primarily due to slowed organic revenue growth and associated gross margin compression partially offset by our success with cost management . our effective tax rate on earnings for the year ended january 1 , 2017 was 25.0 % , compared to 26.1 % in the prior year . a significant driver of fluctuations in our effective income tax rate is the work opportunity tax credit ( “ wotc ” ) program . wotc is designed to encourage employers to hire workers from certain disadvantaged targeted categories with higher unemployment rates and reduce our income taxes . wotc was restored retroactively to january 1 , 2015 and through december 31 , 2019 , as a result of the protecting americans from tax hikes act of 2015 signed into law on december 18 , 2015. net loss was $ 15 million , or $ 0.37 per diluted share for the year ended january 1 , 2017 , compared to net income of $ 71 million , or $ 1.71 per diluted share in the prior year . excluding the goodwill and intangible asset impairment charge , net income would have been $ 67 million . we believe we are taking the right steps to preserve our operating margin and produce long-term growth for shareholders . we also believe we are in a strong position financially to fund working capital needs for growth opportunities . as of january 1 , 2017 , we had cash and cash equivalents of $ 35 million and $ 136 million available under the second amended and restated revolving credit agreement for a secured revolving credit facility ( `` revolving credit facility '' ) for total liquidity of $ 171 million , or a 59 % increase over the prior year end . results of operations total company results the following table presents selected financial data ( in thousands , except percentages and per share amounts ) : replace_table_token_5_th our year-over-year trends are significantly impacted by the following acquisitions : staffing solutions holdings , inc. ( `` seaton '' ) was acquired effective the first day of our fiscal third quarter in 2014 and , accordingly , is included in only twenty-six of the fifty-two weeks ended december 26 , 2014 , as compared to the entire year ended december 25 , 2015 . the seaton acquisition added three new service lines with capabilities to better meet our objective of providing our customers with the talent and flexible workforce solutions they need to enhance their business performance . these service lines have dedicated customer on-site and virtual teams which leverage highly centralized support services for recruiting and delivering services to meet the specialized needs of each customer . story_separator_special_tag since these service lines do not operate a branch network , they can function more flexibly . the acquisition of seaton added the staff management service line for on-premise staffing for large scale exclusive sourcing , screening , recruitment , and management of a customer 's on-premise contingent labor workforce ; the peoplescout service line for recruitment process outsourcing for high-volume sourcing , screening , and recruiting of permanent employees for all major industries and jobs ; and a managed service provider solution business , which provides customers with improved quality and spend management of their contingent labor vendors . effective december 1 , 2015 , we acquired simos , a leading provider of on-premise workforce management solutions . simos specializes in helping clients streamline warehouse/distribution operations to meet the growing demand for e-commerce and supply chain solutions . they are also experts in providing scalable solutions for pick and pack and shipping requirements . their unique productivity model incorporates fixed price-per-unit solutions to drive client value . additionally , their continuous analysis and improvement of processes and incentive pay drives workforce efficiency and reduces costs , lowers risk of injury and damage , and improves productivity and service levels . simos expands our existing services for on-premise staffing and management of a facility 's contingent workforce . effective january 4 , 2016 , we acquired the rpo business of aon hewitt , a leading provider of rpo services . the acquired operations expand and complement our peoplescout services and were fully integrated into this service line in 2016. we realigned our reporting structure in the fourth quarter of fiscal 2016 to streamline our operations and make it easier for our customers to leverage our total workforce solution by using both our contingent work and permanent placement services . we now report our business as three distinct segments . our former staffing services reportable segment has been separated into two reportable segments , peopleready and peoplemanagement , and our former managed services reportable segment has been renamed page - 20 peoplescout . in addition , we changed our methodology for allocating certain corporate costs to our segments , which decreased our corporate unallocated expenses . the prior year amounts have been recast to reflect this change for consistency . see note 17 : segment information , to our consolidated financial statements found in item 8 of this annual report on form 10-k , for additional details of our service lines and reportable segments . peopleready is the new name for our branch-based blue-collar industrial staffing services . peopleready combines labor ready , clp resources , and spartan staffing into one specialized workforce solutions service line creating a more seamless experience for our customers to access all of our blue-collar contingent on-demand general and skilled labor service offerings with more comprehensive solutions to enhance their performance and growth . peopleready services provide a wide range of staffing solutions for contingent on-demand general and skilled labor to a broad range of industries that include retail , manufacturing , warehousing , logistics , energy , construction , hospitality , and others . peopleready helped approximately 122,000 businesses in 2016 to be more productive by providing easy access to dependable contingent labor . through our peopleready service line , we connected over 414,000 people with work in 2016. we have a network of 670 branches across all 50 states , puerto rico , and canada . peoplemanagement predominantly encompasses our on-site placement and management services and provides a wide range of workforce management solutions for blue-collar contingent on-premise staffing and management of a facility 's workforce . we use distinct brands to market our peoplemanagement contingent workforce solutions and operate as staff management , simos , planetechs , and centerline . staff management specializes in exclusive recruitment and on-premise management of a facility 's contingent industrial workforce . simos specializes in exclusive recruitment and on-premise management of warehouse/distribution operations to meet the growing demand for e-commerce and scalable supply chain solutions . planetechs specializes in temporary skilled mechanics and technicians to the aviation and transportation industries ; and centerline drivers specializes in dedicated and temporary truck drivers to the transportation and distribution industries . peoplemanagement helped approximately 900 businesses in 2016 to be more productive by providing easy access to dependable blue-collar contingent workforce solutions . through our peoplemanagement service line , we connected over 133,000 people with work in 2016. we have over 310 on-premise locations at customers ' facilities . peoplescout provides outsourced recruitment for permanent employees for all major industries and jobs . our dedicated recruitment process outsourcing service delivery teams work as an integrated partner with our customers in providing end-to-end talent acquisition services from sourcing candidates to on-boarding employees . in 2016 , peoplescout placed over 268,000 individuals into permanent jobs with 200 customers . our peoplescout segment also includes a management service provider business which provides customers with improved quality and spend management of their contingent labor vendors . our fiscal year-end changed from the last friday in december to the sunday closest to the last day in december effective in the fourth quarter of 2016. the week ending date was moved forward from friday to sunday to better align with the work week of our customers . in addition , the 2016 fiscal year included 53 weeks , with the 53rd week falling in our fourth fiscal quarter . all prior years presented include 52 weeks . the revenue for the nine additional billing days was $ 34 million . this period is one of our lowest revenue weeks of the year . the gross profit generated during this period is more than offset by the operating expenses resulting in a loss from operations of approximately $ 1 million .
| excluding the goodwill and intangible asset impairment charge , income from operations decreased to 6.5 % of revenue for the year ended january 1 , 2017 , compared to 7.6 % of revenue in the prior year due to gross margin compression and the de-leveraging effect associated with the fixed costs in a branch network partially offset by cost control programs . gross margin compression was caused by resistance from our customers to accept price increases beyond the increases caused by increasing minimum wages and benefits in a sluggish economy and higher contingent worker wages in a tightening labor market . through disciplined pricing , we have made continuous progress throughout the current year in successfully passing through our normal markup on increased statutory costs in higher bill rates . due page - 24 to the current year slowdown in revenue growth , we curtailed investments made in the prior year in selling and recruiting resources to fuel revenue growth and commenced cost control programs in the first quarter of 2016 and expanded those programs in subsequent quarters as the sluggish economy persisted . we have reduced sg & a costs in line with our plans and have generated progressively improving operating income margins during the course of the year . we will continue to closely monitor and manage our sg & a costs in the current environment . peoplemanagement segment operating income ( loss ) with and without goodwill and intangible asset impairment charge are as follows for ease of comparability ( in thousands , except for percentages ) : replace_table_token_14_th peoplemanagement income from operations decreased to a loss of $ 60 million for the year ended january 1 , 2017 , compared to income of $ 37 million in the prior year . loss from operations included a non-cash goodwill and intangible asset impairment charge of $ 84 million for the year ended january 1 , 2017 . the goodwill and intangible asset impairment charge in connection with our annual impairment test , was primarily driven
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we expect to continue to incur significant and increasing losses for the foreseeable future , and our net losses may fluctuate significantly from period to period , depending on the timing of expenditures on our planned research and development activities . in october 2020 , we consummated our initial public offering , or ipo , and issued 6,900,000 shares of common stock for net proceeds of $ 93.4 million , after deducting underwriting discounts and commissions and offering expenses . since inception through december 31 , 2020 , we have raised aggregate gross financing proceeds of $ 224.0 million , including $ 103.5 million from our ipo in october 2020 , $ 116.0 million from the sale of our redeemable convertible preferred stock and $ 4.5 million from the issuance of debt . as of december 31 , 2020 , we had cash and cash equivalents of $ 157.2 million . we believe , based on our current operating plan , that our cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months . we have based this projection on assumptions that may be inaccurate and as a result , we may utilize our capital resources sooner than we expect . we expect our expenses will increase significantly in connection with our ongoing activities , as we : ▪ advance tildacerfont through our ongoing phase 2b clinical trials in adult patients with classic cah ; ▪ pursue regulatory approvals of tildacerfont in adult patients with classic cah ; ▪ advance clinical development of tildacerfont in additional indications , including pediatric classic cah and a subpopulation of females with a rare form of polycystic ovary syndrome , or pcos ; ▪ build a highly specialized commercial organization to support the commercialization of tildacerfont , if approved , in the united states and europe ; ▪ build a commercial infrastructure or opportunistically seek strategic collaborations to benefit from the resources of biopharmaceutical companies specialized in either relevant disease areas or geographies , if tildacerfont is approved for additional indications ; ▪ identify additional indications and formulations for which to investigate tildacerfont in the future and expand our pipeline of product candidates ; ▪ implement operational , financial , and management information systems ; ▪ hire additional personnel ; ▪ operate as a public company ; and ▪ obtain , maintain , expand , and protect our intellectual property portfolio . our business has been and could continue to be adversely affected by the evolving covid-19 pandemic . for example , the covid-19 pandemic has resulted in and could result in delays to our clinical trials for numerous reasons including additional delays or difficulties in enrolling patients , diversion of healthcare resources away from the conduct of clinical trials , interruption or delays in the operations of the fda or other regulatory authorities , and delays in clinical sites receiving the supplies and materials to conduct our clinical trials . at this time , the extent to which the covid-19 pandemic impacts our business will depend on future developments , which are highly uncertain and can not be predicted . 102 components of results of operations operating expenses we classify operating expenses into two main categories : ( i ) research and development expenses and ( ii ) general and administrative expenses . research and development expenses our research and development expenses consist of external and internal expenses incurred in connection with our research activities and development programs . these expenses include : ▪ external expenses , consisting of : o clinical development—expenses associated with cros engaged to manage and conduct clinical trials ; o preclinical studies—expenses associated with preclinical studies performed by vendors ; o manufacturing—expenses associated with contract manufacturing ; labeling , packaging , distribution of clinical trial supplies , and consulting ; o other research and development—expenses associated with quality and regulatory compliance ; and ▪ internal expenses , consisting of personnel , including expenses for salaries , bonuses , benefits , stock-based compensation , as well as allocation of certain expenses . to date , these expenses have been incurred to advance tildacerfont . these expenses will primarily consist of expenses for the administration of clinical trials as well as manufacturing costs for clinical material supply . we expect that significant additional spending will be required to progress tildacerfont through clinical development and regulatory approval . research and development expenses are recognized as they are incurred . if deposits are required by external vendors , a portion of the deposit is included as a prepaid expense until sufficient progress has occurred to amortize the deposit to expense in the statement of operations . general and administrative expenses general and administrative expenses consist primarily of personnel-related costs ( including salaries , bonuses , benefits , and stock-based compensation expense ) for personnel in executive , finance , and other administrative functions . general and administrative expenses also include legal fees , professional fees paid for accounting , auditing , consulting , tax , and investor relations services , insurance costs , facility costs not otherwise included in research and development expenses , and public company expenses such as costs associated with compliance with the rules and regulations of the u.s. securities and exchange commission , or the sec , and those of the nasdaq stock market , inc. , or nasdaq , listing rules . we expect that our general and administrative expenses will continue to increase in the foreseeable future as additional administrative personnel and services are required to manage these functions of a public company , as we advance tildacerfont through clinical development and regulatory approval . interest expense interest expense consists of interest incurred and non-cash amortization of debt discount and issuance costs in connection with the term loan with silicon valley bank . 103 other income , net other income , net primarily consists of interest income earned on our cash and cash equivalents . story_separator_special_tag story_separator_special_tag term loan balance , as of the first business day of the first month following the amendment interest-only period , over the repayment period , plus ( ii ) monthly payments of accrued but unpaid interest . the final payment due on the maturity date shall include all outstanding principal and all accrued unpaid interest and an end of term payment totaling ( x ) 6 % of the original funded principal amount of the first tranche if the company does not borrow under the second tranche , or ( y ) 9.5 % of the total original funded principal amount under the first and second tranche if the company does borrow under the second tranche . 105 we may prepay amounts outstanding under the term loan at any time provided certain notification conditions are met , in which case , all outstanding principal plus accrued and unpaid interest , the end of term payment , a prepayment fee between 1 % and 3 % of the principal amount of the first and second tranches , and any bank expenses become due and payable . the loan agreement contains certain covenants that limit our ability to engage in certain transactions that may be in our long-term best interest , including entering into a change in control transaction . the loan agreement also contains certain covenants that limit our ability to obtain additional debt financing , including incurring debt from third parties not permitted under the loan agreement or incurring liens or encumbrances on our property . while we have not previously breached and are currently in compliance with the covenants contained in the loan agreement , we may breach these covenants in the future . our ability to comply with these covenants may be affected by events and factors beyond our control . in the event that we breach one or more covenants , silicon valley bank may choose to declare an event of default and require that we immediately repay all amounts outstanding under the loan agreement , terminate any commitment to extend further credit and foreclose on the collateral . in addition , if an event of default occurs under the loan agreement , silicon valley bank may , among other things , accelerate the term loan or do any acts it considers necessary or reasonable to protect its security interest in the collateral under the term loan . events of default include the occurrence of a material adverse change in our business , operations , or condition ( financial or otherwise ) . the occurrence of any of these events could have a material adverse effect on our business , financial condition , and results of operations . in connection with the first and second tranches under the loan agreement prior to the first amendment , we issued a warrant to purchase up to an aggregate of 49,609 shares of common stock at $ 1.44 per share . we determined the initial fair value of the warrant to be $ 0.1 million using the black-scholes option-pricing model . the fair value of the warrant was recorded to equity and also as a debt discount , which is amortized to interest expense using the effective interest method over the term of the term loan . the warrant was net-exercised for 46,358 shares of our common stock in november 2020. funding requirements to date , we have not generated any revenue . we do not expect to generate any meaningful revenue unless and until we obtain regulatory approval and commercialize tildacerfont or any future product candidates , and we do not know when , or if at all , that will occur . we will continue to require additional capital to develop tildacerfont and fund operations for the foreseeable future . our primary uses of cash are to fund our operations , which consist primarily of research and development expenses related to our clinical development programs , and to a lesser extent , general and administrative expenses . 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 development of , and obtain regulatory approval for , tildacerfont or any of our future product candidates . we expect our research and development expenses to increase significantly in the foreseeable future as we continue to invest in research and development activities related to developing tildacerfont , as tildacerfont continues to advance into later stages of development for the treatment of classic cah in adult patients , as we conduct clinical trials of tildacerfont in pediatric classic cah and a rare form of pcos , as we seek regulatory approvals for tildacerfont , and incur expenses associated with hiring additional personnel to support our research and development efforts . the process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming , the successful development of tildacerfont is highly uncertain , and we may never succeed in achieving regulatory approval for tildacerfont in classic cah in adult patients or other indications . in addition , we expect to incur additional costs associated with operating as a public company . we may seek to raise capital through equity or debt financings , collaborative agreements or other arrangements with other companies , or through other sources of financing . adequate additional funding may not be available to us on acceptable terms or at all . our failure to raise capital as and when needed could have a negative 106 impact on our financial condition and our ability to pursue our business strategies .
| 104 other income , net other income , net was $ 0.2 million for the year ended december 31 , 2020 , compared to $ 0.1 million for the year ended december 31 , 2019. the increase was primarily due to interest income on higher cash and cash equivalents balances in 2020. liquidity and capital resources liquidity since our inception , we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations . we anticipate that we will continue to incur net losses for the foreseeable future . as of december 31 , 2020 , we had an accumulated deficit of $ 60.8 million . as of december 31 , 2020 , we had cash and cash equivalents of $ 157.2 million . in october 2020 , we consummated our ipo and issued 6,900,000 shares of common stock for net proceeds of $ 93.4 million , after deducting underwriting discounts and commissions and offering expenses . we believe , based on our current operating plan , that our cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months . loan agreement in september 2019 , we entered into the loan agreement with silicon valley bank providing for the term loan . pursuant to the loan agreement , we requested $ 2.5 million from the first tranche in connection with the entry into the loan agreement , which is currently outstanding , and we drew the second tranche of $ 2.0 million in december 2019. in april 2020 , we and silicon valley bank entered into the deferral agreement whereby we and silicon valley bank agreed to extend the repayment dates of all monthly payments of principal due and the maturity date with respect to the term loan by six months . in march 2021 , we entered into first amendment with silicon valley bank . the first amendment increased the aggregate principal amount of the term loan commitment by silicon valley bank to up to $ 30.0 million . up to $ 20.0 million is available under the first tranche of the term loan , or the first tranche , $ 5.0 million of which was advanced
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the effective tax rate decreased in 2010 compared to 2009 primarily because of the reversal of tax contingency provisions , due to the expiration of statutes , totaling $ 1.7 million compared to only $ 0.1 million in 2009. these factors were partially offset by a lower r & d credit realized in 2010 because u.s. congress allowed the credit to expire as of december 31 , 2009. our effective tax rate could be affected in future years by , among other factors , the mix of business between u.s. and foreign jurisdictions , our ability to take advantage of available tax credits , and audits of our records by taxing authorities . transportation systems segment replace_table_token_2_th cts sales increased 8 % to $ 415.4 million in 2011 compared to $ 386.0 million in 2010. sales were up in europe and australia , but decreased in north america . the overall increase in sales was primarily due to higher revenue from our new contract in vancouver , b.c . canada , our contract with transport for london ( tfl ) and our contracts in sydney and brisbane , australia . partially offsetting these increases were lower sales from a gating system contract in southern california which was completed in 2010 and lower sales in the san francisco bay area . the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar resulted in an increase in sales of $ 16.2 million for the year . cts sales increased 27 % in 2010 to $ 386.0 million from $ 303.4 million in 2009. sales were higher in 2010 from work in the san francisco bay area , our contract with tfl , the installation of a gating system in southern california , and from a new contract in sydney , australia . these increases were partially offset by lower sales from a system installation contract in florida , which was completed early in 2010 , and from train operating companies in the u.k. a portion of the sales increase from the tfl contract resulted from consolidation of the company 's 50 % owned subsidiary , transys , beginning in march of 2010. this newly consolidated subsidiary added $ 29.9 million to sales in 2010. the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar had no significant impact on sales for 2010 compared to 2009 . 24 cts operating income improved to $ 56.0 million in 2011 from $ 54.7 million in 2010 , an increase of 2 % . operating income was higher on increased revenue from our contracts in the u.k. and australia , and our operating margin percentage increased in australia due to a reduction in bid and proposal costs in 2011 compared to costs incurred in 2010 to secure the sydney contract . partially offsetting these increases were lower operating income on lower sales from the gating system customer in southern california mentioned above . in addition , in 2010 we received a contract modification that resolved a contingency on a contract in europe , resulting in a reversal of a $ 1.6 million reserve that added to operating income in 2010. the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar resulted in an increase in operating income of $ 1.7 million for 2011. operating income from cts increased 24 % in 2010 to $ 54.7 million from $ 44.1 million in 2009. increased income resulted from higher sales and margins in north america and from slightly higher operating profits from european operations . a contract modification received in 2010 resolved a contingency on a contract in europe , allowing us to reverse a reserve of $ 1.6 million that had been recorded in 2009. results from european operations for 2010 also included a pension curtailment charge of $ 0.7 million . results in 2009 had included contract restructuring agreements that added $ 1.6 million to operating income and a foreign currency exchange gain that added $ 1.4 million . the additional sales from transys mentioned above did not add to operating income , because transys operated on a break-even basis , as it was designed to do . the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar had no significant impact on operating income for 2010 compared to 2009. defense systems segment replace_table_token_3_th training systems training systems sales were up 14 % for 2011 to $ 339.7 million from $ 297.4 million last year . higher sales from air combat training , ground combat training , and miles ( multiple integrated laser engagement simulation ) equipment all contributed to the increase . sales of air combat training systems to the u.s. military and to customers in the far east grew this year . increases in ground training system sales in the u.k. more than offset decreases in sales of ground training systems to customers in the far east . the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar resulted in an increase in training system sales of $ 5.3 million for 2011. training systems sales increased 25 % in 2010 to $ 297.4 million compared to $ 238.5 million in 2009. sales were higher in 2010 from all major product lines , including air and ground combat training systems , miles equipment , and small arms training systems . significant fourth quarter deliveries of air combat training systems to the u.s. military helped to push sales higher for 2010 , more than offsetting lower air combat training sales to customers in the far east . sales were also higher for the year from a ground combat training system contract for a customer in the far east . the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar had no significant impact on sales for 2010 compared to 2009 . story_separator_special_tag 25 operating income for training systems increased 71 % to $ 45.9 million in 2011 compared to $ 26.9 million in 2010. the growth in operating income was primarily attributable to improved margins from the sale of a ground combat training system to a customer in the far east , increased operating income on higher sales of air combat training systems to the u.s. military and to a customer in the far east , and improved margins on increased sales of miles equipment . the 2010 operating income for training systems was positively impacted by the $ 4.2 million bad debt recovery described below . we invested $ 3.4 million in 2011 and a similar amount in 2010 in the development of new ground combat training technology for tactical vehicles , which limited our operating income in both years . the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar resulted in an increase in training systems operating income of $ 1.8 million for 2011. training systems operating income increased 66 % in 2010 to $ 26.9 million , from $ 16.2 million in 2009. higher sales from the ground combat training system in the far east mentioned above added to operating income in 2010 , as well as higher sales and improved profit margins from miles . in addition , in 2009 we had established a $ 3.1 million allowance for doubtful accounts receivable related to a company - through which we sold training systems products to the u.s. government - because they failed to pass on to us cash they collected from the government on our behalf . in 2010 , we were able to collect the entire amount plus attorney 's fees , costs and interest , for a total recovery in 2010 of $ 4.2 million . these improvements were partially offset by lower operating income from lower sales of air combat training systems to customers in the far east where we had realized higher margins in 2009. in addition , in the fourth quarter of 2010 , we invested $ 3.2 million in the development of new ground combat training technology for tactical vehicles , which limited growth in our operating income in 2010. the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar had no significant impact on operating income for 2010 compared to 2009. communications communications sales declined 33 % to $ 41.3 million in 2011 from $ 61.9 million in 2010. sales of data links and power amplifiers decreased this year , while sales of personnel locater systems were relatively consistent between years . communications sales grew 36 % in 2010 to $ 61.9 million from $ 45.4 million in 2009. sales were higher in 2010 from all three major product lines , including personnel locator systems , data links and power amplifiers . we began work on a new contract in 2010 called video scout and produced spare parts for the joint-stars system we delivered years ago , which contributed to the increase in data link sales . operating income from communications increased 58 % to $ 6.8 million in 2011 from $ 4.3 million in 2010. in 2010 we realized operating losses of $ 6.0 million on sales of a new mini-common data link ( mini-cdl ) product and video scout product as a result of development costs incurred in 2010 , compared to profitable sales of these products in 2011. communications operating income increased to $ 4.3 million in 2010 , compared to $ 3.4 million in 2009 , which is a 26 % increase . in 2010 , higher operating income on higher sales from all three product lines was partially offset by development costs for new products , including video scout and mini-cdl . other in 2010 , cds added two new businesses through acquisitions that are developing cross domain and global asset tracking products . during 2011 we increased our investment in the development and marketing of these products , resulting in an operating loss for the year as reflected in the other caption in the table above . also included in the other category above were development costs for combat identification technologies . partially offsetting these expenses was an adjustment of $ 0.7 million recorded in 2011 that reduced our estimated liability for contingent consideration related to one of the acquisitions made in 2010 . 26 mission support services segment replace_table_token_4_th mss sales were up 7 % to $ 475.8 million in 2011 compared to $ 443.3 million in 2010. our acquisition of abraxas in december 2010 added $ 50.0 million to sales for 2011. sales growth was also driven by increased activity in support of homeland security under our seaport-e contract , and in support of instruction and maintenance of flight simulators . partially offsetting these sales increases were lower sales from the joint readiness training center ( jrtc ) in fort polk , la , and from the u.s. army quartermaster center and school . sales also decreased from training and education contracts due to delays in contract awards , as well as services insourcing , primarily by the u.s. army , and the migration of certain contracts to small businesses where we are now in a subcontractor role . the insourcing of services and emphasis on small business awards have limited mss growth and may continue to do so in the near term .
| the operating losses for these two businesses totaled $ 11.3 million in 2011 compared to $ 3.0 million in 2010. abraxas incurred an operating loss of $ 3.5 million for 2011 , which included amortization of intangible assets of $ 8.2 million for the year as well as acquisition costs of $ 0.7 million . a $ 4.2 million gain was recorded in 2010 related to the recovery of a receivable that had been reserved for in previous years , which positively impacted our 2010 operating income as described below . the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar resulted in an increase in operating income of $ 3.4 million for 2011. our operating income increased 25 % in 2010 to $ 105.5 million from $ 84.7 million in 2009. the operating results for 2009 had included a provision for an uncollectable receivable of $ 3.1 million ; however , in 2010 we were able to recover the full amount plus attorney 's fees , costs and interest , bringing the total recovery to $ 4.2 million . if the $ 4.2 million were subtracted from the 2010 results , and $ 3.1 million added back to the 2009 results , operating income would have increased about 15 % in 2010 , commensurate with the increase in sales . see the segment discussions following for further information about segment operating income . net income attributable to cubic increased to $ 84.8 million ( $ 3.17 per share ) in 2011 from $ 70.6 million ( $ 2.64 per share ) in 2010 and $ 55.7 million ( $ 2.08 per share ) in 2009. higher net income in both 2011 22 and 2010 resulted primarily from the improvement in operating income , as described above . our net income also increased in 2011 due to the decrease in our effective tax rate described below , and due to the impact of foreign currency exchange rate changes on u.s. dollar denominated investments held by our wholly-owned subsidiary in
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we may also , from time to time , enter into rule 10b5-1 plans to facilitate repurchases of shares under this authorization . the amount and timing of repurchases are subject to a variety of factors including liquidity , cash flow , stock price and general business and market conditions . the program may be modified , suspended , or discontinued at any time . for additional information , including our repurchase activities under the previously authorized program , see note 19 and note 25 to our consolidated financial statements included in item 8 of part ii of this annual report and item 5 of part ii of this annual report . issuer conversion of 4.0 % convertible senior notes due december 15 , 2020 ( “ 2020 notes ” ) . on october 31 , 2018 , we exercised our option to convert the $ 187.5 million principal amount outstanding of our 2020 notes into shares of ciena common stock . in connection with this conversion , we issued approximately 9.2 million shares and the 2020 notes ceased to be outstanding . in accordance with the `` make-whole '' provision , note holders were also entitled to certain additional shares of ciena common stock upon conversion . we elected to deliver cash in lieu of these additional shares . the amount of cash in lieu of the additional shares was approximately $ 13.5 million , which was also paid on october 31 , 2018. see note 16 to our consolidated financial statements included in item 8 of part ii of this annual report for more information relating to our 2020 notes . settlement upon conversion of 3.75 % convertible senior notes due october 15 , 2018. on october 15 , 2018 , both our 3.75 % convertible senior notes due october 15 , 2018 ( original ) ( the “ original notes ” ) and our 3.75 % convertible senior notes due october 15 , 2018 ( new ) ( the “ new notes ” ) matured . following conversion elections by the holders thereof , the outstanding original notes were converted in advance of maturity on october 15 , 2018 and we issued approximately 3.0 million shares of ciena common stock in settlement of such conversion . the original notes thereafter ceased to be outstanding . during the fourth quarter of fiscal 2018 , we elected to settle conversion of the new notes in a combination of cash and shares , provided that the cash portion would not exceed an aggregate amount of approximately $ 400 million . upon conversion of the new notes by the holders in advance of maturity , on october 15 , 2018 , we paid in cash an amount of $ 288.7 million representing the aggregate principal amount outstanding of the new notes . the new notes thereafter ceased to be outstanding . in addition , because ciena common stock traded in excess of the $ 20.17 per share conversion price during an observation period from october 15 , 2018 through november 9 , 2018 , on november 15 , 2018 , we paid an additional $ 111.3 million in cash and issued approximately 1.6 million shares with respect to the “ in the money ” portion of the notes in settlement of the conversion . see notes 14 and 16 to our consolidated financial statements included in item 8 of part ii of this annual report for more information relating to our original notes and new notes . 41 term loan refinancing . on september 28 , 2018 , we refinanced our existing term loan in the aggregate principal amount of $ 394 million , maturing on january 30 , 2022 ( the “ 2022 term loan ” ) into a term loan with an aggregate principal amount of $ 700 million maturing on september 28 , 2025 ( the “ 2025 term loan ” ) . see note 16 to our consolidated financial statements included in item 8 of part ii of this annual report for more information relating to our term loan refinancing . impact of tax cuts and jobs act our results of operations for fiscal 2018 have been impacted by enactment of the tax cuts and jobs act ( the “ tax act ” ) in december 2017. specifically , our results for fiscal 2018 include a $ 472.8 million tax charge consisting of the following : $ 438.2 million charge related to the remeasurement of u.s. net deferred tax assets at the lower statutory rate under the tax act ; and $ 34.6 million charge related to a transition tax on accumulated historical foreign earnings and its deemed repatriation to the u.s. see note 20 to our consolidated financial statements included in item 8 of part ii of this annual report for more information related to the impact of the tax act . 42 story_separator_special_tag services and $ 9.2 million of our blue planet automation software and services . platform software and services sales reflect increases of $ 15.2 million in platform software and $ 5.1 million in software-related services . these increases primarily reflect sales increases $ 17.0 million of our manage , control and plan ( mcp ) software , $ 3.3 million of software subscription services and $ 1.5 million of our software training services . blue planet automation software and services sales primarily reflect increases of $ 5.7 million of services and $ 3.4 million of software . ◦ global services segment revenue primarily reflects sales increases of $ 6.0 million of our maintenance support and training services and $ 2.9 million of our installation and deployment services . emea revenue primarily reflects sales increases of $ 49.2 million within our networking platforms segment , $ 9.8 million within our global services segment and $ 1.8 million within our software and software-related services segment . ◦ networking platforms segment revenue primarily reflects a product line increase of $ 53.0 million in converged packet optical sales , partially offset by a product line decrease of $ 3.9 million in packet networking sales . story_separator_special_tag converged packet optical reflects increases of $ 32.5 million in sales of our waveserver stackable interconnect system primarily to web-scale providers and $ 22.4 million in sales of our 6500 packet-optical platform to communications service providers , web-scale providers and enterprise customers . ◦ global services segment revenue primarily reflects sales increases of $ 8.5 million of our maintenance and training support services and $ 1.6 million of our installation and deployment services , primarily to communications service providers . cala revenue primarily reflects decreases of $ 23.3 million within our networking platforms segment and $ 2.9 million within our global services segment . these decreases were partially offset by a revenue increase of $ 2.1 million within our software and software-related services segment . the decrease in cala revenue primarily relates to decreased sales to a cable and multiservice operator in argentina and communications service providers in brazil . apac revenue primarily reflects sales increases of $ 87.0 million within our networking platforms segment , $ 12.4 million within our global services segment and $ 6.1 million within our software and software-related services segment , primarily reflecting increased sales in japan and india . ◦ networking platforms segment revenue primarily reflects product line increases of $ 72.0 million in converged packet optical sales and $ 15.0 million of packet networking sales . converged packet optical sales reflect sales increases of $ 114.2 million in sales of our 6500 packet-optical platform to communications service providers and $ 9.1 million in sales of our waveserver stackable interconnect system to communications service providers , web-scale providers and government customers . these increases were partially offset by a $ 47.0 million decrease in sales of our 5410/5430 reconfigurable switching systems , reflecting decreased sales to certain communications service providers . packet networking sales primarily reflect sales increases of $ 13.1 million in sales of our 8700 packetwave platform and $ 1.9 million in sales of our 3000 and 5000 families of service delivery and aggregation switches , primarily to a certain communication service provider in india . ◦ software and software-related services segment revenue primarily reflects sales increases of $ 4.8 million of our platform software and services and $ 1.3 million of our blue planet automation software and services . ◦ global services segment revenue primarily reflects increases of $ 9.5 million in sales of installation and deployment services and $ 3.6 million in our maintenance and training support services . in fiscal 2018 and fiscal 2017 , our top ten customers contributed 56.5 % and 55.6 % of revenue , respectively . consequently , our financial results are closely correlated with the spending of a relatively small number of customers and can be significantly affected by market , industry or competitive dynamics affecting their businesses . our reliance upon a relatively small number of customers also increases our exposure to changes in their spending levels , network priorities and purchasing strategies . the loss of a significant customer could have a material adverse effect on our business and results of operations , and our results of operations can fluctuate quarterly depending upon sales volumes and purchasing priorities with these large customers . sales to 45 at & t were $ 374.6 million , or 12.1 % of total revenue in fiscal 2018 , and $ 448.9 million , or 16.0 % of total revenue in fiscal 2017 . verizon accounted for $ 318.0 million or 10.3 % of total revenue for fiscal 2018 and $ 288.0 million , or 10.3 % of total revenue in fiscal 2017 . no other customer accounted for greater than 10 % of our revenue in fiscal 2018 or fiscal 2017 . while drivers of bandwidth growth and network evolution remain strong , our customers are under constant pressure to constrain their capital expenditure budgets and can not grow their network spending at the rate of bandwidth growth . as a result , as we innovate and introduce new and more robust solutions that increase capacity or features , there is a market expectation of solutions that are more cost-effective from price for performance perspective than existing or competing solutions . the combination of this regular technology-driven price compression , price competition and pricing pressure in our markets and ongoing customer efforts to manage network costs can impact growth rates in our markets , and requires that we increase our volume of product shipments to maintain and grow revenue cost of goods sold and gross profit product cost of goods sold consists primarily of amounts paid to third-party contract manufacturers , component costs , employee-related costs and overhead , shipping and logistics costs associated with manufacturing-related operations , warranty and other contractual obligations , royalties , license fees , amortization of intangible assets , cost of excess and obsolete inventory and , when applicable , estimated losses on committed customer contracts . services cost of goods sold consists primarily of direct and third-party costs associated with our provision of services including installation , deployment , maintenance support , consulting and training activities and , when applicable , estimated losses on committed customer contracts . the majority of these costs relate to personnel , including employee and third-party contractor-related costs . our gross profit as a percentage of revenue , or “ gross margin , ” can fluctuate due to a number of factors , particularly when viewed on a quarterly basis . our gross margin can fluctuate and be adversely impacted depending upon our revenue concentration within a particular segment , product line , geography , or customer , including our success in selling software in a particular period . our gross margin remains highly dependent on our continued ability to drive product cost reductions relative to the price erosion that we regularly encounter in our markets . moreover , we are often required to compete with aggressive pricing and commercial terms and , to secure business with new and existing customers , we may agree to pricing or other unfavorable commercial terms that adversely affect our gross margin .
| increased sales of our waveserver stackable interconnect system were primarily to web-scale providers for data center interconnection applications . as we continue to diversify our business , web-scale providers represent a growing portion of our business and are included among our largest customers during fiscal 2018. increased sales of our 6500 packet-optical platform were primarily to communications service providers , web-scale providers and enterprise customers , partially offset by decreased sales to at & t , cable and multiservice operators , and government customers . ◦ packet networking reflects a sales decrease of $ 51.5 million of our 3000 and 5000 families of our service delivery and aggregation switches , primarily related to reduced sales to at & t . this decrease was partially offset by a sales increase of $ 16.3 million of our 8700 packetwave platform . software and software-related services segment revenue increased , reflecting sales increases of $ 28.9 million of our platform software and services and $ 10.7 million of our blue planet automation software and services . ◦ platform software and services primarily reflect sales increases of $ 19.2 million in sales of our software and $ 9.7 million in sales of our software-related services . these increases primarily reflect sales increases of $ 17.9 million of our manage , control and plan ( mcp ) software and $ 7.3 million in sales of our software subscription services . ◦ blue planet automation software and services primarily reflects sales increases of $ 8.4 million of services and $ 2.3 million of software . increased services revenue primarily reflects increases of $ 3.3 million from professional services , $ 2.7 million in maintenance services and $ 1.4 million in professional services related to the packet design and donriver businesses acquired during fiscal 2018 , respectively . global services segment revenue increased , primarily reflecting sales increases of $ 17.8 million of our maintenance support and training services and $ 11.3 million of our installation and deployment services .
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the company is considering all of its strategic alternatives , including potential divestitures and further cost reductions or other downsizing measures , which could be costly and adversely impact our financial performance . management 's recovery plans given the loss of the dana business and unfavorable growth trends and softness in commercial vehicle manufacturing and the oil and gas markets served by sypris technologies , management has developed various profit recovery and protection plans and is evaluating strategic alternatives to optimize asset values in each of the company 's segments . management has engaged advisors to provide recommendations for cost reductions and actions that can be taken to improve profitability . management prepared a revised forecast during march 2016 with plans to control costs , manage cash flow and remain in compliance with debt covenant requirements throughout 2016. in addition , management has embarked on a project to evaluate various strategic alternatives to optimize asset values . the company completed a number of its initial profit recovery and protection actions in 2015 , including : ( i ) the sale of certain assets used in the company 's manufacturing facility in morganton , north carolina within the sypris technologies segment ( ii ) reduction in workforce at all locations , and ( iii ) other reductions in employment costs through reduced work schedules , senior management pay reductions , deferral of merit increases and certain benefit payments . the company 's debt was restructured and the prior credit facility was paid in full , while the company has received the benefit of three cash infusions from gill family capital management , inc. ( “ gfcm ” ) , in the form of subordinated promissory note obligations totaling $ 6.5 million in principal through the first quarter of 2016. the commercial vehicle industry has softened beginning in the fourth quarter of 2015 along with other durable and non-durable goods sectors in the north america economy . management has identified additional cost reduction actions in the sypris technologies segment . reductions in selling , general and administrative expense and labor expense were implemented during the first quarter of 2016 , and additional cost reductions are planned during the second and third quarters . although the expected benefits of the cost reductions will be partially offset by the impact of minor investments and severance required to enable the cost reductions , the actions are expected to contribute to improved liquidity during 2016. management has identified a number of new customer opportunities that provide higher margin opportunities , even at lower volumes . management is implementing operational efficiencies that are expected to enable reductions in the machinery set-up time for new orders which enables the company to quote on customer requirements that are higher margin but with somewhat shorter run lengths . these new business activities are anticipated to enable the company to diversify its revenue volume over a larger and more profitable customer base . 22 one of the additional actions implemented by management during the first quarter of 2016 was to consummate the sale and partial lease back of its facility located in toluca , mexico , which generated gross proceeds of approximately $ 12.1 million . of this total , $ 6.0 million was deposited into a cash collateral account to be held for up to one year as additional collateral for the term loan ( see note 14 “ debt ” to the consolidated financial statement in this form 10-k ) . management will continue to operate in toluca but given the 2015 reduction in the dana business and the overall downturn in the commercial vehicle markets , management determined that the underutilized toluca real estate value could be best optimized with a sale and lease back arrangement where some but not all of the facility would continue to be occupied and managed by sypris technologies . the oil and gas industry has experienced significant price erosion , and as a result the company 's customers are delaying capital expenditures that support their growth and maintenance projects . the company has identified some capacity reallocation opportunities between plants in the united states and mexico . the company has initiated the process of qualifying production for certain components in mexico that are currently produced in the united states and completed the qualification for the first group of these components . the company expects the capacity reallocation will accelerate during 2016 as the capital necessary to fund the reallocation becomes available and the qualification process for the production is complete . sypris electronics has continued to invest in a number of product development projects . the company was awarded a significant engineering services contract in the defense sector during march of 2016. nevertheless , the company has identified certain cost reduction and cash flow enhancements in the sypris electronics segment that can be implemented during the second and third quarters that are not expected to impact the future growth in the electronics segment . sypris electronics has filed a number of patent applications for technology related to its new siometrics hardware authentication solutions , which may enable the company to address commercial markets for infrastructure and the internet of things ( iot ) markets . new commercial opportunities in the automotive , industrial controls , communications , infrastructure , utilities , automation , aviation , retail , and personal communication devices could benefit from the technology that sypris electronics has patented or for which it has patents pending . sypris electronics now provides a platform of layered security protocols that will enable customers in a number of industries to tailor the security solutions to their individual requirements . management has taken steps to diversify its product and service offerings in the sypris electronics segment whereby the company intends to be less dependent upon the defense markets and better positioned to take advantage of the rapidly growing commercial security and encryption markets going forward . story_separator_special_tag management has identified certain cost reductions at the corporate headquarters that are expected to improve profitability and cash flow throughout 2016. salary reductions and other sg & a cost reductions were implemented during the first quarter of 2016 that management believes will continue to benefit the company throughout future periods . additional cost reductions have been identified in the area of professional services , administration and lease expense . our failure or inability to realize our key financial objectives could materially and adversely impair the company 's ability to operate , its cash flows , financial condition and ongoing results . see “ risk factors – customer contracts may not be renewed on acceptable terms or at all . our largest customer dana has repudiated our supply relationship. ” in part i , item 1a of this annual report on form 10-k. see also note 2 “ management 's recovery plans ” to the consolidated financial statements in this form 10-k. 23 critical accounting policies and estimates the preparation of the consolidated financial statements and accompanying notes in conformity with u.s. generally accepted accounting principles requires that we make estimates and assumptions that affect the amounts reported . changes in facts and circumstances could have a significant impact on the resulting estimated amounts included in our consolidated financial statements . we believe the following critical accounting policies affect our more complex judgments and estimates . we also have other policies that we consider to be key accounting policies , such as our policies for revenue recognition for sypris technologies , including cost of sales ; however , these policies do not meet the definition of critical accounting policies because they do not generally require us to make estimates or judgments that are difficult or subjective . allowance for doubtful accounts . we establish reserves for uncollectible accounts receivable based on overall receivable aging levels , a specific evaluation of accounts for customers with known financial difficulties and evaluation of customer chargebacks , if any . these reserves and corresponding write-offs could significantly increase if our customers experience deteriorating financial results or in the event we receive a significant chargeback , which is deemed uncollectible . net revenue and cost of sales . net revenue of products and services under commercial terms and conditions are recorded upon delivery and passage of title , or when services are rendered . related shipping and handling costs , if any , are included in costs of sales . net revenue on fixed-price contracts is recognized as services are performed . revenue is deferred until all of the following have occurred : ( 1 ) there is a contract in place , ( 2 ) delivery has occurred , ( 3 ) the price is fixed or determinable , and ( 4 ) collectability is reasonably assured . contract profits are taken into earnings based on actual cost of sales for units shipped . amounts representing contract change orders or claims are included in revenue when such costs are invoiced to the customer . the company periodically enters into research and development contracts with customers related primarily to key encryption products . when the contracts provide for milestone or other interim payments , the company will recognize revenue under the milestone method in accordance with accounting standards codification ( “ asc ” ) 605-28 , revenue recognition – milestone method . the milestone method requires the company to deem all milestone payments within each contract as either substantive or non-substantive . that conclusion is determined based upon a thorough review of each contract and the deliverables to which the company has committed to in each contract . for substantive milestones , the company concludes that upon achievement of each milestone , the amount of the corresponding defined payment is commensurate with the effort required to achieve such milestone or the value of the delivered item . the payment associated with each milestone relates solely to past performance and is deemed reasonable upon consideration of the deliverables and the payment terms within the contract . milestones may include , for example , the successful completion of design review or technical review , the submission and acceptance of technical drawings , delivery of hardware , software or regulatory agency certifications . the company had no such contracts in process as of december 31 , 2015 and one such milestone contract in process as of december 31 , 2014. all milestones under the contract in process as of december 31 , 2014 were deemed substantive . revenue recognized through the achievement of multiple milestones during 2015 and 2014 amounted to $ 0.3 million and $ 3.1 million , respectively . there are no performance , cancellation , termination or refund provisions in the arrangement that contain material financial consequences to the company . long-lived asset impairment . we perform periodic impairment analysis on our long-lived amortizable assets whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable . when indicators are present , we compare the estimated future undiscounted net cash flows of the operations to which the assets relate to their carrying amount . if the operations are unable to recover the carrying amount of their assets , the long-lived assets are written down to their estimated fair value . fair value is determined based on discounted cash flows , third party appraisals or other methods that provide appropriate estimates of value . a considerable amount of management judgment and assumptions are required in performing the impairment test , principally in determining whether an adverse event or circumstance has triggered the need for an impairment review . 24 pension plan funded status . our u.s. defined benefit pension plans are closed to new entrants and only $ 14 thousand of service-related costs was recorded in 2015 related to a small number of participants who are still accruing benefits in the louisville hourly and salaried plans . changes in our net obligations are principally attributable to changing discount rates and the performance of plan assets .
| additionally , the loss of the trailer axle revenue with the sale of assets in morganton accounted for $ 12.2 million of the decline . partially offsetting this was a net increase in other volumes of $ 6.0 million attributable to favorable demand from our commercial vehicle market customers . sypris electronics derives its revenue from product sales and technical outsourced services . net revenue for sypris electronics increased $ 4.7 million to $ 37.2 million in 2015 , reflecting the start and completion of a new electronic manufacturing service program for $ 5.9 million and the commissioning of a cyber range during the year for $ 2.0 million . partially offsetting this was a decline in engineering services revenue during the year . despite the increase in revenue over the prior year , sypris electronics ' outlook continues to be negatively affected by the budgetary factors described above . for information about the budgetary and funding uncertainty , see “ risk factors – congressional budgetary constraints or reallocations could reduce our government sales ” in part i , item 1a of this annual report on form 10-k. gross profit . sypris technologies ' gross profit decreased $ 42.8 million to a loss of $ 0.8 million in 2015 as compared to profit of $ 42.0 million in the prior year . the net decrease in sales volumes , primarily from the loss of the dana business , resulted in a decrease in gross profit of $ 47.9 million . partially offsetting this was a decrease in depreciation expense of $ 3.1 million . sypris electronics ' gross profit increased $ 4.3 million to $ 1.1 million in 2015. the improvement in gross profit for the year ended december 31 , 2015 was primarily as a result of higher revenue and a favorable mix in sales of higher margin products and services . selling , general and administrative . selling , general and administrative expense decreased $ 7.7 million to $ 27.8 million in 2015 as compared to $ 35.5 million in 2014 , primarily as a result of
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there were no grants to service providers since 2010. replace_table_token_14_th 64 brainstorm cell therapeutics inc. and subsidiary u.s. dollars in thousands ( except share data and exercise prices ) notes to consolidated financial statements note 7 - story_separator_special_tag company overview we are a biotechnology company developing novel adult stem cell therapies for debilitating neurodegenerative disorders such as als , ms , and pd among others . these diseases for the most part have no or limited treatment options and as such represent unmet medical needs . we believe that nurown® , our proprietary process for the propagation of msc and their differentiation into neurotrophic factor-secreting cells , and their transplantation at , or near , the site of damage , offers the hope of more effectively treating neurodegenerative diseases . our core technology was developed in collaboration with prof. daniel offen of the felsenstein medical research center of tel aviv university and the late prof. eldad melamed , who passed away in october 2015 , and was former head of neurology of the rabin medical center and former member of the scientific committee of the michael j. fox foundation for parkinson 's research . our wholly-owned israeli subsidiary holds rights to commercialize the technology , through a licensing agreement with ramot . we currently employ 17 employees in israel and 3 in the united states . story_separator_special_tag margin-bottom : 6pt ; border-bottom : black 1pt solid '' > 37 net cash used in operating activities for the year ended december 31 , 2015 was $ 7,408,000. cash used for operating activities was primarily attributed to cost of clinical trials , rent of clean rooms and materials for clinical trials , payroll costs , rent , outside legal fee expenses and public relations expenses . net cash used in investing activities for the year ended december 31 , 2015 was $ 11,283,000 representing primarily a net increase in short-term deposits . net cash provided by financing activities for the year ended december 31 , 2015 was $ 14,868,000 , including net proceeds of $ 12,409,000 from the january 8 , 2015 agreement described below as well as $ 2,459,000 from the exercises of other warrants and options during the year . on june 13 , 2014 , we entered into a securities purchase agreement with a group of investors , including several healthcare-focused funds ( the “ investors ” ) to effect a private placement ( the “ 2014 private placement ” ) of the company 's common stock and warrants to purchase common stock . on june 19 , 2014 , upon the closing of the 2014 private placement , we received gross proceeds of $ 10.5 million , resulting from the issuance and sale of 2.8 million shares of common stock at a price per share of $ 3.75 , a 15 % discount to the 30 day volume-weighted average price of $ 4.41. the investors also received warrants to purchase up to 2.8 million shares of common stock at an exercise price of $ 5.22 per share ( the “ 2014 warrants ” ) . the 2014 warrants were exercisable immediately upon closing of the 2014 private placement and have a term of three ( 3 ) years . on january 8 , 2015 , the company signed an agreement according to which the company issued 2.5 million shares of common stock , pursuant to the exercise of the 2014 warrants for consideration of $ 13.3 million dollars . in addition , the company granted new warrants to the warrant holders to purchase up to an aggregate of approximately 3.8 million unregistered shares of common stock at an exercise price of $ 6.50. maxim group llc ( “ maxim ” ) acted as solicitation agent for the exercise of the 2014 warrants on january 8 , 2015 , for a cash fee equal to 6.0 % of the exercise proceeds , as well as fees and expenses of maxim of $ 20,000. in addition , the company issued maxim a warrant to purchase up to approximately 38,000 shares of common stock ( equal to 1.5 % of the exercised 2014 warrants ) upon substantially the same terms as the new warrants . on june 4 , 2015 , we filed a shelf registration statement , effective june 10 , 2015 , relating to common stock , warrants and units that we may sell from time to time in one or more offerings , up to a total dollar amount of $ 100,000,000. we have not filed any supplemental prospectus defining particular terms of securities to be offered under the shelf registration statement . our material cash needs for the next 12 months will include ( i ) costs of the clinical trial in the u.s. ( ii ) employee salaries , ( iii ) costs expected for the upcoming multi-dose clinical trial in israel , ( iv ) payments to hadassah for rent and operation of the gmp facilities , and ( v ) fees to our consultants and legal advisors , patents , and fees for facilities to be used in our research and development . future operations are expected to be highly capital intensive and will require substantial capital raisings . we expect our current cash position will allow us to meet our obligations in the upcoming 12 months . over the longer term if we are not able to raise substantial additional capital , we may not be able to continue to function as a going concern and may have to cease operations or the company will reduce its costs , including curtailing its current plan to pursue larger clinical trials in als andmove new indications into clinical testing . story_separator_special_tag we will be required to raise a substantial amount of capital in the future in order to reach profitability and to complete the commercialization of our products . our ability to fund these future capital requirements will depend on many factors , including the following : 38 our ability to obtain funding from third parties , including any future collaborative partners ; the scope , rate of progress and cost of our clinical trials and other research and development programs ; the time and costs required to gain regulatory approvals ; the terms and timing of any collaborative , licensing and other arrangements that we may establish ; the costs of filing , prosecuting , defending and enforcing patents , patent applications , patent claims , trademarks and other intellectual property rights ; the effect of competition and market developments ; and future pre-clinical and clinical trial results . critical accounting policies our significant accounting policies are more fully described in note 2 to our consolidated financial statements appearing in this annual report . we believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations . the discussion and analysis of our financial condition and results of operations is based on our financial statements , which we prepared in accordance with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities , as well as the reported revenues and expenses during the reporting periods . on an ongoing basis , we evaluate such estimates and judgments , including those described in greater detail below . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances . actual results may differ from these estimates under different assumptions or conditions . financial statements in u.s. dollars : the functional currency of the company is the u.s dollar ( `` dollar '' ) since the dollar is the currency of the primary economic environment in which the company has operated and expects to continue to operate in the foreseeable future . part of the transactions of the company are recorded in new israeli shekels ( `` nis '' ) ; however , a substantial portion of the company 's costs are incurred in dollars or linked to the dollar . accordingly , management has designated the dollar as the currency of the company 's primary economic environment and thus it is their functional and reporting currency . transactions and balances denominated in dollars are presented at their original amounts . non-dollar transactions and balances have been re-measured to dollars in accordance with the provisions of asc 830-10 ( formerly statement of financial accounting standard 52 ) , `` foreign currency translation '' . all transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses , as appropriate . fair value of financial instruments : the carrying values of cash and cash equivalents , accounts receivable and prepaid expenses , trade payables and other accounts payable approximate their fair value due to the short-term maturity of these instruments . the company utilizes the black scholes merton formula to measure the fair value of the warrants issued . the assumptions included in the black-scholes model were : ( i ) the market price of the company 's shares ; ( ii ) the exercise price of the warrant ; ( iii ) risk-free interest ; ( iv ) term available to exercise or redeem the security and ( v ) the volatility of the shares during the relevant term . the company determines the volatility of its shares using daily historical quotes of the shares . the risk free interest rate is determined as the interest rate on governmental bonds with maturity commensurate with the term of the warrant . 39 accounting for stock-based compensation : in accordance with asc 718-10 ( formerly statement of financial accounting standards 123 ( revised 2004 ) ) the company estimates the fair value of equity-based payment awards on the date of grant using an option-pricing model . the value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the company 's consolidated statement of operations . the company recognizes compensation expense for the value of non-employee awards , which have graded vesting , based on the straight-line method over the requisite service period of each award . the company recognizes compensation expense for the value of employee awards that have graded vesting , based on the straight-line method over the requisite service period of each of the awards , net of estimated forfeitures . the company estimates the fair value of restricted shares based on the market price of the shares at the grant date and estimates the fair value of stock options granted using a black-scholes options pricing model . the option-pricing model requires a number of assumptions , of which the most significant are , expected stock price volatility and the expected option term ( the time from the grant date until the options are exercised or expire ) . expected volatility was calculated based upon actual historical stock price movements over the period , equal to the expected option term . the company has historically not paid dividends and has no foreseeable plans to issue dividends . the risk-free interest rate is based on the yield from u.s. treasury zero-coupon bonds with an equivalent term . research and development expenses , net : research and development expenses , are charged to the statement of operations as incurred . royalty-bearing grants from the government of israel for funding approved research and development projects are recognized at the time the company is entitled to such grants ,
| 36 general and administrative general and administrative expenses for the years ended december 31 , 2015 and 2014 were $ 3,587,000 and $ 2,649,000 , respectively . the increase of $ 938,000 in general and administrative expenses is mainly due to : ( i ) an increase of $ 527,000 in payroll expenses primarily due to the hiring of a new ceo in june 2014 and his replacement in september 2015 , as well as a hiring of a new cfo in august 2015 , ( ii ) an increase of $ 371,000 in the cost of our investor relations and public relations activities and rent , and ( iii ) an increase of $ 263,000 in the cost of our delaware franchise tax and ( iv ) an increase of $ 10,000 of various other expenses offset by a decrease of $ 233,000 in stock based compensation expenses . financial expenses the financial income of $ 48,000 for the year ended december 31 , 2015 is mainly due to interest earned on our cash , cash equivalents and short term deposits . financial expenses for the year ended december 31 , 2014 were $ 1,825,000. the financial expenses for the year ended december 31 , 2014 included a charge $ 1,743,000 due to revaluation of warrants issued to investors in the august 2013 public offering ( `` 2013 warrants '' ) which included certain anti-dilution provisions . under generally accepted accounting principles , the anti-dilution provisions require those 2013 warrants to be valued and classified as a warrant liability on the balance sheet , resulting in a reduction of stockholders ' equity . on january 6 , 2015 , the remaining 2013 warrants , that did not participate in the redemption and that did not provide a waiver of their anti-dilution rights , exercised their warrants . therefore , the liability related to the 2013 warrants has been cancelled . net loss net loss for the year ended december 31 , 2015 was $ 8,488,000 , as compared to a net loss of $ 9,246,000 for the year ended
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the dsmb unanimously recommended the continuation of the study without modification and had no safety concerns about any of the 3 dose levels of vbi-1901 . the final subject in the high dose cohort was enrolled in mid-december 2018. on november 16 , 2018 , initial immunologic and biomarker data was presented in a poster presentation at the annual scientific meeting and education day of the society for neuro-oncology . we expect to announce data regarding more extensive immunologic data and 6-month survival data from all three dose cohorts in phase i of the study ( low , intermediate , and high ) , mid 2019. we may also seek to in-license clinical-stage vaccines or vaccine-related technologies that we believe complement our product and pipeline portfolio , in addition to technologies that may supplement our therapeutic vaccination efforts in immuno-oncology . 51 at present , our operations are focused on : ● conducting the sci-b-vac phase iii clinical program to support various marketing authorization applications in the united states , europe , canada ; ● conducting the phase i/iia clinical study of our gbm vaccine immunotherapeutic candidate , vbi-1901 ; ● further developing the clinical program for vbi-1501 , our preventative cmv vaccine candidate into the next phase of development ; ● developing vbi-2601 , our protein-based immunotherapeutic for treatment of hepatitis b , in collaboration with brii bio ; ● modernizing and increasing capacity of our sci-b-vac manufacturing facility in rehovot , israel ; ● increasing sales of sci-b-vac in territories where it is currently registered or available on a named-patient basis , and further preparing for commercialization of sci-b-vac in additional markets where we may obtain regulatory approval ; ● continuing the research and development of our product candidates , including the exploration and development of new product candidates , including a zika vaccine candidate ; ● implementing operational , financial and management information systems and adding human resources support , including additional personnel to support our product development and commercialization activities ; and ● maintaining , expanding and protecting our intellectual property portfolio . ● developing our internal systems and processes for regulatory affairs and compliance . vbi 's revenue generating activities have been the sale of sci-b-vac product in markets where it is approved or on a named patient basis where it is not approved , though those markets have generated a limited number of sales to-date , various collaboration agreements , and r & d services generating fees . vbi has incurred significant net losses and negative operating cash flows since inception and expects to continue incurring losses and negative cash flows from operations as we carry out our planned clinical , regulatory , r & d , sales and manufacturing activities with respect to the advancement of our sci-b-vac and new product candidates . as of december 31 , 2018 , vbi had an accumulated deficit of approximately $ 208 million and stockholders ' equity of approximately $ 98 million . our ability to maintain our status as an operating company is dependent upon obtaining adequate cash to finance our clinical development , manufacturing , our administrative overhead and our research and development activities . we plan to finance future operations with existing cash reserves . we expect that we will need to secure additional financing to finance our business plans , if required , which may be a combination of proceeds from the issuance of equity securities , the issuance of additional debt , structured asset financings and revenues from potential collaborations , if any . there is no assurance the company will manage to obtain these sources of financing , if required . these factors raise substantial doubt about the company 's ability to continue as a going concern . the accompanying financial statements have been prepared assuming that we will continue as a going concern . the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern . 52 we have incurred operating losses since inception , have not generated significant product sales revenue and have not achieved profitable operations . we incurred net losses of $ 64 million for the year ended december 31 , 2018 and we expect to continue to incur substantial losses in future periods . we anticipate that our operating expenses will increase as we continue our clinical studies . these include expenses related to : ● continuing the phase iii clinical program for sci-b-vac and the phase i/iia clinical study of our gbm vaccine immunotherapeutic candidate ; ● continuing the research and development of our product candidates , including further developing the clinical program for vbi-1501 our preventative cmv vaccine candidate and vbi-2601 our hepatitis b immunotherapeutic candidate ; ● modernizing and increasing capacity of our manufacturing facility at rehovot , israel ; ● commercializing products and dose forms for which we may obtain regulatory approval , including through the use of sub-contractors ; ● maintaining , expanding and protecting our intellectual property portfolio ; ● hiring additional clinical , manufacturing , and scientific personnel or contractors ; and ● implementing , operational , financial and management information systems and adding human resources support , including additional personnel , to support our vaccine development ● developing our internal systems and processes for regulatory affairs and compliance . in addition , we have incurred and will continue to incur significant expenses as a public company , which subjects us to the reporting requirements of the exchange act , the sarbanes-oxley act and the rules and regulations of the nasdaq capital market and the canadian securities regulators . effective as of march 23 , 2018 , we voluntarily delisted our common shares from the toronto stock exchange . equity financing activities on december 17 , 2018 , we received aggregate gross proceeds of $ 42.9 million from an underwritten public offering of an aggregate of 30,665,304 common shares at a price of $ 1.40 per share . story_separator_special_tag after deducting the underwriting discounts and commissions and offering expenses , net proceeds from the offering were of $ 39.8 million . net proceeds from the offering will be used to support our vaccine development programs , to continue the advancement of our clinical development and research programs and for other general corporate purposes . on december 4 , 2018 , we entered into a license agreement with brii bio , whereby we received a total upfront payment of $ 11 million to collaborate on the development of a hepatitis b recombinant protein based immunotherapeutic in china , hong kong , taiwan and macau and to conduct a phase ii collaboration clinical trial . the license agreement specified an allocation of $ 7 million of this amount as an equity investment in exchange for 2,295,082 common shares . the license agreement set forth a price of $ 3.05 per share which was at a premium to the closing market price of $ 1.58 on the day of issuance , resulting in actual allocation of the fair value of the 2,295,082 shares being $ 3.6 million . the remaining $ 7.4 million of the $ 11 million consideration received was allocated to the sale of the license and research and development services . based upon our current cash position and by monitoring our discretionary expenditures as well as the management of our clinical trial commitments and operating costs , we believe these proceeds will be sufficient to fund our activities , including our approved capital expenditure requirements throughout 2019. we expect , however , that additional financing will be needed in the future to further support clinical , regulatory , research and development , sales and manufacturing , and general business operations . amended credit facility on may 6 , 2016 , the company through vbi de assumed a term loan facility with perceptive credit holdings , lp , a related party , ( the “ lender ” ) in the amount of $ 6,000 ( the “ facility ” ) . on december 6 , 2016 , the company amended the facility ( the “ amended credit facility ” ) and raised the perceptive credit 's commitment amount to $ 13,200 , which was combined with the remaining balance from the facility of $ 1,800. on july 17 , 2018 , the company amended the amended credit facility by the second amendment to extend the period the company is required to pay only the interest on the loan from may 31 , 2018 to december 31 , 2018 and to extend the expiration date of certain warrants to purchase 363,771 common shares issued to the lender with an original issue date of july 25 , 2014 , from july 25 , 2019 to december 6 , 2021. the company accounted for this as a debt modification , and as a result of the extension of the warrant expiration date in connection with the second amended facility , the debt discount was increased by $ 386. this amount represents the incremental fair value of the modified warrants . 53 on january 31 , 2019 we further amended the amended credit facility ( the “ third amendment ” ) to i ) extend the period we are required to pay only the interest on the loan from december 31 , 2018 to the amortization commencement date ( which is defined as the later of july 31 , 2019 and , if sci-b-vac phase iii clinical trial endpoints are achieved by june 30 , 2019 , january 31 , 2020 ) ; ii ) to extend the maturity date of the term loan from december 31 , 2019 to june 30 , 2020 and iii ) reduce the exercise price on certain warrants to purchase common shares issued to perceptive credit to $ 2.75 from $ 4.13 for 363,771 warrants issued on july 25 , 2014 and for 363,771 warrants issued on december 6 , 2016 and from $ 3.355 for 1,341,282 warrants issued on december 6 , 2016. research and development ( “ r & d ” ) services pursuant to an agreement with the israel innovations authority ( formerly the office of the chief scientist of israel ) , the company is required to make services available for the biotechnology industry in israel . these services include relevant activities for development and manufacturing of therapeutic proteins according to international standards and gmp quality level suitable for toxicological studies in animals and clinical studies ( phase i & ii ) in humans . service activities include analytics/bio analytics methods for development and process development of therapeutic proteins starting with a candidate clone through the upstream , purification , formulation and filling processes and manufacturing for phase i & ii clinical trials . these r & d services are primarily marketed to the israeli research community in academia and israeli biotechnology companies in the life sciences lacking the infrastructure or experience in the development and production of therapeutic proteins to the standards and quality required for clinical trials for human use . in 2018 , the company provided services to biotechnology companies including analytical development , upstream development process , protein purification and formulation and filling for phase i clinical studies . modernization and capacity increase of our manufacturing facility on april 22 , 2018 , we temporarily closed our manufacturing facility in rehovot , israel , for modernization and capacity increase . we intend to increase the capacity of our manufacturing facility to be able to supply commercial quantities of sci-b-vac upon fda , and or ema and or health canada approval and future clinical supplies of vbi-2601 . the construction related to the modernization and the capacity increase is ongoing and validation activities are in progress .
| r & d expenses leading up to the phase iii sci-b-vac clinical studies . 56 general and administration general and administration ( “ g & a ” ) expenses for the year ended december 31 , 2018 were $ 20,787 as compared to $ 12,034 for the year ended december 31 , 2017. the g & a expense increase of $ 8,753 or 73 % is a result of ( 1 ) the increased human resource expenses , including stock-based compensation expenses , and the allocation of certain costs of revenues related to the temporary closure of our manufacturing facility , to g & a expenses , ( 2 ) $ 6 million paid to re-obtain distribution rights in asia , ( 3 ) certain marketing expenses and ( 4 ) the impairment loss on property and equipment that were incurred in the first half of 2018. net loss from operations the net loss from operations for the year ended december 31 , 2018 was $ 60,408 as compared to $ 37,280 for the year ended december 31 , 2017. the $ 23,128 increase in the net loss from operations resulted from the increased cost of revenues and r & d and g & a expenses as discussed above . interest expense , net the interest expense , net of interest income decrease of $ 250 is largely as a result of increased interest as the interest rates increased compared to the year ended december 31 , 2017 , offset by interest income earned on cash balances during the year ended december 31 , 2018 , compared to minimal interest earned during the year ended december 31 , 2017. foreign exchange loss the foreign exchange loss for the year ended december 31 , 2018 was $ 560 compared to a foreign exchange gain of $ 736 for the year ended december 31 , 2017. the change is a result of the changes in the exchange rate in which the foreign currency transactions were denominated for each of those periods . income
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we evaluate our estimates , on an on-going basis , including those estimates related to recognition and measurement of contingencies and accrued costs . we base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances . actual results may differ from these estimates under different assumptions or conditions . as part of the process of preparing our financial statements , we are required to estimate our provision for income taxes . significant management judgment is required in determining our provision for income taxes , deferred tax assets and liabilities , tax contingencies , unrecognized tax benefits , and any required valuation allowance , including taking into consideration the probability of the tax contingencies being incurred . management assesses this probability based upon information provided by its tax advisers , its legal advisers and similar tax cases . if at a later time our assessment of the probability of these tax contingencies changes , our accrual for such tax uncertainties may increase or decrease . our effective tax rate for annual and interim reporting periods could be impacted if uncertain tax positions that are not recognized are settled at an amount which differs from our estimates . some of our accounting policies require higher degrees of judgment than others in their application . these include share-based compensation and contingencies and areas such as revenue recognition , operating lease liabilities , warranty liabilities , impairments and valuation of intangible assets . -23- revenue recognition . we sell our products to customers including law enforcement agencies , domestic distributors and international distributors and revenue from such transactions is recognized in the periods that products are shipped ( free on board ( “ fob ” ) shipping point ) or received by customers ( fob destination ) , when the fee is fixed or determinable and when collection of resulting receivables is reasonably assured . we identify customer performance obligations , determine the transaction price , allocate the transaction price to the performance obligations and recognize revenue as we satisfy the performance obligations . our primary performance obligations are products/accessories and training . our customers do not have the right to return product unless the product is found to be defective . stock based compensation . we follow the fair value recognition provisions issued by the financial accounting standards board ( “ fasb ” ) in accounting standards codification ( “ asc ” ) topic 718 , stock compensation ( “ asc 718 ” ) and we adopted accounting standards update ( “ asu ” ) 2018-07 for share-based transactions with non-employees . share-based compensation expense recognized during 2019 and 2018 includes stock option and restricted stock unit compensation expense . the grant date fair value of stock options is determined using the black-scholes option-pricing model . the grant date is the date at which an employer and employee or non-employee reach a mutual understanding of the key terms and conditions of a share-based payment award . the black-scholes option-pricing model requires inputs including the market price of the company 's common stock on the date of grant , the term that the stock options are expected to be outstanding , the implied stock volatilities of several publicly-traded peers over the expected term of stock options , risk-free interest rate and expected dividend . each of these inputs is subjective and generally requires significant judgment to determine . the grant date fair value of restricted stock units is based upon the market price of the company 's common stock on the date of the grant . we determine the amount of share-based compensation expense based on awards that we ultimately expect to vest and account for forfeitures as they occur . the fair value of share-based compensation is amortized to compensation expense over the vesting term . allowance for doubtful accounts . our products are sold to customers in many different markets and geographic locations . we estimate our bad debt reserve on a case-by-case basis due to a limited number of customers mostly government agencies or well-established distributors . we base these estimates on many factors including customer credit worthiness , past transaction history with the customer , current economic industry trends and changes in customer payment terms . our judgments and estimates regarding collectability of accounts receivable have an impact on our financial statements . valuation of inventory . our inventory is comprised of raw materials , assemblies and finished products . we must periodically make judgments and estimates regarding the future utility and carrying value of our inventory . the carrying value of our inventory is periodically reviewed and impairments , if any , are recognized when the expected future benefit from our inventory is less than carrying value . valuation of intangible assets . intangible assets consist of patents and trademarks that are amortized over their estimated useful lives . we must make judgments and estimates regarding the future utility and carrying value of intangible assets . the carrying values of such assets are periodically reviewed and impairments , if any , are recognized when the expected future benefit to be derived from an individual intangible asset is less than carrying value . this generally could occur when certain assets are no longer consistent with our business strategy and whose expected future value has decreased . accrued expenses . we establish a warranty reserve based on anticipated warranty claims at the time product revenue is recognized . this reserve requires us to make estimates regarding the amount and costs of warranty repairs we expect to make over a period of time . factors affecting warranty reserve levels include the number of units sold , anticipated cost of warranty repairs , and anticipated rates of warranty claims . we have very limited history to make such estimates and warranty estimates have an impact on our financial statements . warranty expense is recorded in cost of revenues . we evaluate the adequacy of this reserve each reporting period . story_separator_special_tag we use the recognition criteria of asc 450-20 , “ loss contingencies ” to estimate the amount of bonuses when it becomes probable a bonus liability will be incurred and we recognize expense ratably over the service period . we accrue bonus expense each quarter based on estimated year-end results , and then adjust the actual in the fourth quarter based on our final results compared to targets . historically , our assumptions , judgments and estimates relative to our critical accounting policies have not differed materially from actual results . there were no significant changes or modification of our critical accounting policies and estimates involving management valuation adjustments affecting our results for the year ended december 31 , 2019 . -24- recent accounting pronouncements new pronouncements issued for future implementation are discussed in note 1 to our financial statements . segment and related information the company has one operating segment with one business activity , providing restraint solutions . the company 's chief operating decision maker is its chief executive officer , who manages operations for purposes of allocating resources . refer to note 13 , major customers and related information , in our financial statements for further discussion . operating expense our operating expense includes ( i ) selling , general and administrative expense , and ( ii ) research and development expense . research and development expense is comprised of the costs incurred in performing research and development activities and developing production on our behalf , including compensation and consulting , design and prototype costs , contract services , patent costs and other outside expenses . the scope and magnitude of our future research and development expense is difficult to predict at this time and will depend on elections made regarding research projects , staffing levels and outside consulting and contract costs . however , in the near term , we expect our research and development expense to increase in absolute dollars as we increase new product development activities . the actual level of future selling , general and administrative expense will be dependent on staffing levels , elections regarding expenditures on sales , marketing and customer training , the use of outside resources , public company and regulatory costs , and other factors , some of which are outside of our control . we expect our operating costs will increase as we expand product distribution activities and expand our research and development , production , distribution , training , service and administrative functions in the near term . we may also incur substantial noncash share-based compensation costs depending on future option and restricted stock unit grants that are impacted by stock prices and other valuation factors . historical expenditures are not indicative of future expenditures . story_separator_special_tag 0px ; margin-right : 0px ; text-indent : 0px '' > research and development expense research and development expense increased $ 1,502,209 during the year ended december 31 , 2019 , when compared to the year ended december 31 , 2018. we incurred a $ 30,164 period over period increase in non-cash share-based compensation expense allocated to research and development expense . other increases in costs for the 2019 period , when compared to the 2018 period included a $ 696,762 increase in cash compensation costs from an increase in headcount primarily associated with production development . prototype related costs increased $ 423,952 in the 2019 period , primarily related to developing the updated version of the bolawrap 100 product and effect of model and component changes . consulting costs during the 2019 period increased $ 231,826 related to developing systems for monitoring research and production . travel costs increased $ 91,970 due primarily to setting up the new manufacturing facilities . we expect our research and development costs will increase in 2020 due to increased research personnel added during 2019 and current projects focused on improving our products , developing an improved restraint product and developing additional security products . net loss loss from operations during the year ended december 31 , 2019 increased by $ 5,276,042 when compared to the year ended december 31 , 2018 , resulting , primarily from increased operating costs due to increased personnel and marketing and selling and supporting activities . -26- liquidity and capital resources overview we have experienced net losses and negative cash flows from operations since our inception . as of december 31 , 2019 , we had cash of $ 16,983,864 and positive working capital of $ 18,598,899 , and had sustained cumulative losses attributable to stockholders of $ 12,729,824. we believe that our cash on hand will sustain our operations for at least the next twelve months from the date of this report . our sources of liquidity to date has been primarily funding from our stockholders and the sale and exercise of equity securities . we expect our primary source of future liquidity will be from the sale of products , exercise of stock options and warrants and if required from future equity or debt financings . capital requirements in december 2017 , we completed our self-underwritten ipo , raising gross proceeds of approximately $ 3.49 million from the sale of 2,328,533 shares of common stock at the public offering price of $ 1.50 per share . in october 2018 , we received approximately $ 12.14 million in net cash proceeds from the private sale of equity securities to certain accredited investors . in june 2019 , we obtained net cash proceeds of approximately $ 11.35 million from the june 2019 follow-on offering . during the year ended december 31 , 2019 we also obtained $ 2.14 million of net proceeds from the exercise of previously issued warrants and stock options . we can not currently estimate our future liquidity requirements or future capital needs , which will depend on , among other things , capital required to introduce our products and the staffing and support requirements , as well as the timing and amount of future revenue and product costs .
| at december 31 , 2019 we had $ 344,000 of customer deposits on orders and had backlog of approximately $ 1.725 million expected to be delivered in 2020. distributor and customer orders for future deliveries are generally subject to modification , rescheduling or in some instances , cancellation in the normal course of business . gross profit our cost of revenue for the year ended december 31 , 2019 was $ 420,016 resulting in a gross margin of 40 % . due to the minimal revenue and the changes being made to our product as we establish volume manufacturing such margin may not be indicative of future margins . in addition , our margins vary based on the sales channels through which our products are sold . we continue to implement product updates and changes , including raw material and component changes that may impact product costs . with such product updates and changes we have limited warranty cost experience and estimated future warranty costs can impact our gross margins . we do not believe that historical gross profit margins should be relied upon as an indicator of future gross profit margins . in september 2019 , we relocated manufacturing operations and production to our new facility in tempe , arizona . while this significantly increases our capacity , we expect that larger allocations of overhead and costs associated with start-up and training may have a negative impact on product margins until and if production volume increases in future quarters . selling , general and administrative expense selling , general and administrative expense increased by $ 4,046,068 during the year ended december 31 , 2019 , when compared to the year ended december 31 , 2018. during the year ended december 31 , 2019 , we incurred a $ 992,944 increase in non-cash share-based compensation expense allocated to selling , general and administrative expense with $ 1,410,095 in the year ended december 31 , 2019 compared to $ 417,151 in the year ended december 31 , 2018. other increases in the 2019 period included a $ 1,154,578 increase in cash compensation costs from an increase in headcount since 2018 and a $ 408,802
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factors affecting the comparability of our financial condition and results of operations basis of presentation and fresh-start accounting upon berry llc 's emergence from bankruptcy , we adopted fresh-start accounting , which , with the recapitalization upon emergence from bankruptcy , resulted in berry corp. becoming the financial reporting entity in our corporate group . unless otherwise noted or suggested by context , all financial information and data and accompanying financial statements and corresponding notes , as contained in this report , on or prior to the effective date , reflect the actual historical results of operations and financial condition of our predecessor company for the periods before and after the effective date and do not give effect to the plan or any of the transactions contemplated thereby or the adoption of fresh-start accounting . following the effective date , they reflect the actual historical results of operations and financial condition of berry corp. on a consolidated basis and give effect to the plan and any of the transactions contemplated thereby and the adoption of fresh-start accounting . thus , the financial information presented herein on or prior to the effective date is not comparable to berry corp. 's performance or financial condition after the effective date . as a result , “ black-line ” financial statements are presented to distinguish between berry llc as the predecessor and berry corp. as the successor . berry corp. 's financial statements reflect the application of fresh-start accounting under gaap . gaap requires that the financial statements , for periods subsequent to the chapter 11 proceedings , distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business . accordingly , certain expenses , gains and losses that are realized or incurred in connection with the bankruptcy proceedings are recorded in “ reorganization items , net ” on berry corp. 's as well as berry llc 's statements of operations . in addition , berry corp. 's 56 index to financial statements and supplementary data balance sheet classifies the cash distributions from a $ 35 million cash distribution pool ( the “ cash distribution pool ” ) as “ liabilities subject to compromise. ” pre-petition unsecured and under-secured obligations that were affected by the bankruptcy reorganization process have been classified as “ liabilities subject to compromise ” on our balance sheet and our predecessor company 's balance sheet . reorganization and financing activities the main actions we took affecting comparability between periods before and after the effective date include the reorganization of berry llc through bankruptcy and resulting substantial elimination of debt , entry into the rbl facility , issuance of the 2026 notes , dividends on and conversion of series a preferred stock and completion of the ipo . these actions are described below in “ —liquidity and capital resources. ” capital expenditures and capital budget immediately following berry llc 's emergence from bankruptcy and separation from the linn entities in 2017 , we increased our pace of development and have continued to do so throughout 2018 . for the years ended december 31 , 2018 and 2017 , our capital expenditures were approximately $ 148 million and $ 73 million , respectively , on an accrual basis excluding acquisitions . our 2019 anticipated capital expenditure budget is approximately $ 195 to $ 225 million , which represents an increase of approximately 42 % over 2018 capital expenditures . capital expenditures increased 103 % from 2017 to 2018. based on current commodity prices and a drilling success rate comparable to our historical performance , we believe we will be able to fund our 2019 capital development programs while producing positive levered free cash flow . our 2019 capital program is focused on growing our oil production in california . we anticipate oil production will be approximately 86 % of total production in 2019 , compared to 82 % in 2018. this change in product mix also factors in the divestiture of our non-core east texas gas properties in late 2018. during 2019 , we expect to : employ four drilling rigs in california throughout the year ; and drill approximately 370 to 420 gross development wells , all of which we expect will be in california for oil production . the table below sets forth the expected allocation of our 2019 capital expenditure budget by area as compared to the allocation of our 2018 and 2017 capital expenditures . replace_table_token_19_th the amount and timing of these capital expenditures is within our control and subject to our management 's discretion . we retain the flexibility to defer a portion of these planned capital expenditures depending on a variety of factors , including but not limited to the success of our drilling activities , prevailing and anticipated prices for oil , natural gas and ngls , the availability of necessary equipment , infrastructure and capital , the receipt and timing of required regulatory permits and approvals , seasonal conditions , drilling and acquisition costs and the level of participation by other interest owners . any postponement or elimination of our development drilling program could result in a reduction of proved reserve volumes and materially affect our business , financial condition and results of operations . acquisitions and divestitures acquisition of hill properties 57 index to financial statements and supplementary data on july 31 , 2017 , we acquired the remaining 84 % working interest in the south belridge hill property located in kern county , california , in which we previously owned a 16 % working interest ( the “ hill acquisition ” ) . we purchased the properties for approximately $ 249 million . chevron north midway-sunset acquisition in april 2018 , we acquired two leases on an aggregate of 214 acres and a lease option on 490 acres of land owned by chevron u.s.a. in the north midway-sunset field immediately adjacent to assets we currently operate . story_separator_special_tag we assumed a drilling commitment of approximately $ 34.5 million to drill 115 wells on or before april 1 , 2020 , which we extended to april 1 , 2022. our drilling commitment will be tolled for a month for each consecutive 30-day period for which the posted price of wti is less than $ 45 per barrel . we had not drilled any of these wells as of december 31 , 2018 . we would assume an additional 40 well drilling commitment if we exercise our option on the 490 acres . we paid no other consideration for the acquisition . our 2019 anticipated capital expenditure budget currently includes approximately $ 16 million to drill 33 out of these 115 wells . this transaction is consistent with our business strategy to investigate areas beyond our known productive areas . disposition of hugoton properties on july 31 , 2017 , we divested our 78 % working interest in the hugoton natural gas field located in southwest kansas and the oklahoma panhandle ( the “ hugoton disposition ” ) because we deemed it a non-core asset . this resulted in approximately $ 234 million of proceeds and a $ 23 million gain . disposition of east texas properties on november 30 , 2018 , we sold our non-core gas-producing properties and related assets located in the east texas basin for approximately $ 7 million , before purchase price adjustments , which resulted in a gain of approximately $ 4 million . production comprised approximately 0.7 mboe per day of natural gas in the third quarter of 2018. commodity derivatives we utilize derivatives , such as swaps , puts and calls , to hedge a portion of our forecasted oil production and gas purchases to reduce exposure to fluctuations in oil and natural gas prices . we target covering our operating expenses and fixed charges , including maintenance capital expenditures , for up to two years out . we have hedged a portion of our exposure to differentials between brent and wti as well . we also , from time to time , have entered into agreements to purchase a portion of the natural gas we require for our operations , which we do not record at fair value as derivatives because they qualify for normal purchases and normal sales exclusions . as of february 28 , 2019 , our hedge position consisted of oil swaps and puts and natural gas swaps . we use oil swaps and puts to protect against decreases in the oil price and natural gas swaps to protect against increases in natural gas prices . we do not enter into derivative contracts for speculative trading purposes and have not accounted for our derivatives as cash-flow or fair-value hedges . for our purchased puts , we would receive settlement payments for prices below the indicated weighted-average price per barrel of brent . for some of our put positions , we paid the premium at the time the positions were created , and for others , we will pay the premium at the time of settlement . in order to mitigate the exposure to these deferred premiums , we have entered into several offsetting put positions . swap contracts are designed to provide a fixed price . for fixed-price swaps , we make settlement payments for prices above the indicated weighted-average price per barrel of brent and receive settlement payments for prices below the indicated weighted‑average price per barrel of brent . for oil basis swaps , we make settlement payments if the difference between brent and wti is greater than the indicated weighted-average price per barrel of our contracts and receive settlement payments if the difference between brent and wti is below the indicated weighted-average price per barrel . for fixed-price natural gas purchase swaps , we are the buyer so we make settlement payments for prices below the weighted-average price per mmbtu and receive settlement payments for prices above the weighted-average price per mmbtu . 58 index to financial statements and supplementary data in january and february 2019 , we closed a portion of our deferred premium put positions by selling offsetting put positions and terminating contracts . we also added to our natural gas swap positions we had previously hedged . as of february 28 , 2019 , we had hedged approximately 15.3 mbbl/d of our 2019 crude oil production at $ 68 per barrel , as outlined in the following table along with our natural gas derivative contracts : replace_table_token_20_th the following table summarizes the historical results of our hedging activities . replace_table_token_21_th we expect our operations to generate substantial cash flows at current commodity prices . we have protected a portion of our anticipated cash flows through 2020 as part of our crude oil hedging program . our low-decline production base , coupled with our stable operating cost environment , affords an ability to hedge a material amount of our future expected production . in may 2018 , we elected to terminate outstanding commodity derivative contracts for all wti oil swaps and certain wti/brent basis swaps for july 2018 through december 2019 and all wti oil sold call options for july 2018 through june 2020. termination costs totaled approximately $ 127 million and were calculated in accordance with a bilateral agreement on the cost of elective termination included in these derivative contracts ; the present value of the contracts using the forward price curve as of the date termination was elected . no penalties were charged as a result of the elective termination .
| while this combined presentation is a non-gaap presentation for which there is no comparable gaap measure , management believes that providing this financial information is the most relevant and useful method for comparing the periods before and after the effective date . 65 index to financial statements and supplementary data replace_table_token_26_th revenues and other oil , natural gas and ngl sales increased in 2018 by $ 121 million or 28 % when compared to the year ended december 31 , 2017 , including the successor and predecessor periods . the increase was primarily due to increased oil production in california and higher realized oil prices , partially offset by lower gas and ngl production . oil production in the rockies was adversely impacted as we managed storage to address the extended shutdown of a major refinery in the area which limited sales and negatively impacted production . the net effect of the hill acquisition and hugoton disposition in 2017 resulted in lower total production on an oil equivalent basis but helped to increase oil volumes and the relative mix of oil production , resulting in a $ 39 million increase in revenues . our organic oil production growth from our 2018 capital program also contributed to increased revenues . electricity sales represents sales to utilities which increased in 2018 by $ 10 million or 37 % when compared to the year ended december 31 , 2017 , including the successor and predecessor periods , primarily due to higher prices , 66 index to financial statements and supplementary data attributed to higher natural gas costs , and higher volumes sold externally because of increased utilization at our cogeneration facilities . losses on oil derivatives were $ 4.6 million , a decrease of $ 49 million or 91 % when compared to the year ended december 31 , 2017 , including the successor and predecessor periods . our losses in 2018 were due to the mark-to-market losses incurred on oil derivatives prior to being terminated in may 2018 and settled with a $ 127 million payment . we terminated these derivatives and entered into new hedges to better align our hedge pricing with the then-prevailing market pricing . these early-2018 losses were offset by gains
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although economic growth in asia appears to be moderating to a lower level , we believe that it remains a fast-growing area and chinese and indian investments in refining , petrochemical and energy facilities appear to continue to be strong . 19 south america , specifically brazil , venezuela and colombia , is seeing increased refining and petrochemical investments that are driven by their expanding economies , and increased local demand for transportation fuels and other products that are made from oil as the feedstock . there is also the desire to extract more value from their natural resources by supplying energy products into the global markets . however , the south american market can be unpredictable and has historically been slower to invest than other emerging markets . the u.s. refining market has recently exhibited improvement . we do not expect the u.s. refining markets to return to the levels experienced during the last upcycle , but that such markets will improve compared with its levels over the past few years . we expect that the u.s. refining markets will continue to be an important aspect of our business . we are beginning to see renewed signs of planned investments in the u.s. to convert greater percentages of crude oil to transportation fuels , such as revamping distillation columns to extract residual higher-value components from the low-value waste stream . we are also seeing renewed investment to expand the flexibility of facilities to allow them to utilize multiple feed stocks . moreover , a trend to upgrade existing equipment in order to extend on-stream operation duration between planned shutdowns has emerged that has resulted in an increase in demand for our equipment . investments , including foreign investments , in north american oil sands projects have occurred over the past few years . these investments suggest that downstream spending involving our equipment might increase in the next few years . the dramatic change in natural gas costs and expectation of steady supply in the u.s. has led to a revival in the u.s. petrochemical market and a recent interest toward potential major investment . there are numerous new projects in planning or initial engineering phases for the construction of new petrochemical producing facilities , including ethylene , ammonia and urea facilities . in addition , existing petrochemical facilities are evaluating restarting idled process units or debottlenecking existing operations to increase throughput . we currently have a number of these projects in our pipeline . we historically have had strong market share within u.s. petrochemical facilities . proposed ethylene capacity expansion and re-opening of mothballed facilities in the u.s. , as well as downstream products , are being discussed by petrochemical producers for the first time in well over a decade . lower natural gas cost is a relatively recent phenomena , having occurred over the past three years and is driven by technology advancements in drilling , creating a significant increase in supply . this has made the u.s. production of the raw material for ethylene , ethane ( which is a side product of natural gas production ) , globally competitive with naphtha ( the alternative feedstock for ethylene used in most of the world ) . we believe investment in u.s. petrochemical markets could be significant over the next one to five years . investment in new nuclear power capacity in the u.s. and internationally may become subject to increased uncertainty due to political and social pressures , which were augmented by the tragic earthquake and tsunami that occurred in japan in march 2011. the continued progress at the new u.s. nuclear reactor projects planned for the summer ( south carolina ) and vogtle ( georgia ) facilities suggest some growth in the domestic nuclear market . investments in existing u.s. nuclear plants to extend their operating life and add incremental capacity are expected to continue . the need for additional safety and back up redundancies at existing domestic nuclear plants could increase demand for our products in the near-term . the desire to extend the life of the existing nuclear plants including new operating licenses and expanded output ( re-rating ) of the facilities will require investment and could increase demand for our products . we expect that the consequences of these trends , and specifically projected expansion in petrochemical and oil refining which should occur outside of north america , primarily in the growing asian and south american markets , will result in more pressure on our pricing and gross margins , as these markets historically provided lower margins than north american refining markets . a counter to margin pressure from international markets may come from investments in new petrochemical capacity built in north america and the timing of such investments . 20 because of continued global economic and financial uncertainty and the risk associated with growth in emerging economies , we also expect that we will have continued volatility in our order pattern . we continue to expect our new order levels to remain volatile , resulting in both strong and weak quarters . as the chart below indicates , quarterly orders can vary significantly . we believe that looking at our order level in any one quarter does not provide an accurate indication of our future expectations or performance . rather , we believe that looking at our orders and backlog over a trailing twelve month period provides a better measure of our business . our quarterly order levels and trailing twelve month order levels for fiscal 2013 , fiscal 2012 and fiscal 2011 , respectively , are set forth in the table below . expected international growth in refining and chemical processing with domestic growth in chemical processing , nuclear power and u.s. navy projects we expect growth in the refining and chemical processing capacity to be driven by emerging markets . we also expect incremental investments in the domestic market for the refining market and renewed investment in the chemical processing market in north america . story_separator_special_tag we have also expanded our addressable markets with expansion of our business capabilities in the power market and our focus on u.s. navy nuclear propulsion projects . we believe our revenue opportunities during the near term will be equivalent between the domestic and international markets . over the long-term , we expect our customers ' markets to regain their strength and , while remaining cyclical , continue to grow . we believe the long-term trends remain strong and that the drivers of future growth include : global consumption of crude oil is estimated to expand significantly over the next two decades , primarily in emerging markets . this is expected to offset estimated flat to slightly declining demand in north america and europe . in addition , an increased trend toward export supply of finished product from the middle east to north america and europe is expected . 21 global oil refining capacity is projected to increase , and is expected to be addressed through new facilities , refinery upgrades , revamps and expansions . increased demand is expected for power , refinery and petrochemical products , stimulated by an expanding middle class in asia and the middle east . increased regulation worldwide , impacting the refining , petrochemical and nuclear power industries are expected to continue to drive requirements for capital investments . more domestic refineries are expected to convert their facilities to use heavier , more readily available and lower cost crude oil as a feedstock . lower costs are expected to drive increased domestic use of natural gas in the u.s. , as well as the ability to export liquefied natural gas to serve other regions , since natural gas in the u.s. is globally competitive with oil . shale gas development and the resulting availability of affordable natural gas as feedstock to u.s.-based chemical/petrochemical facilities is expected to lead to renewed investment in chemical/petrochemical facilities in the u.s. an expansion of the petrochemical market in the u.s. is expected , given the plentiful supply and globally competitive price of natural gas . construction of new petrochemical plants in the middle east is expected to meet local demand . increased development of geothermal electrical power plants in certain regions is expected to address projected growth in demand for electrical power . increased investments in new power generation projects are expected in asia and south america to meet projected consumer demand increases . long-term growth potential in alternative energy markets , such as geothermal , coal-to-liquids , gas-to-liquids and other emerging technologies , such as biodiesel , and waste-to-energy . increased focus on safety and redundancy is anticipated in existing nuclear power facilities . long-term increased project development of international nuclear facilities is expected . we believe that all of the above factors offer us long-term growth opportunities to meet our customers ' expected capital project needs . in addition , we believe we can continue to grow our less cyclical smaller product lines and aftermarket businesses . our domestic sales as a percentage of aggregate product sales was 63 % in our fiscal year ended march 31 , 2009 ( fiscal 2009 ) . since fiscal 2009 , as the u.s. market weakened , relative to international markets , domestic sales declined to 45 % of total sales in each of fiscal 2010 and 2011. in fiscal 2012 and 2013 , domestic sales increased to 54 % and 53 % , respectively , with our acquisition of energy steel , with sales primarily in the domestic market and expanded u.s. navy work , which is exclusively in the u.s. the u.s. navy activity represents our production of surface condensers for the cvn-79 gerald r. ford class nuclear carrier order that was won in the third quarter of fiscal 2010. this project was in excess of $ 25,000 and is converting to revenue across multiple fiscal years . story_separator_special_tag short-cycle orders and improved pricing on key projects resulting from strategic decisions regarding pricing . gross profit for fiscal 2012 increased $ 10,784 , compared with fiscal 2011. gross profit increased primarily due to higher sales as well as the improved gross margin level . sg & a expense for fiscal 2012 was $ 15,540 , up 19 % compared with $ 13,076 in fiscal 2011. half of the increase in sg & a was related to the full year impact of owning energy steel . the remaining increase was due to the addition of staff to support current and future expected revenue growth . sg & a expense as a percentage of sales decreased in fiscal 2012 to 15.1 % of sales compared with 17.6 % of sales in fiscal 2011. interest income for fiscal 2012 was $ 58 , down from $ 77 in fiscal 2011. this decrease was due to lower average levels of cash during fiscal 2012 compared with fiscal 2011. interest expense was $ 476 in fiscal 2012 , up from $ 92 in fiscal 2011. the increase was due to the interest expense recognized related to the energy steel acquisition earn-out ( reversing the discounting calculations made when estimating the payment of the earn-out ) as well as interest charges for a research and development tax credit audit resolution reached with the irs and other unrecognized tax benefits . the irs tax resolution is discussed in more detail in note 10 to the consolidated financial statements in item 8 of part ii of this annual report on form 10-k. our effective tax rate in fiscal 2012 was 37 % compared with an effective tax rate of 33 % for fiscal 2011. the effective tax rate increased in fiscal 2012 due to a charge of $ 374 related to the resolution of an irs audit and appeal related to research and development tax credits taken in tax years 2006 through 2008. excluding this charge , the effective tax rate in fiscal 2012 was 34 % . the tax rate in fiscal 2011 was adversely impacted by acquisition-related costs which were not tax affected .
| gross profit for fiscal 2013 decreased $ 813 , compared with fiscal 2012. selling , general and administrative , or sg & a , expense for fiscal 2013 was $ 16,560 , up 7 % or $ 1,020 , compared with $ 15,540 in fiscal 2012. however , this also included a $ 975 reversal of a reserve for the potential earn out for year two of the energy steel acquisition . the energy steel acquisition provided for a potential earn out to the seller of up to $ 1,000 per year for each of the first two full calendar years ( calendar years 2011 and 2012 ) that we owned energy steel . the first year , calendar year 2011 , the earn out was achieved and paid to the seller in january 2012. the earn out for the second year , calendar year 2012 , had been partly reserved for at the time of acquisition with the remaining charges added subsequent to the acquisition . however , due to lower order volume levels experienced in calendar year 2012 and project timing , the 2012 energy steel earn out criteria was not achieved . as a result , the reserve of $ 975 was adjusted to $ 0 , and $ 975 was recorded as a reduction of selling , general and administrative expenses in the third quarter of fiscal 2013. sg & a expense increased due to higher selling and commission cost and an increase in headcount , as we prepare for the anticipated continued recovery in our markets . sg & a as a percentage of sales increased in fiscal 2013 to 15.8 % of sales ( 16.7 % of sales excluding the $ 975 reserve reversal noted above ) compared with 15.1 % of sales in fiscal 2012. interest income for fiscal 2013 was $ 51 , down from $ 58 in fiscal 2012. interest expense was a credit of $ 264 in fiscal 2013 , down from $ 476 in fiscal 2012. the decrease was due to the interest charges being reversed for a research and development tax credit audit resolution reached with the internal revenue service ( the irs ) . it is our policy to recognize any
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story_separator_special_tag 2014 and 2013 , respectively . of the grain revenues decrease of $ 3.1 billion ( 13 % ) , $ 3.7 billion is due to decreased average grain selling prices , partially offset by an increase of $ 579.3 million due to a net increase in sales volume of 2 % during the year ended august 31 , 2014 , compared to the prior year . the average sales price of all grain and oilseed commodities sold reflected a decrease of $ 1.51 per bushel ( 15 % ) over the previous year . wheat , soybeans , and corn had increased volumes , compared to the twelve months ended august 31 , 2013. our processing and food ingredients revenues in our ag segment of $ 1.9 billion for the year ended august 31 , 2014 , is almost flat when compared to the year ended august 31 , 2013. we experienced decreases in revenue of $ 94.0 million related to decreased average selling prices and a decrease of $ 18.4 million in the volume associated with our oilseed products as compared to the year ended august 31 , 2013. typically , changes in average selling prices of oilseed products are primarily driven by the average market prices of soybeans . these decreases were almost entirely offset by revenues from our ethanol facility of approximately $ 82.4 million , which was acquired in fiscal 2014. wholesale crop nutrient revenues in our ag segment totaled $ 2.6 billion and $ 2.7 billion during the twelve months ended august 31 , 2014 and 2013 , respectively . of the wholesale crop nutrient revenues decrease of $ 108.0 million ( 4 % ) , $ 592.7 million was related to decreased average fertilizer selling prices , partially offset by $ 484.7 million related to an increase in volumes , during the year ended august 31 , 2014 , compared to the last fiscal year . our wholesale crop nutrient volumes increased 18 % during the year ended august 31 , 2014 compared with the previous year . the average sales price of all fertilizers sold reflected a decrease of $ 81.29 per ton ( 19 % ) compared with the previous year . our ag segment other product revenues , primarily feed and farm supplies , of $ 3.4 billion increased by $ 125.3 million during the year ended august 31 , 2014 compared to the year ended august 31 , 2013 , primarily due to an increase in our country operations retail merchandise revenues . other revenues within our ag segment of $ 191.4 million during the year ended august 31 , 2014 , increased $ 41.2 million ( 27 % ) compared to the year ended august 31 , 2013. total revenues include other revenues generated primarily within our ag segment and corporate and other . our ag segment 's country operations elevators and agri-service centers derive other revenues from activities related to production agriculture , which include grain storage , grain cleaning , fertilizer spreading , crop protection spraying and other associated services . in addition , our grain marketing operations receive other revenues at our export terminals from activities related to loading vessels . corporate and other derives revenues primarily from our financing , hedging and insurance operations . cost of goods sold . consolidated cost of goods sold was $ 41.0 billion for the year ended august 31 , 2014 , compared to $ 42.7 billion for the year ended august 31 , 2013 , which represents a $ 1.7 billion ( 4 % ) decrease . our energy segment cost of goods sold , after elimination of intersegment costs , increased by approximately $ 1.4 billion ( 13 % ) to $ 12.8 billion during the year ended august 31 , 2014 , compared to the prior year . the increase in cost of goods sold is primarily due to increased costs associated with refined fuels , propane and renewable fuels marketing products . 29 specifically , refined fuels cost of goods sold increased $ 187.4 million ( 2 % ) , which reflects a 3 % increase in the volume from the prior year . on average , we process approximately 55,000 barrels of crude oil per day at our laurel , montana refinery and 85,000 barrels of crude oil per day at ncra 's mcpherson , kansas refinery . the cost of goods sold of propane increased $ 640.1 million ( 86 % ) primarily from an average cost increase of $ 0.32 per gallon ( 30 % ) and a 42 % increase in volumes resulting from demand caused by a condensed harvest and associated corn drying activity as well as colder than normal temperatures , when compared to the previous year . renewable fuels marketing costs increased $ 542.9 million ( 35 % ) , primarily from a 46 % increase in volumes , partially offset by a decrease in the average cost of $ 0.18 per gallon ( 7 % ) , when compared to the prior year . our ag segment cost of goods sold , after elimination of intersegment costs , decreased by $ 3.1 billion ( 10 % ) to $ 28.2 billion , during the year ended august 31 , 2014 , compared to the prior year . the majority of the decrease was driven by the lower grains and oilseed costs , which decreased by $ 3.5 billion ( 15 % ) in the year ended august 31 , 2014 compared to the prior year . this is primarily the result of a $ 1.67 ( 17 % ) decrease in the average cost per bushel . this decrease was partially offset by a 3 % net increase in bushels sold , as compared to the prior year . the average month-end market price per bushel of soybeans , corn and spring wheat decreased compared to the previous year . story_separator_special_tag our processing and food ingredients cost of goods sold in our ag segment of $ 1.9 billion was flat for the year ended august 31 , 2014 , compared to the year ended august 31 , 2013. we experienced a decrease in volumes sold which was offset by a combination of the costs of goods sold associated with our ethanol facility which was acquired in fiscal 2014 , and a non-cash $ 74.5 million impairment charge related to certain assets in israel recorded in fiscal 2014. see note 17 , acquisitions , to our audited consolidated financial statements included in this annual report on form 10-k for additional information . wholesale crop nutrients cost of goods sold in our ag segment totaled $ 2.4 billion and $ 2.6 billion during the years ended august 31 , 2014 and 2013 , respectively . the net decrease of $ 171.5 million ( 7 % ) is comprised of a decrease in the average cost per fertilizer ton of $ 88 ( 21 % ) , partially offset by an 18 % increase in tons sold , when compared to the prior year . our ag segment other product cost of goods sold , primarily feed and farm supplies , as of august 31 , 2014 was $ 2.9 billion , an increase of $ 84.9 million ( 3 % ) compared to the prior year and was primarily the result of an increase in our country operations retail volumes . marketing , general and administrative . marketing , general and administrative expenses of $ 602.6 million for the year ended august 31 , 2014 , increased by $ 49.0 million ( 9 % ) compared to the prior year . the net increase in fiscal 2014 was driven by our grain marketing and international operations , and to a lesser extent , our processing and food ingredients operations , including our ethanol facility acquired in fiscal 2014 , partially offset by a decrease in our energy operations . gain/loss on investments . gain on investments for the year ended august 31 , 2014 increased by $ 114.1 million compared to the twelve months ended august 31 , 2013 , related primarily to a $ 109.2 million gain associated with the contribution of our horizon milling assets to the newly formed ardent mills joint venture . see note 4 , investments , to our audited consolidated financial statements included in this annual report on form 10-k for additional information . interest , net . net interest of $ 134.9 million for the year ended august 31 , 2014 decreased $ 96.6 million compared to the previous year . interest expense for the years ended august 31 , 2014 and 2013 was $ 150.5 million and $ 248.4 million , respectively . the decrease in interest expense of $ 97.9 million is primarily due to a $ 78.2 million decrease in patronage earned by the noncontrolling interests of ncra and , to a lesser extent , a gain on interest rate swaps of $ 13.5 million , when compared with the previous year . equity income from investments . equity income from investments of $ 107.4 million for the year ended august 31 , 2014 , increased $ 10.1 million ( 10 % ) compared to the year ended august 31 , 2013. we record equity income or loss from the investments in which we have an ownership interest of 50 % or less and have significant influence , but not control , for our proportionate share of income or loss reported by the entity , without consolidating the revenues and expenses of the entity in our consolidated statements of operations . income taxes . income tax expense was $ 48.3 million for the year ended august 31 , 2014 compared with $ 89.7 million for the year ended august 31 , 2013 , resulting in effective tax rates of 4.3 % and 8.3 % , respectively . the decrease in the tax rate for fiscal 2014 was driven by a combination of excise tax credit claims made for the years 2007 through 2012 related to the blending and sale of renewable fuels deducted for income taxes of $ 46.3 million , net of reserves , and to a lesser extent the release of reserves related to the expiration of certain statues of limitations of $ 20.9 million . the federal and state statutory rate applied to nonpatronage business activity was 38.1 % and 38.1 % for the years ended august 31 , 2014 and 2013 , respectively . 30 the income taxes and effective tax rate vary each year based upon profitability and nonpatronage business activity during each of the comparable years . noncontrolling interests . income attributable to noncontrolling interests of $ 1.6 million for the year ended august 31 , 2014 decreased by $ 2.4 million compared to the year ended august 31 , 2013. comparison of the years ended august 31 , 2013 and 2012 general . we recorded income before income taxes of $ 1.1 billion in fiscal 2013 compared to $ 1.4 billion in fiscal 2012 , a decrease of $ 330.6 million ( 23 % ) . operating results reflected decreased pretax earnings in our energy and ag segments , partially offset by increased pretax earnings in corporate and other . our energy segment generated income before income taxes of $ 816.7 million for the year ended august 31 , 2013 compared to $ 1.0 billion in fiscal 2012 , representing a decrease of $ 210.8 million ( 21 % ) . the decrease in earnings was primarily from reduced margins on refined fuels at our laurel , montana refinery due to the shut down of the refinery for a major maintenance turnaround . we experienced decreased earnings in our propane business , while our renewable fuels marketing , lubricants , and transportation businesses experienced increased earnings during the year ended august 31 , 2013 when compared to the previous year .
| the epa suggested that it would reduce the renewable fuels mandate for 2014 under the rfs , which has caused rins prices to decline , however , the mandate has not yet been issued . our ag segment generated income before income taxes of $ 209.3 million for the year ended august 31 , 2014 , compared to $ 199.3 million in the year ended august 31 , 2013 , an increase in earnings of $ 10.0 million ( 5 % ) . the increase is primarily related to our grain marketing earnings which increased by $ 51.6 million during the year ended august 31 , 2014 , compared to the prior period , primarily due to strong logistical performance in north america . our country operations earnings increased $ 19.9 during the year ended august 31 , 2014 , compared to the prior year . overall agronomy and grain margins as well as service income increased for retail operations . earnings from our wholesale crop nutrients business increased by $ 6.3 million for the year ended august 2014 , compared to the prior year , primarily due to increased volumes and margins . these items were mostly offset by decreased earnings in our processing and food ingredients operations of $ 67.7 million in fiscal 2014. the decrease consisted of a non-cash $ 74.5 million charge related to certain assets in israel in fiscal 2014 , partially offset by earnings related to an acquisition in fiscal 2014. see note 17 , acquisitions , to our audited consolidated financial statements included in this annual report on form 10-k for additional information . corporate and other generated income before income taxes of $ 186.3 for the year ended august 31 , 2014 compared to $ 70.0 million during the previous year , an increase in earnings of $ 116.3 million . the increase was primarily related to a $ 109.2 million gain associated with the contribution of our horizon milling assets to the newly formed ardent mills joint venture . see note 4 , investments for additional information . net income attributable to chs inc . consolidated net income attributable to chs inc. for the year ended august
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we actively monitor customer activity in the areas served by our systems to pursue new supply opportunities . to maintain and increase our transportation and storage volumes , we must continue to contract our capacity to shippers , including producers , marketers , ldcs , power generators and end-users . gross margin we view gross margin as an important performance measure of the core profitability of our business , as well as our operating performance as compared to that of other companies in our industry , without regard to financing methods , historical cost basis , capital structure or the impact of fluctuating commodity prices . we define gross margin as revenues minus costs of natural gas and natural gas liquids , excluding depreciation and amortization . gross margin allows us to make a meaningful comparison of the operating results between our fee-based revenues , and our commodity-based contracts which involve the purchase or sale of natural gas , ngls , and or crude oil . in addition , gross margin allows us to make a meaningful comparison of the results of our commodity-based activities across different commodity price environments because it measures the spread between the product sales price and cost of products sold . please read “ —results of operations ” and “ —non-gaap financial measures ” below . operation and maintenance and general and administrative expenses we seek to maximize the profitability of our operations by effectively managing operation and maintenance and general and administrative expenses . these expenses are comprised primarily of labor expenses , lease costs , utility costs , insurance premiums and repairs and maintenance expenses . these expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of these expenses . we seek to manage our maintenance expenditures on our assets by scheduling maintenance over time to avoid significant variability in our maintenance expenditures and minimize their impact on our system operations and cash flow . the levels of exploration , development and production activities impact competition for personnel and equipment . increased competition could place upward pressure on the prices we pay for labor , supplies and miscellaneous equipment . to the extent we are unable to procure necessary services or offset higher costs , should they occur , our operating results will be negatively impacted . adjusted ebitda and distributable cash flow we define adjusted ebitda as net income from continuing operations before interest expense , income tax expense , depreciation and amortization expense and certain other items management believes affect the comparability of operating results . distributable cash flow will not reflect changes in working capital balances . please read “ —non-gaap financial measures ” below . 61 note about non-gaap financial measures gross margin , adjusted ebitda and distributable cash flow are not financial measures presented in accordance with gaap . management believes that the presentation of these non-gaap financial measures will provide useful information to investors in assessing our financial condition and results of operations . revenue is the gaap measure most directly comparable to gross margin , and net income attributable to controlling interest and net cash provided by operating activities are the gaap measures most directly comparable to adjusted ebitda and distributable cash flow . our non-gaap financial measures should not be considered as alternatives to the most directly comparable gaap financial measure . each of these non-gaap financial measures has important limitations as an analytical tool because it excludes some but not all items that affect the most directly comparable gaap financial measure . gross margin , adjusted ebitda and distributable cash flow should not be considered in isolation or as a substitute for analysis of our results as reported under gaap . because gross margin , adjusted ebitda and distributable cash flow may be defined differently by other companies in our industry , our definitions of these non-gaap financial measures may not be comparable to similarly titled measures of other companies , thereby diminishing their utility . management compensates for the limitations of gross margin , adjusted ebitda and distributable cash flow as analytical tools by reviewing the comparable gaap measures , understanding the differences between gross margin , adjusted ebitda and distributable cash flow , on the one hand , and revenue , net income and net cash provided by operating activities , on the other hand , and incorporating this knowledge into its decision-making processes . management believes that investors benefit from having access to the same financial measures that our management uses in evaluating our operating results . for a reconciliation of gross margin , adjusted ebitda and distributable cash flow to their most directly comparable financial measures calculated and presented in accordance with gaap , please read “ —non-gaap financial measures ” below . items 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 . formation of partnership . for accounting purposes , we treat the formation of our partnership on may 1 , 2013 as an acquisition , with the partnership as the acquirer of enogex . as a result , our historical results of operations for periods prior to may 1 , 2013 do not include the results of enogex 's operations . operation and maintenance and general and administrative expenses . we have entered into services agreements with each of centerpoint energy and oge energy pursuant to which they perform certain administrative services for us that are generally consistent with the level and type of services they provided to each of their respective businesses prior to our formation . at formation , these services included accounting , finance , legal , risk management , information technology and human resources . we are required to reimburse centerpoint energy and oge energy for their direct expenses or , where the direct expenses can not reasonably be determined , an allocated cost as set forth in the agreements . story_separator_special_tag our reimbursement obligations are capped at amounts set forth in our annual budget . the initial term of the services agreements ends in may 2016 , after which date they continue on a year-to-year basis unless terminated by us upon 90 days ' notice . subject to the provisions of the service agreements , we terminated use of a significant portion of these services as we now perform many of the services internally . historically , our general and administrative expenses included direct monthly charges for the management and operation of our logistics assets and certain expenses allocated by our sponsors for general corporate services , such as treasury , accounting and legal services . these expenses were charged or allocated to us based on conventions accepted by the regulators of centerpoint energy 's and oge energy 's regulated utility assets . for additional information , please see note 14 to the combined and consolidated financial statements for the years ended december 31 , 2015 , 2014 and 2013 . income tax expenses . prior to may 1 , 2013 , our assets were included in centerpoint energy 's consolidated federal income tax returns , which were taxed at the entity level as a c corporation . following our formation , we are treated as a partnership for federal income tax purposes , with each partner being separately taxed on its share of taxable income ; therefore , there is no income tax expense in our financial statements subsequent to may 1 , 2013 ( other than texas state margin taxes and taxes associated with the partnership 's corporate subsidiary , enable midstream services ) . as a result of the conversion to a limited partnership , we recorded a one-time income tax benefit of $ 1.24 billion in the year ended december 31 , 2013. financing . upon our formation , we entered into our $ 1.05 billion three-year term loan facility ( 2013 term loan facility ) , the proceeds of which were used to repay $ 1.05 billion of intercompany indebtedness owed to centerpoint energy . in addition , 62 upon our formation , we entered into a $ 1.4 billion five-year revolving credit facility . initial advances under the $ 1.4 billion revolving credit facility were used for general partnership purposes and to refinance a revolving credit facility held by enogex , which was terminated in connection with our formation , and existing indebtedness owing by enogex to oge energy as of may 1 , 2013. in january 2014 , we initiated our $ 1.4 billion commercial paper program . this program is used for general corporate purposes . commercial paper issuances effectively reduce our borrowing capacity under our current revolving credit facility . in april 2014 , the partnership completed the offering of 25,000,000 units and received net proceeds of $ 464 million . the partnership retained the net proceeds of the offering for general partnership purposes , including the funding of expansion capital expenditures , and to pre-fund demand fees expected to be incurred over the next three years relating to certain expiring transportation and storage contracts . on may 27 , 2014 , the partnership completed the private offering of 2019 notes , 2024 notes and 2044 notes , with registration rights . the partnership received aggregate proceeds of $ 1.63 billion . certain of the proceeds were used to repay the 2013 term loan facility , and certain of the proceeds were used to repay the eoit $ 250 million variable rate term loan and the eoit $ 200 million 6.875 % senior notes due july 15 , 2014 , and for general corporate purposes . see note 10 for discussion of the repayment of the eoit $ 200 million 6.875 % senior notes . a wholly owned subsidiary of centerpoint energy has guaranteed collection of the partnership 's obligations under the 2019 notes and 2024 notes , on an unsecured subordinated basis , subject to automatic release on may 1 , 2016. on june 18 , 2015 , the partnership amended and restated its revolving credit facility to , among other things , increase the borrowing capacity thereunder to $ 1.75 billion and extend its maturity date to june 18 , 2020. on july 31 , 2015 , the partnership entered into a term loan agreement providing for an unsecured three -year $ 450 million term loan facility ( 2015 term loan facility ) . please read `` —liquidity and capital resources '' . on january 28 , 2016 , the partnership entered into an agreement with centerpoint energy to issue and sell in a private placement an aggregate of 14,520,000 preferred units for a cash purchase price of $ 25.00 per preferred unit , resulting in total gross proceeds of $ 363 million . the closing of the private placement , which is expected to occur prior to the end of the first quarter of 2016 , is subject to the completion of due diligence by centerpoint energy , including the review of the partnership 's audited financial statements and this form 10-k , and certain customary closing conditions . in connection with the private placement , the partnership intends to redeem the $ 363 million of notes payable—affiliated companies scheduled to mature in 2017 payable to a subsidiary of centerpoint energy . for a further discussion regarding the private placement , see `` — liquidity and capital resources — equity issuances. ” cash distributions . our partnership agreement requires that we distribute to our unitholders quarterly all of our available cash . as a result , we expect to fund future capital expenditures primarily from external sources , including borrowings under our revolving credit facility , issuances of commercial paper , when available , and future issuances of equity and debt securities . general trends and outlook we expect our business to continue to be affected by the key trends discussed below . our expectations are based on assumptions made by us and information currently available to us .
| our gathering and processing segment gross margin decrease d $ 84 million primarily due to a decrease in processing margins of $ 66 million resulting from the impact of lower average natural gas liquids prices and lower processed volumes in the ark-la-tex basin offset by higher processed volumes in the anadarko and arkoma basins . also , gathering margins decreased due to reduced sales on natural gas length of $ 25 million and decreased gathering fees of $ 14 million , as a result of lower gathered volumes in the arkoma and ark-la-tex basins and lower average natural gas prices partially offset by higher gathered volumes 66 in the anadarko basin , net of minimum volume payments , and lower revenues on third party measurement and communication services of $ 4 million . these decreases were partially offset by increases in crude oil gathered volumes in the williston basin of $ 12 million , one time project reimbursements of $ 11 million and a $ 2 million increase in unrealized gains on condensate and ngl derivatives during the year ended december 31 , 2015 . our gathering and processing segment operation and maintenance and general and administrative expenses decrease d $ 4 million primarily due to workforce reductions and lower payroll related costs of $ 13 million , lower write down of materials and supplies inventory of $ 4 million , and lower losses on sale of assets of $ 2 million . these decreases were partially offset by expenses for one time project costs of $ 9 million and payroll expenses for severance payments related to workforce reductions of $ 6 million . our gathering and processing segment depreciation and amortization expense increase d $ 35 million due to additional assets placed in service . our gathering and processing segment recognized impairments of $ 543 million and $ 8 million in the years ended december 31 , 2015 and 2014 , respectively . due to the continuing commodity price declines , the resulting decreases in forward
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we expect to continue to incur net losses for the foreseeable future , and we expect our expenses and operating losses to increase substantially as we advance ang-3777 , ang-3070 and our other product candidates through clinical trials and preclinical development , and as we seek regulatory approval for ang-3777 , ang-3070 or any of our other product candidates . in addition , if we seek approval for any of our wholly-owned product candidates or those for which we retain the right to commercialize , we expect to incur additional expenses as we expand our clinical , regulatory , quality , manufacturing and commercialization capabilities , incur significant commercialization expenses for marketing , sales , manufacturing and distribution if we obtain marketing approval for such product candidates . finally , we expect to incur increased expenses to protect our intellectual property and expand our general and administrative support functions , including hiring additional personnel , as well as incur additional costs associated with operating as a public company . our net losses may fluctuate significantly from quarter-to-quarter and year-to-year , depending on the timing of our clinical development activities , other research and development activities and pre-commercialization activities . we rely on third parties in the conduct of our preclinical studies and clinical trials and for manufacturing and supply of our product candidates . we have no internal manufacturing capabilities , and we expect to continue to rely on third parties , many of whom are single-source suppliers , for our preclinical study and clinical trial materials . in addition , we do not yet have a marketing or sales organization or commercial infrastructure . accordingly , we will incur significant expenses to develop a marketing and sales organization and commercial infrastructure in advance of generating any product sales of wholly-owned product candidates or those for which we retain the right to commercialize . furthermore , we will need to make continued investment in development studies , registration activities and the development of commercial support functions including quality assurance and safety pharmacovigilance before we will be in a position to sell any of our product candidates , if approved . the initial public offering and concurrent private placement the initial public offering and concurrent private placement , which both closed on february 9 , 2021 , generated aggregate net proceeds of approximately $ 109.9 million , after deducting the underwriting discounts and commissions , private placement fee and estimated offering expenses payable by the company . see item 5. market for registrant 's common equity , related stockholder matters and issuer purchases of equity securities . covid-19 update a novel strain of coronavirus sars-cov-2 and the resulting disease , coronavirus disease 2019 ( covid-19 ) , were first identified in wuhan , china in december 2019 , and subsequently declared a pandemic by the world health organization . covid-19 has placed strains on the providers of healthcare services , including the healthcare institutions where we conduct our clinical trials . these strains have resulted in institutions prohibiting the initiation of new clinical trials , enrollment in existing trials and restricting the on-site monitoring of clinical trials . for example , our phase 3 registration trial of ang-3777 to improve kidney function and reduce the severity of dgf , patient enrollment between february 2020 and when we completed enrollment was impacted by public safety restrictions related to the covid-19 pandemic . our phase 2 clinical trial of ang-3777 in patients at risk for developing aki following cardiac surgery involving cardiopulmonary bypass has been similarly impacted . we are continuing to evaluate the 111 impact of the covid-19 restrictions on our expected pace of enrollment , as such impacts could delay the timing of topline results in either our phase 3 study in dgf or our phase 2 clinical trial in csa-aki . we also follow fda guidance on clinical trial conduct during the covid-19 pandemic , including the remote monitoring of clinical data . numerous state and local jurisdictions have imposed , and others in the future may impose , `` shelter-in-place '' orders , quarantines , executive orders and similar government orders and restrictions for their residents to control the spread of covid-19 . starting in mid-march 2020 , the governor of california , where our corporate operations are based , issued `` shelter-in-place '' or `` stay at home '' orders restricting non-essential activities , travel and business operations for an indefinite period of time , subject to certain exceptions for necessary activities . similar orders and restrictions have been imposed in new york and massachusetts , and such orders or restrictions have resulted in our office closing , work stoppages , slowdowns and delays , travel restrictions and cancellation of events , among other effects , thereby negatively impacting our operations . we are supporting our employees by utilizing remote work , leveraging virtual meeting technology and encouraging employees to follow local guidance . the global pandemic of covid-19 continues to rapidly evolve . the extent to which covid-19 may impact our business , including our clinical trials , and financial condition will depend on future developments , which are highly uncertain and can not be predicted with confidence , such as the ultimate geographic spread of the disease , the duration of the pandemic , travel restrictions and social distancing in the united states and other countries , business closures or business disruptions and the effectiveness of actions taken in the united states and other countries to contain and treat the disease . at this time , we do not expect any disruption in our supply chain of drugs necessary to conduct our clinical trials and given our drug inventories , and we believe we will be able to supply the drug needs of our clinical trials in 2020 and 2021. however , we are continuing to evaluate our clinical supply chain in light of the covid-19 pandemic . story_separator_special_tag license , collaboration and grant agreements license agreement with vifor pharma in november 2020 , we granted vifor pharma , an exclusive , global ( excluding greater china ) , royalty-bearing license , for the commercialization of ang-3777 in all renal indications , beginning with dgf and csa-aki . the vifor license also grants vifor pharma exclusive rights , with a right to sublicense subject to our consent for certain specified conditions , to develop and manufacture ang-3777 for commercialization in renal indications worldwide ( excluding greater china ) in cooperation with us or independently . we retain the right to develop and commercialize combination therapy products combining ang-3777 with our other proprietary molecules , subject to vifor pharma 's right of first negotiation with respect to global ( excluding greater china ) rights to such combination therapy products in the renal indications . pursuant to the vifor license , we are entitled to receive $ 80 million in upfront and near-term clinical milestone payments , including $ 30 million in upfront cash that we received in november 2020 , a $ 30 million equity investment and $ 20 million due upon enrolling the first patient in a phase 3 trial of ang-3777 for csa-aki . in december 2020 , we issued vifor pharma a convertible promissory note in aggregate principal amount of $ 5.0 million as part of the equity investment with a maturity date of three years , 2 % interest and a conversion price of $ 11.57 per share , which was automatically converted into shares of our common stock upon the consummation of our initial public offering on february 9 , 2021 , and one or more entities affiliated with vifor pharma purchased $ 25 million of shares of our common stock in the concurrent private placement at a price per share equal to the initial public offering price , $ 16.00 per share ( see note 17 in the notes to the consolidated financial statements set forth in item 8 of this annual report on form 10-k. ) we are also eligible to receive post-approval milestones of up to approximately $ 260 million . further , we are eligible to receive milestone payments based upon global net sales : in the united states , the milestone payments range from $ 100 million to $ 450 million , based upon annual u.s. net sales tiers between $ 300 million and $ 1 billion , and outside the united states , the milestone payments range from $ 75 million to $ 200 million , based upon annual net sales tiers between $ 250 million and $ 550 million . in aggregate , we are eligible for sales milestone payments totaling $ 1.585 billion and a total potential deal value of up to $ 1.925 billion ( subject to certain reductions and offsets ) . we are also eligible to receive tiered royalties on global net sales of ang-3777 at royalty rates of 10 % for annual u.s. net sales below $ 100 million , mid-teens to low twenties for annual u.s. net sales between $ 100 million and $ 500 million and 40 % for annual u.s. net sales above $ 500 million . outside the united states , we are eligible to receive tiered royalties on annual ex-u.s. net sales of ang-3777 at royalty rates of 10 % for annual ex-u.s. net sales below $ 50 million , mid-teens to low twenties for annual ex-u.s. net sales between $ 50 million and $ 250 million and 40 % for annual ex-u.s. net sales above $ 250 million . such milestones and royalties 112 are subject to certain specified reductions and offsets . we recognized revenue of $ 0.2 million for the upfront cash payment in 2020 as license revenue . we had deferred revenue under this agreement of $ 29.8 million at december 31 , 2020. under the vifor license , we retain responsibility at our own cost for executing a pre-specified clinical development plan , which has been designed to obtain regulatory approvals of ang-3777 for the dgf and csa-aki indications in the united states , the european union , switzerland and the united kingdom . the plan includes the completion of our ongoing and currently planned clinical trials and other clinical development activities in such indications . we will be responsible for regulatory interactions and filings relating to such indications in the united states , and vifor pharma will be responsible for such matters outside the united states . we will share equally with vifor pharma the cost of related post-approval clinical development activities for such indications . we will conduct drug substance and drug product development for ang-3777 for dgf and csa-aki until production scale at our cost . prior to the first regulatory approval of ang-3777 for dgf or csa-aki in the united states or the european union , vifor pharma will assume responsibility of the commercial manufacture of ang-3777 for such indications in accordance with a supply agreement to be negotiated in good faith between vifor pharma and us . in addition , vifor pharma will be solely responsible at its own cost for the commercialization of dgf and csa-aki indications and any other renal indications , both within and outside of the united states ( excluding greater china ) . pursuant to the vifor license , we expect to collaborate with vifor pharma through the operation of joint governance committees , with each party having final determination authority in their respective areas of responsibility and other specific matters , subject to certain exceptions . the vifor license will continue until the expiration of the last royalty term for a licensed product in the licensed territory , unless earlier terminated .
| general and administrative expenses general and administrative expenses increased by $ 8.4 million , or 87.3 % , from the year ended december 31 , 2019 to the year ended december 31 , 2020. the increase in general and administrative expenses was primarily due to an increase of $ 1.9 million of personnel-related expenses , including salaries , benefits and stock-based compensation expenses , due to increases in headcount , an increase of $ 4.0 million of corporate fees due to financing from debt and equity , and an increase of $ 2.5 million of professional fees for legal , consulting , accounting , tax and other services . other income ( expense ) other expenses increased by $ 22.8 million , from the year ended december 31 , 2019 to the year ended december 31 , 2020. this increase is primarily attributable to interest expense of $ 8.8 million related to our convertible notes and series c convertible preferred stock and an increase of $ 14.3 million in fair value related to our warrant liability , convertible notes , and series c convertible preferred stock for which we have elected the fair value option . the convertible notes and warrants both require re-measurement at each balance sheet date with gains and losses reported through our consolidated statement of operations . liquidity and capital resources sources and uses of liquidity we have incurred losses and negative cash flows from operations since inception , and we anticipate that we will incur losses for at least the next several years . to date , we have not generated any revenue from product sales . we have funded our operations primarily through the receipt of grants , the sale of debt and equity securities , and proceeds from license agreements . as of december 31 , 2020 and 2019 , we had $ 34.6 million and $ 5.6 million , respectively , of cash and cash equivalents . from our inception , we have received an aggregate of $ 182.9 million in total funding , which consists of over $ 68.8 million from u.s. government grants and contracts . in november 2020 , we
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the preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenue and expenses , and related disclosure of contingent assets and liabilities . management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances . management has discussed the development , selection and disclosure of these estimates with the audit committee of our board . actual results could differ from these estimates under different assumptions or conditions . critical accounting policies are those that are both significant to the overall presentation of our financial condition and results of operations and require management to make difficult , complex or subjective judgments . for example , significant estimates and assumptions have been made with respect to useful lives of assets , capitalization of development and leasing costs , recoverable amounts of receivables and initial valuations and related amortization periods of deferred costs and intangibles . the following discussion relates to what we believe to be our most critical accounting policies that require our most subjective or complex judgment . revenue recognition our shopping center space is generally leased to retail tenants under leases that are classified as operating leases . we recognize minimum rents using the straight-line method over the terms of the leases commencing when the tenant takes possession of the space and when construction of landlord funded improvements is substantially complete . certain of the leases also provide for contingent percentage rental income which is recorded on an accrual basis once the specified target that triggers this type of income is achieved . the leases also provide for recoveries from tenants of common area maintenance ( “ cam ” ) , real estate taxes and other operating expenses . the majority of our recoveries are estimated and recognized as revenue in the period the recoverable costs are incurred or accrued . revenues from management , leasing , and other fees are recognized in the period in which the services have been provided and the earnings process is complete . lease termination income is recognized when a lease termination agreement is executed by the parties and the tenant vacates the space . when a lease is terminated early but the tenant continues to control the space under a modified lease agreement , the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement . current accounts receivable from tenants primarily relate to contractual minimum rent , percentage rent , real estate taxes , and cam or other operating expense reimbursements . accounts receivable and accrued rent we provide for bad debt expense based upon the allowance method of accounting . we continuously monitor the collectability of our accounts receivable from specific tenants , analyze historical bad debts , customer creditworthiness , current economic trends and changes in tenant payment terms when evaluating the adequacy of the allowance for bad debts . allowances are taken for those balances that we have reason to believe will be uncollectible . when tenants are in bankruptcy , we make estimates of the expected recovery of pre-petition and post-petition claims . the period to resolve these claims can exceed one year . management believes the allowance for doubtful accounts is adequate to absorb currently estimated bad debts . however , if we experience bad debts in excess of the allowance we have established , our operating income would be reduced . at december 31 , 2012 and 2011 , our accounts receivable were $ 8.0 million and $ 9.6 million , respectively , net of allowances for doubtful accounts of $ 2.6 million and $ 3.5 million , respectively . 24 in addition , many of our leases contain non-contingent rent escalations for which we recognize income on a straight-line basis over the non-cancelable lease term . this method results in rental income in the early years of a lease being higher than actual cash received , creating a straight-line rent receivable asset which is included in the “ other assets ” line item in our consolidated balance sheets . we review our unbilled straight-line rent receivable balance to determine the future collectability of revenue that will not be billed to or collected from tenants due to early lease terminations , lease modifications , bankruptcies and other factors . our evaluation is based on our assessment of tenant credit risk changes indicating that expected future straight-line rent may not be realized . depending on circumstances , we may provide a reserve against the previously recognized straight-line rent receivable asset for a portion , up to its full value , that we estimate may not be received . the balance of straight-line rent receivable at december 31 , 2012 and 2011 , net of allowances was $ 14.8 million and $ 16.0 million , respectively and is included in other assets on our consolidated balance sheets . to the extent any of the tenants under these leases become unable to pay their contractual cash rents , we may be required to write down the straight-line rent receivable from those tenants , which would reduce our operating income . real estate investment income producing real estate assets that we own directly are stated at cost less accumulated depreciation . depreciation is computed using the straight-line method . the estimated useful lives for computing depreciation are generally 25 – 40 years for buildings and 10 – 20 years for parking lot surfacing and equipment . we capitalize all capital improvement expenditures associated with replacements and improvements to real property that extend the property 's useful life and depreciate such improvements over their estimated useful lives ranging from 5 – 30 years . in addition , we capitalize tenant leasehold improvements and depreciate them over the shorter of the useful life of the improvements or the term of the related tenant lease . we consider a number of different factors to evaluate whether we or the tenant is the owner of the tenant improvement for accounting purposes . story_separator_special_tag these factors include : 1 ) whether the lease stipulates how and on what a tenant improvement allowance may be spent ; 2 ) whether the tenant or landlord retains legal title to the improvements ; 3 ) the uniqueness of the improvements ; 4 ) the expected economic life of the tenant improvements relative to the term of the lease ; and 5 ) who constructs or directs the construction of the improvements . we depreciate all tenant improvements over the shorter of the useful life of the improvements or the term of the related tenant lease . we charge maintenance and repair costs that do not extend an asset 's life to expense as incurred . sale of a real estate asset is recognized when it is determined that the sale has been consummated , the buyer 's initial and continuing investment is adequate , our receivable , if any , is not subject to future subordination , and the buyer has assumed the usual risks and rewards of ownership of the assets . development and redevelopment real estate also includes costs incurred in the development of new operating properties and the redevelopment of existing operating properties . these properties are carried at cost and no depreciation is recorded on these assets until the commencement of rental revenue or no later than one year from the completion of major construction . these costs include pre-development costs directly identifiable with the specific project , development and construction costs , interest , real estate taxes and insurance . interest is capitalized on land under development and buildings under construction based on the weighted average rate applicable to our borrowings outstanding during the period and the weighted average balance of qualified assets under development/redevelopment during the period . indirect project costs associated with development or construction of a real estate project are capitalized until the earlier of one year following substantial completion of construction or when the property becomes available for occupancy . the capitalized costs associated with development and redevelopment projects are depreciated over the useful life of the improvements . if we determine a development or redevelopment project is no longer probable , we expense all capitalized costs which are not recoverable . acquisitions acquisitions of properties are accounted for utilizing the acquisition method and , accordingly , the results of operations of an acquired property are included in our results of operations from the date of acquisition . estimates of fair values are based upon future cash flows and other valuation techniques in accordance with our fair value measurements policy , which are used to record the purchase price of acquired property among land , buildings on an “ as if vacant ” basis , tenant improvements , identifiable intangibles and any gain on purchase . identifiable intangible assets and liabilities include the effect of above-and below-market leases , the value of having leases in place ( “ as-is ” versus “ as if vacant ” and absorption costs ) , and out-of-market assumed mortgages . initial valuations are subject to change until such information is finalized , no later than twelve months from the acquisition date . the impact of these estimates , including incorrect estimates in connection with acquisition values and estimated useful lives , could result in significant differences related to the purchased assets , liabilities and resulting gain on purchase , depreciation or amortization . for the years ended december 31 , 2012 , 2011 and 2010 , we recorded in general and administrative expenses approximately $ 0.2 million , $ 0.1 million , and $ 0.3 million , respectively , in costs associated with the closing of our acquisitions . 25 the estimated fair value of acquired in-place leases are the costs we would have incurred to lease the properties to the occupancy level of the properties at the date of acquisition . such estimates include the fair value of leasing commissions , legal costs and other direct costs that would be incurred to lease the properties to such occupancy levels . additionally , we will evaluate the time period over which such occupancy levels would be achieved . such evaluation will include an estimate of the net market-based rental revenues and net operating costs ( primarily consisting of real estate taxes , insurance and cam ) that would be incurred during the lease-up period . acquired in-place leases as of the date of acquisition are amortized over the remaining lease term . acquired above-and below-market lease values are recorded based on the present value ( using an interest rate that reflects the risks associated with the lease acquired ) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management 's estimate of fair market value lease rates for the corresponding in-place leases . the capitalized above-and below-market lease values are amortized as adjustments to rental revenue over the remaining terms of the respective leases , which includes periods covered by bargain renewal options . should a tenant terminate its lease prior to expiration , the unamortized portion of the in-place lease value is charged to amortization expense and the unamortized portion of out-of-market lease value is charged to rental revenue . impairment we review our investment in real estate , including any related intangible assets , for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the remaining estimated useful lives of those assets may warrant revision or that the carrying value of the property may not be recoverable . for operating properties , these changes in circumstances include , but are not limited to , changes in occupancy , rental rates , tenant sales , net operating income , geographic location , and real estate values . the viability of all projects under construction or development , including those owned by unconsolidated joint ventures , are regularly evaluated under applicable accounting requirements , including requirements relating to abandonment of assets or changes in use .
| interest expense in 2012 decreased $ 1.7 million , or 6.3 % , from 2011 primarily due to lower revolving credit facility/term loan interest and the payoff of several higher interest rate mortgages in 2011 and 2012 . 28 amortization of deferred financing fees in 2012 decreased $ 0.4 million , or 22.1 % from 2011. the decrease is primarily due to the refinancing of our revolving credit facility in the second quarter of 2011 which resulted in the writeoff of associated deferred financing costs . impairment provisions of $ 4.7 million recorded in 2012 related to the decision to market certain income-producing properties for sale , adjustments to the sales price assumptions for certain undeveloped land parcels available for sale at several of our development properties and other-than-temporary decline in the fair market value of an equity investments in unconsolidated joint ventures . in the fourth quarter 2011 our impairment provisions totaled $ 26.5 million . refer to note 7 of the notes to the consolidated financial statements for a detailed discussion of these charges . in 2012 we recorded a deferred gain of $ 0.8 million due to the sale of one property held in a joint venture . the deferred gain related to our proportional 7 % equity interest when the property was sold to the joint venture in 2007. in 2011 we recorded a one-time write-off of unamortized deferred financing costs related to the extinguishment of debt of approximately $ 2.0 million . there was no similar charge in 2012. the income tax benefit was $ 34,000 in 2012 compared to a tax provision of $ 0.8 million in 2011. the decrease is due to the 2011 repeal of the michigan business tax which resulted in a one-time write-off of net deferred tax assets of $ 0.8 million . loss from discontinued operations was $ 1.6 million in 2012 compared to loss of $ 0.3 million in 2011. in 2012 we recorded a gain on sale of real estate of $ 0.3 million compared to $ 9.4
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during the year ended march 31 , 2019 , we recorded net realized gains on investments of $ 68.6 million , primarily related to a $ 65.7 million realized gain from the exit of cambridge sound management , inc. ( cambridge ) , a $ 13.8 million realized gain from the exit of drew foam companies , inc. ( drew foam ) , a $ 13.0 million realized gain from the exit of logo sportswear , inc. ( logo ) , and a $ 5.4 million realized gain from the exit of star seed , inc. ( star seed ) , partially offset by a $ 10.0 million realized loss from the restructure of our debt investments in the mountain , a $ 10.0 million realized loss from the restructure of our debt investments in sog , a $ 7.7 million realized loss from the exit of our equity investment in country club enterprises , llc ( cce ) and a $ 3.6 million realized loss from the exit of ndli , inc. ( ndli ) . taxes on deemed distribution of long-term capital gains for the year ended march 31 , 2020 and 2019 , we elected to retain $ 38.0 million and $ 50.0 million of long-term capital gains and to treat them as deemed distributions to common stockholders , respectively . we incurred $ 8.0 million and $ 10.5 million of federal income taxes on behalf of common stockholders for the year ended march 31 , 2020 and 2019 , respectively . in addition , we incurred virginia state taxes related to the deemed distribution of $ 2.3 million and $ 3.0 million for the year ended march 31 , 2020 and 2019 , respectively . refer to note 9 distributions to common stockholders in the accompanying notes to consolidated financial statements for additional information . net realized gain ( loss ) on other there were no realized gains or losses on other during the year ended march 31 , 2020. during the year ended march 31 , 2019 , we recorded a net realized loss on other of $ 1.7 million which primarily related to unamortized deferred issuance costs written off upon the redemption of our 6.750 % series b cumulative term preferred stock ( our series b term preferred stock ) and 6.500 % series c cumulative term preferred stock ( our series c term preferred stock ) in august 2018 . 53 net unrealized appreciation ( depreciation ) of investments during the year ended march 31 , 2020 , we recorded net unrealized depreciation of investments of $ 78.1 million . the realized gains ( losses ) and unrealized appreciation ( depreciation ) across our investments for the year ended march 31 , 2020 were as follows : replace_table_token_15_th the primary drivers of net unrealized depreciation of investments of $ 78.1 million for the year ended march 31 , 2020 were decreased performance of certain of our portfolio companies , a decrease in comparable multiples used to estimate the fair value of majority of our portfolio companies , and the reversal of previously recorded unrealized appreciation of certain investments upon their exit , partially offset by the reversal of previously recorded unrealized depreciation upon the exit of certain of our investments and an increase in performance of certain of our other portfolio companies . in part , the decrease in multiples used to estimate the fair value , and to a lesser extent the performance of certain of our portfolio companies was driven by the impact covid-19 has had or is expected to have on our portfolio companies and the markets in which they operate , including government restrictions on the portfolio companies ' ability to operate under historical conditions , shutdowns , demand for products , and general economic outlook . 54 during the year ended march 31 , 2019 , we recorded net unrealized appreciation of investments of $ 20.2 million . the realized gains ( losses ) and unrealized appreciation ( depreciation ) across our investments for the year ended march 31 , 2019 were as follows : replace_table_token_16_th the primary drivers of net unrealized appreciation of investments of $ 20.2 million for the year ended march 31 , 2019 were increased performance of certain of our portfolio companies , an increase in comparable multiples used to estimate the fair value of certain of our portfolio companies , and the reversal of previously recorded unrealized depreciation of certain investments upon their exit or restructure , partially offset by the reversal of previously recorded unrealized appreciation upon the exit of certain of our investments and a decline in performance of certain of our other portfolio companies . across our entire investment portfolio , we recorded $ 81.0 million of net unrealized depreciation on our equity investments and $ 2.9 million of net unrealized appreciation on our debt investments for the year ended march 31 , 2020. at march 31 , 2020 , the fair value of our investment portfolio was less than our cost basis by $ 43.7 million , as compared to march 31 , 2019 , when the fair value of our investment portfolio was greater than our cost basis by $ 34.5 million , representing net unrealized depreciation of $ 78.1 million for the year ended march 31 , 2020. our entire portfolio was fair valued at 92.8 % of cost as of march 31 , 2020. net unrealized depreciation ( appreciation ) on other there was no net unrealized depreciation or appreciation of other for the year ended march 31 , 2020. during the year ended march 31 , 2019 , we recorded net unrealized depreciation of other of $ 0.5 million related to the credit facility recorded at fair value . 55 comparison of the fiscal year ended march 31 , 2019 to the fiscal year ended march 31 , 2018 replace_table_token_17_th nm = not meaningful investment income total investment income increased by 2.2 % for story_separator_special_tag during the year ended march 31 , 2019 , we recorded net realized gains on investments of $ 68.6 million , primarily related to a $ 65.7 million realized gain from the exit of cambridge sound management , inc. ( cambridge ) , a $ 13.8 million realized gain from the exit of drew foam companies , inc. ( drew foam ) , a $ 13.0 million realized gain from the exit of logo sportswear , inc. ( logo ) , and a $ 5.4 million realized gain from the exit of star seed , inc. ( star seed ) , partially offset by a $ 10.0 million realized loss from the restructure of our debt investments in the mountain , a $ 10.0 million realized loss from the restructure of our debt investments in sog , a $ 7.7 million realized loss from the exit of our equity investment in country club enterprises , llc ( cce ) and a $ 3.6 million realized loss from the exit of ndli , inc. ( ndli ) . taxes on deemed distribution of long-term capital gains for the year ended march 31 , 2020 and 2019 , we elected to retain $ 38.0 million and $ 50.0 million of long-term capital gains and to treat them as deemed distributions to common stockholders , respectively . we incurred $ 8.0 million and $ 10.5 million of federal income taxes on behalf of common stockholders for the year ended march 31 , 2020 and 2019 , respectively . in addition , we incurred virginia state taxes related to the deemed distribution of $ 2.3 million and $ 3.0 million for the year ended march 31 , 2020 and 2019 , respectively . refer to note 9 distributions to common stockholders in the accompanying notes to consolidated financial statements for additional information . net realized gain ( loss ) on other there were no realized gains or losses on other during the year ended march 31 , 2020. during the year ended march 31 , 2019 , we recorded a net realized loss on other of $ 1.7 million which primarily related to unamortized deferred issuance costs written off upon the redemption of our 6.750 % series b cumulative term preferred stock ( our series b term preferred stock ) and 6.500 % series c cumulative term preferred stock ( our series c term preferred stock ) in august 2018 . 53 net unrealized appreciation ( depreciation ) of investments during the year ended march 31 , 2020 , we recorded net unrealized depreciation of investments of $ 78.1 million . the realized gains ( losses ) and unrealized appreciation ( depreciation ) across our investments for the year ended march 31 , 2020 were as follows : replace_table_token_15_th the primary drivers of net unrealized depreciation of investments of $ 78.1 million for the year ended march 31 , 2020 were decreased performance of certain of our portfolio companies , a decrease in comparable multiples used to estimate the fair value of majority of our portfolio companies , and the reversal of previously recorded unrealized appreciation of certain investments upon their exit , partially offset by the reversal of previously recorded unrealized depreciation upon the exit of certain of our investments and an increase in performance of certain of our other portfolio companies . in part , the decrease in multiples used to estimate the fair value , and to a lesser extent the performance of certain of our portfolio companies was driven by the impact covid-19 has had or is expected to have on our portfolio companies and the markets in which they operate , including government restrictions on the portfolio companies ' ability to operate under historical conditions , shutdowns , demand for products , and general economic outlook . 54 during the year ended march 31 , 2019 , we recorded net unrealized appreciation of investments of $ 20.2 million . the realized gains ( losses ) and unrealized appreciation ( depreciation ) across our investments for the year ended march 31 , 2019 were as follows : replace_table_token_16_th the primary drivers of net unrealized appreciation of investments of $ 20.2 million for the year ended march 31 , 2019 were increased performance of certain of our portfolio companies , an increase in comparable multiples used to estimate the fair value of certain of our portfolio companies , and the reversal of previously recorded unrealized depreciation of certain investments upon their exit or restructure , partially offset by the reversal of previously recorded unrealized appreciation upon the exit of certain of our investments and a decline in performance of certain of our other portfolio companies . across our entire investment portfolio , we recorded $ 81.0 million of net unrealized depreciation on our equity investments and $ 2.9 million of net unrealized appreciation on our debt investments for the year ended march 31 , 2020. at march 31 , 2020 , the fair value of our investment portfolio was less than our cost basis by $ 43.7 million , as compared to march 31 , 2019 , when the fair value of our investment portfolio was greater than our cost basis by $ 34.5 million , representing net unrealized depreciation of $ 78.1 million for the year ended march 31 , 2020. our entire portfolio was fair valued at 92.8 % of cost as of march 31 , 2020. net unrealized depreciation ( appreciation ) on other there was no net unrealized depreciation or appreciation of other for the year ended march 31 , 2020. during the year ended march 31 , 2019 , we recorded net unrealized depreciation of other of $ 0.5 million related to the credit facility recorded at fair value . 55 comparison of the fiscal year ended march 31 , 2019 to the fiscal year ended march 31 , 2018 replace_table_token_17_th nm = not meaningful investment income total investment income increased by 2.2 % for
| in august 2019 , we sold our investment in alloy die casting co. ( adc ) , which resulted in success fee income of $ 1.9 million and a realized gain of $ 20.4 million . in connection with the sale , we received net cash proceeds of $ 38.8 million , including the repayment of our debt investment of $ 13.3 million at par . in september 2019 , we invested $ 4.4 million in phoenix door systems , inc. ( phoenix ) through a combination of secured first lien debt and common equity . phoenix , headquartered in mason , ohio , manufactures high impact traffic doors for the commercial and industrial market and architectural doors for the municipal market . in september 2019 , we invested an additional $ 8.5 million in bassett creek in the form of first lien debt . in october 2019 , we exited our investment in b-dry , llc ( b-dry ) and recorded a realized loss of $ 14.5 million . in november 2019 , we invested an additional $ 16.9 million in brunswick in the form of second lien debt , of which $ 10.0 million was repaid in december 2019 . 49 in december 2019 , we exited our investment in nth degree , inc. ( nth degree ) , which resulted in dividend income of $ 2.7 million , success fee income of $ 0.2 million , and a realized gain of $ 47.9 million . in connection with the sale , we received net cash proceeds of $ 68.6 million , including the repayment of our debt investment of $ 13.3 million at par , and retained an equity investment in common stock in nth degree investment group , llc . in january 2020 , we exited our investment in meridian rack & pinion , inc. ( meridian ) and recorded a realized loss of $ 13.0 million . in january 2020 , we invested an additional $ 4.4 million into edge adhesives holdings , inc. in the form of preferred equity . in february 2020 , we invested an additional $ 5.0 million into j.r. hobbs in the form of preferred equity . in march 2020 , we invested $ 35.9 million in
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through our merchant and network relationships we primarily offer fuel cards , corporate cards , virtual cards , purchasing cards , t & e cards , gift cards , stored value payroll cards , vehicle maintenance , food , fuel , toll and transportation cards and vouchers or lodging services to our customers . the following diagram illustrates a typical card transaction flow , but may also be applied to our vehicle maintenance , lodging and food , fuel , toll and transportation card and voucher products , substituting transactions for gallons . this representative model may not include all of our businesses . illustrative transaction flow 48 from our customers and partners , we derive revenue from a variety of program fees , including transaction fees , card fees , network fees and charges , which can be fixed fees , cost plus a mark-up or based on a percentage discount from retail prices . our programs include other fees and charges associated with late payments and based on customer credit risk . from our merchant and network relationships , we derive revenue mostly from the difference between the price charged to a customer for a transaction and the price paid to the merchant or network for the same transaction , as well as network fees and charges in certain businesses . as illustrated in the table below , the price paid to a merchant or network may be calculated as ( i ) the merchant 's wholesale cost of the product plus a markup ; ( ii ) the transaction purchase price less a percentage discount ; or ( iii ) the transaction purchase price less a fixed fee per unit . the following table presents an illustrative revenue model for transactions with the merchant , which is primarily applicable to fuel based product transactions , but may also be applied to our vehicle maintenance , lodging and food , fuel , toll and transportation card and voucher products , substituting transactions for gallons . this representative model may not include all of our businesses . illustrative revenue model for fuel purchases ( unit of one gallon ) replace_table_token_6_th set forth below are our sources of revenue for the years ended december 31 , 2015 , 2014 and 2013 , expressed as a percentage of consolidated revenues : replace_table_token_7_th 1 although we can not precisely calculate the absolute impact of fuel price spreads and the absolute price of fuel on our consolidated revenues , we believe these percentages approximate their relative impacts . 49 revenue per transaction . set forth below is revenue per transaction information for the years ended december 31 , 2015 , 2014 and 2013 : replace_table_token_8_th 2 transactions in 2015 and 2014 include appropriately 1.3 billion and 270 million transactions , respectively , related to our svs product , which is part of the comdata business acquired in november 2014. svs , stored value solutions , is our global provider of gift card and stored value solutions . the svs product has lower revenue per transaction . 3 adjusted revenues is a non-gaap financial measure defined as revenues , net less merchant commissions . we believe this measure is a more effective way to evaluate our revenue performance . we use adjusted revenues as a basis to evaluate our revenues , net of the commissions that are paid to merchants to participate in our card programs . adjusted revenues is a supplemental non-gaap financial measure of operating performance . see the heading entitled management 's use of non-gaap financial measures. revenue per transaction is derived from the various revenue types as discussed above and can vary based on geography , the relevant merchant relationship , the payment product utilized and the types of products or services purchased , the mix of which would be influenced by our acquisitions , organic growth in our business , and the overall macroeconomic environment , including fluctuations in foreign currency exchange rates . revenue per transaction per customer changes as the level of services we provide to a customer increases or decreases , as macroeconomic factors change and as adjustments are made to merchant and customer rates . see results of operations for further discussion of transaction volumes and revenue per transaction . from 2014 to 2015 , total transactions increased from 652.4 million to 1.9 billion , an increase of 1.2 billion or 183.8 % . we experienced an increase in transactions in our north america segment primarily due to our acquisition of comdata in november 2014 , of which 1.3 billion and 270 million transactions are attributable to svs for 2015 and 2014 , respectively , as well as from organic growth in our u.s. businesses . transaction volumes in our international segment decreased slightly by 4.5 % primarily due to market softness in some of our international businesses . from 2013 to 2014 , total transactions increased from 327.5 million to 652.4 million , an increase of 324.9 million or 99.2 % . we experienced an increase in transactions in our north america and international segments primarily due to organic growth in certain payment programs , the impact of the acquisitions completed in 2014 and the full year impact of acquisitions completed in 2013. in 2014 , transaction volume was primarily affected by the inclusion of approximately 270 million transactions related to our svs product , which is part of the comdata business acquired in november 2014. sources of expenses we incur expenses in the following categories : merchant commissions in certain of our card programs , we incur merchant commissions expense when we reimburse merchants with whom we have direct , contractual relationships for specific 50 transactions where a customer purchases products or services from the merchant . in the card programs where it is paid , merchant commissions equal the difference between the price paid by us to the merchant and the merchant 's wholesale cost of the underlying products or services . story_separator_special_tag processing our processing expense consists of expenses related to processing transactions , servicing our customers and merchants , bad debt expense and cost of goods sold related to our hardware sales in certain businesses . selling our selling expenses consist primarily of wages , benefits , sales commissions ( other than merchant commissions ) and related expenses for our sales , marketing and account management personnel and activities . general and administrative our general and administrative expenses include compensation and related expenses ( including stock-based compensation ) for our executive , finance and accounting , information technology , human resources , legal and other administrative personnel . also included are facilities expenses , third-party professional services fees , travel and entertainment expenses , and other corporate-level expenses . depreciation and amortization our depreciation expenses include depreciation of property and equipment , consisting of computer hardware and software ( including proprietary software development amortization expense ) , card-reading equipment , furniture , fixtures , vehicles and buildings and leasehold improvements related to office space . our amortization expenses include amortization of intangible assets related to customer and vendor relationships , trade names and trademarks and non-compete agreements . we are amortizing intangible assets related to business acquisitions and certain private label contracts associated with the purchase of accounts receivable . other operating , net our other operating , net includes other operating expenses and income items unusual to the period and presented separately . equity method investment loss our equity method investment loss relates to our minority interest in masternaut group holdings limited ( masternaut ) , a provider of telematics solutions to commercial fleets in europe , which we account for using the equity method . other expense ( income ) , net other expense ( income ) , net includes foreign currency transaction gains or losses , proceeds/costs from the sale of assets and other miscellaneous operating costs and revenue . interest expense , net interest expense , net includes interest income on our cash balances and interest expense on our outstanding debt and on our securitization facility . we have historically invested our cash primarily in short-term money market funds . loss on early extinguishment of debt loss on early extinguishment of debt relates to our write-off of debt issuance costs associated with the refinancing of our existing credit facility and entry into our new credit agreement , along with our recent acquisition of comdata . provision for income taxes the provision for income taxes consists primarily of corporate income taxes related to profits resulting from the sale of our products and services in the united states and internationally . our worldwide effective tax rate is lower than the u.s. statutory rate of 35 % , due primarily to lower rates in foreign jurisdictions and foreign-sourced non-taxable income . 51 adjusted revenues , adjusted net income and adjusted net income per diluted share . set forth below are adjusted revenues , adjusted net income and adjusted net income per diluted share for the years ended december 31 , 2015 , 2014 and 2013. replace_table_token_9_th we use adjusted revenues as a basis to evaluate our revenues , net of the commissions that are paid to merchants that participate in certain of our card programs . the commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate . thus , we believe this is a more effective way to evaluate our revenue performance on a consistent basis . we use adjusted net income and adjusted net income per diluted share to eliminate the effect of items that we do not consider indicative of our core operating performance on a consistent basis . adjusted revenues , adjusted net income and adjusted net income per diluted share are supplemental non-gaap financial measures of operating performance . see the heading entitled management 's use of non-gaap financial measures. factors and trends impacting our business we believe that the following factors and trends are important in understanding our financial performance : fuel prices our fleet customers use our products and services primarily in connection with the purchase of fuel . accordingly , our revenue is affected by fuel prices , which are subject to significant volatility . a change in retail fuel prices could cause a decrease or increase in our revenue from several sources , including fees paid to us based on a percentage of each customer 's total purchase . changes in the absolute price of fuel may also impact unpaid account balances and the late fees and charges based on these amounts . see sources of revenue above for further information related to the absolute price of fuel . fuel-price spread volatility a portion of our revenue involves transactions where we derive revenue from fuel-price spreads , which is the difference between the price charged to a fleet customer for a transaction and the price paid to the merchant for the same transaction . in these transactions , the price paid to the merchant is based on the wholesale cost of fuel . the merchant 's wholesale cost of fuel is dependent on several factors including , among others , the factors described above affecting fuel prices . the fuel price that we charge to our customer is dependent on several factors including , among others , the fuel price paid to the merchant , posted retail fuel prices and competitive fuel prices . we experience fuel-price spread contraction when the merchant 's wholesale cost of fuel increases at a faster rate than the fuel price we charge to our customers , or the fuel price we charge to our customers decreases at a faster rate than the merchant 's wholesale cost of fuel . see sources of revenue above for further information related to fuel-price spreads . acquisitions since 2002 , we have completed over 65 acquisitions of companies and commercial account portfolios .
| on november 14 , 2014 in order to finance a portion of the comdata acquisition and to refinance our existing credit agreement , we made initial borrowings under the new credit agreement . the new credit agreement replaced the existing credit agreement , which was a five-year , $ 900 million credit agreement ( the existing credit agreement ) with bank of america , n.a. , as administrative agent , swing line lender and l/c issuer , and a syndicate of financial institutions ( the lenders ) entered into on june 22 , 2011. on march 13 , 2012 , we entered into the first amendment to the existing credit agreement . the amendment added two u.k. entities as designated borrowers and added a $ 110 million foreign currency swing line subfacility under the existing revolver , which allows for alternate currency borrowing on the swing line . the amendment also permitted us to provide a cash deposit of up to $ 50 million in connection with one of our mastercard programs . on november 6 , 2012 , we entered into a second amendment to the credit agreement to increase our total borrowing capacity from $ 900 million to $ 1.4 billion , comprised of an increase to the term loan from $ 300 million to $ 550 million and an increase to the revolving line of credit from $ 600 million to $ 850 million . in addition , we increased the accordion feature from $ 150 million to $ 250 million . the interest rates on the amended credit agreement did not change . on march 20 , 2013 , we entered into a third amendment to the credit agreement to extend the term of the facility for an additional five years from the amendment date , with a new maturity date of march 20 , 2018 , separated the revolver into two tranches ( a $ 815 million revolving a facility and a $ 35 million revolving b facility ) , added a designated borrower in australia and another
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europe performed well in a difficult environment , canada continued to face challenges , and our international business made significant progress toward its goal of profitability by 2016. particular challenges included miller lite in the u.s. and coors light in canada , along with commercial performance in serbia . nonetheless , our focus on building our core brands , growing the above-premium segment of our portfolio , and driving sales revenue from innovation was instrumental in delivering these results . coors light grew more than 30 % in the u.k. , where it is now our second largest brand . and it is growing even faster in mexico and our latin american markets . coors light also gained segment share in the u.s. , but declined in canada and will be a focus for 2014. carling , the u.k. 's number one brand , reaffirmed its leading position by growing both volume and share in a soft u.k. market . molson canadian brand increased both volume and share in canada in 2013. meanwhile , coors banquet achieved its seventh year of growth in the u.s. and has sold ahead of expectations across canada following its launch there in the 3rd quarter . staropramen grew share in its home market , czech republic , and grew volume strong double digits in the rest of our european business . our brands continue to increase market share in croatia and czech republic and grew market share in bulgaria for the full year and in romania for the second half of the year . we lost market share in both serbia and hungary during 2013. the loss of share in serbia is being addressed by a new management team , and the loss in hungary was planned , as we gave up low-margin private label production . our above-premium brands grew volume at a double-digit rate globally , contributing to mix-related net sales per hectoliter growth of 1.4 % in the u.s. and 1 % in europe , on a comparable basis , in local currency . we continue to make progress in the craft sector through tenth and blake in the u.s. and six pints in canada . as a result , we accounted for 29 % of craft beer growth in the u.s. and saw our six pints volume in canada increase nearly 13 % in 2013. finally , our innovation pipeline had its best year so far and delivered nearly 6 % of global net sales . our focus on innovation remains a top priority as we extend the reach of our portfolio to bring in new consumers to our brands . in summary , our overall brand performance was strong , and strategically we are gaining momentum in the areas that will have the most impact on our financial results as markets begin to improve . 2013 financial highlights : net income from continuing operations attributable to mcbc of $ 565.3 million , or $ 3.07 per diluted share , increased 28.0 % from a year ago , due to cycling of financing and acquisition costs incurred in 2012 related to the acquisition , lower income taxes and an increase in earnings from our europe segment operations , offset by an increase in special charges , primarily due to non-cash impairments of intangible assets and restructuring charges incurred in 2013 . additionally , underlying after-tax income of $ 727.1 million , or $ 3.95 per diluted share , increased 2.3 % and underlying ebitda increased 5.1 % compared to 2012 , primarily due to an increase in underlying earnings in europe and the u.s. , partially offset by lower underlying income in canada , due to lower volumes . our underlying income excludes some special and other non-core gains , losses and expenses that net to a $ 210.9 million pretax charge , as explained below . worldwide beer volume for mcbc in 2013 increased 8.5 % compared to 2012 , primarily due to including the results of our central europe operations , as well as increased volumes in the u.k. , partially offset by lower volumes in canada and the u.s. additionally , total-company net sales increased 7.4 % compared to 2012 , primarily due to including a full year of results from our central europe operations , positive pricing in europe , partially offset by lower volumes and unfavorable foreign exchange rate changes in canada . we generated cash flow from operating activities of $ 1,168.2 million , representing an 18.8 % increase from $ 983.7 million in 2012 and a 34.6 % increase from $ 868.1 million in 2011. underlying free cash flow in 2013 was $ 892.0 million , compared to $ 864.7 million in 2012 , representing an increase of 3.2 % from 2012. these increases in operating cash flow and underlying free cash flow are driven by higher net income , adjusted for increased non-cash impairments and other non-cash add-backs . additionally , increased operating cash flows are primarily driven by an increased focus on managing working capital , particularly in canada and europe , along with lower cash paid for interest , partially offset by higher tax payments and pension contributions . we decreased our total outstanding debt balances by $ 868.2 million during the year , primarily due to the repayment of our $ 575 million convertible notes , as well as the 500 million convertible note ( less amounts initially withheld of 44.9 million ) and remaining outstanding portion of our 120 million term loan , offset by commercial paper issuances and borrowings on our euro credit facility during 2013 . additionally , we saw an improvement in the net underfunded position of our pension and other postretirement benefit plans , excluding those of millercoors and other equity method investments , of approximately $ 405 million primarily driven by increased discount rates , increased employer contributions and the performance of our plan assets . we also made repayments on our outstanding cross currency swaps of approximately $ 114 million . story_separator_special_tag 28 regionally : in canada , we gained share in the value segment , which has been a source of share loss in recent years , and we delivered strong cash and cost-saving results , but our overall performance declined . we are reducing our cost base in the same manner that we did in the u.k. , and as a result , we expect to increase our capital spend in canada by approximately cad 40 million this year , with the expectation that we will begin to realize the resulting benefits in 2015. as in the u.k. , we expect to re-invest most of the benefits back into our canadian brands . our 2013 income from continuing operations before income taxes and underlying pretax income in canada decreased by 14.1 % to $ 363.3 million and by 10.1 % to $ 392.8 million , respectively , compared to 2012 . positive pricing and cost reductions were more than offset by the negative impact of lower volume and higher costs , driven by input inflation , sales mix shift toward higher-cost brands and packages , increased promotional packaging expense and increased pension costs , in addition to negative foreign currency movements . we grew u.s. 2013 pretax earnings on the strength of positive net pricing , strong sales mix and significant cost reductions . although overall industry volume declined , we held share in the premium light segment , and we led the industry in above-premium share growth . our above-premium portfolio now represents nearly 14 % of our total net revenue , up more than 3 percentage points from 2012. our 2013 equity income in millercoors increased 5.5 % to $ 539.0 million , while underlying equity income in millercoors increased 4.4 % to $ 547.3 million compared to 2012 , primarily driven by higher net pricing , favorable brand mix and lower mg & a partially offset by lower sales volume , commodity and brewery inflation and lower fixed cost absorption . in europe , although consumer demand remained weak , our business delivered solid growth in market share , net pricing , earnings and free cash flow . in addition to the brand performances mentioned above , our craft business is performing well and posted record volumes , with doom bar becoming the biggest selling cask ale in the u.k. on-premise channel . we reported 2013 income from continuing operations before income taxes of $ 34.3 million , a decrease of 78.6 % from 2012 on a pro forma basis , which is primarily attributable to a non-cash impairment charge of $ 150.9 million recognized in 2013 related to indefinite-lived intangible brand assets . underlying income of $ 213.3 million increased by 15.3 % on a pro forma basis , compared to $ 185.0 million in 2012 , driven by strong net pricing and lower supply chain costs , partially offset by negative impact of lower volume , a mix shift toward higher-cost products and packages , increased marketing investments and spending behind our products . our international business rationalized its cost base and migrated its sales mix toward more profitable businesses in 2013 . as a result , we reduced the underlying loss by nearly half versus 2012 and are on track to our goal of profitability by 2016. internationally , the portfolio is led by coors light but has been reinforced by staropramen and increasingly blue moon , with carling being used tactically . our mci 2013 loss from continuing operations before income taxes decreased by 83.6 % to $ 11.8 million and our 2013 underlying pretax loss decreased by 44.9 % to $ 16.2 million . this was driven by the addition of the central europe export and license business for a full year in 2013 , the elimination of losses in our mc si'hai joint venture , lower overhead costs and improved profit performance in our non-joint venture business in china , partially offset by lower sales volumes due to the negative impact of transferring our carling travel and export business to the europe segment . additionally , the decrease in our loss from continuing operations before income taxes in 2013 is also driven by a gain recognized on the sale of our mc si'hai joint venture in china during the fourth quarter of 2013 , versus charges incurred in 2012 on the impairment and deconsolidation of the joint venture . 29 the following table highlights summarized components of our consolidated statements of operations for the years ended december 31 , 2013 , december 29 , 2012 , and december 31 , 2011 , and provides a reconciliation of `` underlying income '' , a non-gaap measure , to its nearest u.s. gaap measure . replace_table_token_9_th n/m = not meaningful ( 1 ) see part ii—item 8 financial statements and supplementary data , note 8 , `` special items '' of the notes to the consolidated financial statements ( `` notes '' ) for additional information . ( 2 ) see `` results of operations '' , `` united states segment '' under the sub-heading `` special items `` in this section for additional information . ( 3 ) in connection with the acquisition , we recognized fees in marketing , general and administrative expenses of $ 10.7 million and $ 40.2 million in 2013 and 2012 , respectively . concurrent with the announcement of the acquisition , we entered into a bridge loan agreement , which we terminated upon the closing of our issuance of the $ 1.9 billion senior notes . in connection with the issuance and subsequent termination of the bridge loan , we incurred debt fees of $ 13.0 million in the second quarter of 2012 recorded as other expense . additionally , in advance of our issuance of the $ 1.9 billion senior notes , we systematically removed a portion of our interest rate market risk in the second quarter of 2012 by entering into standard pre-issuance u.s. treasury interest rate hedges ( `` treasury locks '' ) .
| excluding royalty sales ( primarily in mexico and eastern europe ) , mci reported sales volume increased 17.4 % in 2012 compared to 2011 . net sales per hectoliter increased 2.1 % in 2012 versus 2011 , driven by positive sales mix , including higher sales of zima and modelo brands in japan . cost of goods sold cost of goods sold per hectoliter increased 1.1 % in 2013 versus 2012 , due to the addition of contract brewing volume in india . cost of goods sold per hectoliter increased 1.1 % in 2012 versus 2011 , driven by sales mix , including higher sales of zima and modelo brands in japan . marketing , general and administrative expenses marketing general and administrative expenses decreased 21.2 % to $ 68.9 million in 2013 compared to 2012 , due to lower marketing spending in low-margin accounts in china , as well as the exit from our china joint venture and reduced overhead expenses in other markets . these decreases were partially offset by increases in marketing investments related to the launch of coors and blue moon in australia . marketing general and administrative expenses increased 12.9 % to $ 87.4 million in 2012 compared to 2011 , due to incremental brand investments in priority markets and asset-value and cost adjustments in our mc si'hai joint venture . marketing , general and administrative expenses attributable to the addition of the central europe export and license business were insignificant for 2012. special items , net in 2013 , we sold our interest in the mc si'hai joint venture in china and recognized a gain of $ 6.0 million . the gain consists of the release of the $ 5.4 million liability representing the fair value of our remaining investment upon deconsolidation of the joint venture in 2012 , as well as $ 0.6 million of proceeds received for our interest in the joint venture . we also recognized legal and related fees in relation
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the increase in the yield on interest-earning assets was due primarily to increases in the yields earned on securities and other earning assets , partially offset by a decrease in the yield earned on loans . the decrease in the yield earned on loans was due primarily to strong growth in the public finance portfolio which typically has lower tax-exempt interest rates . 27 2016 v. 2015 net interest income for the twelve months ended december 31 , 2016 was $ 39.7 million , an increase of $ 8.9 million , or 29.1 % , compared to $ 30.8 million for the twelve months ended december 31 , 2015 . the increase in net interest income was the result of a $ 17.5 million , or 42.1 % , increase in total interest income to $ 58.9 million for the twelve months ended december 31 , 2016 compared to $ 41.4 million for the twelve months ended december 31 , 2015 . the increase in total interest income was partially offset by an $ 8.5 million , or 79.6 % , increase in total interest expense to $ 19.2 million for the twelve months ended december 31 , 2016 compared to $ 10.7 million for the twelve months ended december 31 , 2015 . the increase in total interest income was due primarily to an increase in interest earned on loans resulting from an increase of $ 290.7 million , or 34.0 % , in the average balance of loans , including loans held-for-sale , as well as an increase in interest earned on securities resulting from an increase of $ 198.7 million , or 109.3 % , in the average balance of securities for the twelve months ended december 31 , 2016 compared to the twelve months ended december 31 , 2015 . the increase in total interest income was also due to a 19 bp increase in the yield earned on the securities portfolio , partially offset by a decline of 5 bps in the yield earned on loans , including loans held-for-sale . the increase in total interest expense was driven primarily by an increase in interest expense related to interest-bearing deposits as a result of a $ 448.7 million , or 53.5 % , increase in the average balance of interest-bearing deposits for the twelve months ended december 31 , 2016 compared to the twelve months ended december 31 , 2015 , and an increase of 19 bps in the cost of funds related to these deposits . interest expense related to other borrowed funds also contributed to the increase in total interest expense , due to a $ 43.7 million , or 31.3 % , increase in the average balance of other borrowed funds for the twelve months ended december 31 , 2016 compared to the twelve months ended december 31 , 2015 , and an increase of 44 bps in the cost of other borrowed funds . net interest margin was 2.49 % for the twelve months ended december 31 , 2016 compared to 2.85 % for the twelve months ended december 31 , 2015 . the decrease in net interest margin was primarily due to a 22 bp increase in the cost of total interest-bearing liabilities and a 15 bp decrease in the yield on total interest-earning assets . the increase in the cost of total interest-bearing liabilities was primarily due to an increase in average certificates of deposits balances and an increase in the related cost of those deposits . furthermore , the company issued additional subordinated debt during 2016 which increased the cost of other borrowed funds . the decrease in yield on total interest-earning assets was primarily due to a decrease in the yield earned on loans and an increase in average cash balances compared to december 31 , 2015. noninterest income the following table presents noninterest income for the five most recent years . replace_table_token_6_th 2017 v. 2016 during the twelve months ended december 31 , 2017 , noninterest income totaled $ 10.5 million , representing a decrease of $ 3.5 million , or 25.1 % compared to $ 14.1 million for the twelve months ended december 31 , 2016 . the decrease in noninterest income was primarily driven by a decrease of $ 4.6 million , or 36.8 % , in mortgage banking activities , partially offset by gain on sale of loans and other noninterest income . the decrease in revenue from mortgage banking activities was due primarily to decreases in mortgage held-for-sale ( `` hfs '' ) origination and sales volumes . the increase in gain on sale of loans was due to the sale of $ 24.7 million of single tenant lease financing loans , which was the first sale of this loan type in the company 's history . the increase in other noninterest income was due primarily to a $ 0.4 million increase in income from bank-owned life insurance and a $ 0.4 million increase in income from subleasing the company 's former corporate office . 28 historically , a large percentage of the mortgages originated by the company have been conventional 15- and 30- year fixed rate mortgages , which are sold in the secondary market . with the increase in conventional mortgage interest rates since late 2016 , the company has seen a shift in consumer behavior as an increase percentage of customers are selecting adjustable rate mortgages , which are typically held for investment on the balance sheet . during 2017 , portfolio mortgage originations increased relative to the comparable period in 2016 while mortgages hfs volume declined , contributing to the decline in revenue from mortgage banking activities . 2016 v. 2015 during the twelve months ended december 31 , 2016 , noninterest income totaled $ 14.1 million , representing an increase of $ 3.9 million , or 38.8 % , compared to $ 10.1 million for the twelve months ended december 31 , 2015 . story_separator_special_tag the increase in noninterest income was primarily driven by an increase of $ 3.4 million , or 37.8 % , in mortgage banking activities , resulting from increases in mortgage originations and sales as well as higher gain on sale margins . noninterest expense the following table presents noninterest expense for the five most recent years . replace_table_token_7_th 2017 v. 2016 noninterest expense for the twelve months ended december 31 , 2017 was $ 36.7 million , compared to $ 31.5 million for the twelve months ended december 31 , 2016 . the increase of $ 5.3 million , or 16.8 % , compared to the twelve months ended december 31 , 2016 was primarily due to increases of $ 3.8 million in salaries and employee benefits , $ 0.6 million in marketing , advertising and promotion expenses , $ 0.5 million in premises and equipment expenses , and $ 0.3 million in deposit insurance premium expenses . the increase in salaries and employee benefits was driven primarily by merit compensation increases ; personnel growth ; higher claims experience related to medical , prescription drug and dental insurance ; and equity compensation expense . the increase in marketing , advertising and promotion expenses was driven primarily by digital marketing initiatives and higher mortgage lead generation costs . the increase in premises and equipment was primarily due to technology related expenses and the increase in deposit insurance premium was due primarily to the company 's year-over-year asset growth , which impacts the formula used by the fdic to calculate deposit insurance . 2016 v. 2015 noninterest expense for the twelve months ended december 31 , 2016 was $ 31.5 million , compared to $ 25.3 million for the twelve months ended december 31 , 2015 . the increase of $ 6.2 million , or 24.4 % , compared to the twelve months ended december 31 , 2015 was primarily due to increases of $ 3.1 million in salaries and employee benefits , $ 0.9 million in premises and equipment expenses , $ 0.8 million in consulting and professional services and $ 0.5 million in deposit insurance premium expenses . the increase in salaries and employee benefits resulted from personnel growth and higher incentive compensation related to increased mortgage production . the increase in premises and equipment was primarily due to expenses associated with the company 's new headquarters location . the increase in consulting and professional fees was due to higher legal fees incurred in the normal course of business commensurate with the company 's growth and certain consulting projects that occurred during 2016. the increase in deposit insurance premium was due to the new methodology implemented by the fdic as of july 1 , 2016 , which places a heavier weighting on year-over-year asset growth used to determine the cost of fdic deposit insurance . 29 income taxes the following table reconciles reported income tax expense to that computed at the statutory federal tax rate for the five most recent years . replace_table_token_8_th 2017 v. 2016 the company recognized income tax expense of $ 7.7 million in 2017 , resulting in an effective tax rate of 33.6 % , compared to $ 5.9 million and an effective tax rate of 32.6 % in 2016. the company 's federal statutory tax rate was 35 % in 2017 and 34 % in 2016. in 2017 , the variance from the federal statutory rate was due primarily to tax-exempt income offset by state income taxes and the net deferred tax asset revaluation as a result of the tax act as discussed further in the paragraph below . excluding the impact of the net deferred tax asset revaluation , income tax expense in 2017 was $ 5.9 million and the effective tax rate was 25.5 % . in 2016 , the variance from the federal statutory rate was due to tax-exempt income , partially offset by state income taxes . interest income on certain securities issued by or loans made to governmental , municipal and not-for-profit entities , and earnings from bank-owned life insurance are the primary components of tax-exempt income . on december 22 , 2017 , the tax act was signed into law , significantly reforming the internal revenue code . the tax act , among other things , reduced the federal corporate tax rate from 35 % to 21 % . the reduction of the corporate tax rate resulted in a $ 1.8 million reduction to our net deferred tax asset in 2017. as of december 31 , 2017 , the company had substantially completed its accounting of the tax effects of enactment of the tax act ; however , in certain cases , we have made reasonable estimates of the effects on our existing deferred tax balances . we do not believe the actual results will vary materially from those estimates . the company continues to analyze certain aspects of the tax act and further refinements are possible , which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts , although we do not expect these adjustments to materially impact our financial statements . 2016 v. 2015 the company recognized income tax expense of $ 5.9 million in 2016 , resulting in an effective tax rate of 32.6 % , compared to $ 4.7 million and an effective tax rate of 34.7 % in 2015. the federal statutory tax rate was 34 % in 2016 and 2015. in both 2016 and 2015 , the variance from the federal statutory rate was due primarily to tax-exempt income offset by state income taxes and other differences . interest income on certain securities issued by or loans made to governmental , municipal and not-for-profit entities , and earnings from bank-owned life insurance are the primary components of tax-exempt income . 30 financial condition the following table presents summary balance sheet data as of the end of the last five years .
| during the twelve months ended december 31 , 2017 , return on average shareholders ' equity was 8.54 % , compared to 9.74 % for the twelve months ended december 31 , 2016 and 8.89 % for the twelve months ended december 31 , 2015 . as a result of the tax cuts and jobs act ( “ tax act ” ) , the company 's net deferred tax asset ( “ net dta ” ) was revalued as of december 31 , 2017. the value of the net dta was reduced by $ 1.8 million with the amount of the reduction recognized as additional income tax expense in 2017. consequently , this revaluation decreased 2017 diluted earnings per share by $ 0.26. adjusted for the net dta revaluation , 2017 net income was $ 17.1 million and diluted earnings per share were $ 2.39. the revaluation also decreased return on average assets by 8 bps and return on average shareholders ' equity by 104 bps . adjusted for the net dta revaluation , 2017 return on average assets was 0.74 % and return on average shareholders ' equity was 9.58 % . 25 refer to the “ reconciliation of non-gaap financial measures ” section of item 7 of part ii of this report , management 's discussion and analysis of financial condition and results of operations . consolidated average balance sheets and net interest income analyses for the periods presented , the following tables provide the average balances of interest-earning assets and interest-bearing liabilities and the related yields and cost of funds . the tables do not reflect any effect of income taxes . balances are based on the average of daily balances . nonaccrual loans are included in average loan balances . replace_table_token_5_th 1 yield on total interest-earning assets minus cost of total interest-bearing liabilities 2 net interest income divided by average interest-earning assets 3 on a fully-taxable equivalent ( `` fte '' ) basis assuming a 35 % tax rate 26 rate/volume analysis the following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing
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as a result of the covid-19 pandemic , we might see a slowdown in revenue growth in first and second quarter 2020 as our businesses might be negatively impacted by the novel coronavirus ( covid-19 ) outbreak . for a detailed description of the risks associated with the novel coronavirus , see recent developments and `` risk factors—risks related to our business and operations—the occurrence of the covid-19 pandemic may negatively affect our operations depending on the severity and longevity of the pandemic . '' because of the significant uncertainties surrounding the covid-19 outbreak , the extent of the business disruption and the related financial impact can not be reasonably estimated at this time . 51 story_separator_special_tag their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management 's current judgments . we believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our consolidated financial statements . accounts receivable , net accounts receivable include trade accounts due from customers . an allowance for doubtful accounts may be established and recorded based on management 's assessment of potential losses based on the credit history and relationships with the customers . management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate , and adjusts the allowance when necessary . delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable . 53 inventories inventories are comprised of raw materials and work in progress and are stated at the lower of cost or net realizable value using the first-in-first-out method in shengrong wfoe and weighted average method in wuhan host and rong hai . management reviews inventories for obsolescence and cost in excess of net realizable value at least annually and records a reserve against the inventory when the carrying value exceeds net realizable value . prepayments prepayments are funds deposited or advanced to outside vendors for future inventory purchases . as a standard practice in china , many of the company 's vendors require a certain amount to be deposited with them as a guarantee that the company will complete its purchases on a timely basis . this amount is refundable and bears no interest . the company has legally binding contracts with its vendors , which require any outstanding prepayments to be returned to the company when the contract ends . fair value measurement the accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by us . the company considers the carrying amount of cash , notes receivable , accounts receivable , other receivables , prepayments , accounts payable , other payables and accrued liabilities , customer deposits , short term loans and taxes payable to approximate their fair values because of their short term nature . the accounting standards define fair value , establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures . the three levels are defined as follow : ● level 1 inputs to the valuation methodology are quoted prices ( unadjusted ) for identical assets or liabilities in active markets . ● level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets , and inputs that are observable for the assets or liability , either directly or indirectly , for substantially the full term of the financial instruments . ● level 3 inputs to the valuation methodology are unobservable and significant to the fair value . financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost , which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest . revenue recognition on january 1 , 2018 , the company adopted accounting standards update ( “ asu ” ) 2014-09 revenue from contracts with customers ( asc 606 ) using the modified retrospective method for contracts that were not completed as of january 1 , 2018. this did not result in an adjustment to retained earnings upon adoption of this new guidance as the company 's revenue , other than warranty revenues , was recognized based on the amount of consideration we expect to receive in exchange for satisfying the performance obligations . however , the impact of the company 's warranty revenue was not material as of the date of adoption , and as a result , did not result in an adjustment . the core principle underlying the revenue recognition asu is that the company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the company expects to be entitled in such exchange . this will require the company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time , based on when control of goods and services transfers to a customer . the company 's revenue streams are primarily recognized at a point in time except for the warranty revenues where the warranty periods are recognized over the warranty period , usually is a period of twelve months . 54 the asu requires the use of a new five-step model to recognize revenue from customer contracts . story_separator_special_tag the five-step model requires that the company ( i ) identify the contract with the customer , ( ii ) identify the performance obligations in the contract , ( iii ) determine the transaction price , including variable consideration to the extent that it is probable that a significant future reversal will not occur , ( iv ) allocate the transaction price to the respective performance obligations in the contract , and ( v ) recognize revenue when ( or as ) the company satisfies the performance obligation . the application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the company records its revenue . upon adoption , the company evaluated its revenue recognition policy for all revenue streams within the scope of the asu under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition except its warranty revenues . an entity will also be required to determine if it controls the goods or services prior to the transfer to the customer in order to determine if it should account for the arrangement as a principal or agent . principal arrangements , where the entity controls the goods or services provided , will result in the recognition of the gross amount of consideration expected in the exchange . agent arrangements , where the entity simply arranges but does not control the goods or services being transferred to the customer , will result in the recognition of the net amount the entity is entitled to retain in the exchange . revenue from equipment and systems , revenue from coating and fuel materials , and revenue from trading and others are recognized at the date of goods delivered and title passed to customers , when a formal arrangement exists , the price is fixed or determinable , the company has no other significant obligations and collectability is reasonably assured . such revenues are recognized at a point in time after all performance obligations are satisfied under the new five-step model . in addition , training service revenues are recognized when the services are rendered and the company has no other obligations , and collectability is reasonably assured . these revenues are recognized at a point in time . prior to january 1 , 2018 , the company allowed its customers to retain 5 % to 10 % of the contract price as retainage during the warranty period of 12 months to guarantee product quality . retainage is considered as a payment term included as a part of the contract price , and was recognized as revenue upon the shipment of products . due to nature of the retainage , the company 's policy is to record revenue the full value of the contract without vat , including any retainage , since the company has experienced insignificant warranty claims historically . due to the infrequent and insignificant amount of warranty claims , the ability to collect retainage was reasonably assured and was recognized at the time of shipment . on january 1 , 2018 , upon the adoption of asu 2014-09 ( asc 606 ) , revenues from product warranty are recognized over the warranty period over 12 months . for the year ended december 31 , 2018 , less than 5 % of our warranty revenues were recognized in our consolidated revenues and included in the company 's equipment and systems revenues in the accompanying statements of income and comprehensive income . payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits . gross versus net revenue reporting starting from july 2016 , in the normal course of the company 's trading of industrial waste materials business , the company directly purchases the processed industrial waste materials from the company 's suppliers under the company 's specifications and drop ships the materials directly to the company 's customers . the company would inspect the materials at its customers ' site , during which inspection it temporarily assumes legal title to the materials , and after which inspection legal title is transferred to its customers . in these situations , the company generally collects the sales proceed directly from the company 's customers and pay for the inventory purchases to the company 's suppliers separately . the determination of whether revenues should be reported on a gross or net basis is based on the company 's assessment of whether it is the principal or an agent in the transaction . in determining whether the company is the principal or an agent , the company follows the new accounting guidance for principal-agent considerations . since the company is the primary obligor and is responsible for ( i ) fulfilling the processed industrial waste materials delivery , ( ii ) controlling the inventory by temporarily assume legal title to the materials after inspecting the products from our vendors before passing the materials to our customers , and ( iii ) bearing the back-end risk of inventory loss with respect to any product return from the company 's customers , the company has concluded that it is the principal in these arrangements , and therefore report revenues and cost of revenues on a gross basis . 55 recently issue accounting pronouncements in february 2016 , the fasb issued accounting standards update no . 2016-02 ( asu 2016-02 ) , leases ( topic 842 ) . asu 2016- 02 requires a lessee to record a right-of-use asset and a corresponding lease liability , initially measured at the present value of the lease payments , on the balance sheet for all leases with terms longer than 12 months , as well as the disclosure of key information about leasing arrangements . asu 2016-02 requires recognition in the statement of operations of a single lease cost , calculated so that the cost of the lease is allocated over the lease term .
| cost of fuel materials revenue during the year ended december 31 , 2019 , we sold 240,597 tons of coal after rong hai being acquired with an average unit cost of approximately $ 77.72. cost of others revenue cost of others revenue increased by approximately $ 0.3 million or 634.4 % , to approximately $ 0.3 million for the year ended december 31 , 2019 , compared to $ 0.04 million for the same period in 2018. the increase was mainly due to increased harbor cargo handling revenue of rong hai . 52 gross profit the company 's gross profit increased by approximately $ 0.2 million , or 68.4 % , to approximately $ 0.6 million during the year ended december 31 , 2019 , from approximately $ 0.3 million for the year ended december 31 , 2018. the increase was due to the company 's increased harbor cargo handling revenue which typically has higher gross margins because there is limited competition at the harbor where the company operates such service . operating expenses ( income ) the company 's operating expenses ( income ) include selling , general and administrative ( “ sg & a ” ) expenses , ( recovery of ) provision for doubtful accounts . sg & a expenses increased by approximately $ 0.1 million , by approximately 13.9 % , from approximately $ 0.7 million for the year ended december 31 , 2018 to approximately $ 0.9 million for the year ended december 31 , 2019. the slight increase was due to slight increases in general and administrative expenses from the company 's investment in professional staff as part of the general expense of maintaining as public company . loss from operations as a result of the foregoing , loss from operations for the year ended december 31 , 2019 was approximately $ ( 0.3 ) million , a decrease of approximately $ 0.1 million , or approximately 30.1 % , from approximately $ ( 0.4 ) million for the year ended december 31 , 2018. the decrease of loss was a result of improved gross profit , partially offset by an increase in selling , general and administrative expenses . net income ( loss ) as a result of the foregoing , net income decreased by approximately $ 18.3 million , or 1260.4 % , to approximately $ ( 16.8 ) million
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consequences of regulatory guidance , litigation , administrative proceedings , rule-making , interpretations , actions and examinations ; · future capital expenditures ; and · the strength of the u.s. economy in general and the strength of the local and regional economies in which the company conducts operations . forward-looking statements discuss matters that are not historical facts . as forward-looking statements discuss future events or conditions , the statements often include words such as “ anticipate , ” “ believe , ” “ estimate , ” “ expect , ” “ intend , ” “ plan , ” “ project , ” “ target , ” “ can , ” “ could , ” “ may , ” “ should , ” “ will , ” “ would , ” “ potential , ” or similar expressions . do not rely on forward-looking statements . forward-looking statements detail management 's expectations regarding the future and are not guarantees . forward-looking statements are assumptions based on information known to management only as of the date the statements are made and management may not update them to reflect changes that occur subsequent to the date the statements are made . see additional discussion under part i item 1 “ business ” and part i item 1a “ risk factors. ” 49 critical accounting policies and estimates republic 's consolidated financial statements and accompanying footnotes have been prepared in accordance with u.s. generally accepted accounting principles ( “ gaap ” ) . the preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods . management continually evaluates the company 's accounting policies and estimates that it uses to prepare the consolidated financial statements . in general , management 's estimates and assumptions are based on historical experience , accounting and regulatory guidance , and information obtained from i ndependent third party professionals . actual results may differ from those estimates made by management . critical accounting policies are those that management believes are the most important to the portrayal of the company 's financial condition and operating results and require management to make estimates that are difficult , subjective and complex . most accounting policies are not considered by management to be critical accounting policies . several factors are considered in determining whether or not a policy is critical in the preparation of the financial statements . these factors include , among other things , whether the estimates have a significant impact on the financial statements , the nature of the estimates , the ability to readily validate the estimates with other information including independent third parties or available pricing , sensitivity of the estimates to changes in economic conditions and whether alternative methods of accounting may be utilized under gaap . management has discussed each critical accounting policy and the methodology for the identification and determination of critical accounting policies with the company 's audit committee . republic believes its critical accounting policies and estimates relate to : · allowance for loan and lease losses and provision for loan and lease losses · acquisition accounting · goodwill and other intangible assets · mortgage servicing rights · income tax accounting · investment securities · other real estate owned · correspondent loan premiums allowance for loan and leases losses and provision for loan and lease losses — the bank maintains an allowance for probable incurred credit losses inherent in the bank 's loan portfolio , which includes overdrawn deposit accounts . management evaluates the adequacy of the allowance on a monthly basis and presents and discusses the analysis with the audit committee and the board of directors on a quarterly basis . the allowance consists of specific and general components . the specific component relates to loans that are individually classified as impaired . the general component is based on historical loss experience adjusted for qualitative factors . the bank defines impaired loans as follows : · all loans internally rated as “ substandard , ” “ doubtful ” or “ loss ” ; · all loans on non-accrual status and non-pci loans past due 90 days-or-more still on accrual ; · all retail and commercial tdrs ; · all loans internally rated in a purchased credit impaired ( “ pci ” ) category with cash flows that have deteriorated from management 's initial acquisition day estimate ; and · any other situation where the full collection of the total amount due for a loan is improbable or otherwise meets the definition of impaired . generally , loans are designated as classified or special mention to ensure more frequent monitoring . these loans are reviewed to ensure proper earning status and management strategy . if it is determined that there is serious doubt as to performance in accordance with original or modified contractual terms , then the loan is generally downgraded and often placed on non-accrual status . 50 gaap recognizes three methods to measure specific loan impairment , including : · cash flow method — the recorded investment in the loan is measured against the present value of expected future cash flows discounted at the effective interest rate . the bank employs this method for a significant portion of its impaired tdrs . impairment amounts under this method are reflected in the bank 's allowance as specific reserves on the respective impaired loan . these specific reserves are adjusted quarterly based upon reevaluation of the expected future cash flows and changes in the recorded investment . · collateral method — the recorded investment in the loan is measured against the fair value of the collateral value less applicable selling costs . the bank employs the fair value of collateral method for its impaired loans when repayment is based solely on the sale of or the operations of the underlying collateral . collateral fair value is typically based on the most recent real estate valuation on file . story_separator_special_tag measured impairment under this method is generally charged off unless the loan is a smaller balance , homogeneous mortgage loan . the bank 's selling costs for its collateral dependent loans typically range from 10-13 % of the fair value of the underlying collateral , depending on the asset class . selling costs are not applicable for collateral dependent loans whose repayment is based solely on the operations of the underlying collateral . · market value method — the recorded investment in the loan is measured against the loan 's obtainable market value . the bank does not currently employ this technique , as it is typically found impractical . in addition to obtaining appraisals at the time of origination , the bank typically updates appraisals and or broker price opinions for loans with potential impairment . updated valuations for commercial related credits exhibiting an increased risk of loss are typically obtained within one year of the previous valuation . collateral values for past due residential mortgage loans and home equity loans are generally updated prior to a loan becoming 90 days delinquent , but no more than 180 days past due . when measuring impairment , to the extent updated collateral values can not be obtained due to the lack of recent comparable sales or for other reasons , the bank discounts the valuation of the collateral primarily based on the age of the appraisal and the real estate market conditions of the location of the underlying collateral . the general component of the allowance covers loans collectively evaluated for impairment and is based on historical loss experience , with potential adjustments for current relevant qualitative factors . historical loss experience is determined by loan performance and class and is based on the actual loss history experienced by the bank . large groups of smaller balance homogeneous loans , such as consumer and residential real estate loans , are included in the general component unless the loans are classified as tdrs or on non-accrual . in determining the historical loss rates for each respective loan class , management evaluates the following historical loss rate scenarios : · rolling four quarter average · rolling eight quarter average · rolling twelve quarter average · rolling sixteen quarter average · rolling twenty quarter average · rolling twenty-four quarter average · rolling twenty-eight quarter average · current year to date historical loss factor average · peer group loss factors i n order to take account of periods of economic growth and economic downturn , management generally uses the highest of the rolling four , eight , twelve , sixteen , twenty , twenty-four , or twenty-eight quarter averages for each loan class when determining its historical loss factors for its “ pass ” rated and nonrated credits . 51 loan classes are also evaluated utilizing subjective factors in addition to the historical loss calculations to determine a loss allocation for each class . management assigns risk multiples to certain classes to account for qualitative factors such as : · changes in nature , volume and seasoning of the portfolio ; · changes in experience , ability and depth of lending management and other relevant staff ; · changes in the quality of the bank 's credit review system ; · changes in lending policies and procedures , including changes in underwriting standards and collection , charge-off , and recovery practices not considered elsewhere in estimating credit losses ; · changes in the volume and severity of past due , non-performing and classified loans ; · changes in the value of underlying collateral for collateral-dependent loans ; · changes in international , national , regional , and local economic and business conditions and developments that affect the collectability of portfolios , including the condition of various market segments ; · the existence and effect of any concentrations of credit , and changes in the level of such concentrations ; and · the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution 's existing portfolio . as this analysis , or any similar analysis , is an imprecise measure of loss , the allowance is subject to ongoing adjustments . therefore , management will often take into account other significant factors that may be necessary or prudent in order to reflect probable incurred losses in the total loan portfolio . for core banking operations , management performs two calculations at year end in order to confirm the reasonableness of its allowance . in the first calculation , management compares the beginning allowance to the net charge-offs for the most recent calendar year . the ratio of net charge-offs to the beginning of year allowance indicates how adequately the allowance accommodated subsequent charge-offs . higher ratios suggest the beginning of year allowance may not have been large enough to absorb impending charge-offs , while inordinately low ratios might indicate the accumulation of excessive allowances . the core bank 's net charge-off ratio to the beginning allowance was 7 % at december 31 , 201 5 , compared to 9 % for december 31 , 2014 . the core bank 's five year annual average for this ratio was 19 % as of december 31 , 201 5 . management believes the core bank 's net charge-off ratio to beginning allowance was within a reasonable range at december 31 , 2015 and 2014 . for the second calculation , management assesses the core bank 's allowance exhaustion rate . exhaustion rates indicate the time ( expressed in years ) taken to use the beginning of year allowance in the form of actual charge-offs . management believes an exhaustion rate that indicates a reasonable allowance is in a range of three to six years . the core bank 's a llowance exhaustion rate at december 31 , 2015 and 2014 was 5.6 years and 4 . 6 years compared to the five year annual average of 3.8 years as of december 31 , 201 5 .
| billion with a weighted average yield of 4.06 % during 2015 compared to $ 2.5 billion with a weighted average yield of 4.29 % during 2014 . the overall effect of these changes in rate and volume was an increase of $ 7.2 million in interest income . · net interest income related to loans from the company 's 2012 fdic-assisted transactions was lower during 2015 due to payoffs on the portfolio over the previous twelve months together with diminishing benefits from discount accretion . overall , the average balance of the portfolio was $ 32 mil lion with a yield of 13 . 6 0 % for 2015 compared to $ 57 million with a yield of 15.79 % for 2014 . the overall effect of these changes in rate and volume was a decrease of $ 4.7 million in interest income . interest income on this portfolio was $ 4.3 million for 2015 , with $ 2.4 million , or 55 % , of such income attributable to discount accretion compared to $ 9.0 million during 2014 , with $ 5.2 million , or 58 % , of such income attributable to discount accretion . discount accretion income on this portfolio contributed seven and sixteen basis points , respectively , to the overall traditional bank 's net interest margin during 2015 and 2014 . management projects accretion of loan discounts related to the 2012 f dic-assisted transactions to decline further in 2016 , with such income largely dependent upon workout arrangements in which the bank may receive loan payoffs for amounts greater than the loans ' respective carrying values . · the weighted average cost of fhlb advances during 2015 compared to 2014 declined to 1.99 % from 2.24 % . the average outstanding advances increased $ 15 million during the same period , with the traditional bank employing a higher mix of lower cost overnight borrowings during 2015. the net effect of
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some of our recent orders received are for large petrochemical and offshore oil and gas construction projects which will take several months to produce , and most were awarded in competitive bid situations . fiscal 2010 compared to twelve months ended september 30 , 2009 ( fiscal 2009 ) revenue and gross profit consolidated revenues decreased $ 115.2 million to $ 550.7 million in fiscal 2010 compared to $ 665.9 million in fiscal 2009. revenues decreased as a result of the decrease in demand for our products and services . domestic revenues decreased by 23.8 % to $ 393.3 million in fiscal 2010 compared to $ 516.0 million in fiscal 2009. international revenues increased from $ 149.9 million in fiscal 2009 to $ 157.6 million in fiscal 2010. the acquisition of powell canada contributed $ 51.1 million of our international revenues during fiscal 2010. gross profit in fiscal 2010 decreased by $ 3.0 million compared to fiscal 2009 , primarily as a result of lower revenues . consolidated gross profit , as a percentage of revenues , was 25.8 % in fiscal 2010 compared to 21.8 % in fiscal 2009. this increase in gross profit as a percentage of revenues resulted from strong market demand when the projects were negotiated , reduced costs on project completion from operational efficiencies , a reduced work force , reduced warranty costs , cancellation fees for orders that were cancelled from our backlog and the successful negotiation of change orders and the favorable negotiation of a customer claim for which the costs were previously recognized . 19 electrical power products our electrical power products business segment recorded revenues of $ 517.1 million in fiscal 2010 , compared to $ 630.0 million in fiscal 2009. in fiscal 2010 , revenues from public and private utilities were $ 148.6 million compared to $ 154.3 million in fiscal 2009. the acquisition of powell canada contributed $ 51.1 million of revenue during fiscal 2010. revenues from commercial and industrial customers totaled $ 330.8 million in fiscal 2010 , a decrease of $ 93.9 million compared to fiscal 2009. municipal and transit projects generated revenues of $ 37.6 million in fiscal 2010 compared to $ 51.1 million in fiscal 2009. business segment gross profit , as a percentage of revenues , was 25.1 % in fiscal 2010 compared to 20.6 % in fiscal 2009. this increase in gross profit as a percentage of revenues resulted from strong market demand when the projects were negotiated , reduced costs on project completion from operational efficiencies , a reduced workforce , reduced warranty costs , cancellation fees , as defined in the contract , for orders that were cancelled from our backlog and the successful negotiation of change orders and the favorable negotiation of a customer claim for which the costs were previously recognized . process control systems in fiscal 2010 , our process control systems business segment recorded revenues of $ 33.6 million , a decrease from $ 35.9 million in fiscal 2009. business segment gross profit , as a percentage of revenues , decreased to 36.5 % for fiscal 2010 , compared to 43.5 % for fiscal 2009. this decrease in revenues and gross profit as a percentage of revenues is related to the mix of jobs currently in the backlog and revenues of $ 3.5 million and gross profit of $ 2.8 million in the third quarter of fiscal 2009 , resulting from a mediated settlement related to a previously completed contract that was in dispute for several years . for additional information related to our business segments , see note n of notes to consolidated financial statements . consolidated selling , general and administrative expenses consolidated selling , general and administrative expenses increased to 15.3 % of revenues in fiscal 2010 compared to 12.0 % of revenues in fiscal 2009. selling , general and administrative expenses increased to $ 84.5 million in fiscal 2010 compared to $ 80.0 million in fiscal 2009. this increase was primarily related to the acquisition of powell canada and includes acquisition-related costs of $ 2.4 million . selling , general and administration expenses increased as a percentage of revenues as a result of our decline in revenues , along with the fact that portions of our sales and administrative support infrastructure is necessary to support our customers , invest in information systems , continue research and development and pursue project opportunities . amortization of intangible assets amortization of intangible assets increased to $ 4.5 million in fiscal 2010 , compared to $ 3.5 million in fiscal 2009. this increase was from the amortization of the intangible assets recorded as a result of the acquisition of powell canada . impairments an impairment of goodwill of $ 7.5 million was recorded in fiscal 2010 related to the powell canada acquisition . the company 's strategic decision to exit the 50 % owned joint venture in kazakhstan and delays in the anticipated growth in capital investments in the oil sands region of western canada , relative to our expectations , resulted in the impairment charge . interest income and expense interest expense was $ 0.9 million in fiscal 2010 , a decrease of $ 0.2 million compared to fiscal 2009. the decrease in interest expense was primarily due to lower amounts outstanding under our credit facilities in the u.s. and u.k. during fiscal 2010 . 20 interest income was $ 0.3 million in fiscal 2010 compared to $ 0.1 million in fiscal 2009. this increase resulted from larger cash amounts being invested during fiscal 2010. income tax provision our provision for income taxes reflects an effective tax rate on earnings before income taxes of 44.1 % in fiscal 2010 compared to 34.2 % in fiscal 2009. the increase in the effective tax rate was primarily related to the valuation allowance recorded related to foreign deferred tax assets . story_separator_special_tag net income attributable to powell industries , inc. in fiscal 2010 , we recorded net income of $ 25.0 million , or $ 2.14 per diluted share , compared to $ 39.7 million , or $ 3.43 per diluted share , in fiscal 2009. we generated improved gross profits as a percentage of revenues for the company as a whole as a result of favorable margins on project completion due to operational efficiencies and cancellation fees for orders that were cancelled from our backlog , along with the successful negotiation of change orders and the favorable negotiation of a customer claim in fiscal 2010 for which costs were previously recognized . net income for fiscal 2010 was negatively impacted by the impairment of goodwill of $ 7.5 million and the valuation allowance recorded on foreign deferred tax assets of $ 3.7 million . as previously discussed , net income in fiscal 2009 included the benefit of the $ 3.5 million mediated settlement , reduced by legal and other expenses of approximately $ 0.7 million , net of tax , related to a previously completed contract that was in dispute for several years . backlog the order backlog at september 30 , 2010 , was $ 282.3 million , compared to $ 365.8 million at september 30 , 2009. new orders placed during fiscal 2010 totaled $ 466.8 million compared to $ 511.2 million in fiscal 2009. backlog decreased during the second half of fiscal 2009 and into fiscal 2010 due to the ongoing economic downturn which has led our customers to reduce and delay spending on new capital projects . this decline in backlog throughout fiscal 2010 negatively impacted our revenues in fiscal 2010 and continued to negatively impact our revenues into fiscal 2011. liquidity and capital resources cash and cash equivalents increased to $ 123.5 million at september 30 , 2011 , as a result of cash flow provided by operations of approximately $ 15.5 million for fiscal 2011. as of september 30 , 2011 , current assets exceeded current liabilities by 2.4 times and our debt to total capitalization ratio was 1.9 % . at september 30 , 2011 , we had cash and cash equivalents of $ 123.5 million , compared to $ 115.4 million at september 30 , 2010. we have a $ 75.0 million revolving credit facility in the u.s. , which expires in december 2016. as of september 30 , 2011 , there were no amounts borrowed under this line of credit . we also have a $ 19.4 million revolving credit facility in canada . at september 30 , 2011 , there was no balance outstanding under the canadian revolving credit facility . total long-term debt and capital lease obligations , including current maturities , totaled $ 5.4 million at september 30 , 2011 , compared to $ 6.9 million at september 30 , 2010. letters of credit outstanding were $ 13.2 million and $ 15.2 million at september 30 , 2011 and 2010 , respectively , which reduce our availability under our u.s. credit facility . amounts available under the u.s. revolving credit facility were $ 61.8 million at september 30 , 2011. amounts available under the canadian revolving credit facility were $ 16.5 million at september 30 , 2011. for further information regarding our debt , see notes h and l of notes to consolidated financial statements . approximately $ 8.0 million of our cash at september 30 , 2011 , was held internationally for international operations . it is our intention to indefinitely reinvest all current and future foreign earnings at these locations in order to ensure sufficient working capital and support and expand international operations . we believe that cash and cash equivalents , projected cash flows from operations and borrowing capacity under our existing credit facilities should be sufficient to finance anticipated operating activities , capital improvements and debt repayments for the foreseeable future . in the event that management elects to repatriate some or all of the foreign earnings that were previously deemed to be indefinitely reinvested outside the u.s. , we would incur additional tax expense upon such repatriation . 21 operating activities during fiscal 2011 and fiscal 2010 , cash provided by operating activities was $ 15.5 million and $ 64.1 million , respectively . cash flow from operations is primarily influenced by demand for our products and services and is impacted as our progress payment terms with our customers are matched with the payment terms with our suppliers . the decrease in fiscal 2011 cash flow from operations resulted primarily from the net loss and increase in accounts receivable . during fiscal 2010 , cash provided by operating activities was $ 64.1 million and resulted primarily from net income and decreases in accounts receivable , offset by decreases in accounts payable and income taxes payable . during fiscal 2009 , cash provided by operating activities was $ 127.0 million and resulted primarily from net income and our increased efforts to manage inventory and billings to customers . investing activities investments in property , plant and equipment during fiscal 2011 totaled $ 7.3 million compared to $ 4.4 million and $ 8.1 million in fiscal 2010 and 2009 , respectively . during fiscal 2011 , we received cash of $ 1.2 million from the sale of our 50 % equity investment in kazakhstan and established a restricted cash account of $ 1.0 million for the purchase of land near houston , texas , which subsequently occurred in october 2011. during fiscal 2011 , our capital expenditures primarily related to the implementation of erp systems and construction of a warehouse at one of our u.s. facilities . during fiscal 2010 , we paid cash of $ 23.4 million , excluding debt assumed and acquisition-related expenses , to acquire powell canada .
| 2010. revenues from commercial and industrial customers totaled $ 320.5 million in fiscal 2011 , a decrease of $ 10.2 million compared 17 to fiscal 2010. municipal and transit projects generated revenues of $ 46.2 million in fiscal 2011 compared to $ 37.6 million in fiscal 2010. business segment gross profit , as a percentage of revenues , was 17.2 % in fiscal 2011 compared to 25.1 % in fiscal 2010. this decrease in gross profit as a percentage of revenues resulted primarily from the competitive pressure on margins , as discussed above , as well as execution-related challenges on certain large projects at powell canada . gross profit in fiscal 2010 benefitted from the favorable execution of large projects , as well as cancellation fees and the successful negotiation of change orders on projects which were substantially completed in prior periods . process control systems in fiscal 2011 , our process control systems business segment recorded revenues of $ 29.1 million , a decrease from $ 33.6 million in fiscal 2010. business segment gross profit , as a percentage of revenues , decreased to 28.2 % for fiscal 2011 , compared to 36.5 % for fiscal 2010. this decrease in revenues and gross profit as a percentage of revenues resulted from a less favorable mix of projects . for additional information related to our business segments , see note n of notes to consolidated financial statements . consolidated selling , general and administrative expenses consolidated selling , general and administrative expenses decreased to 15.1 % of revenues in fiscal 2011 compared to 15.3 % of revenues in fiscal 2010. selling , general and administrative expenses remained relatively unchanged at $ 85.1 million in fiscal 2011 compared to $ 84.5 million in fiscal 2010. decreases in short-term and long-term incentive compensation resulting from lower earnings compared to fiscal 2010 were offset by increased depreciation expense related to the company 's erp system
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based on this definition , our critical policies include revenue recognition including sales returns and allowances , valuation of inventories including identification of excess quantities and product obsolescence , allowance for doubtful accounts , valuation of investments , valuation of long-lived assets , measurement of stock-based compensation , accounting for income taxes , and estimating accrued liabilities . we believe that we apply judgments and estimates in a consistent manner and that such consistent application results in consolidated financial statements and accompanying notes that fairly represent all periods presented . however , any factual errors or errors in these judgments and estimates may have a material impact on our financial statements . revenue recognition we supply standard products which must be programmed before they can be used in an application . our products may be programmed by us , distributors , end-customers or third parties . we recognize revenue as products are shipped if evidence of an arrangement exists , delivery has occurred , the sales price is fixed or determinable , collection of the resulting receivable is reasonably assured and product returns are reasonably estimable . revenue is recognized upon shipment of programmed and unprogrammed parts to both oem customers and distributors , provided that legal title and risk of ownership have transferred . parts held by distributors may be returned for quality reasons only under our standard warranty policy . valuation of inventories inventories are stated at the lower of standard cost or net realizable value . standard cost approximates actual cost on a first-in , first-out basis . we routinely evaluate quantities and values of our inventories in light of current market conditions and market trends and record reserves for quantities in excess of demand and product obsolescence . the evaluation may take into consideration historic usage , expected demand , anticipated sales price , the stage in the product life cycle of our customers ' products , new product development schedules , the effect new products might have on the sale of existing products , product obsolescence , customer design activity , customer concentrations , product merchantability and other factors . market conditions are subject to change . actual consumption of inventories could differ from forecasted demand and this difference could have a material impact on our gross margin and inventory balances based on additional provisions for excess or obsolete inventories or a benefit from inventories previously written down . we also regularly review the cost of inventories against estimated market value and record a lower of cost or market reserve for inventories that have a cost in excess of estimated market value , which could have a material impact on our gross margin and inventory balances based on additional write-downs to net realizable value or a benefit from inventories previously written down . our semiconductor products have historically had an unusually long product life cycle and obsolescence has not been a significant factor in the valuation of inventories . however , as we pursue opportunities in the mobile market and continue to develop new products , we believe our new product life cycle will be shorter and increase the potential for obsolescence . a significant decrease in demand could result in an increase in the amount of excess inventory on hand . although we make every effort to ensure the accuracy of our forecasts of future product demand , due to our small customer base and limited cssp engagements , any significant unanticipated changes in demand could have a significant impact on the value of our inventory and our results of operations . valuation of long-lived assets we assess annually whether the value of identifiable intangibles and long-lived assets , including property and equipment , has been impaired and when events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable . there were no significant factors that triggered an impairment review during the fiscal year 2013 . our assessment of possible impairment is based on our ability to recover the carrying value of an asset or asset group from their expected future pre-tax cash flows , undiscounted and without interest charges , of the related operations . if these cash flows are less than the carrying value of the asset or asset group , we recognize an impairment loss for the difference between estimated fair value and carrying value , and the carrying value of the related assets is reduced by this difference . the measurement of impairment requires management to estimate future cash flows and the fair value of long-lived assets . 25 stock-based compensation we account for stock-based compensation under the provisions of the amended authoritative guidance and related interpretations which require the measurement and recognition of expense related to the fair value of stock-based compensation awards . the fair value of stock-based compensation awards is measured at the grant date and re-measured upon modification , as appropriate . determining the appropriate fair value model and calculating the fair value of stock-based awards at the date of grant require judgment . we use the black-scholes option pricing model to estimate the fair value of employee stock options and rights to purchase shares under the company 's 2009 stock plan and 2009 employee stock purchase plan , or espp , consistent with the provisions of the amended authoritative guidance . this fair value is expensed on a straight-line basis over the requisite service period of the award . using the black-scholes pricing model requires us to develop highly subjective assumptions including the expected term of awards , expected volatility of our stock , expected risk-free interest rate and expected dividend rate over the term of the award . our expected term of awards is based primarily on our historical experience with similar grants . our expected stock price volatility for both stock options and espp shares is based on the historic volatility of our stock , using the daily average of the opening and closing prices and measured using historical data appropriate for the expected term . story_separator_special_tag the risk-free interest rate assumption approximates the risk-free interest rate of a treasury constant maturity bond with a maturity approximately equal to the expected term of the stock option or espp shares . in addition to the assumptions used in the black-scholes pricing model , the amended authoritative guidance requires that we recognize compensation expense only for awards ultimately expected to vest ; therefore we are required to develop an estimate of the historical pre-vest forfeiture experience and apply this to all stock-based awards . the fair value of restricted stock awards , or rsas , and restricted stock units , or rsus , is based on the closing price of our common stock on the date of grant . rsa and rsu awards which vest with service are expensed over the requisite service period . rsas and rsu awards which are expected to vest based on the achievement of a performance goal are expensed over the estimated vesting period . we regularly review the assumptions used to compute the fair value of our stock-based awards and we revise our assumptions as appropriate . in the event that assumptions used to compute the fair value of our stock-based awards are later determined to be inaccurate or if we change our assumptions significantly in future periods , stock-based compensation expense and our results of operations could be materially impacted . see note 11 of our consolidated financial statements . accounting for income taxes as part of the process of preparing our financial statements , we are required to estimate our income taxes in each of the jurisdictions in which we operate . this process involves estimating our actual current tax exposure together with assessing temporary differences resulting from different tax and accounting treatment of items , such as deferred revenue , allowance for doubtful accounts , the impact of equity awards , depreciation and amortization , and employee related accruals . these differences result in deferred tax assets and liabilities , which are included on our balance sheets . we must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely , we must establish a valuation allowance . to the extent we establish a valuation allowance or increase this allowance in a period , we must include an expense within the tax provision in the statements of operations . significant management judgment is required in determining our provision for income taxes , our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets . our deferred tax assets , consisting primarily of net operating loss carryforwards , amounted to $ 63.6 million as of the end of 2013 . we have also recorded a valuation allowance of $ 63.5 million as of the end of 2013 due to uncertainties related to our ability to utilize our u.s. deferred tax assets before they expire . the valuation allowance is based on the uncertainty of our estimates of taxable income and the period over which we expect to recover our deferred tax assets . 26 story_separator_special_tag interest expense is due primarily to the decrease of our capital software lease obligation to $ 310,000 in 2013 from $ 426,000 in 2012 . the change in interest income and other expense , net was due primarily to an increase of foreign exchange losses in 2013 as compared to 2012 . we conduct a portion of our research and development activities in canada and india and we have sales and marketing activities in various countries outside of the united states . most of these international expenses are incurred in local currency . 29 foreign currency transaction gains and losses are included in interest and other income ( expense ) , net , as they occur . we do not use derivative financial instruments to hedge our exposure to fluctuations in foreign currency and , therefore , our results of operations are and will continue to be susceptible to fluctuations in foreign exchange gains or losses . provision for income taxes . the table below sets forth the changes in provision for ( benefit from ) income taxes for 2013 as compared to 2012 : fiscal years change 2013 2012 amount percentage ( in thousands ) income tax provision $ 455 $ 18 $ 437 2,428 % the income tax expense for 2013 and 2012 is primarily for our foreign operations which are cost-plus entities . included within the provision for income taxes for 2013 is a charge in the amount of $ 273,000 relating to our investment in towerjazz . this expense was previously recorded as a component of other comprehensive income and reclassified to the provision for income taxes upon the sale of our investment in towerjazz . as of the end of 2013 , our ability to utilize our u.s. deferred tax assets in future periods is uncertain and , accordingly , we have recorded a full valuation allowance against the related u.s. tax asset . we will continue to assess the realizability of deferred tax assets in future periods . the american taxpayer relief act of 2012 , which was enacted on january 2 , 2013 , extended the federal research tax credit retroactively for two years from january 1 , 2012 through december 31 , 2013. there was no impact to the income tax provision for this enactment in the year ended december 29 , 2013 due to the valuation allowance recorded against our u.s. deferred tax assets . comparison of fiscal years 2012 and 2011 revenue . the table below sets forth the changes in revenue for fiscal year 2012 as compared to fiscal year 2011 ( in thousands , except percentage data ) : replace_table_token_9_th _ ( 1 ) for all periods presented : new products include arcticlink , arcticlink ii , arcticlink iii , eclipse ii , polarpro , polarpro ii , and quickpci ii .
| while winning large volume sales opportunities will increase our revenue , we believe these opportunities may decrease our gross profit as a percentage of revenue . gross profit . the table below sets forth the changes in gross profit for fiscal year 2013 as compared to fiscal year 2012 ( in thousands , except percentage data ) : replace_table_token_6_th the decrease in gross profit in 2013 as compared to 2012 was due to customer and product mix including a high concentration of revenue from samsung , higher inventory reserve , and higher unabsorbed overhead . in addition , the decrease in gross profit was partially offset by the sale of previously reserved inventories of $ 596,000 and $ 599,000 in 2013 and 2012 , respectively . our semiconductor products have historically had a long product life cycle and obsolescence has not been a significant factor in the valuation of inventories . however , as we pursue opportunities in the mobile market and continue to develop new cssps and products , we believe our product life cycle will be shorter and increase the potential for obsolescence . we also regularly review the cost of inventories against estimated market value and record a lower of cost or market reserve for 28 inventories that have a cost in excess of estimated market value . this could have a material impact on our gross margin and inventory balances based on additional write-downs to net realizable value or a benefit from inventories previously written down . operating expenses . the table below sets forth the changes in operating expenses for fiscal year 2013 as compared to fiscal year 2012 ( in thousands , except percentage data ) : replace_table_token_7_th research and development expense . our research and development expenses consist primarily of personnel , overhead and other costs associated with engineering process improvements , programmable logic design , cssp design and software development . research and development expense was $ 8.4 million and $ 8.7 million in 2013 and 2012 , respectively , which represented 32 %
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end of 2012 , a decrease of $ 6,870,000 or 1.56 % ; loans ( excluding loans held for sale ) , net of unearned income and loan loss provision , increased to $ 339,994,000 as of december 31 , 2013 from $ 319,922,000 as of the end of december 31 , 2012 , an increase of 6.27 % ; and the net interest margin increased 5 basis points to 4.08 % for 2013 , compared to 4.03 % for 2012. the following table sets forth selected financial ratios : replace_table_token_3_th 22 effect of economic trends the u.s. economy continued to experience slow growth throughout 2013. locally , real estate values appear to have stabilized and there were positive trends in housing during 2012 and 2013. however , uncertainty for small and medium size businesses lessened the demand for lending . even through the difficult economic environment , the bank 's capital levels and asset quality continued to improve in 2013. for additional information regarding the local economy and its impact on the company 's business refer to the business section in this 10-k under the caption location and market area ( part i. item 1. business section location and market area ) . despite this improvement , management expects difficult economic conditions to persist in 2014. in light of these conditions , financial institutions also face continued heightened levels of scrutiny from federal and state regulators . financial institutions experienced , and are expected to continue to experience , pressure on credit costs , loan yields , deposit and other borrowing costs , liquidity , and capital . a variety and wide scope of economic factors affect financial 's success and earnings . although interest rate trends are one of the most important of these factors , financial believes that interest rates can not be predicted with a reasonable level of confidence and therefore does not attempt to do so with complicated economic models . management believes that the best defense against wide swings in interest rate levels is to minimize vulnerability at all potential interest rate levels . rather than concentrate on any one interest rate scenario , financial prepares for the opposite as well , in order to safeguard margins against the unexpected . the downward trend in short term interest rates beginning in the last quarter of 2007 was due to the actions of the federal open market committee ( fomc ) resulting from a deteriorating economy . the federal funds target rate set by the federal reserve has remained at 0.00 % to 0.25 % since december 2008 , following a decline from 4.25 % in december 2007 through a series of rate reductions . as liquidity increased as a result of open market operations and other government actions , longer-term interest rates decreased and the yield curve remains positively sloped . although it can not be certain , as discussed below under results of operations net interest income management believes that short term interest rates will remain stable for the foreseeable future . an increase in long-term interest rates would have an adverse impact on the mortgage division , primarily due to reduced refinancing opportunities . stock dividends on may 19 , 2010 , financial declared a 10 % stock dividend , which was paid on july 23 , 2010 to shareholders of record on june 21 , 2010. except as otherwise described in this report , all share amounts and dollar amounts per share in this report with regard to the common stock have been adjusted to reflect these and all prior stock dividends . critical accounting policies financial 's financial statements are prepared in accordance with accounting principles generally accepted in the united states ( gaap ) . the financial information contained within our statements is , to a significant extent , based on measures of the financial effects of transactions and events that have already occurred . a variety of factors could affect the ultimate value that is obtained either when earning income , recognizing an expense , recovering an asset or relieving a liability . the bank uses historical loss factors as one factor in determining the inherent loss that may be present in the loan portfolio . actual losses could differ significantly from the historical factors that the bank uses in estimating risk . in addition , gaap itself may change from one previously acceptable method to another method . although the economics of financial 's transactions would be the same , the timing of events that would impact the transactions could change . 23 the allowance for loan losses is management 's estimate of the losses that may be sustained in our loan portfolio . the allowance is based on two basic principles of accounting : ( i ) asc 450 , contingencies , which requires that losses be accrued when they are probable of occurring and are reasonably estimable and ( ii ) asc 310 , receivables , which requires that losses on impaired loans be accrued based on the differences between the value of collateral , present value of future cash flows or values that are observable in the secondary market and the loan balance . guidelines for determining allowances for loan losses are also provided in the sec staff accounting bulletin no . 102 selected loan loss allowance methodology and documentation issues and the federal financial institutions examination council 's interagency guidance , interagency policy statement on the allowance for loan and lease losses ( the ffiec policy statement ) . see management discussion and analysis results of operations allowance for loan losses and loan loss reserve below for further discussion of the allowance for loan losses . in situations where , for economic or legal reasons related to a borrower 's financial condition , management may grant a concession to the borrower that it would not otherwise consider , the related loan is classified as a troubled debt restructuring ( tdr ) . story_separator_special_tag management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loans reach nonaccrual status . these modified terms may include rate reductions , principal forgiveness , payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral . in cases where borrowers are granted new terms that provide for a reduction of either interest or principal , management measures any impairment on the restructuring as noted above for impaired loans . the bank had $ 564,000 and $ 572,000 classified as tdrs as of december 31 , 2013 and 2012 , respectively . because financial has a relatively short operating history , historical trends alone do not provide sufficient information to judge the adequacy of the allowance for loan losses . therefore , management considers industry trends , peer comparisons , as well as individual classified impaired loans , in addition to historical experience to evaluate the allowance for loan losses . our method for determining the allowance for loan losses is discussed more fully under provision and allowance for loan losses for the bank below . story_separator_special_tag align= '' center '' size= '' 3 '' style= '' color : # 999999 '' width= '' 100 % '' / > ownership interest , and fees generated by the investment services of investment . service fees consist primarily of monthly service and minimum account balance fees and charges on transactional deposit accounts , overdraft charges , and atm service fees . the bank , through the mortgage division originates both conforming and non-conforming consumer residential mortgage loans primarily in the region 2000 area . as part of the bank 's overall risk management strategy , all of the loans originated and closed by the mortgage division are presold to mortgage banking or other financial institutions . the mortgage division assumes no credit or interest rate risk on these mortgages . the mortgage division originated 335 mortgage loans , totaling $ 59,286,000 in 2012 as compared with 298 mortgage loans , totaling $ 52,177,000 during the year ended december 31 , 2013. income remained relatively unchanged despite a decrease in volume , primarily due to renegotiated and improved pricing from the investors that purchase loans from the mortgage division . the primary driver of the improved pricing was the migration of the mortgage division 's broker relationships to hybrid correspondent . in 2013 , the mortgage division faced an improving real estate market and loans for new home purchase comprised 68 % of the total volume . refinancing decreased in response to slightly higher long term mortgage rates , which limited the number of borrowers for whom refinancing made economic sense . for the year ended december 31 , 2013 , the mortgage division accounted for 5.73 % of financial 's total revenue as compared with 5.62 % of financial 's total revenue for the year ended december 31 , 2012. mortgage contributed $ 236,000 and $ 270,000 to financial 's pre-tax net income in 2013 and 2012 , respectively . although management anticipates that residential mortgage rates will remain low by historical standards throughout 2014 , management also anticipates that if rates trend higher , the loan mix will continue to shift towards new home purchases and away from refinancing . the mortgage division continues to improve its market share in region 2000. we opened a new mortgage origination office in roanoke in october and anticipate providing mortgage originations in charlottesville beginning in march , 2014. management expects that low rates coupled with the mortgage division 's reputation in region 2000 and these new offices present an opportunity for us to grow the mortgage division 's revenue . service charges and fees and commissions increased to $ 1,350,000 for the year ended december 31 , 2013 from $ 1,230,000 for the year ended december 31 , 2012. this increase was due in large part to an increase in most significant service charge categories , including debit card fees , commissions on sales of securities , and nsf fees . our investment division provides brokerage services through an agreement with a third-party broker-dealer . pursuant to this arrangement , the third party broker-dealer operates a service center adjacent to one of the branches of the bank . the center is staffed by dual employees of the bank and the broker-dealer . investment receives commissions on transactions generated and in some cases ongoing management fees such as mutual fund 12b-1 fees . the investment division 's financial impact on our consolidated revenue has been immaterial . although management can not predict the financial impact of investment with certainty , management anticipates it will continue to be an immaterial component of revenue in 2014. in the third quarter of 2008 , we began providing insurance and annuity products to bank customers and others , through the bank 's insurance subsidiary . the bank has one full-time and one part-time employee that are dedicated to selling insurance products through insurance . insurance generates minimal revenue and its financial impact on our consolidated revenue has been immaterial . management anticipates that insurance 's impact on noninterest income will remain immaterial in 2014 . 28 noninterest income , exclusive of gains and losses on sale of securities , increased to $ 3,022,000 in 2013 from $ 2,944,000 in 2012. inclusive of gains and losses on sale of securities , noninterest income decreased slightly to $ 3,478,000 in 2013 from $ 3,618,000 in 2012. the following table summarizes our noninterest income for the periods indicated . replace_table_token_6_th the decrease in noninterest income for 2013 as compared to 2012 was due to a decrease in gains on sales of available-for-sale securities . these gains were largely offset by increases in the other categories of non-interest income in the other categories of non-interest income .
| the significant categories of earning assets are loans , federal funds sold , and investment securities , while deposits , fed funds purchased , and other borrowings represent interest-bearing liabilities . the level of net interest income is impacted primarily by variations in the volume and mix of these assets and liabilities , as well as changes in interest rates when compared to previous periods of operation . interest income decreased to $ 18,428,000 for the year ended december 31 , 2013 from $ 18,753,000 for the year ended december 31 , 2012. this decrease was due to a decrease in the yields on average earning assets which primarily consist of loans and investment securities , as discussed below . interest expense decreased , as discussed more fully below . net interest income for 2013 increased slightly $ 252,000 to $ 15,989,000 or 1.60 % from net interest income of $ 15,737,000 in 2012. the growth in net interest income was due in large part to a decrease in our interest expense of $ 577,000 from $ 3,016,000 for the year ended december 31 , 2012 to $ 2,439,000 for the year ended december 31 , 2013. this decrease in interest expense was primarily due to reductions in the interest rate paid on time deposits and savings accounts and an increase in the average balance held in non-interest bearing accounts . the average interest rate paid on time deposits decreased by 34 basis points during 2013 as compared to 2012. the net interest margin increased to 4.08 % in 2013 from 4.03 % in 2012. the average rate on earning assets decreased 10 basis points from 4.80 % in 2012 to 4.70 % in 2013 and the average rate on interest-bearing liabilities decreased from 0.88 % in 2012 to 0.73 % in 2013. although management can not predict with certainty future interest rate decisions by the fomc , statements from the federal reserve board indicate that interest rates will remain low at least as long as the unemployment
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we have implemented a number of procedures in response to the pandemic to support the safety and well-being of our employees , customers and stockholders that continue through the date of this report : as shelter-in-place orders and general distancing guidelines were released , we moved quickly to transition virtually all of our employees to a remote work environment , in which we continue to operate . we are actively working with our customers to understand their financial situations , waive late fees , offer a variety of repayment options to increase flexibility and reduce or defer payments for impacted customers . we took measures to adjust our underwriting procedures , which reduced exposure to more heavily impacted consumers and businesses . we adjusted loan and draw sizes as well as shortened duration in an effort to reduce risk in this volatile environment . from a loan valuation perspective , the covid-19 pandemic significantly increases the potential variability of our expected cash flows . we deemed it appropriate to increase the discount rate to capture the increase in potential volatility in expected cash flows due to the unprecedented nature of this pandemic and governmental response . after adjusting the discount rate for the decrease in underling interest rates , we increased the rate by 500 basis points based on what we deemed a market participant would require to assume the additional risk . consequently , the associated fair values of these loans were adjusted lower as part of the standard process in our internally-developed valuation models described in the notes to the consolidated financial statements as well as the “ critical accounting estimates ” section of this form 10-k. the number of loans with payment deferrals or other modifications increased meaningfully toward the end of the first quarter and into the second quarter . these requests for deferrals and modifications decreased meaningfully over the remainder of 2020 . since the beginning of the pandemic , we have assessed performance of borrowers that had elected to defer or modify loan payments during the pandemic . as of december 31 , 2020 , our collection data does not appear to indicate increased risk with these borrowers . as modifications and deferrals do not appear to be a strong indicator of future activity , we did not make an adjustment to the fair value of these loans at december 31 , 2020 based on current or past modification or deferral . after seeing increases in delinquency and charge-offs early in the pandemic , we have experienced significant improvements to these metrics over the remainder of 2020. both delinquencies and charge-offs have declined to levels below even the pre-covid period . however , positive test results and related deaths increased during the fourth quarter . further , a new variant of the covid-19 strain had begun spreading rapidly in europe and had been first detected in the united states in late december . after improvements in unemployment claims and rates from april through the third quarter , new weekly claims and the overall unemployment rate were generally level in the fourth quarter , although both significantly higher than pre-pandemic levels . at december 31 , 2020 , although a new round of stimulus had been passed by congress and vaccine distribution had begun , many were still viewing the near- and intermediate-term outlook as negative in regards to control of the pandemic , business reopening/closing trends , unemployment , and the economy in general . m anagement concluded that the probability of future charge-offs was higher than what we had experienced in the past and , therefore , increased anticipated charge-offs in our fair value models , which reduced the fair value of our portfolio at december 31 , 2020. we deemed the resulting fair value to be an appropriate market-based exit price that considers current market conditions at december 31 , 2020. we continue to closely monitor this pandemic and expect to make future changes to respond to the situation as it continues to evolve . story_separator_special_tag normal ; '' > constant currency basis in addition to reporting financial results in accordance with gaap , we have provided certain other non-gaap financial information on a constant currency basis . outside of the united states , we currently operate in brazil and , with the acquisition of ondeck australia . during 2020 , 2019 and 2018 , 1.1 % , 1.8 % and 2.7 % of our revenue , respectively , originated in currencies other than the u.s. dollar , principally the brazilian real and australian dollar . as a result , changes in our reported revenue and profits include the impacts of changes in foreign currency exchange rates . we provide constant currency assessments in the following discussion and analysis to isolate the impact of the fluctuation in foreign exchange rates and utilize constant currency results in our analysis of performance . our constant currency assessment assumes foreign exchange rates in the current fiscal periods remained the same as in the prior fiscal year periods . all conversion rates below are based on the u.s. dollar equivalent to the applicable foreign currency : replace_table_token_5_th ( 1 ) determined using the average foreign currency exchange rates for the period subsequent to the acquisition of ondeck . we believe that our non-gaap constant currency assessments are a useful measure , indicating the actual growth and profitability of our operations . combined loans and finance receivables combined loans and finance receivables is a non-gaap measure that includes both loans and rpas we own and loans we guarantee , which are either gaap items or disclosures required by gaap . we believe this non-gaap measure provides investors with important information needed to evaluate the magnitude of potential receivable losses and the opportunity for revenue performance of the loans and finance receivables portfolio on an aggregate basis . story_separator_special_tag we also believe that the comparison of the aggregate amounts from period to period is more meaningful than comparing only the amounts reflected on our consolidated balance sheets since both revenue and cost of revenue are impacted by the aggregate amount of receivables we own and those we guarantee as reflected in our consolidated financial statements . year ended 2020 compared to year ended 2019 revenue and net revenue revenue decreased $ 91.1 million , or 7.8 % , to $ 1,083.7 million for 2020 as compared to $ 1,174.8 million for 2019. on a constant currency basis , revenue decreased by $ 88.3 million , or 7.5 % , for 2020 compared to 2019. the change in revenue was driven primarily by the strategic reduction in originations due to the covid-19 pandemic , partially offset by the inclusion of ondeck . our net revenue was $ 684.2 million for 2020 compared to gross profit of $ 571.9 million for 2019. on a constant currency basis , net revenue for 2020 was $ 114.9 million higher than gross profit in 2019. our net revenue as a percentage of revenue ( “ net revenue margin ” ) was 63.1 % in 2020 compared to gross profit as a percentage of revenue ( “ gross profit margin ” ) of 48.7 % in 2019. the increase was driven by lower delinquency rates and lower than expected charge-offs as a result of portfolio seasoning and lower originations . 49 the following table sets forth the components of revenue , net revenue and gross profit , separated by product for 2020 and 2019 ( dollars in thousands ) : replace_table_token_6_th loan and finance receivable balances the fair value of our loan and finance receivable portfolio in our consolidated financial statements at december 31 , 2020 was $ 1,241.5 million with an outstanding principal balance of $ 1,263.1 million . our loan and finance receivable balance in our consolidated financial statements as of december 31 , 2019 was $ 1,239.6 million , before the allowance for losses of $ 176.9 million . the fair value of the combined loan and finance receivables portfolio includes $ 10.3 million with an outstanding principal balance of $ 8.8 million of consumer loan balances that are guaranteed by us but not owned by us , which are not included in our consolidated financial statements as of december 31 , 2020. the combined loan and finance receivables portfolio includes $ 27.6 million as of december 31 , 2019 of consumer loan balances that are guaranteed by us but not owned by us , which are not included in our consolidated financial statements as of december 31 , 2019 before the liability for estimated losses of $ 1.5 million provided in “ accounts payable and accrued expenses ” in our consolidated financial statements for december 31 , 2019. with the acquisition of ondeck , our portfolio of loans and finance receivables serving the needs of small businesses increased significantly to 52.3 % of our combined loan and finance receivable portfolio as of december 31 , 2020 , compared to 13.7 % as of december 31 , 2019. the consumer portfolio balance decreased to 47.7 % of our combined loan and finance receivable portfolio balance as of december 31 , 2020 , compared to 86.3 % as of december 31 , 2019. see “ —non-gaap financial measures—combined loans and finance receivables ” above for additional information related to combined loans and finance receivables . 50 the following table s summarize loan and finance receivable balances outstanding as of december 31 , 2020 and 2019 ( in thousands ) : replace_table_token_7_th replace_table_token_8_th ( a ) gaap measure . the loan and finance receivable balances guaranteed by us relate to loans originated by third-party lenders through the cso programs and are not included in our consolidated balance sheets . ( b ) except for allowance and liability for estimated losses , amounts represent non-gaap measures . at december 31 , 2020 , the ratio of fair value as a percentage of principal was 98.3 % on company owned loans and finance receivables and 98.4 % on combined loans and finance receivables . these ratios decreased during the year due primarily to increased charge-offs and delinquencies in the small business portfolio from the impact of covid-19 , partially offset by the seasoning of the consumer portfolio with the reduced level of originations , particularly to new customers , which carry a higher risk of charge-off . 51 average amount outstanding per loan and finance receivable the average amount outstanding per loan and finance receivable is calculated as the total combined loans and finance receivables , gross balance at the end of the period divided by the total number of combined loans and finance receivables outstanding at the end of the period . the following table shows the average amount outstanding per loan and finance receivable by product at december 31 , 2020 and 2019 : replace_table_token_9_th ( a ) the disclosure regarding the average amount per loan is statistical data that is not included in our consolidated financial statements . ( b ) includes loans guaranteed by us , which represent loans originated by third-party lenders through the cso programs and are not included in our consolidated balance sheets . the average amount outstanding per loan increased to $ 5,721 as of december 31 , 2020 compared to $ 2,144 from prior year , mainly due to a greater mix of small business loans and finance receivables as a result of the acquisition of ondeck in 2020. average loan and finance receivable origination the average loan and finance receivable origination amount is calculated as the total amount of combined loans and finance receivables originated , renewed and purchased for the period divided by the total number of combined loans and finance receivables originated , renewed and purchased for the period .
| adjusted earnings measures in addition to reporting financial results in accordance with gaap , we have provided adjusted earnings and adjusted earnings per share , or , collectively , the adjusted earnings measures , which are non-gaap measures . we believe that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures , compensation strategies , derivative instruments and amortization methods , which provides a more complete understanding of our financial performance , competitive position and prospects for the future . we also believe that investors regularly rely on non-gaap financial measures , such as the adjusted earnings measures , to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with gaap . in addition , we believe that the adjustments shown below are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items . the following table provides reconciliations between net income and diluted earnings per share calculated in accordance with gaap to the adjusted earnings measures , which are shown net of tax ( in thousands , except per share data ) : replace_table_token_3_th 47 ( a ) for the years ended december 31 , 2020 , 2019 and 2018 , we recorded $ 0.8 million ( $ 0.6 million net of tax ) , $ 2.3 million . ( $ 1.8 million net of tax ) and $ 25.0 million ( $ 19.6 million net of tax ) losses on early extinguishment of debt , respectively , related to the early termination of a revolving line of credit and securitization facility obtained with the ondeck acquisition , the redemption of $ 44.1 million of securitization notes in 2019 and the repurchase of $ 345 million of principal amount of senior notes in 2018 , respectively . ( b ) for the year ended december 31 , 2020 , we recorded
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, or crealta , in january 2016 and acquired procysbi and quinsair as a result of our acquisition of raptor pharmaceutical corp. , or raptor , in october 2016. on january 13 , 2016 , we completed our acquisition of crealta for approximately $ 539.7 million , including cash acquired of $ 24.9 million . following completion of the acquisition , crealta became our wholly owned subsidiary and was renamed horizon pharma rheumatology llc . 95 on may 18 , 2016 , we entered into a definitive agreement with boehringer ingelheim international gmbh , or boehringer ingelheim international , to acquire certain rights to interferon gamma-1b , which boehringer ingelheim international currently commercializes under the trade names imukin ® , imukine ® , immukin ® and immukine ® in an estimated thirty countries primarily in europe and the middle east . under the terms of the agreement , we paid boehringer ingelheim international 5.0 million ( $ 5.6 million when converted using a euro-to-dollar exchange rate at date of payment of 1.1132 ) upon signing and will pay 20.0 million upon closing , for certain rights for interferon gamma-1b in all territories outside of the united states , canada and japan , as we currently hold marketing rights to interferon gamma-1b in these territories . we currently market interferon gamma-1b as actimmune in the united states . the transaction is expected to close in 2017 and we are continuing to work with boehringer ingelheim international to enable the transfer of applicable marketing authorizations . we recorded an impairment charge of 5.0 million ( $ 5.3 million when converted using a euro-to-dollar exchange rate at date of impairment of 1.052 ) during the three months ended december 31 , 2016 to fully write off the value of the initial payment on our consolidated balance sheet , and upon closing we expect to record the additional 20.0 million payment as an expense in our consolidated statement of comprehensive ( loss ) income . see “ results from phase 3 study of actimmune ( interferon gamma-1b ) in friedreich 's ataxia ” section below for further details . on october 25 , 2016 , we completed our acquisition of raptor in which we acquired all of the issued and outstanding shares of raptor 's common stock for $ 9.00 per share in cash . the total consideration was $ 860.8 million , including cash acquired of $ 24.9 million and $ 56.0 million to repay raptor 's outstanding debt . following completion of the acquisition , raptor became our wholly owned subsidiary and converted to a limited liability company , changing its name to horizon pharmaceutical llc . we financed the transaction through $ 300.0 million aggregate principal amount of 8.75 % senior notes due 2024 , or the 2024 senior notes , $ 375.0 million aggregate principal amount of loans pursuant to an amendment to our existing credit agreement and cash on hand . part of our commercial strategy for rayos and our primary care medicines is to offer physicians the opportunity to have their patients fill prescriptions through pharmacies participating in our horizoncares patient access program . for commercial patients who are prescribed our primary care medicines or rayos , the horizoncares program offers co-pay assistance when a third-party commercial payer covers a prescription but requires an eligible patient to pay a co-pay or deductible , and offers full subsidization when a third-party commercial payer rejects coverage for an eligible patient . during 2016 , we entered into business arrangements with pharmacy benefit managers , or pbms , and other payers to secure formulary status and reimbursement of our medicines , such as our arrangements with express scripts , inc. , or express scripts , cvs caremark and prime therapeutics llc . while we believe that this strategy will result in broader inclusion of certain of our primary care medicines on healthcare plan formularies , and therefore increase payer reimbursement and lower our cost of providing patient access programs , these arrangements generally require us to pay administrative and rebate payments to the pbms and or other payers . we market our medicines in the united states through our field sales force , which numbered approximately 480 representatives as of december 31 , 2016. our strategy is to continue to build a well-balanced , diversified , high-growth biopharmaceutical company . we are executing this through the successful commercialization of our existing medicines , a strong commitment to patient access and support and business development efforts focused on transformative acquisitions to accelerate our rare disease leadership as well as on-market and development-stage medicines to fill out our pipeline . we are building a sustainable biopharmaceutical company by helping ensure that patients have access to their medicines and support services , and by investing in the further development of medicines for patients with rare or underserved diseases . our growing business is diversified across three business units : orphan , rheumatology and primary care , and is driven by a successful commercial model that focuses on differentiated , long-life medicines , innovative patient access programs and a disciplined business development strategy . 96 results from phase 3 study of actimmune ( interferon gamma-1b ) in friedreich 's ataxia on december 8 , 2016 , we announced that the phase 3 trial , safety , tolerability and efficacy of actimmune dose escalation in friedreich 's ataxia study , or steadfast , evaluating actimmune for the treatment of friedreich 's ataxia , or fa , did not meet its primary endpoint of a statistically significant change from baseline in the modified friedreich 's ataxia rating scale , or fars-mneuro , at twenty-six weeks versus treatment with placebo and that the secondary endpoints did not meet statistical significance , or the fa announcement . no new safety findings were identified on initial review of data other than those already noted in the actimmune prescribing information for approved indications . story_separator_special_tag we , in conjunction with the independent data safety monitoring board , the principal investigator and the friedreich 's ataxia research alliance , or fara , collaborative clinical research network in fa , determined that , based on the trial results , the steadfast program would be discontinued , including the twenty-six week extension study and the long-term safety study . following the fa announcement , we recorded the following amounts in our consolidated statement of comprehensive loss during the year ended december 31 , 2016 ( in thousands ) : amount description financial statement line item loss/ ( gain ) note impairment of in-process research and development impairment of in-process research and development $ 66,000 1 impairment of non-current asset general and administrative expenses 5,260 2 loss on inventory purchase commitments cost of goods sold 14,287 3 remeasurement of contingent royalty liabilities cost of goods sold ( 2,480 ) 4 clinical trial wind-down costs research and development expenses 3,966 5 total $ 87,033 note 1 in-process research and development , or ipr & d , related to the research and development project to evaluate actimmune in the treatment of fa , which we acquired in the vidara merger . at the time of the vidara merger , ipr & d was considered separable from the business as the project could be sold to a third party , and we assigned a fair value of $ 66.0 million to the intangible asset using an income approach in our purchase accounting . following the fa announcement , we determined that the ipr & d has no alternative use or economic value , and we recorded an impairment charge during the three months ended december 31 , 2016 to fully write off the value of the asset on our consolidated balance sheet . note 2 as described above , on may 18 , 2016 , we entered into a definitive agreement with boehringer ingelheim international to acquire certain rights to interferon gamma-1b , and we paid boehringer ingelheim international 5.0 million upon signing . the purchase price was determined with the expectation that the steadfast study would be successful . following the fa announcement , we determined that this payment , which was recorded in “ other assets ” on our consolidated balance sheet was impaired , and we recorded an impairment charge during the three months ended december 31 , 2016 to fully write off the value of the asset ( $ 5.3 million when converted using a euro-to-dollar exchange rate at date of impairment of 1.052 ) . upon closing , we will pay boehringer ingelheim international an additional 20.0 million and we expect to record this payment as an expense in our consolidated statement of comprehensive ( loss ) income . note 3 during the year ended december 31 , 2016 , we committed to purchase additional units of actimmune from boehringer ingelheim rcv gmbh & co kg , or boehringer ingelheim . these additional units of actimmune were intended to cover anticipated demand if the results of the steadfast study of actimmune for the treatment of fa had been successful . following the fa announcement , we recorded a loss of $ 14.3 million for firm , non-cancellable and unconditional purchase commitments for quantities in excess of our current forecasts for future demand . during the year ended december 31 , 2016 , we also committed to incur an additional $ 14.9 million for the harmonization of the drug substance manufacturing process with boehringer ingelheim . these additional costs have not been included in our consolidated statement of comprehensive loss or our consolidated balance sheet at december 31 , 2016. note 4 at the time of the vidara merger , we assigned a fair value to a contingent liability for royalties potentially payable under previously existing royalty and licensing agreements related to actimmune , which included an amount of $ 2.5 million for estimated future sales of actimmune for fa . following the fa announcement , we recorded an adjustment to reduce the contingent royalty liability for actimmune by $ 2.5 million as we do not anticipate future sales of actimmune for fa . 97 note 5 following the fa announcement , we recorded an amount of $ 4.0 million at december 31 , 2016 related to costs anticipated to be incurred to discontinue the steadfast study . these costs will be incurred without economic benefit to us , and represent costs to us to wind down the study under u.s. food and drug administration , or fda , protocol . story_separator_special_tag . procysbi . net sales were $ 25.3 million during the year ended december 31 , 2016. we began recognizing procysbi sales following the acquisition of raptor in october 2016. buphenyl . net sales increased $ 3.4 million , or 25 % , to $ 16.9 million during the year ended december 31 , 2016 , from $ 13.5 million during the year ended december 31 , 2015. we began recognizing buphenyl sales following the acquisition of hyperion in may 2015 , therefore only a partial period of buphenyl sales were recognized during the year ended december 31 , 2015 , compared with full-period recognition of sales during the year ended december 31 , 2016. migergot . net sales were $ 4.7 million during the year ended december 31 , 2016. we began recognizing migergot sales following the acquisition of crealta in january 2016. lodotra . net sales decreased $ 0.7 million , or 14 % , to $ 4.2 million during the year ended december 31 , 2016 , from $ 4.9 million during the year ended december 31 , 2015. the decrease was due to fewer shipments to our european distribution partner , mundipharma international corporation limited , or mundipharma . lodotra sales to mundipharma occur at the time we ship , based on mundipharma 's estimated requirements . accordingly , lodotra sales are not linear or directly tied to mundipharma 's in-market sales and can therefore fluctuate significantly . quinsair .
| net sales decreased $ 16.6 million , or 9 % , to $ 173.7 million during the year ended december 31 , 2016 , from $ 190.3 million during the year ended december 31 , 2015. net sales decreased by approximately $ 50.4 million due to lower net pricing resulting from higher co-pay and other patient assistance , offset by an increase of approximately $ 33.8 million resulting from prescription volume growth . ravicti . net sales increased $ 64.7 million , or 74 % , to $ 151.5 million during the year ended december 31 , 2016 , from $ 86.8 million during the year ended december 31 , 2015. net sales increased by approximately $ 55.7 million resulting from prescription volume growth and $ 9.0 million due to higher net pricing . we began recognizing ravicti sales following the acquisition of hyperion in may 2015 , therefore only a partial period of ravicti sales were recognized during the year ended december 31 , 2015 , compared with full-period recognition of sales during the year ended december 31 , 2016. vimovo . net sales decreased $ 45.4 million , or 27 % , to $ 121.3 million during the year ended december 31 , 2016 , from $ 166.7 million during the year ended december 31 , 2015. net sales decreased by approximately $ 35.9 million due to lower net pricing resulting from higher co-pay and other patient assistance and approximately $ 9.5 million resulting from lower prescription volumes . actimmune . net sales decreased $ 2.8 million , or 3 % , to $ 104.6 million during the year ended december 31 , 2016 , from $ 107.4 million during the year ended december 31 , 2015. net sales decreased by approximately $ 8.8 million resulting from prescription volume decreases , offset by an increase of approximately $ 6.0 million due to higher net pricing . krystexxa . net sales were $ 91.1 million during the year ended december 31 , 2016. we began recognizing krystexxa sales following the acquisition of crealta in january 2016 . 99 rayos . net sales increased $ 7.0 million , or 17 % , to $ 47.4 million during the year ended december 31 , 2016 , from $ 40.4 million during the year
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retailers continue to use their buying power and negotiating strength to seek increased promotional programs funded by their suppliers and more favorable terms . we expect consolidations among retailers will continue to create large and sophisticated customers that may further this trend . retailers also continue to grow and promote store brands that compete with branded products , while other challenger brands drive innovation and engagement that threatens our market share . in addition , our businesses are largely concentrated in the traditional retail grocery trade , which has experienced slower growth than other retail channels , such as dollar stores , drug stores , club stores and e-commerce retailers . we anticipate that alternative retail channels , particularly e-commerce , will continue to grow rapidly . the cost of distribution has increased due to a rise in transportation and logistics costs , driven by excess demand , reduced availability and higher fuel costs . in addition , certain ingredients and packaging required for the manufacture of our products , including steel , have been or may be impacted by tariffs and weather-related events . we expect these cost pressures to continue in 2020. story_separator_special_tag style= '' padding-top:6px ; padding-bottom:6px ; font-family : times new roman ; font-size:10pt ; '' > in 2018 , we recorded expense of $ 22 million in other expenses / ( income ) ( $ 15 million after tax , or $ .05 per share ) from a settlement of a legal claim . discontinued operations in 2019 , we recognized losses of $ 12 million ( $ 9 million after tax , or $ .03 per share ) associated with mark-to-market adjustments for defined benefit pension plans . in 2018 , we recognized gains of $ 5 million ( $ 3 million after tax , or $ .01 per share ) associated with mark-to-market and curtailment adjustments for defined benefit pension plans ; 18 in 2018 , we recorded a pre-tax restructuring charge of $ 7 million and implementation costs and other related costs of $ 1 million in administrative expenses ( aggregate impact of $ 4 million after tax , or $ .01 per share ) related to the cost savings initiatives discussed above . see note 8 to the consolidated financial statements and `` restructuring charges and cost savings initiatives '' for additional information ; in the fourth quarter of 2019 , as part of the company 's annual review of intangible assets , we recognized a non-cash impairment charge of $ 7 million on a trademark and $ 10 million on goodwill in kelsen due to a lower long-term outlook for sales and the pending sale of the business . the aggregate impact was $ 17 million ( $ 12 million after tax , or $ .04 per share ) . in the second quarter of 2019 , interim impairment assessments were performed on the intangible and tangible assets within campbell fresh , which included garden fresh gourmet , bolthouse farms carrot and carrot ingredients and bolthouse farms refrigerated beverages and salad dressings , as we continued to pursue the divestiture of these businesses . we revised our future outlook for earnings and cash flows for each of these businesses as the divestiture process progressed . we recorded non-cash impairment charges of $ 104 million on the tangible assets and $ 73 million on the intangible assets of bolthouse farms carrot and carrot ingredients ; $ 96 million on the intangible assets and $ 9 million on the tangible assets of bolthouse farms refrigerated beverages and salad dressings ; and $ 62 million on the intangible assets and $ 2 million on the tangible assets of garden fresh gourmet . the aggregate impact of the impairment charges was $ 346 million ( $ 264 million after tax , or $ .88 per share ) . in the first quarter of 2019 , we recorded a non-cash impairment charge of $ 14 million ( $ 11 million after tax , or $ .04 per share ) on our u.s. refrigerated soup plant assets . in 2019 , total non-cash impairment charges recorded were $ 377 million ( $ 287 million after tax , or $ .95 per share ) . in the third quarter of 2018 , we performed interim impairment assessments within campbell fresh on the deli reporting unit , which includes garden fresh gourmet and the u.s. refrigerated soup business , and the bolthouse farms refrigerated beverages and salad dressings reporting unit . within the deli unit , we revised our long-term outlook due to the anticipated loss of refrigerated soup business with certain private label customers , as well as the performance of the business . in addition , the operating performance of the bolthouse farms refrigerated beverages and salad dressings reporting unit was below expectations . we revised our long-term outlook for future earnings and cash flows for each of these reporting units . we recorded a non-cash impairment charge of $ 11 million on the tangible assets and $ 94 million on the intangible assets ( $ 80 million after tax , or $ .27 per share ) of the deli reporting unit , and a non-cash impairment charge of $ 514 million ( $ 417 million after tax , or $ 1.39 per share ) related to the intangible assets of the bolthouse farms refrigerated beverages and salad dressings reporting unit . the aggregate impact of the impairment charges was $ 619 million ( $ 497 million after tax , or $ 1.65 per share ) . in the second quarter of 2018 , we performed an interim impairment assessment on the intangible assets of the bolthouse farms carrot and carrot ingredients reporting unit as operating performance was below expectations . we revised our outlook for future earnings and cash flows and recorded a non-cash impairment charge of $ 75 million ( $ 74 million after tax , or $ .25 per share ) . story_separator_special_tag in 2018 , the total non-cash impairment charges recorded were $ 694 million ( $ 571 million after tax , or $ 1.89 per share ) ; and in 2019 , we incurred pre-tax expenses of $ 32 million associated with the sale process of the businesses in campbell fresh , including transaction costs . in addition , we recorded tax expense of $ 29 million as deferred tax assets on bolthouse farms were not realizable . the aggregate impact was $ 51 million after tax , or $ .17 per share . in 2019 , we also incurred costs of $ 12 million ( $ 10 million after tax , or $ .03 per share ) associated with the planned divestiture of campbell international . the total aggregate impact was $ 61 million after tax , or $ .20 per share . 19 the items impacting comparability are summarized below : replace_table_token_3_th ( 1 ) sum of the individual amounts may not add due to rounding . earnings from continuing operations were $ 474 million ( $ 1.57 per share ) in 2019 , compared to $ 724 million ( $ 2.40 per share ) in 2018 . after adjusting for items impacting comparability , earnings decreased reflecting higher interest expense , partly offset by a lower adjusted tax rate as incremental earnings before interest and taxes ( ebit ) from the snyder's-lance acquisition were mostly offset by declines in ebit in the base business . see `` discontinued operations '' for additional information . net earnings attributable to campbell soup company - 2018 compared with 2017 in addition to the 2018 items that impacted comparability of net earnings discussed above , the following items impacted the comparability of net earnings and net earnings per share : continuing operations in 2017 , we recognized gains of $ 156 million in other expenses / ( income ) ( $ 100 million after tax , or $ .33 per share ) associated with mark-to-market adjustments for defined benefit pension and postretirement plans ; in 2017 , we recorded a pre-tax restructuring charge of $ 11 million and implementation costs and other related costs of $ 33 million in administrative expenses and $ 4 million in cost of products sold ( aggregate impact of $ 30 million after tax , or $ .10 per share ) related to the cost savings initiatives discussed above . see note 8 to the consolidated financial statements and `` restructuring charges and cost savings initiatives '' for additional information ; and in 2017 , we recorded a tax benefit of $ 52 million ( $ .17 per share ) in taxes on earnings primarily related to the sale of intercompany notes receivable to a financial institution , which resulted in the recognition of foreign exchange losses on the notes for tax purposes . see note 12 to the consolidated financial statements for additional information . discontinued operations in 2017 , we recognized gains of $ 22 million ( $ 16 million after tax , or $ .05 per share ) associated with mark-to-market adjustments for defined benefit pension plans ; 20 in 2017 , we recorded a pre-tax restructuring charge of $ 7 million and implementation costs and other related costs of $ 3 million in administrative expenses ( aggregate impact of $ 7 million after tax , or $ .02 per share ) related to the cost savings initiatives discussed above . see note 8 to the consolidated financial statements and `` restructuring charges and cost savings initiatives '' for additional information ; in the second quarter of 2017 , we performed an interim impairment assessment on the intangible assets of the bolthouse farms carrot and carrot ingredients reporting unit and the garden fresh gourmet reporting unit as operating performance was well below expectations and a new leadership team of the campbell fresh division initiated a strategic review which led to a revised outlook for future sales , earnings , and cash flow . we recorded a non-cash impairment charge of $ 147 million ( $ 139 million after tax , or $ .45 per share ) related to intangible assets of the bolthouse farms carrot and carrot ingredients reporting unit and a non-cash impairment charge of $ 65 million ( $ 41 million after tax , or $ .13 per share ) related to the intangible assets of the garden fresh gourmet reporting unit ( aggregate pre-tax impact of $ 212 million , $ 180 million after tax , or $ .59 per share ) ; and in 2017 , we recorded a $ 6 million reduction to interest expense ( $ 4 million after tax , or $ .01 per share ) related to premiums and fees received on the sale of the intercompany notes receivable discussed above . the items impacting comparability are summarized below : replace_table_token_4_th ( 1 ) sum of the individual amounts may not add due to rounding . earnings from continuing operations were $ 724 million ( $ 2.40 per share ) in 2018 , compared to $ 924 million ( $ 3.01 per share ) in 2017 . after adjusting for items impacting comparability , earnings decreased primarily due to declines on the base business reflecting a lower gross profit performance , and the dilutive impact of acquisitions , partially offset by a lower effective tax rate . earnings per share benefited from a reduction in the weighted average diluted shares outstanding , reflecting share repurchases . we suspended our share repurchases as of the second quarter of 2018 . 21 discussion and analysis sales an analysis of net sales by reportable segment follows : replace_table_token_5_th n/m - not meaningful . an analysis of percent change of net sales by reportable segment follows : replace_table_token_6_th replace_table_token_7_th ( 1 ) represents revenue reductions from trade promotion and consumer coupon redemption programs . ( 2 ) sum of the individual amounts does not add due to rounding .
| after adjusting for this item , the remaining decrease in the effective tax rate was primarily due to the ongoing lower u.s. federal tax rate as a result of the act . earnings from continuing operations per share were $ 1.57 in 2019 , compared to $ 2.40 a year ago . the current and prior year included expenses of $ .74 and $ .12 per share , respectively , from items impacting comparability as discussed below . loss from discontinued operations per share was $ .87 in the 2019 , compared to $ 1.53 a year ago . the current and prior year included expenses of $ 1.18 and $ 1.89 per share , respectively , from items impacting comparability as discussed below . cash flows from operations were $ 1.398 billion in 2019 , compared to $ 1.305 billion in 2018 . the increase was primarily due to improvements in working capital management efforts and higher cash earnings . 17 net earnings attributable to campbell soup company - 2019 compared with 2018 the following items impacted the comparability of net earnings and net earnings per share : continuing operations in 2019 , we recognized losses of $ 122 million in other expenses / ( income ) ( $ 93 million after tax , or $ .31 per share ) associated with mark-to-market adjustments for defined benefit pension and postretirement plans . in 2018 , we recognized gains of $ 131 million in other expenses / ( income ) ( $ 100 million after tax , or $ .33 per share ) associated with mark-to-market adjustments for defined benefit pension and postretirement plans ; in 2019 , we recognized a pre-tax pension settlement charge in other expenses / ( income ) of $ 28 million ( $ 22 million after tax , or $ .07 per share ) associated with a u.s. pension plan . the settlement resulted from the level of lump sum distributions from the plan 's assets in 2019 ; in 2015 , we implemented initiatives to reduce costs and to streamline
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as a stand-alone offering , dolby atmos continues to enjoy increasing adoption by studios , content creators , post-production facilities and exhibitors . as of the end of our current fiscal year , there are over fourteen hundred dolby atmos-enabled screens installed or committed to be installed , compared to a year ago when there were more than seven hundred such screens globally . challenges : demand for our cinema products is dependent upon industry economic cycles along with our ability to develop and introduce new technologies , further our relationships with content creators , and promote new consumer audio and imaging experiences . to the extent that we do not make progress in these areas , and are unsuccessful in resisting pricing pressures and prevailing over competing technologies , our revenues may be adversely affected . new growth initiatives dolby voice opportunity : dolby voice is an audio conferencing solution that emulates the in-person meeting experience with superior spatial perception , voice clarity , and background noise suppression . launched in fiscal 2014 in global partnership with bt® , a leading provider of audio and imaging conferencing systems , the bt meetme with dolby voice service is available via the desktop and on mobile devices . during fiscal 2015 , we launched the dolby conference phone which was designed specifically to further enhance and optimize the conference call experience using dolby voice . in the current fiscal year , we saw a steady increase in the customer base with now over ninety enterprise customers signed up . further deployment continues . challenges : our success in this market will depend on the number of conference service providers and enterprise customers the service attracts , as well as on sales of dolby conference phones , and the magnitude of end user activity the service generates . dolby cinema opportunity : in fiscal 2015 and in partnership with established movie theater exhibitors , we launched dolby cinema , a branded premium cinema that features spectacular imagery using dolby vision laser projection , object-oriented dolby atmos audio technology , and inspired theater design . to date , we have partnered with three cinema exhibitors including amc in the u.s. amc has opened the first eight dolby cinemas at some of the highest grossing sites in the country , and has announced plans to open fifty sites by the end of the calendar 2016. as part of our ongoing efforts to build a robust pipeline of theatrical content for dolby cinema locations , every major studio has released dolby vision theatrical titles . upcoming major releases include `` in the heart of the sea , '' `` the good dinosaur `` , `` star wars : episode vii - the force awakens `` , and `` the jungle book `` . challenges : although the premium large format sector of the cinema industry is currently a growing segment , dolby cinema is a new offering and will be in competition with other existing solutions . our success with this initiative depends in large part on our ability to differentiate our offering , provide a compelling experience , and attract and retain a viewing audience . 29 dolby vision opportunity : dolby vision is an imaging technology that offers more realistic distinctions in color , brighter highlights , and improved shadow details for cinema , digital tv , and other consumer devices . this playback technology focuses on the ability of each pixel to contribute to the overall image , and is not dependent on the number of pixels . in the fourth quarter , vizio announced the availability of the vizio reference series , the industry 's first hdr 4k tv with dolby vision , and leading chinese oems tcl and skyworth also announced dolby vision tvs that will ship later in the 2015 calendar year . we also announced collaborations with various partners including several key soc providers , to offer dolby vision enabled technologies for digital tvs , and other consumer devices . to support home entertainment , specified dolby vision mastered titles are now available from warner bros. home entertainment inc. via the streaming service vudu , and we believe additional dolby vision titles from other content providers will soon be available through netflix . challenges : to successfully establish dolby vision , we will need to work with oems to expand the array of consumer devices that incorporate dolby vision , expand the pipeline of dolby vision entertainment available from content creators , and encourage consumer adoption in the face of competing products and technologies . revenue from significant customers in fiscal 2015 , 2014 and 2013 , revenue from samsung represented approximately 12 % , 11 % and 12 % of our total revenue , respectively , and consisted primarily of licensing revenue from our mobile and broadcast markets . critical accounting policies and estimates our consolidated financial statements and accompanying notes are prepared in accordance with u.s. gaap , and pursuant to sec rules and regulations . the preparation of these financial statements requires us to establish accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities , revenue and expenses . the sec considers an accounting policy and estimate to be critical if it is both important to a company 's financial condition or results of operations , and requires significant judgment by management in its application . if actual results or events differ materially from our judgments and estimates , our reported financial condition and results of operation for future periods could be materially affected . historically , actual results have not differed significantly from our estimates and assumptions . on a regular basis , we evaluate our assumptions , judgments , and estimates and these have not changed notably in recent years nor do we anticipate them to change notably in the future . we have reviewed the selection and development of the critical accounting policies and estimates discussed below with the audit committee of our board of directors . story_separator_special_tag revenue recognition we recognize revenue when persuasive evidence of an arrangement exists , we have delivered the product or performed the service , the fee is fixed or determinable , and collection is probable . determining whether and when these criteria have been satisfied may involve assumptions and judgments that can have a significant impact on the timing and amount of revenue we report . revenue recognition for transactions may include multiple elements such as hardware and accompanying software , upgrade rights , support and maintenance , and rights to receive commissioning services in connection with certain digital servers . for these transactions , we may also have to exercise judgment in performing the following : identifying the significant deliverables within the arrangements and determine whether the significant deliverables constitute separate units of accounting . we evaluate each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting . an element constitutes a separate unit of accounting when it has standalone value and delivery of an undelivered element is both probable and within our control . when these criteria are not met , the delivered and undelivered elements are combined and the arrangement fees are allocated to this combined single unit ; assessing inputs used to determine selling price ( whether vsoe , tpe , or esp ) for the significant deliverables . we determine our esp for an individual element within a me revenue arrangement using the same methods used to determine the selling price of an element sold on a standalone basis . if we sell the element on a standalone basis , we estimate the selling price by considering actual sales prices . otherwise , we estimate the selling price by considering internal factors such as pricing practices and margin objectives . consideration is also given to market conditions such as competitor pricing strategies , customer demands and industry technology lifecycles . management applies judgment to establish margin objectives , pricing strategies and technology lifecycles ; 30 estimating , as necessary , the period of time over which customers receive certain elements of the arrangement following initial delivery so as to assess the period over which revenue should be recognized . goodwill , intangible assets , and long-lived assets as part of our annual goodwill impairment test , we first evaluate goodwill to determine if it is more likely than not that the occurrence of an event or change in circumstances has reduced the fair value of a reporting unit below its carrying value . this qualitative assessment requires that we consider events or circumstances that may include macroeconomic conditions , industry and market considerations , cost factors , overall financial performance , changes in management or key personnel , changes in strategy and changes in customers . if the qualitative assessment indicates that the two-step quantitative analysis should be performed , we exercise judgment at various steps , including the identification of reporting units , assignment of goodwill to reporting units , and determination of the fair value of each reporting unit . we assess the fair value of each reporting unit using expected cash flows that reflect our best estimate of future revenue using our historical information , third-party industry data , and review of our internal operations . we also estimate operating costs using these sources . we adjust expected future cash flows by discount rates based on our weighted average cost of capital and related considerations . the estimates used to calculate the fair value of a reporting unit may change from year to year based on operating results , market conditions , and other factors . changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment , if any , for each reporting unit . intangible assets and long-lived assets subject to amortization and depreciation , respectively , are only evaluated for impairment upon a significant change in the operating or macroeconomic environment . if an asset 's undiscounted future cash flows are lower than its carrying value , the asset is written down to its estimated fair value , which is based on its discounted future cash flows . assessing discounted future cash flows requires management to make assumptions and exercise judgment in forecasting revenues and the useful lives of assets , as well as selecting the discount rate that reflects the risk inherent in our future cash flows . stock-based compensation to determine the fair value of a stock-based award using the black-scholes option pricing model , we make assumptions regarding the expected term of the award , the expected future volatility of our stock price over the expected term of the award , and the risk-free interest rate over the expected term of the award . we estimate the expected term of our stock-based awards by evaluating historical exercise patterns of our employees . we use a blend of the historical volatility of our common stock and the implied volatility of our traded options as an estimate of the expected volatility of our stock price over the expected term of the awards . we use an average interest rate based on u.s. treasury instruments with terms consistent with the expected term of our awards to estimate the risk-free interest rate . we reduce the stock-based compensation expense for estimated forfeitures based on our historical experience . we are required to estimate forfeitures at the time of the grant and revise our estimate , if necessary , in subsequent periods if actual forfeitures differ from our estimate . income taxes we make estimates and judgments that affect our accounting for income taxes . this includes estimating temporary differences from differing treatment of items for tax and accounting purposes , future taxable income and actual tax exposure , possible or likely changes in current tax laws , and uncertainties in tax positions . these differences result in deferred tax assets and liabilities which are included in our consolidated balance sheets .
| replace_table_token_9_th 2015 vs. 2014 factor revenue gross margin pc â lower asps from product mix as fewer pcs included optical disc drives , and lower shipments , partially offset by an increase in recoveries ßà no significant fluctuations other á higher automotive dvd shipments and recovery activity , new revenue from dolby voice , and higher shipments of gaming consoles ce â lower shipments of dvds , avrs , htibs and blu-ray discs , partially offset by higher shipments of soundbars and an increase in recoveries broadcast á increase in patent licensing and higher shipments of stbs , partially offset by lower recoveries as fiscal 2014 included a payment of $ 24.7 million from a large licensee mobile ßà no significant fluctuations 2014 vs. 2013 factor revenue gross margin broadcast á increase in recoveries received for royalties including $ 24.7 million from a large licensee , and higher shipments of tvs and stbs that incorporate our technologies á decrease in cost of licensing due to the release of a previously-accrued liability of $ 5.3 million in the fourth quarter of fiscal 2014 related to certain revenue sharing agreements pc â lower revenues associated with product mix and lower unit shipments from declines in the underlying pc market mobile á increase in direct patent licensing revenues from mobile phones , recoveries and unit growth of tablets that incorporate our technologies other á higher revenues from our gaming market largely attributable to the new playstation 4 and xbox one game consoles that were launched late in the 2013 calendar year â non-recurring revenue recognized in the third quarter of fiscal 2013 from a licensing arrangement for certain imaging technologies outside of our core markets ce á higher shipments of soundbars and digital media adapters incorporating our technologies , partially offset by shipment decreases of blu-ray disc devices and avrs 32 products products revenue is generated from the sale of audio and imaging products for the film production , cinema , and television broadcast industries . cost of products consists primarily of the cost of materials related to products sold , applied labor and manufacturing overhead , and amortization of certain intangible assets . our cost of products also includes third party royalty obligations paid to license intellectual property that we include in our products . replace_table_token_10_th 2015 vs. 2014 factor revenue gross margin cinema á inclusion of digital server shipments from our acquisition of doremi and higher sales of
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the following represent our significant accounting policies : loans receivable . loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at current unpaid principal balances , net of the allowance for loan losses and including net deferred loan origination fees and costs . interest income is accrued based on the unpaid principal balance . loan origination fees , net of certain direct origination costs , are deferred and recognized in interest income using the interest method without anticipating prepayments . a loan is moved to nonaccrual status in accordance with the bank 's policy , typically after 90 days of non-payment . the accrual of interest on mortgage and business loans is generally discontinued at the time that the loan becomes 90 days past due , unless the loan is well-secured and in the process of collection . consumer loans are typically charged off no later than 120 days past due . past-due status is based on contractual terms of the loan . in all cases , loans are placed on nonaccrual status or charged off if collection of principal or interest is considered doubtful . all nonaccrual loans are considered impaired loans . all interest accrued but not received for loans placed on nonaccrual are reversed against interest income . interest received on such loans is accounted for on the cash-basis or recorded against principal balances only until qualifying for return to accrual . cash-basis interest recognition is only applied on nonaccrual loans with a sufficient collateral margin to ensure no doubt with respect to the collectability of principal . loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and remain current for a period of time ( typically six months ) and future payments are reasonably assured . allowance for loan losses . the allowance for loan losses is a valuation allowance for probable incurred credit losses . loan losses are charged against the allowance when management believes the uncollectibility of a loan balance , or portion thereof , is confirmed . subsequent recoveries , if any , are credited to the allowance . 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 factors . 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 . 50 the allowance consists of specific and general components . the specific component relates to loans that are individually classified as impaired when , based on current information and events , it is probable that the bank will be unable to collect all amounts due according to the con tractual terms of the loan agreement . loans for which the terms have been modified resulting in a concession , and for which the borrower is experiencing financial difficulties , are considered troubled debt restructurings ( “ tdr ” ) and classified as impaired . factors considered by management in determining impairment include payment status , collateral value , and the probability of collecting scheduled principal and interest payments when due . loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired . management determines the significance of payment delays and payment shortfalls on a case-by-case basis , taking into consideration all of the circumstances surrounding the loan and the borrower , including the length of the delay , the reasons for the delay , the borrower 's prior payment record , and the amount of the shortfall in relation to the principal and interest owed . impaired loans are measured for impairment using the fair value of the collateral , present value of cash flows , or the observable market price of the note . impairment measurement for all collateral dependent loans , excluding accruing tdr 's , is based on the fair value of collateral , less costs to sell , if necessary . a loan is considered collateral dependent if repayment of the loan is expected to be provided solely by the sale or the operation of the underlying collateral . when the bank modifies a loan in a tdr , management evaluates for any possible impairment using either the discounted cash flows method , where the value of the modified loan is based on the present value of expected cash flows , discounted at the contractual interest rate of the original loan agreement , or by using the fair value of the collateral less selling costs if repayment under the modified terms becomes doubtful . when establishing the allowance for loan losses , management categorizes loans into risk categories reflecting individual borrower earnings , liquidity , leverage and cash flow , as well as the nature of underlying collateral . the general component covers non-impaired loans and is based on historical loss experience adjusted for current factors . as of december 31 , 2017 , the bank determines the historical loss experience by portfolio segment and it is based on the actual losses experienced by the bank using a rolling 12 quarter average . this actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment . these economic factors include consideration of the following : levels of and trends in delinquencies and impaired loans ; levels of and trends in charge-offs and recoveries ; trends in volume and terms of loans ; effects of any changes in risk selection and underwriting standards ; other changes in lending policies , procedures , 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 . story_separator_special_tag management believes that the allowance for loan losses is adequate at december 31 , 2017. the allowance for loan losses is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements . in addition , various regulatory agencies periodically review the allowance for loan losses . securities . management determines the appropriate classification of securities at the date individual investment securities are acquired , and the appropriateness of such classification is reassessed at each statement of financial condition date . debt securities that management has the positive intent and ability to hold to maturity , if any , are classified as “ held to maturity ” and recorded at amortized cost . trading securities , if any , are carried at fair value , with unrealized gains and losses recognized in earnings . securities not classified as held to maturity or trading , are classified as “ available-for-sale ” and recorded at fair value , with unrealized gains and losses excluded from earnings and reported in other comprehensive income ( loss ) , net of taxes . purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities . management evaluates securities for other-than-temporary impairment ( “ otti ” ) on at least a quarterly basis , and more frequently when economic or market conditions warrant such an evaluation . for securities in an unrealized loss position , management considers the extent and duration of the unrealized loss , and the financial condition and near-term prospects of the issuer . management also assesses whether it intends to sell , or it is more likely than not that it will be required to sell , a security in an unrealized loss position before recovery of its amortized cost basis . if either of the criteria regarding intent or requirement to sell is met , the entire difference between amortized cost and fair value is recognized as impairment through earnings . for debt securities that do not meet the aforementioned criteria , the amount of impairment is split into two components as follows : 1 ) otti related to credit loss , which must be recognized in the consolidated statements of income ( loss ) and 2 ) otti related to other factors , which is recognized in other comprehensive income . the credit loss is defined as the difference between the discounted present value of the cash flows expected to be collected and the amortized cost basis . for equity securities , the entire amount of impairment is recognized through earnings . 51 gains and losses on the sale of securities are recorded on the trade date and are determined using the specific-identification method . the sale of a held-to-maturity security within three months of its maturity date or after collection of at least 85 % of t he principal outstanding at the time the security was acquired is considered a maturity for purposes of classification and disclosure . income taxes . the bank recognizes income taxes under the asset and liability method . under this method , deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated 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 . 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 . deferred tax assets are reduced by a valuation allowance when , in the opinion of management , it is more likely than not that all or some portion of the deferred tax assets will not be realized . when tax returns are filed , it is highly certain that some positions taken would be sustained upon examination by the taxing authorities , while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained . the benefit of a tax position is recognized in the consolidated financial statements in the period during which , based on all available evidence , management believes it is more likely than not that the position will be sustained upon examination , including the resolution of appeals or litigation processes , if any . tax positions taken are not offset or aggregated with other positions . tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 % likely of being realized upon settlement with the applicable taxing authority . the portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination . at december 31 , 2017 and 2016 , there were no liabilities recorded related to uncertain tax positions . the bank is no longer subject to income tax examinations by u.s. federal , state or local tax authorities for years before 2014. interest and penalties associated with unrecognized tax benefits , if any , would be classified as additional provision for income taxes in the consolidated statements of income ( loss ) . refer to note 1 to the consolidated financial statements for management 's assessment of recently issued accounting pronouncements . comparison of financial condition at december 31 , 2017 and december 31 , 2016 total assets . total assets increased $ 180.5 million , or 24.2 % , to $ 925.5 million at december 31 , 2017 , from $ 745.0 million at december 31 , 2016. the increase was due to increases in net loans and cash and cash equivalents , partially offset by a decrease in available-for-sale securities , as discussed in more detail below . available-for-sale securities .
| net income decreased $ 5.8 million , or 407.9 % , to a loss of $ 4.4 million for the year ended december 31 , 2017 , compared to a net income of $ 1.4 million for the year ended december 31 , 2016. the decrease was due to an increase in non-interest expenses , of $ 8.7 million , or 31.2 % , to $ 36.6 million for the year ended december 31 , 2017 from $ 27.9 million for the year ended december 31 , 2016. the increase in non-interest expenses for the year ended december 31 , 2017 includes a one-time , pre-tax contribution , by the company of 609,279 shares of company common stock , valued at $ 6.1 million , and $ 200,000 in cash , to establish the ponce de leon foundation . excluding this non-recurring expense , net income would have been $ 1.9 million for the year ended december 31 , 2017. compensation and benefit expenses also increased by $ 2.1 million , or 14.2 % , to $ 17.1 million for the year ended december 31 , 2017 from $ 15.0 million for the year ended december 31 , 2016. the increase in compensation and benefit expenses is mainly attributed to an increase of $ 921,000 in compensation expense as we continue to add experienced senior level individuals to complement our existing management team including our sales and relationship management personnel and an expense in the amount of $ 744,000 related to the newly established employee stock ownership plan . other operating expenses increased by $ 816,000 , due to marketing outlays to generate organic growth and investments in new products and services . these increases in non-interest expenses were mitigated by a $ 288,000 , or 53.5 % , decrease in federal deposit insurance premium , $ 195,000 , or 42.0 % , decrease in insurance and surety bond premiums , direct loan expense decreased $ 121,000 , due primarily to the improvement in the quality of our loan portfolio , and a $ 147,000 , or 9.1 % , decrease in data processing expenses due to a contract renewal providing cost efficiencies along with increased in-service applications . we have made significant investments over the last several years in adding senior management , experienced senior level individuals , and upgrading technology and facilities . this has
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ø the announcement of a master services agreement with platinum communications for the provisioning and delivery of bandwidth services to mobile and static oil and gas customers throughout the canadian province of alberta . ø the announcement of a master services agreement with partnership broadband to deliver digital oilfield solutions in north central texas . the network has some 160 towers and covers more than 15,000 square mile in the oil and gas rich barnett shale . ø the announcement of a master services agreement with the computer works to deliver digital oilfield solutions in north central arkansas . the network has some 42 towers and covers more than 3,000 square miles in the oil and gas rich fayetteville shale . ø the announcement of a master services agreement with southwestern wireless to deliver digital oilfield solutions in west texas and new mexico . the network added more than 37,000 square miles in these oil and gas rich territories . ø the company registered and obtained fcc approval for nearly 90 wimax 3.665 ghz transmission locations in strategic oil and natural gas development and production areas in the united states . ø the completion of a branchnet encrypted enterprise-class wireless banking network for west texas state bank located in the oil and gas rich permian basin including the midland and odessa , texas markets . the network is comprised of fcc-licensed frequencies creating a 165mbps backbone , delivering speeds in excess of 40mbps to each branch bank location . additionally , the company entered into a winet agreement with the bank and has begun reselling digital oilfield solutions off of this network to its oil and gas customers in this region . ø the announcement of energy sector expert , douglas gibson joining erf wireless as energy industry consultant . in the mid-1990 's gibson founded petrosol , generating over $ 110 million in total sales through 2002. petrosol , in 2000 , became a partner of sensa , which developed fiber optic sensing technologies for use within the oil and gas industry . schlumberger later acquired sensa in 2001. ø the announcement of the immediate start of design , development and construction of a new wireless network in the oil and gas rich haynesville shale in northwestern louisiana and northeastern texas ; covering hundreds of natural gas drilling rigs in one of the fastest growing gas shale developments in north america . the company 's revenue is generated primarily from the sale of wireless communications products and services , including providing reliable enterprise-class wireless broadband services . the company recognizes revenue when persuasive evidence of an arrangement exists , delivery has occurred , the sales price is fixed or determinable , and collectibility is probable . the company records revenues from its fixed-price , long-term contracts using the percentage-of-completion method . revenues are recorded based on construction costs incurred to date as a percentage of estimated total cost at completion . the percentage-of-completion , determined by using total costs incurred to date as a percentage of estimated total costs at completion , reflects the actual physical completion of the project . this method of revenue recognition is used because management considers total cost to be the best available measure of progress on the contracts . 22 the company recognizes product sales generally at the time the product is shipped . concurrent with the recognition of revenue , the company provides for the estimated cost of product warranties and reduces revenue for estimated product returns . sales incentives are generally classified as a reduction of revenue and are recognized at the later of when revenue is recognized or when the incentive is offered . shipping and handling costs are included in cost of goods sold . service revenue is principally derived from wireless broadband services , including internet , voice , and data and monitoring service . subscriber fees are recorded as revenues in the period during which the service is provided . story_separator_special_tag text-indent : 0pt ; line-height : 1.25 '' > replace_table_token_6_th for the year ended december 31 , 2009 , operating expenses increased by 3 % to $ 9,921,000 , as compared to $ 9,653,000 for the year ended december 31 , 2008. the increases that occurred , as evidenced by the immediately preceding table , are discussed below : · a $ 135,000 increase in employment expense . the increase is primarily attributable to growth of the company through recent acquisitions ; · a $ 36,000 decrease in professional services . the decrease is primarily related to accounting expenses ; 24 · a $ 39,000 increase in rent and maintenance . the increase is primarily attributable to growth of the company through recent acquisitions ; · a $ 488,000 increase in depreciation and amortization ; the increase is primarily attributable to growth of the company through recent acquisitions ; and · a $ 333,000 decrease in other general and administrative expense . other ( income ) expense , net for the year ended december 31 , 2009 , the decrease in other expense is primarily attributable to interest expense , net on debt obligations totaling $ 1,293,000 and offset with a net derivative income of $ 50,000 as compared to interest expense , net of $ 887,000 , loss on extinguishment of related party debt of $ 3,580,000 and offset with derivative income of $ 306,000 for the year ended december 31 , 2008. the derivative expense represents the net unrealized ( non-cash ) charge during the year ended december 31 , 2009 and 2008 , in the fair value of our derivative instrument liabilities related to warrants and embedded derivatives in our debt instruments that have been bifurcated and accounted for separately . story_separator_special_tag net loss for the year ended december 31 , 2009 , our net loss was $ 8,872,000 compared to a loss of $ 11,742,000 for the year ended december 31 , 2008. the deceased in the loss for the year ended december 31 , 2009 , as compared to the year ended december 31 , 2008 is primarily attributable to prior year loss on extinguishment of related party debt of $ 3,580,000 and offset with an increase in employment and depreciation and amortization expense . cash flows the company 's operating activities increased net cash used by operating activities to $ 2,959,000 in the year ended december 31 , 2009 , compared to net cash used of $ 4,048,000 in the year ended december 31 , 2008. the increase in net cash used by operating activities was primarily attributable to an increase in the company 's net operating loss of $ 8,872,000 , net of $ 5,494,000 non-cash charges combined with derivative income $ 50,000 to equal net non-cash charge of $ 5,444,000 , combined together with $ 469,000 of cash provided by fluctuations in working capital requirements consisting of the combination of accounts receivable , inventory , prepaid expenses , accounts payable , accrued expenses , cost and profit in excess of billings , deferred liability lease and deferred revenue . the company 's investing activities used net cash of $ 1,306,000 in the year ended december 31 , 2009 , compared to use of net cash of $ 974,000 in the year ended december 31 , 2008. the increase in investing activities is primarily growing as a result wireless capabilities through asset acquisition and expansion of our infrastructure in texas , new mexico , oklahoma and louisiana . the company 's financing activities provided net cash of $ 4,145,000 in the year ended december 31 , 2009 , compared to $ 3,159,000 of cash provided in year ended december 31 , 2008. the cash provided in the year ended december 31 , 2009 , was primarily associated with the proceeds from equity financings , subordinated promissory financing , convertible debt financing and the line of credit , net . liquidity and capital resources general at december 31 , 2009 , the company 's current assets totaled $ 1,281,000 ( including cash and cash equivalents of $ 228,000 ) total current liabilities were $ 4,661,000 , resulting in negative working capital of $ 3,380,000. the company has funded operations to date primarily through a combination of utilizing cash on hand , borrowings and raising additional capital through the sale of its securities . the company 's operations for the year ended december 31 , 2009 , were as primarily funded by proceeds from the company 's line of credit totaling $ 3,618,000 , subordinated promissory financing of $ 1,390,000 , sale of restricted common stock , net to accredited investors of $ 334,000 and convertible debt financing of $ 150,000. current debt facility at december 31 , 2009 , the company had approximately $ 5,051,000 available on a $ 10.5 million unsecured revolving credit facility with angus capital partners , which matures in december 2011. the terms of the two-year unsecured revolving credit facility will allow us to draw upon the facility as financing requirements dictate and provides for quarterly interest payments at an annual 12 % rate . the loan may be prepaid without penalty or repaid at maturity . 25 issuance of common stock during the fiscal year ended december 31 , 2009 , we issued to various accredited investors and third parties ( i ) 1,918,000 shares of restricted common stock for net consideration of $ 334,000 , ( ii ) 6,955,000 shares for services rendered and debt conversions , and ( iii ) 28,796,000 shares upon conversion of series a preferred stock . we relied on section 4 ( 2 ) of the securities act in effecting these transactions . during the fiscal year ended december 31 , 2009 , we issued 6,023,000 shares of common stock to employees and business consultants , for aggregate consideration of $ 1,857,000 of services rendered , pursuant to a registration statement on form s-8 . use of working capital we believe our cash and available credit facilities afford us adequate liquidity for the balance of fiscal 2010. we anticipate that we will need additional capital in the future to continue to expand our business operations , which expenditures may include acquisitions and capital expenditures . we have historically financed our operations through private equity and debt financings . we do not have any commitments for equity funding at this time , and additional funding may not be available to us on favorable terms , if at all . as such there is no assurance that we can raise additional capital from external sources , the failure of which could cause us to curtail operations . contractual obligations the following table sets forth contractual obligations as of december 31 , 2009 : replace_table_token_7_th the company 's contractual obligations consist of long-term debt of $ 7,772,000 , derivative liabilities of $ 269,000 , unamortized debt discount of $ 117,000 , and interest expense of $ 958,000 as set forth in note 12 to the company 's financial statements , notes payable and long-term debt . the capital lease obligations include interest as set forth in note 12 in the future minimum lease payments schedule and certain obligations for operating leases requiring future minimal commitments under non-cancelable leases set forth in note 14 - commitments and contingencies . off-balance sheet arrangements as of december 31 , 2009 the company did not have any significant off-balance-sheet arrangements other than certain office and tower facility operating leases requiring minimal commitments under non-cancelable leases disclosed in the table above .
| the company incurred a net loss of $ 8,872,000 for the year ended december 31 , 2009. the company 's principal components of the net loss for the year ended december 31 , 2009 , included approximately $ 2,704,000 in depreciation and amortization expenses , $ 1,293,000 of interest expense , $ 50,000 of derivative income , $ 1,411,000 of other general and administrative expense , $ 4,870,000 in employment expenses and $ 1,832,000 in professional services . sales information set forth below is a table presenting summarized sales information for our business segments for the years ended december 31 , 2009 and 2008 : replace_table_token_3_th for the year ended december 31 , 2009 , net sales increased to $ 5,533,000 from $ 5,155,000 for the year ended december 31 , 2008. the overall increase of 7 % was primarily attributable to increase sales of wbs of $ 1,164,000 in recurring wireless broadband services growth through asset acquisitions and oil and gas revenue from deployment of our mobile broadband trailers ( mbts ) in the oil patch regions , offset with a decrease in wms of $ 583,000 due to wireless paging service and infrastructure construction revenue , and a decrease in sales of ens of $ 203,000 in banking network installation and services resulting in reduced network construction revenues in 2009 . 23 cost of goods sold the following tables set forth summarized cost of goods sold information for the years ended december 31 , 2009 and 2008 : replace_table_token_4_th replace_table_token_5_th for the year ended december 31 , 2009 , cost of goods sold increased by $ 133,000 , or 4 % , to $ 3,254,000 from $ 3,121,000 as compared to the year ended december 31 , 2008. the increase of $ 133,000 in cost of goods sold is primarily attributable to a decrease of cost of goods sold of $ 233,000 in wms due to reduced revenue in wireless paging service and infrastructure construction , a decrease of cost of goods sold of $ 335,000 in ens due to slowdown in banking installations and offset with an increase of
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during fiscal 2010 , new products and enhancements introduced included the nas-based dxi6500 family , disk backup appliances with advanced data deduplication technology targeted to meet the needs of midrange customers . the dxi6500 family consists of five preconfigured appliance models and has been designed to be simple for customers and end users to order , deploy , operate and manage while providing the advantages of data deduplication . we believe the dxi6500 family is an ideal offering for the independent channel and will provide us incremental opportunities . we continue to provide enterprise disk solutions in the growing target-based deduplication systems market . our current dxi results are dominated by the dxi7500 appliance in a vtl implementation , and we believe there are additional opportunities in this market . we plan to expand and further improve our product line of disk solutions for the enterprise market to deliver edge-to-core solutions for end user customers and increase our revenue . although deduplication disk systems are rapidly becoming the standard for backup and fast recovery of archive data , automated tape continues to hold a strong role in the data preservation hierarchy . we view our tape automation systems business as a mature segment of storage solutions and have worked to improve our branded sales productivity and decrease our manufacturing cost structure for these products . we continue to manage our tape business in a manner that recognizes the mature nature of tape technology . during fiscal 2010 , we released products and upgrades that we expect will deliver incremental revenue growth opportunities in the near term due to our strength in this market , including an encryption solution and the scalar ® i40 and scalar i80 tape automation libraries that were designed to provide small and medium businesses and distributed data centers with more storage capacity , room for continued growth and simplified system management . in addition , we were the first company to introduce lto-5 technology-based solutions . lto-5 tape drives nearly double capacity and increase transfer rates by up to 15 percent over lto-4 technology in addition to enabling media partitioning functionality . we believe these innovations , along with native encryption , enhance tape 's role in providing long-term data retention , archiving and disaster recovery as an integral component of a broader tiered storage strategy . in april 2010 , we announced a new enterprise tape library , the scalar i6000 , designed to meet the challenges of high data growth while facilitating tape consolidation in tiered storage environments . the scalar i6000 provides a significant increase in capacity , high availability and enhanced security over the previous generation enterprise library and incorporates the company 's next-generation ilayer software . this combination of enhanced capabilities and intelligence provides enterprise customers with a long-term archive and data retention solution optimized for the evolving role of tape in data protection . also in april 2010 , we released version 4.0 of the quantum vision software , which supports a tiered storage strategy by enhancing centralized monitoring and reporting of scalar tape libraries and dxi-series disk backup and deduplication products . 29 in may 2010 , we released the dxi4500 family of products comprised of two turnkey disk backup appliances designed to work with the leading backup software packages to provide non-disruptive deduplication for small and medium-size businesses and remote offices to simply and cost-effectively address their backup needs . both dxi4500 models are bundled with dxi software to support backup , including in vmware environments , deduplication and replication . in addition , the dxi4500 products are optimized for sales through channel partners . we anticipate these recently introduced product offerings will expand our market opportunities . we continue to work with our channel partners to take advantage of opportunities to reach end customers that have historically chosen competitor products , but due to consolidation in the market and resulting actions by competitors , we believe are more likely to select our products and solutions . we have been focused on transforming the company for several years ; however , we view fiscal 2010 as the year where most aspects of this transformation were completed . we believe the transitions we worked through in fiscal 2010 , including launching a number of new products and improving our engagement with channel partners , position us for stronger performance through revenue growth . our product portfolio provides us with a competitive advantage and establishes the foundation for building revenue momentum . capitalizing on this opportunity by growing revenue and continuing to improve our competitive position is our priority in fiscal 2011. specifically , for fiscal 2011 our goals are : to gain share in the open systems tape automation market ; to increase revenue from disk backup systems and software solutions ; and to deliver new technology in order to extend our ability to grow . our intent is to capitalize on the actions we have taken during fiscal 2010 and on the improved external environment to build revenue momentum in fiscal 2011. in order to achieve our goals , we are focused on three primary objectives . these objectives are to continue to extend and improve our product portfolio , to expand our position with the var channel and to further invest in our technology platform . we believe we are well positioned with our product portfolio from a competitive perspective . between new product releases in the fourth quarter of fiscal 2010 and in the first quarter of fiscal 2011 , we have expanded our offerings for end user customers ranging from small business to large enterprise corporations . we believe this and future expansion of our product portfolio will enable us to increase sales of both our disk backup systems and software solutions and tape automation systems . our edge-to-core disk and tape offerings provide strategic solutions for independent vars . we have seen increased engagement with this channel due to the combination of value from our product offerings and competitive dynamics in the market . story_separator_special_tag we believe continuing to expand our engagement with vars will be key toward improving our go-to-market leverage and growing our business , especially for sales of branded disk systems to midrange and small and medium-sized business end users . we are investing in our technology platform for a number of market areas expected to have significant growth in order to extend our ability to grow . these include deduplication and replication technology as well as extending technology in our stornext software to provide solutions into a broader market as companies struggle to manage the vast growth in unstructured data . we believe we are in the early evolution of deduplication and replication technology . in addition , cloud storage solutions are another area where we intend to invest resources to increase our ability to grow in the future . the relative strength in the deduplication market , in addition to the fact that the majority of storage system end users have not implemented deduplication in their environments , provides us with opportunities for revenue growth . we also see growing strength in other market areas which reinforce our opportunities for revenue growth , especially for stornext solutions , including tiered storage , rich media and consolidation . although the role of tape continues to evolve , 85 % of customers still use tape as part of a disk-to-tape strategy or on a standalone basis . 1 we believe the market environment and our product offerings provide the path to achieve our revenue growth goals . we expect momentum to grow as the year progresses . we recognize there are numerous risks to the successful execution of our business plans , including changes in the economic environment . for a discussion of some of the risks and uncertainties that impact our business , see “ risk factors ” in item 1a . 1 february 2010 , gartner , inc. “ poll shows disk-based backup on the rise , with a few surprises. ” http : //www.gartner.com 30 story_separator_special_tag prior years . over half of the decrease was attributable to reduced revenue from oem customers in fiscal 2010. devices , including tape drives and removable hard drives , and media product revenues decreased $ 42.4 million to $ 108.6 million largely due to decreased sales of midrange drives sold to oems and to a lesser extent decreased sales of entry-level drives sold to oems as our older tape drives reach their end of life . we continued to place emphasis on sales of non-royalty media that bring higher margins and to not pursue volume sales at lower margins , resulting in lower overall revenue from non-royalty media products . fiscal 2009 compared to fiscal 2008 our product revenue decreased in fiscal 2009 compared to fiscal 2008. revenue from oem sales decreased $ 82.1 million , while revenue from branded products decreased $ 76.2 million . the product revenue decrease was most pronounced in our tape automation systems and to a lesser extent from devices and media products . these decreases were partially offset by an increase in our disk backup systems and software solutions revenue . revenues from disk backup systems and software solutions increased $ 38.3 million to $ 87.6 million in fiscal 2009 compared to fiscal 2008 primarily due to the addition of oem dxi software revenue . increased sales of our stornext software , especially in branded channels , and the addition of dxi7500 revenue also contributed to increased disk backup and software solutions revenue in fiscal 2009. tape automation system sales decreased $ 107.9 million to $ 317.9 million in fiscal 2009 compared to fiscal 2008. this decrease was due to both a decline in demand resulting from the global economic recession as well as our decision to exit portions of the entry-level automation market in the second half of the fiscal year . over half of the decrease was attributable to reduced revenue from oem tape automation system sales in fiscal 2009. devices , including tape drives and removable hard drives , and media product revenues decreased $ 88.8 million to $ 151.0 million largely due to decreased sales of entry-level drives sold to oems and to a lesser extent decreased sales of midrange drives sold to oems as our older tape drives reach their end of life . we continued to place emphasis on sales of non-royalty media that bring higher margins and to not pursue volume sales at lower margins , resulting in lower overall revenue from non-royalty media products . service revenue service revenue includes revenue from sales of hardware service contracts , product repair , installation and professional services . hardware service contracts are typically purchased by our customers to extend the warranty or to provide faster service response time , or both . service revenue decreased $ 8.2 million to $ 156.5 million in fiscal 2010 compared to fiscal 2009 primarily due to reduced service revenues from our oem customers . although service revenue related to our branded products increased slightly in fiscal 2010 , this increase was tempered in the first half of fiscal 2010 due to several changes in customer trends during this period . these included customers renewing their service contracts for shorter periods , choosing lower cost and slower response time service levels and waiting longer periods after a contract lapsed to renew . it appears these changed trends for the first half of fiscal 2010 were in response to the recession and reduced it budgets . service revenue increased $ 3.7 million to $ 164.7 million in fiscal 2009 compared to fiscal 2008 primarily due to increased service contract revenues from branded customers due to an increase in our installed base . 33 royalty revenue royalty revenue declined $ 19.0 million to $ 68.8 million in fiscal 2010 primarily due to $ 11.0 million in royalty revenue recorded in connection with a settlement agreement in the prior year that was not repeated .
| in addition , we had decreased oem dxi software revenue due to the changed nature of our relationship with emc , from partner to competitor in deduplication , as a result of its july 2009 acquisition of data domain , a competitor of ours . our product revenue from oem customers decreased 34 % while revenue from branded products decreased 8 % from fiscal 2009. service revenue decreased primarily due to reduced revenues from our oem customers . our focus on growing the branded business during the fiscal year is reflected in the greater proportion of non-royalty revenue from our branded business , at 74 % in fiscal 2010 compared to 67 % in fiscal 2009 and 62 % in fiscal 2008. royalty revenue decreased primarily due to $ 11.0 million from a settlement agreement in the prior year that was not repeated . our gross margin percentage increased 350 basis points in fiscal 2010 to 41.1 % due to the continued shift in sales mix toward higher margin products and services in addition to efficiencies in our manufacturing structure and service delivery model . gross margin was favorably impacted by cost-cutting measures and because product sales through our branded channels comprised a larger percentage of non-royalty revenue in fiscal 2010 than in fiscal 2009. although sales of branded products typically generate higher gross margins than sales to our oem customers , oem dxi software revenue provides one of our highest product margins . the gross margin percentage increase was tempered by decreases in oem dxi software revenue and in royalty revenue . operating expenses decreased $ 383.5 million due to the $ 339.0 million goodwill impairment in the prior year that was not repeated as well as reductions in all other operating expenses . notably , we reduced our sales and marketing expenses by $ 26.6 million , or 19 % , from our efforts to align our resources with market opportunities , and general and administrative expenses decreased $ 15.3 million , or 20 % , in fiscal 2010 compared to the prior
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in addition , the 2010 interest expense includes a $ 7.5 million premium paid to extinguish approximately $ 200 million aggregate principal amount of senior notes . other expense ( income ) other expense for 2011 was $ 14.1 million as compared to other income in the prior year of $ 11.6 million . the unfavorable impact of $ 25.7 million was primarily a result of unfavorable changes in net foreign currency gains/losses of approximately $ 13 million , and losses associated with the minority interest of approximately $ 5 million . in addition , other income for 2010 included an approximately $ 8 million benefit from customs refunds partially offset by acquisitions purchase accounting adjustments of $ 1.7 million . the unrealized foreign currency losses are attributable to certain of the company 's consolidated foreign subsidiaries that measure financial conditions and results using the u.s. dollar rather than the local currency . the unrealized foreign currency losses were primarily a result of volatility in the mexican peso and the canadian dollar that occurred late in the third quarter of 2011. the customs refunds from the u.s. government resulted from settling customs disputes dating back to 1986. the company is pursuing additional recoveries for years subsequent to 1986 but there can be no assurances such recoveries will occur . additional future recoveries , if any , will be recorded as realized . income tax expense for 2011 , the company recorded an income tax expense of $ 21.6 million on earnings before income taxes of $ 199.9 million for an effective tax rate of 10.8 % , as compared to an income tax expense of $ 2.7 million on earnings before income taxes of $ 192.6 million for an effective tax rate of 1.4 % for 2010. the difference in the effective tax rate for the comparative period is primarily due to the benefit from the settlement of certain tax contingencies of $ 7.2 million and $ 30.0 million , respectively , in 2011 and 2010. in addition , both years were effected by the geographical dispersion of earnings and losses for the current period . year ended december 31 , 2010 , as compared with year ended december 31 , 2009 net sales net sales for 2010 were $ 5,319.1 million , reflecting a decrease of $ 25.0 million , or 0.5 % , from the $ 5,344.0 million reported for 2009. included in net sales for 2009 is a carpet sales allowance of $ 121.2 million . for 2010 , net sales decreased primarily due to lower sales volume of approximately $ 81 million , primarily related to continued weakness in the residential , commercial and new construction markets , unfavorable foreign exchange impact of approximately $ 37 million and the net effect of price and product mix of approximately $ 28 million , driven by customers trading down to lower priced products and distribution channel mix . mohawk segment net sales decreased $ 11.9 million , or 0.4 % , to $ 2,844.9 million in 2010 compared to $ 2,856.7 million in 2009. included in net sales for 2009 is a carpet sales allowance of $ 121.2 million . for 2010 , net sales decreased primarily due to lower sales volume of approximately $ 183 million , primarily related to continued weakness in the soft surface product category , partially offset by approximately $ 50 million due to the net effect of price and product mix as a result of price increases to offset higher raw material costs . dal-tile segment net sales decreased $ 59.3 million , or 4.2 % , to $ 1,367.4 million in 2010 compared to $ 1,426.8 million in 2009. the decrease in net sales was primarily driven by the net effect of price and product mix of approximately $ 51 million , primarily driven by customer mix , and lower sales volume of approximately $ 17 million , primarily related to continued weakness in the commercial , residential and new construction markets , partially offset by the impact of favorable foreign exchange rates of approximately $ 9 million . unilin segment net sales increased $ 60.0 million , or 5.3 % , to $ 1,188.3 million in 2010 compared to $ 1,128.3 million in 2009. the increase in net sales was primarily driven by higher sales volume of approximately 25 index to financial statements $ 132 million as a result of growth in developing markets , partially offset by the impact of unfavorable foreign exchange rates of approximately $ 46 million and the net effect of price and product mix of approximately $ 27 million , as customers traded down to lower priced products . quarterly net sales and the percentage changes in net sales by quarter for 2010 versus 2009 were as follows ( dollars in millions ) : replace_table_token_6_th gross profit gross profit for 2010 was $ 1,402.6 million ( 26.4 % of net sales ) and represented an increase of $ 170.4 million , or 13.8 % , compared to gross profit of $ 1,232.2 million ( 23.1 % of net sales ) for 2009. gross profit for 2009 includes a carpet sales allowance of $ 121.2 million and inventory write-off of $ 12.4 million . for 2010 , gross profit was favorably impacted by approximately $ 50 million as a result of various restructuring actions and cost savings initiatives implemented by the company , including facility consolidations , workforce reductions and productivity improvements , lower restructuring charges of approximately $ 32 million and the net effect of price and product mix of approximately $ 27 million . these increases were partially offset by higher manufacturing costs , primarily raw materials , of approximately $ 58 million , lower sales volume of approximately $ 13 million and the impact of unfavorable foreign exchange rates of approximately $ 11 million . story_separator_special_tag selling , general and administrative expenses selling , general and administrative expenses for 2010 were $ 1,088.4 million ( 20.5 % of net sales ) , reflecting a decrease of $ 100.1 million , or 8.4 % , compared to $ 1,188.5 million ( 22.2 % of net sales ) for 2009. the decrease in selling , general and administrative expenses is primarily driven by various restructuring actions and cost savings initiatives implemented by the company , including distribution facility consolidations , workforce reductions and productivity improvements , to align such expenses with the company 's sales volumes . operating income operating income for 2010 was $ 314.2 million ( 5.9 % of net sales ) reflecting a $ 270.4 million increase compared to an operating income of $ 43.7 million ( 0.8 % of net sales ) in 2009. operating income for 2009 includes a carpet sales allowance and inventory write-off of $ 133.5 million . for 2010 , operating income was favorably impacted by approximately $ 128 million as a result of lower selling , general and administrative expenses and various restructuring actions and cost savings initiatives implemented by the company , lower restructuring charges of approximately $ 49 million and the net effect of price and product mix of approximately $ 27 million , partially offset by higher manufacturing costs , primarily raw materials , of approximately $ 58 million and lower sales volume of approximately $ 13 million . mohawk segment operating income was $ 122.9 million ( 4.3 % of segment net sales ) in 2010 reflecting an increase of $ 248.9 million compared to operating loss of $ 126.0 million in 2009. operating loss for 2009 includes a carpet sales allowance and inventory write-off of $ 133.5 million . for 2010 , operating income was favorably impacted by approximately $ 101 million as a result of lower selling , general and administrative expenses and various restructuring actions and cost savings initiatives implemented by the company , the net 26 index to financial statements effect of price and product mix of approximately $ 66 million and lower restructuring charges of approximately $ 19 million , partially offset by higher manufacturing costs , primarily raw materials , of approximately $ 25 million and lower sales volume of approximately $ 45 million . dal-tile segment operating income was $ 97.3 million ( 7.1 % of segment net sales ) in 2010 reflecting an increase of $ 13.2 million , or 15.7 % , compared to operating income of $ 84.2 million ( 5.9 % of segment net sales ) for 2009. the increase was primarily driven by the favorable impact of approximately $ 20 million as a result of lower selling , general and administrative expenses and various restructuring actions and cost savings initiatives implemented by the company , lower restructuring charges of approximately $ 16 million and lower manufacturing expenses of approximately $ 4 million , partially offset by the net effect of price and product mix of approximately $ 28 million . unilin segment operating income was $ 114.3 million ( 9.6 % of segment net sales ) in 2010 reflecting an increase of $ 8.3 million , or 7.9 % , compared to operating income of $ 106.0 million ( 9.4 % of segment net sales ) for 2009. the increase was primarily driven by higher sales volume of approximately $ 42 million , lower restructuring charges of approximately $ 14 million and lower selling , general and administrative expenses of approximately $ 5 million , offset by higher manufacturing costs , primarily raw materials , of approximately $ 36 million , the net effect of price and product mix of approximately $ 10 million and unfavorable foreign exchange rates of approximately $ 6 million . interest expense interest expense for 2010 was $ 133.2 million compared to $ 127.0 million in 2009. the increase in interest expense resulted from the $ 7.5 million premium and fees related to the extinguishment of approximately $ 200 million aggregate principal amount of the company 's 5.75 % senior notes due january 15 , 2011 , higher costs on the company 's revolving credit facility and higher interest rates on the company 's notes , partially offset by the impact of lower debt levels . other expense ( income ) the company has received partial refunds from the u.s. government in reference to settling customs disputes dating back to 1986. accordingly , the company realized a gain of $ 7.7 million in other expense ( income ) for 2010. the company is pursuing additional recoveries for years subsequent to 1986 but there can be no assurances such recoveries will occur . additional future recoveries , if any , will be recorded as realized . income tax expense ( benefit ) for 2010 , the company recorded an income tax expense of $ 2.7 million on earnings before income taxes of $ 192.6 million compared to a benefit of $ 76.7 million on loss before income taxes of $ 77.7 million for 2009. the 2010 effective tax rate of 1.4 % is primarily due to the favorable geographic dispersion of profits and losses resulting in a tax benefit of approximately $ 21 million , a tax benefit of approximately $ 30 million related to the settlement of certain income tax contingencies in europe , and a decrease in valuation allowance of approximately $ 17 million related to european deferred tax assets . the 2009 effective tax rate of 98.7 % was the result of the geographic dispersion of profits and losses resulting in a tax benefit of approximately $ 13 million , a permanent tax benefit in europe on notional interest of approximately $ 56 million , offset by an increase to the company 's valuation allowance and tax contingencies of approximately $ 19 million . liquidity and capital resources the company 's primary capital requirements are for working capital , capital expenditures and acquisitions . the company 's capital needs are met primarily through a combination of internally generated funds , bank credit lines and credit terms from suppliers .
| quarterly net sales and the percentage changes in net sales by quarter for 2011 versus 2010 were as follows ( dollars in millions ) : replace_table_token_5_th gross profit gross profit for 2011 was $ 1,416.9 million ( 25.1 % of net sales ) compared to gross profit of $ 1,402.6 million ( 26.4 % of net sales ) for 2010. gross profit dollars were impacted by favorable price and product mix of approximately $ 124 million , lower manufacturing costs of approximately $ 69 million , higher sales volume of approximately $ 27 million and favorable foreign exchange rates of approximately $ 16 million , substantially offset by higher inflationary costs of approximately $ 206 million , primarily related to raw materials , and approximately $ 7 million of higher restructuring charges . the lower manufacturing costs are primarily a result of cost savings initiatives implemented and various restructuring activities taken by the company , including facility consolidations , workforce reductions and productivity improvements resulting from capital investments . in addition , the gross profit for 2010 included insurance settlement proceeds of approximately $ 9 million related to a flood in the company 's mexican manufacturing facility . selling , general and administrative expenses selling , general and administrative expenses for 2011 were $ 1,101.3 million ( 19.5 % of net sales ) compared to $ 1,088.4 million ( 20.5 % of net sales ) for 2010. as a percentage of sales , selling , general and administrative expenses for 2011 decreased 1.0 % compared to the prior year as a result of the company 's ability to leverage its various cost savings initiatives . the dollar increase in selling , general and administrative expenses is primarily a result of unfavorable foreign exchange rates of approximately $ 9 million , a lease charge ( discussed below ) of approximately $ 6 million and higher restructuring charges of approximately $ 5 million , partially offset by the various cost savings initiatives implemented by the company including facility consolidations and productivity improvements . during the fourth quarter of 2011 , the company corrected an immaterial error in its consolidated financial statements . the error related to accounting for operating leases . the correction of $ 6.0 million resulted in an
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in 2016 , we integrated liveengage with one of the leading mobile search ad extensions , enabling consumers to initiate sms messaging conversations with brands directly out of their mobile 38 search results . in 2017 , liveperson launched the liveengage for bots program and we have subsequently integrated liveengage with multiple artificial intelligence/bots vendors , including ibm watson . our offering is vendor agnostic , empowering our customers to manage a mix of different bots , human agents and technologies from one control panel , thereby optimizing contact center efficiency . livepersons ' proprietary and third-party ai/bots enable brands to partially or fully automate communications with their customers . in addition , we have opened up access to our platform and our products with application programming interfaces ( apis ) that allow third parties to develop on top of our platform . customers and partners can utilize these apis to build our capabilities into their own applications and to enhance our applications with their services . in 2017 , we allocated additional resources to supporting partners and we expect this investment to increase as our partner network expands . maintaining market leadership in technology and security expertise . as described above , we are devoting significant resources to creating new products and enabling technologies designed to accelerate innovation . in order to better support our customers and to attract the best talent , liveperson is globalizing research and development . we now have tech centers in israel ; mannheim , germany ; new york ; atlanta and mountain view , california . we evaluate emerging technologies and industry standards and continually update our technology in order to retain our leadership position in each market we serve . we monitor legal and technological developments in the area of information security and confidentiality to ensure our policies and procedures meet or exceed the demands of the world 's largest and most demanding corporations . we believe that these efforts will allow us to effectively anticipate changing customer and consumer requirements in our rapidly evolving industry . international presence . liveperson is focused on expanding its international revenue contribution , which increased to 37 % of total revenue in 2017 , from 34 % in 2016 and 33 % in 2015. liveperson generated positive results from previous investments in direct sales and services personnel in the united kingdom and western europe . we also continued to focus on expanding our presence in the asia pacific region , leveraging our relationships with partners . continuing to build brand recognition . as a pioneer of brand-to-consumer digital messaging , liveperson enjoys strong brand recognition and credibility . we continue to develop relationships with the media , industry analysts and relevant business associations to enhance awareness of our leadership within the care , sales , tech and marketing industries . with a vision of becoming the leader in messaging , we 've hosted several private executive events for our customers and prospects , highlighting our expertise and the breadth of our services . these private executive events have led us to close several high-profile deals and we are continuing them throughout 2018. our focus on connecting large enterprise businesses and their millions of consumers securely and at scale is a primary differentiator for liveperson and a key component of our marketing strategy . we strategically target decision makers and influencers within several key vertical markets , leveraging customer successes to generate increased awareness and demand for brand-to-consumer messaging . in addition , our brand name may also be visible to both business users and consumers on a brand 's website , within the dialog messaging window . we also engage in digital marketing campaigns that promote our brand on web searches and third-party sites . increasing the value of our service to our customers . leveraging liveengage to shift communication between consumers and brands from 1-800 number calls to ai and human-powered messaging is the most important initiative in liveperson 's history . we believe that adoption of liveengage will align brands with consumer communication preferences , improve the customer experience and reduce contact center costs . our platform strategy makes available the full suite of liveperson 's capabilities through a single solution . in addition , the open architecture of liveengage will enable liveperson to rapidly add new capabilities either directly or through partners . for example , we see opportunities for additional efficiencies in the contact center through the integration of artificial intelligence and bots . because we directly manage the server infrastructure , we can make new features available to our customers immediately upon release , without customer or end-user installation of software or hardware . our strategy is to continue to enhance the liveengage messaging platform and to leverage the substantial amount of mobile and online consumer data we collect , with the aim of increasing agent efficiency , decreasing customer care costs , improving the customer experience and increasing customer lifetime value . evaluating strategic alliances and acquisitions when appropriate . we have successfully integrated several acquisitions over the past decade . while we have in the past , and may from time to time in the future , engage in discussions regarding acquisitions or strategic transactions or to acquire other companies that can accelerate our growth or broaden our product offerings , we currently have no binding commitments with respect to any future acquisitions or strategic transactions . key metrics financial overview of the three and twelve months ended december 31 , 2017 compared to the comparable periods in 2016 are as follows : revenue increased 2 % and decreased 2 % to $ 57.4 million and $ 218.9 million in the three and twelve months ended december 31 , 2017 , respectively , from $ 56.1 million and $ 222.8 million in the comparable periods in 2016 . story_separator_special_tag 39 revenue from our business segment increased 2 % and decreased 2 % to $ 52.9 million and $ 201.4 million in the three and twelve months ended december 31 , 2017 , respectively , from $ 51.9 million and $ 206.5 million in the comparable periods in 2016 . gross profit margin increased to 74 % and 73 % in the three and twelve months ended december 31 , 2017 from 73 % and 72 % in the comparable periods in 2016 . cost and expenses decreased 2 % to $ 63.3 million and $ 236.7 million in the three and twelve months ended december 31 , 2017 , respectively , from $ 64.4 million and $ 242.2 million in the comparable periods in 2016 . net loss decreased to $ 3.7 million and $ 18.2 million in the three and twelve months ended december 31 , 2017 , respectively , from net loss of $ 9.6 million and $ 25.9 million for the three and twelve months ended december 31 , 2016 , respectively . trailing-twelve-month average revenue per enterprise and mid-market customer was greater than $ 220,000 in 2017 , as compared to approximately $ 200,000 in 2016 . revenue retention rate for enterprise and mid-market customers on liveengage was greater than 100 % for the twelve-months ended december 31 , 2017 and 2016 . revenue the majority of our revenue is generated from monthly service revenues and related professional services from the sale of the liveperson services . we charge a monthly fee , which varies by service and customer usage . the majority of our larger customers also pay a professional services fee related to implementation and ongoing optimization services . a large proportion of our revenue from new customers comes from large corporations . these companies typically have more significant implementation requirements and more stringent data security standards . such customers also have more sophisticated data analysis and performance reporting requirements , and are likely to engage our professional services organization to provide such analysis and reporting on a recurring basis . revenue from our business segment accounted for 92 % , 93 % , and 94 % of total revenue for the year ended december 31 , 2017 , 2016 , and 2015 , respectively . revenue attributable to our monthly hosted business services accounted for 89 % of total business revenue for the year ended december 31 , 2017 and 2016 . revenue attributable to our monthly hosted business services accounted for 90 % of total business revenue for the years ended december 31 , 2015 . our service agreements typically have twelve month terms and , in some cases , are terminable or may terminate upon 30 to 90 days ' notice without penalty . given the time required to schedule training for our customers ' operators and our customers ' resource constraints , we have historically experienced a lag between signing a customer contract and recognizing revenue from that customer . although this lag has typically ranged from 30 to 90 days , it may take more time between contract signing and recognizing revenue in certain situations . revenue from our consumer segment is generated from online transactions between experts and users is recognized net of expert fees and accounted for approximately 8 % , 7 % , and 6 % of total revenue for the years ended december 31 , 2017 , 2016 , and 2015 , respectively . we also have entered into contractual arrangements that complement our direct sales force and online sales efforts . these are primarily with call center service companies , pursuant to which liveperson is paid a commission based on revenue generated by these service companies from our referrals . to date , revenue from such commissions has not been material . costs and expenses our cost of revenue consists of : compensation costs relating to employees who provide customer support and implementation services to our customers ; outside labor provider costs ; compensation costs relating to our network support staff ; depreciation of certain hardware and software ; allocated occupancy costs and related overhead ; the cost of supporting our infrastructure , including expenses related to server leases , infrastructure support costs and internet connectivity ; the credit card fees and related payment processing costs associated with the consumer and smb services ; and amortization of certain intangibles . our sales and marketing expenses consist of compensation and related expenses for sales personnel and marketing personnel , online marketing , allocated occupancy costs and related overhead , advertising , sales commissions , public relations , promotional materials , travel expenses and trade show exhibit expenses . 40 our general and administrative expenses consist primarily of compensation and related expenses for executive , accounting , legal , information technology and human resources personnel , allocated occupancy costs and related overhead , litigation , professional fees , provision for doubtful accounts and other general corporate expenses . our product development expenses consist primarily of compensation and related expenses for product development personnel , allocated occupancy costs and related overhead , outsourced labor and expenses for testing new versions of our software . product development expenses are charged to operations as incurred . during 2017 , we decreased our allowance for doubtful accounts from $ 1.7 million to approximately $ 1.3 million , principally due to an increase in write-offs compared to 2016. during 2016 , we increased our allowance for doubtful accounts by approximately $ 0.5 million to approximately $ 1.7 million , principally due to analysis of the accounts receivable aging . a large proportion of receivables are due from larger corporate customers that typically have longer payment cycles . we base our allowance for doubtful accounts on specifically identified credit risks of customers , historical trends and other information that we believe to be reasonable . we adjust our allowance for doubtful accounts when accounts previously reserved have been collected .
| this is partially offset by increases in revenue from new customers of approximately $ 10.0 million and revenue from professional services of approximately $ 0.5 million . the overall decrease in business revenue is primarily attributable to our focus in 2016 on migration of current customers from our old platform to our new liveengage platform rather than sales to new customers or expansion of our services to existing customers , which has a carry-over effect in 2017. as of january 1 , 2017 , our focus shifted back to selling and expanding our base of messaging customers . in addition , the majority of customers had been notified for end of life on the legacy offering in 2017 , and not every legacy customer has elected to move to liveengage . we continue to see a decrease in existing customer cancellations quarter over quarter . during the fourth quarter 2017 , we returned to year over year revenue growth . consumer revenue increased by 7 % to $ 17.5 million for the year ended december 31 , 2017 , from the year ended december 31 , 2016 . this increase is primarily attributable to an increase in price per minute along with an increase in gross fees . consumer revenue increased by 7 % to $ 16.3 million for the year ended december 31 , 2016 , from the year ended december 31 , 2015 . this increase is primarily attributable to an increase in chat minutes , along with an increase in gross fees . cost of revenue - business cost of revenue consists of compensation costs relating to employees who provide customer service to our customers , compensation costs relating to our network support staff , the cost of supporting our server and network infrastructure , and allocated occupancy costs and related overhead . year ended december 31 , year ended december 31 , 2017 2016 % change 2016 2015 % change ( $ in thousands ) ( $ in thousands ) cost of revenue - business $ 54,600 $ 60,352 ( 10 ) % $ 60,352 $
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acquisition of acurity and nexera assets on february 28 , 2020 , we , through two newly formed consolidated subsidiaries , prince a purchaser , llc ( `` pap '' ) and prince n purchaser , llc ( `` pnp '' ) , acquired substantially all of the assets and certain liabilities of acurity , inc. and nexera , inc. , both indirect wholly-owned subsidiaries of greater new york hospital association ( `` gnyha '' ) , for an aggregate amount of $ 291.5 million , of which $ 166.1 million was paid at closing with borrowings under our credit facility . pursuant to the terms of the asset purchase agreement ( as amended , the `` purchase agreement '' ) , an additional $ 120.0 million will be paid to the sellers in four equal annual installments of $ 30.0 million on or about june 30 , 2021 , 2022 , 2023 and 2024. an additional $ 5.4 million is expected to be paid during our first fiscal quarter of 2021. in addition to the aggregate amount of $ 291.5 million , the purchase agreement provides a graduated earn-out opportunity to acurity , inc. of up to $ 30.0 million based upon our achievement of a range of member renewals on terms to be agreed to by us and gnyha based on prevailing market conditions in december 2023. after the closing of the transaction , we changed the names of pap and pnp to acurity , llc ( `` acurity '' ) and nexera , llc ( `` nexera '' ) , respectively . acurity is a regional group purchasing organization and has been a customer and strategic partner of ours for more than 24 years . nexera is a hospital financial improvement consulting firm which partners with healthcare organizations to improve hospital and health system performance , with a significant focus on supply chain enhancement and transformation . we report the operations of acurity and nexera as part of the supply chain services segment . see note 3 - business acquisitions to the accompanying audited consolidated financial statements for further information . acquisition of medpricer on october 28 , 2019 , we , through its consolidated subsidiary , premier supply chain improvement , inc. ( `` psci '' ) , acquired all of the outstanding capital stock in medpricer.com , inc. ( `` medpricer '' ) for an adjusted purchase price of $ 38.5 million , giving effect to certain purchase price adjustments provided for in the purchase agreement . the transaction was funded with borrowings under the credit facility . medpricer is a saas-based provider of technology solutions that enable hospitals and other organizations to analyze , benchmark and source purchased services contracts independent of any existing gpo affiliation . recently , medpricer changed its name to conductiv , inc. ( `` conductiv '' ) and is reported as part of the supply chain services segment . see note 3 - business acquisitions to the accompanying audited consolidated financial statements for further information . acquisition of stanson on november 9 , 2018 , we acquired 100 % of the outstanding capital stock in stanson health , inc. ( `` stanson '' ) for an adjusted purchase price of $ 55.4 million , giving effect to certain purchase price adjustments provided for in the purchase agreement . stanson is a saas-based provider of clinical decision support tools that are integrated directly into the electronic health record workflow , to help provide real-time , patient-specific best practices at the point of care . stanson is reported as part of the performance services segment . see note 3 - business acquisitions to the accompanying audited consolidated financial statements for further information . divestiture of specialty pharmacy business - discontinued operations on june 7 , 2019 , we completed the sale of prescription files and records and certain other assets used in our specialty pharmacy business for $ 22.3 million . we also received $ 7.6 million related to the sale of a portion of our pharmaceutical inventory on june 10 , 2019 , and an additional $ 3.6 million on july 24 , 2019 primarily in connection with the sale of our remaining pharmaceutical inventory . in addition , during the fourth quarter of fiscal year 2019 , we had substantially completed the wind down and exit from the specialty pharmacy business . we recognized non-cash impairment charges of $ 80.4 million during the year ended june 30 , 2019 related to goodwill , purchased intangibles and other assets of the specialty pharmacy business that were not sold or did not have an alternative use . we met the criteria for classifying certain assets and liabilities of the specialty pharmacy business as a discontinued operation as of june 30 , 2019 . accordingly , unless otherwise indicated , information in this annual report has been retrospectively adjusted to reflect continuing operations for all periods presented . see note 4 - discontinued operations and exit activities to the accompanying audited consolidated financial statements for further information . market and industry trends and outlook we expect that certain trends and economic or industry-wide factors will continue to affect our business , both in the short-term and long-term . we have based our expectations described below on assumptions made by us and on information currently available to us . to the extent our underlying assumptions about , or interpretation of , available information prove to be incorrect our actual 56 results may vary materially from our expected results . see `` cautionary note regarding forward-looking statements '' and `` risk factors . '' trends in the u.s. healthcare market affect our revenues and costs in the supply chain services and performance services segments . story_separator_special_tag the trends we see affecting our current healthcare business include the impact of the implementation of current or future healthcare legislation , particularly the uncertainty regarding the status of the affordable care act , its repeal , replacement or other modification , the enactment of new regulatory and reporting requirements , expansion and contraction of insurance coverage and associated costs that may impact subscriber elections , intense cost pressure , payment reform , provider consolidation , shift in care to the alternate site market and increased data availability and transparency . to meet the demands of this environment , there will be increased focus on scale and cost containment and healthcare providers will need to measure and report on and bear financial risk for outcomes . over the long-term , we believe these trends will result in increased demand for our supply chain services and performance services solutions in the areas of cost management , quality and safety , and value based care , however , there are uncertainties and risks that may affect the actual impact of these anticipated trends , expected demand for our services or related assumptions on our business . see `` cautionary note regarding forward-looking statements '' for more information . covid-19 pandemic in addition to the trends in the u.s. healthcare market discussed above , we face known and unknown uncertainties arising from the outbreak of the novel coronavirus ( `` covid-19 '' ) and the resulting global pandemic and financial and operational uncertainty , including its impact on the overall economy , our sales , operations and supply chains , our members , workforce and suppliers , and countries . as a result of the covid-19 pandemic and potential future pandemic outbreaks , we face significant risks including , but not limited to : changes in the demand for our products and services . we have experienced and may continue to experience demand uncertainty from both significant increases and decreases in demand as a result of covid-19 . there has been a significant increase in demand for personal protective equipment ( `` ppe '' ) , drugs and other supplies directly related to treating and preventing the spread of covid-19 . however , either voluntarily or due to government orders or advisories , patients , hospitals and other medical facilities have deferred elective procedures and routine medical visits during the crisis , which created a significant decline in the demand for supplies and services not related to covid-19 in the fourth quarter of fiscal 2020 and such lower demand is expected to continue into fiscal 2021. in addition , as a result of our members ' focus on managing covid-19 and its impacts , we have experienced a decrease in demand for our consulting and other performance service engagements . furthermore , during the covid-19 pandemic , many of our members ' non-acute or non-healthcare facilities , such as education and hospitality businesses , closed , operated on a limited or reduced basis and have delayed re-opening , and , as a result , we may see a material reduction in product sales to those facilities . the extent to which these impacts on demand will continue , and the effect that they will have on our business and operating results , will depend upon future developments that are highly uncertain and can not be accurately predicted . limited access to our members ' facilities that impacts our ability to fulfill our contractual requirements . our member hospitals and non-acute care sites have experienced reduced or limited access for non-patients , including our field teams , consultants and other professionals , and travel restrictions have impacted our employees ' ability to travel to our members ' facilities . the long-term continuation , or any future recurrence of these circumstances may negatively impact the ability of our employees to more effectively deliver existing or sell new products and services to our members and could affect our performance of our existing contracts . materials and personnel shortages and disruptions in supply chain , including manufacturing and shipping . the global supply chain has been significantly disrupted due to stay at home orders , border closings and rapidly escalating shipping costs . borders closings and restrictions in response to covid-19 , particularly regarding china and india , have impacted our access to products for our members . staffing or personnel shortages due to shelter in place orders and quarantines have impacted and in the future may impact us and our members or suppliers . in addition , due to unprecedented demand during the covid-19 pandemic , there are widespread shortages in certain product categories . in the food service line , covid-19 related illnesses have impacted food processing suppliers and led to plant closures . if the supply chain for materials used in the products purchased by our members through our gpo or products contract manufactured through our direct sourcing business is adversely impacted by restrictions resulting from covid-19 , our supply chain may be disrupted . failure of our suppliers , contract manufacturers , distributors , contractors and other business partners to meet their obligations to our members or to us , or significant disruptions in their ability to do so due to their own financial or operational difficulties , may adversely impact our operations . requests for contract modifications , payment deferrals or exercises of force majeure clauses . we have and may continue to receive requests for contract modifications , payment waivers and deferrals , payment reductions or amended payment terms from our contract counterparties . we have and may continue to receive requests to delay service or payment on performance service contracts . in addition , we may receive requests from our suppliers for increases to their contracted prices , and such 57 requests may be implemented in the future . in addition , several pharmacy suppliers have exercised force majeure clauses related to failure to supply clauses in their contracts with us because they are unable to obtain raw materials for manufacturing from india and china .
| due to competitive market trends , we have experienced , and expect to continue to experience , requests , at times , to provide existing and prospective members increases in revenue share on 74 incremental or overall purchasing volume that could , if materially increased , adversely impact our revenues and overall financial performance . net administrative fees revenue increase d by $ 18.6 million , or 3 % , during the year ended june 30 , 2019 compared to the year ended june 30 , 2018 , due in part to the impact of revenue recognition under the new revenue standard . net administrative fees recognized in the year ended june 30 , 2019 under the previous revenue standard increased $ 10.5 million , or 2 % , over the prior year . growth was primarily due to further contract penetration of existing members and , to a lesser degree , the impact of conversion of new members to our portfolio , partially offset by higher revenue recoveries in the prior year . other services and support revenue other services and support revenue increase d by $ 3.7 million , or 43 % , during the year ended june 30 , 2020 compared to the year ended june 30 , 2019 primarily due supply chain co-management fees as a result of the asset acquisition of nexera as well as continued growth in our strategic initiatives . other services and support revenue increase d by $ 0.7 million , or 10 % , during the year ended june 30 , 2019 compared to the year ended june 30 , 2018 . growth in service fees from our strategic initiatives of $ 5.4 million was offset by the impact of revenue recognition under the new revenue standard related to our partnership with a third party to provide pharmacy benefit management services . product revenue product revenue increase d by $ 85.8 million , or 47 % , during the year ended june 30 , 2020 compared to the year ended june 30 , 2019 . the increase was primarily driven by the aggregated purchasing of personal protective equipment as a result of covid-19 and growth in commodity products and aggregated purchasing of certain products . product
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41 factors impacting operating results our results of operations are affected by a number of factors and primarily depend on , among other things , the level of the interest income from target assets , the market value of our assets and the supply of , and demand for , commercial mortgage loans , commercial real estate corporate debt and loans and other real estate-related debt investments in which we invest , and the financing and other costs associated with our business . interest income and borrowing costs may vary as a result of changes in interest rates and the availability of financing , each of which could impact the net interest income we receive on our assets . our operating results may also be impacted by conditions in the financial markets , credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers whose commercial mortgage loans are held directly by us . changes in market interest rates . with respect to our business operations , increases in interest rates , in general , may over time cause : ( i ) the interest expense associated with variable rate borrowings to increase ; ( ii ) the value of commercial mortgage loans and commercial real estate corporate debt and loans to decline ; ( iii ) coupons on variable rate commercial mortgage loans and commercial real estate corporate debt and loans to reset , although on a delayed basis , to higher interest rates ; ( iv ) to the extent applicable under the terms of our investments , prepayments on commercial mortgage loan and commercial real estate corporate debt and loans portfolio to slow , and ( v ) to the extent that we enter into interest rate swap agreements as part of our hedging strategy , the value of these agreements to increase . conversely , decreases in interest rates , in general , may over time cause : ( i ) the interest expense associated with variable rate borrowings to decrease ; ( ii ) the value of commercial mortgage loan and commercial real estate corporate debt and loans portfolio to increase ; ( iii ) coupons on variable rate commercial mortgage loans and commercial real estate corporate debt and loans to reset , although on a delayed basis , to lower interest rates ; ( iv ) to the extent applicable under the terms of our investments , prepayments on commercial mortgage loan and commercial real estate corporate debt and loan portfolio to increase , and ( v ) to the extent that we enter into interest rate swap agreements as part of our hedging strategy , the value of these agreements to decrease . credit risk . one of our strategic focuses is acquiring assets which are believed to be of high credit quality . management believes this strategy will generally keep credit losses and financing costs low . however , we are subject to varying degrees of credit risk in connection with our target assets . the manager seeks to mitigate this risk by seeking to acquire high quality assets , at appropriate prices given anticipated and unanticipated losses and by deploying a value-driven approach to underwriting and diligence , consistent with the manager 's historical investment strategy , with a focus on current cash flows and potential risks to cash flow . the manager seeks to enhance its due diligence and underwriting efforts by accessing the manager 's extensive knowledge base and industry contacts . nevertheless , unanticipated credit losses could occur which could adversely impact operating results . size of portfolio . the size of our portfolio of assets , as measured by the aggregate principal balance of commercial mortgage-related loans and the other assets owned is also a key revenue driver . generally , as the size of our portfolio grows , the amount of interest income received increases . a larger portfolio , however , may result in increased expenses as we may incur additional interest expense to finance the purchase of assets . market conditions . during the first quarter of 2020 , there was a global outbreak of covid-19 , which was declared by the world health organization as a pandemic . in response to covid-19 , the united states and numerous other countries declared national emergencies , which has led to large scale quarantines as well as restrictions to business deemed non-essential . these responses to covid-19 have disrupted economic activities and could have a significant continued adverse effect on economic and market conditions , and could result in a recession . as we are still in the midst of the covid-19 pandemic we are not in a position to estimate the ultimate impact this will have on our business and the economy as a whole . the effects of covid-19 have adversely impacted the value of our assets , business , financial condition , results of operations and cash flows , and our ability to operate successfully . some of the factors that impacted us to date and may continue to affect us are outlined in item 1a . `` risk factors '' of this annual report on form 10-k. please see `` liquidity and capital resources '' below for additional discussion surrounding the ongoing impact we expect covid-19 will have on our liquidity and capital resources . critical accounting policies and use of estimates our financial statements are prepared in accordance with gaap , which requires the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties . the most critical accounting policies involve decisions and assessments that affect our reported assets and liabilities , as well as reported revenues and expenses . we believe that all of the decisions and assessments upon which these financial statements are based are reasonable based upon information currently available to us . the accounting policies and estimates that we consider to be most critical to an investor 's understanding of our financial results and condition and require complex management judgment are discussed below . story_separator_special_tag risk ratings 42 our loans are typically collateralized by commercial real estate . as a result , we regularly evaluate the extent and impact of any credit migration associated with the performance and or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis . specifically , a property 's operating results and any cash reserves are analyzed and used to assess ( i ) whether cash from operations are sufficient to cover the debt service requirements currently and into the future , ( ii ) the ability of the borrower to refinance the loan , and or ( iii ) the property 's liquidation value . we also evaluate the financial wherewithal of any loan guarantors as well as the borrower 's competency in managing and operating the properties . in addition , we consider the overall economic environment , real estate sector , and geographic sub-market in which the borrower operates . such analyses are completed and reviewed by asset management and finance personnel , who utilize various data sources , including ( i ) periodic financial data such as debt service coverage ratio , property occupancy , tenant profile , rental rates , operating expenses , the borrower 's exit plan , and capitalization and discount rates , ( ii ) site inspections , and ( iii ) current credit spreads and discussions with market participants . we assess the risk factors of each loan , and assign a risk rating based on a variety of factors , including , without limitation , loan-to-value ratio ( `` ltv '' ) , debt yield , property type , geographic and local market dynamics , physical condition , cash flow volatility , leasing and tenant profile , loan structure and exit plan , and project sponsorship . this review is performed quarterly . based on a 5-point scale , our loans are rated `` 1 '' through `` 5 , '' from less risk to greater risk , which ratings are defined as follows : 1. very low risk 2. low risk 3. moderate/average risk 4. high risk/potential for loss : a loan that has a risk of realizing a principal loss 5. impaired/loss likely : a loan that has a high risk of realizing principal loss , has incurred principal loss or an impairment has been recorded the following tables allocate the carrying value of our loan portfolio based on our internal risk ratings and date of origination at the dates indicated ( $ in thousands ) : replace_table_token_10_th 43 replace_table_token_11_th current expected credit losses ( `` cecl '' ) in june 2016 , the fasb issued asu 2016-13 , which we refer to as the `` cecl standard . '' this update has changed how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value . the cecl standard replaced the `` incurred loss '' approach under existing guidance with an `` expected loss '' model for instruments measured at amortized cost . the cecl standard requires entities to record allowances for held-to-maturity debt securities that are deducted from the carrying amount of the assets to present the net carrying value at the amounts expected to be collected on the assets . we continue to record loan-specific allowances as specific cecl allowance , as a practical expedient under the cecl standard , which we apply to assets that are collateral dependent and where the borrower or sponsor is experiencing financial difficulty . in addition , we now record a general cecl allowance in accordance with the cecl standard on the remainder of the loan portfolio on a collective basis by assets with similar risk characteristics . the cecl standard requires us to record an allowance for credit losses that are deducted from the carrying amount of our loan portfolio to present the net carrying value at the amounts expected to be collected on the assets . we adopted the cecl standard through a cumulative-effect adjustment to accumulated deficit on january 1 , 2020. subsequent changes to the cecl allowance are recognized through net income on our consolidated statement of operations . specific cecl allowance we evaluate our loans on a quarterly basis . for loans where we have deemed the borrower/sponsor to be experiencing financial difficulty , we have elected to apply a practical expedient in accordance with the cecl standard . in accordance with the practical expedient approach , we determine the loan loss provision to be the difference between the fair value of the underlying collateral and the carrying value of the loan ( prior to the loan loss provision ) . when the repayment or satisfaction of a loan is dependent on a sale , rather than operations , of the collateral , the fair value is adjusted for the estimated cost to sell the collateral . the fair value of the underlying collateral is determined by using method ( s ) such as discounted cash flow , the market approach , or direct capitalization approach . the key unobservable inputs used to determine the fair value of the underlying collateral may vary depending on the information available to us and market conditions as of the valuation date . if we deem all or any portion of a loan balance uncollectible , that amount is written-off . the following table summarizes the specific provision for loan losses that have been recorded on our portfolio as of december 31 , 2020 ( $ in thousands ) : replace_table_token_12_th ( 1 ) amortized cost is shown net of $ 175.0 million of net specific cecl allowance . during the year ended december 31 , 2020 , there was $ 118.0 million in net specific cecl allowances taken due to factors including covid-19 . see note 2 for additional information regarding covid-19 . 44 ( 2 ) the fair value of urban predevelopment collateral was determined by assuming rent per square foot ranging from 25 to $ 225 and a capitalization rate ranging from 5.0 % to 5.5 % .
| our average asset and debt balances for the year ended december 31 , 2020 were ( $ in thousands ) : average month-end balances for the year ended december 31 , 2020 description assets related debt commercial mortgage loans , net $ 5,675,735 $ 3,415,598 subordinate loans and other lending assets , net 1,018,097 — portfolio management due to the impact of covid-19 , some of our borrowers have experienced consequences which are preventing the execution of their business plans and in some cases temporary closures . as a result , we have worked with borrowers to execute loan modifications which are typically coupled with additional equity contributions from borrowers . loan modifications to date have included repurposing of reserves , temporary deferrals of interest or principal , and partial deferral of coupon interest as payment-in-kind interest . investment activity during the year ended december 31 , 2020 , we committed $ 562.0 million of capital to loans ( $ 463.9 million of which was funded during the year ended december 31 , 2020 ) . in addition , during the year ended december 31 , 2020 , we received $ 683.3 million in repayments and sales and funded $ 412.7 million for loans closed prior to 2020. net income available to common stockholders for the years ended december 31 , 2020 and 2019 , our net income available to common stockholders was $ 4.8 million , or $ 0.01 per diluted share of common stock , and $ 211.6 million , or $ 1.40 per diluted share of common stock , respectively . operating results the following table sets forth information regarding our consolidated results of operations and certain key operating metrics ( $ in thousands ) : 39 replace_table_token_8_th for a comparison and discussion of our results of operations and other operating and financial data for the fiscal years ended december 31 , 2019 and december 31 , 2018 , see `` part ii , item 7. management 's discussion and analysis of financial condition and results of operations '' of our annual report on form 10-k for the fiscal year ended december 31 , 2019 , filed with the sec on february 13 , 2020. net interest income net interest income
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observations on current market opportunities we believe there is currently a significant market opportunity to acquire single-family rental properties through the distressed loan channel and expect the supply of non-performing loans , sub-performing loans ( defined as loans that are more than 60 days delinquent ) , properties in foreclosure and reo to increase over the next several years as banks and other mortgage lenders seek to dispose of these distressed inventories which they accumulated during the recent economic crisis . we continue to see substantial volumes of distressed residential mortgage loan sales offered for sale by banks , hud and private equity funds , among others . we believe residential is well-positioned to be selected as the buyer of diverse portfolios of such loans since it is not geographically constrained . we believe that this distressed loan channel gives residential a cost advantage over other acquisition channels such as foreclosure auctions and reo acquisitions because : we believe there are fewer participants in the sub-performing and non-performing loan marketplace than in the foreclosure auction and other reo acquisition channels due to the large size of portfolios offered for sale on an all or none basis and the required operational infrastructure involved in servicing loans and managing single-family rental properties across various states . we believe the relatively lower level of competition for sub-performing and non-performing loans , combined with growing supply , provides buyers with the opportunity for a higher discount rate relative to the foreclosure auction and other reo acquisition channels and therefore a relatively lower cost to ultimately acquire single-family rental properties . we believe that residential will be able to purchase residential mortgage loans at a lower price than reo properties because sellers of such loans will be able to avoid paying the costs typically associated with home sales , such as broker commissions and closing costs of up to 10 % of gross proceeds of the sale . we believe this will motivate the sellers to accept a lower price for the sub-performing and non-performing loans than they would if selling reo . use of the distressed loan channel gives residential multiple resolution methodologies to unlock asset value . residential 's preferred resolution methodology is to modify the sub-performing and non-performing loans . we believe modification followed by refinancing generates near-term cash flows , provides the highest possible economic outcome for residential and is a socially responsible business strategy because it keeps more families in their homes . we expect a majority of residential 's acquired mortgage loans that are converted to reo to become single-family rental properties that we believe will generate long-term returns for residential 's stockholders . if a reo property meets residential 's rental profile , it determines the extent of renovations that are needed to generate an optimal rent and maintain consistency of renovation specifications for future branding . if we determine that the reo property will not meet residential 's rental profile , residential lists the property for sale , in many instances after renovations are made to optimize the sale proceeds . 41 metrics affecting our consolidated results as described above , our operating results depend heavily on residential 's operating results . residential 's results are affected by various factors , some of which are beyond our control , including the following : revenues residential 's revenues initially primarily consist of the following : i. net unrealized gains from the conversion of loans to reo . upon conversion of loans to reo , residential marks the properties to the most recent market value ( less estimated selling costs in the case of reo held for sale ) . the difference between the carrying value of asset at the time of conversion and most recent market value , based on broker price opinions , is recorded in residential 's statement of operations as net unrealized gains . we expect the timeline to convert acquired loans into reo will vary significantly by loan , which could result in fluctuations in residential 's revenue recognition and operating performance from period to period . the factors that may affect the timelines to foreclose upon a residential mortgage loan include , without limitation , state foreclosure timelines and deferrals associated therewith ; unauthorized parties occupying in the property ; federal , state or local legislative action or initiatives designed to provide homeowners with assistance in avoiding residential mortgage loan foreclosures and continued declines in real estate values and or sustained high levels of unemployment that increase the number of foreclosures and which place additional pressure and or delays on the already overburdened judicial and administrative proceedings . ii . net unrealized gains from the change in fair value of loans . on a monthly basis we adjust residential 's loans to fair value by evaluating the fair value of the underlying property , the expected timeline and probabilities of loan resolution and expected market yield . we employ various loan resolution methodologies with respect to residential 's residential mortgage loans including loan modification , collateral resolution and collateral disposition . the manner in which a sub-performing or non-performing loan is resolved will impact the amount and timing these net unrealized gains . we expect the timelines for each of the different processes to vary significantly , and final resolution could take up to 24 months or longer from the loan acquisition date . the exact nature of resolution will be dependent on a number of factors that are beyond our control , including borrower willingness , property value , availability of refinancing , interest rates , conditions in the financial markets , the regulatory environment and other factors . iii . net realized gain on mortgage loans . residential records net realized gains , including the reclassification of previously accumulated net unrealized gains , upon the liquidation of a loan which may consist of short sale , third party sale of the underlying property , refinancing or full debt pay-off of the loan . story_separator_special_tag we expect the timeline to liquidate loans will vary significantly by loan , which could result in fluctuations in revenue recognition and operating performance from period to period . additionally , the proceeds from loan liquidations may vary significantly depending on the resolution methodology . residential generally expects to collect proceeds of loan liquidations in cash and , thereafter , have no continuing involvement with the asset . as a greater number of residential 's reo are renovated and deemed suitable for rental , we expect a greater portion of its revenues will be residential rental revenues . we believe the key variables that will affect residential 's rental revenues over the long term will be average occupancy and rental rates . we anticipate that a majority of residential 's leases of single-family rental properties to tenants will be for a term of two years or less . as these leases permit the residents to leave at the end of the lease term without penalty , we anticipate residential 's rental revenues will be affected by declines in market rents more quickly than if its leases were for longer terms . short-term leases may result in high turnover , which involves expenses such as renovation costs and marketing costs , or reduced rental revenues . although we generally seek to lease the reo residential acquires on foreclosure , we may determine to sell the properties that do not meet residential 's investment criteria . the real estate market and home prices will determine proceeds from any sale of real estate . in addition , while we seek to track real estate price trends and estimate the effects of those trends on the valuations of residential 's portfolios of residential mortgage loans , future real estate values are subject to influences beyond our control . 42 expenses residential 's expenses primarily consist of loan servicing fees and advances , rental property operating expenses , depreciation and amortization , general and administrative expenses , expense reimbursement , incentive management fees and interest expense . from time to time , expenses also may include impairments of assets . loan servicing fees and advances are expenses paid to ocwen to service residential 's acquired loans and for real estate insurance and other corporate advances . rental property operating expenses are expenses associated with residential 's ownership and operation of rental properties including expenses such as altisource 's inspection , property preservation and renovation fees , property management fees , turnover costs , property taxes , insurance and hoa dues . depreciation and amortization is a non-cash expense associated with the ownership of real estate and generally remains relatively consistent each year in relation to residential 's asset levels since it depreciate its properties on a straight-line basis over a fixed life . interest expense consists of the costs to borrow money in connection with residential 's debt financing of our portfolios . general and administrative expenses consist of the costs related to the general operation and overall administration of our business . expense reimbursement consists primarily of our employee salaries in direct correlation to the services they provide on residential 's behalf and other personnel costs and corporate overhead . we are not reimbursed by residential for certain general and administrative expenses pertaining to stock-based compensation and our expenditures that are not for the benefit of residential . the incentive management fees consist of compensation due to us , based on the amount of cash available for distribution to residential 's stockholders for each period . the expense reimbursement and incentive management fee are eliminated in consolidation but increase our net income by reducing the amount of net income attributable to noncontrolling interest . other factors affecting our consolidated results we expect residential 's results of operations to be affected by various additional factors , many of which are beyond our control , including the following : acquisitions residential 's operating results will depend on our ability to source sub-performing and non-performing loans . we believe that there is currently a large supply of sub-performing and nonperforming loans available to residential for acquisition . we believe the available supply provides for a steady acquisition pipeline of assets since we plan on targeting just a small percentage of the population . generally , we expect that residential 's mortgage loan portfolio may grow at an uneven pace , as opportunities to acquire distressed residential mortgage loans may be irregularly timed and may involve large portfolios of loans , and the timing and extent of our success in acquiring such loans can not be predicted . financing our ability to grow residential 's business by acquiring sub-performing and non-performing loans is dependent on the availability of adequate financing including additional equity financing , debt financing or both in order to meet residential 's objectives . we intend to leverage residential 's investments with debt , the level of which may vary based upon the particular characteristics of its portfolio and on market conditions . to the extent available at the relevant time , residential 's financing sources may include bank credit facilities , warehouse lines of credit , structured financing arrangements and repurchase agreements , among others . we may also seek to raise additional capital for residential through public or private offerings of debt or equity securities , depending upon market conditions . to qualify as a reit under the code , residential generally will need to distribute at least 90 % of its taxable income each year ( subject to certain adjustments ) to its stockholders . this distribution requirement limits its ability to retain earnings and thereby replenish or increase capital to support its activities . residential 's taxable income is triggered primarily by material charges in the economic status of loans , such as a sale of the loan , modification of the loan from a non-performing status to a performing status or conversion of the loan to reo . we expect residential to convert its taxable gains on reo dispositions and loan modifications within a short period to cash gains .
| during the year ended december 31 , 2013 , residential converted 228 loans to reo status . upon conversion of these loans to reo , we marked these properties to the most recent market value ( less estimated selling costs in the case of reo held for sale ) ; and second , residential recognized $ 52.8 million in unrealized gains for the year ended december 31 , 2013 from the net increase in the fair value of loans during the period subsequent to acquisition . adjustments to the fair value of loans after acquisition represent a change in the expected time required to complete the foreclosure process , among other factors . the reduction in time required to complete the foreclosure is driven by the completion of activities in the foreclosure process after residential acquired the loans . this reduction in timeline results in reduced carrying costs and reduced future expenses for the loans , each of which increase the fair value of the loans . the increase in the value of the loans is recognized in net unrealized gain on mortgage loans in our consolidated statements of operations . through our acquisitions for residential , its loan portfolio had grown to 8,054 loans at december 31 , 2013. the fair value of mortgage loans is based on a number of factors which are difficult to predict and may be subject to adverse changes in value depending on the financial condition of borrowers , as well as geographic , economic , market and other conditions . therefore , residential may experience unrealized losses on its mortgage loans in the future . net realized gain on mortgage loans residential generated $ 10.5 million of net realized gains on mortgage loans for the year ended december 31 , 2013 primarily from disposition of 211 loans , the substantial majority of which were through short sales and foreclosure sales . residential rental property operating expenses residential incurred $ 0.8 million of rental property operating expenses for the year
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ck-274 is a novel , oral , small molecule cardiac myosin inhibitor that we discovered independent of our collaborations . ck-274 arose from an extensive chemical optimization program conducted with attention to therapeutic index and pharmacokinetic properties that may translate into next-in-class potential in clinical development . ck-274 was designed to reduce the hypercontractility that is associated with hcm . in preclinical models , ck-274 reduces myocardial contractility by binding directly to cardiac myosin at a distinct and selective allosteric binding site , thereby preventing myosin from entering a force producing state . ck-274 reduces the number of active actin-myosin cross bridges during each cardiac cycle and consequently reduces myocardial contractility . this mechanism of action may be therapeutically effective in conditions characterized by excessive hypercontractility , such as hcm . we completed a phase 1 study which met its primary and secondary objectives to assess the safety and tolerability of single and multiple oral doses of ck-274 , describe the pharmacokinetics of ck-274 and its pharmacodynamic effects as measured by echocardiography , as well as to characterize the pk/pd relationship with regards to cardiac function . these data support the advancement of ck-274 into a phase 2 clinical trial in patients with obstructive hcm which started in the first quarter of 2020. redwood-hcm is a multi-center , randomized , placebo-controlled , double-blind , dose-finding , clinical trial in patients with symptomatic , obstructive hcm ( “ ohcm ” ) . our research continues to drive innovation and leadership in muscle biology . all of our drug candidates have arisen from our cytoskeletal research activities . our focus on the biology of the cytoskeleton distinguishes us from other biopharmaceutical companies , and potentially positions us to discover and develop novel therapeutics that may be useful for the treatment of severe diseases and medical conditions . each of our drug candidates has a novel mechanism of action compared to currently marketed drugs , which we believe validates our focus on the cytoskeleton as a productive area for drug discovery and development . we intend to leverage our experience in muscle contractility to expand our current pipeline and expect to identify additional potential drug candidates that may be suitable for clinical development . critical accounting polices and significant estimates our discussion and analysis of our financial condition and results of operations are based on our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities and expenses and related disclosure of contingent assets and liabilities . we review our estimates on an ongoing basis . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . actual results may differ from these estimates under different assumptions or conditions . while our significant accounting policies are described in more detail in the notes to our financial statements included in this annual report on form 10-k , we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements . revenue recognition we recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration for those goods or services . to recognize revenue from a contract with a customer , we : 53 ( i ) identify our contracts with our customers ; ( ii ) identify our distinct performance obligations in each contract ; ( iii ) determine the transaction price of each contract ; ( iv ) allocate the transaction price to the performance obligations ; and ( v ) recognize revenue as we satisfy our performance obligations . at contract inception , we assess the goods or services promised within each contract and assess whether each promised good or service is distinct and determine those that are performance obligations . 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 . collaborative arrangements we enter into collaborative arrangements with partners that typically include payment to us for one of more of the following : ( i ) license fees ; ( ii ) milestone payments related to the achievement of developmental , regulatory , or commercial goals ; and ( iii ) royalties on net sales of licensed products . each of these payments results in collaboration or other revenues . where a portion of non-refundable up-front fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement , they are recorded as deferred revenue and recognized as revenue when ( or as ) the underlying performance obligation is satisfied . as part of the accounting for these arrangements , we must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligation . the stand-alone selling price may include such items as , forecasted revenues , development timelines , reimbursement rates for personnel costs , discount rates and probabilities of technical and regulatory success , to determine the transaction price to allocate to each performance obligation . for our collaboration agreements that include more than one performance obligation , such as a license combined with a commitment to perform research and development services , we make judgments to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and , if over time , the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable , up-front fees . story_separator_special_tag we evaluate our progress each reporting period and , if necessary , adjust the measure of a performance obligation and related revenue recognition . license fees : if a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement , we recognize revenues from non-refundable , up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license . for licenses that are bundled with other promises , we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and , if over time , the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable , up-front license fees . we evaluate the measure of progress each reporting period and , if necessary , adjust the measure of performance and related revenue recognition . milestone payments : we use judgement to determine whether a milestone is considered probable of being reached . using the most likely amount method , we include the value of a milestone payment in the consideration for a contract at inception if we then conclude achieving the milestone is more likely than not . otherwise , we exclude the value of a milestone payment from contract consideration at inception and recognize revenue for a milestone at a later date , when we judge that it is more likely than not that the milestone will be achieved . if we conclude it is probable that a significant revenue reversal would not occur , the associated milestone is included in the transaction price . we then allocate the transaction price to each performance obligation on a relative stand-alone selling price basis , for which we recognize revenue as or when the performance obligations under the contract are satisfied . at the end of each subsequent reporting period , we re-evaluate the probability of achievement of such milestones and any related constraint , and if necessary , adjust our estimate of the overall transaction price . any such adjustments are recorded on a cumulative catch-up basis , which would affect license , collaboration and other revenues and earnings in the period of adjustment . royalties : for contracts that include sales-based royalties , we recognize revenue at the later of ( i ) when the related sales occur , or ( ii ) when the performance obligation to which some or all of the royalty has been allocated has been satisfied . to date , we have not recognized any royalty revenues resulting from contracts . research and development cost reimbursements : our astellas and amgen arrangements include promises of research and development services . we have determined that these services collectively are distinct from the licenses provided to astellas and 54 amgen and as such , these promises are accounted for as a separate performance obligation recorded over time . we reco gnize revenue for these services as the performance obligations are satisfied , which we estimate us ing internal development costs incurred . accrued research and development expenditures a substantial portion of our preclinical studies and all of our clinical trials have been performed by third-party cros and other vendors and our accruals for expenses for preclinical studies and clinical trials may be significant . for preclinical studies , the significant factors used in estimating accruals include the percentage of work completed to date and contract milestones achieved . for clinical trial expenses , the significant factors used in estimating accruals include the number of patients enrolled , duration of enrollment , milestones achieved and percentage of work completed to date . we monitor patient enrollment levels and related activities to the extent practicable through internal reviews , correspondence and status meetings with cros , and review of contractual terms . we depend on the timeliness and accuracy of data provided by our cros and other vendors to accrue expenses . if we receive and rely on incomplete or inaccurate data , accruals and expenses may be too high or too low at a given point in time and corresponding adjustments to accruals and expenses would be made in future periods when the actual expense becomes known . liability related to sale of future royalties we treat the liability related to sale of future royalties as a debt financing , to be amortized under the effective interest rate method over the life of the related royalty stream . the liability related to sale of future royalties and the debt amortization are based on our current estimates of future royalties expected to be paid over the life of the arrangement . we will periodically assess the expected royalty payments using a combination of internal projections and forecasts from external sources . to the extent our future estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates , we will adjust the liability related to sale of future royalties and prospectively recognize the related non-cash interest expense . story_separator_special_tag style= '' text-align : justify ; margin-bottom:0pt ; margin-top:12pt ; text-indent:4.54 % ; font-size:10pt ; font-family : times new roman ; font-weight : normal ; font-style : normal ; text-transform : none ; font-variant : normal ; '' > on november 13 2019 , the company issued $ 138.0 million aggregate principal amount of 4.0 % convertible senior notes due 2026 ( the “ 2026 notes ” ) . the 2026 notes are unsecured obligations and bear interest at an annual rate of 4.0 % per year , payable semi-annually on may 15 and december 15 of each year , beginning may 15 , 2020. the 2026 notes are governed by an indenture between the company and u.s. bank national association , as trustee .
| research and development expenses by program for 2019 and 2018 were : replace_table_token_2_th under our strategic alliance with astellas , we may continue to develop reldesemtiv to treat als and sma . cytokinetics and astellas have agreed in principle to revise the terms of the collaboration to provide that cytokinetics will obtain exclusive control over the development and commercialization of fstas , including reldesemtiv and ck-601 , which would lead to a reduction in the level of funding from astellas and an associated increase in the share of commercial returns to cytokinetics . we expect to enter into definitive agreements with astellas on these terms , but until we do so , the astellas agreement remains in effect in accordance with its current terms , the agreement in principle remains non-binding , and there can be no assurance we will enter into definitive agreements with astellas regarding any revised terms . under our strategic alliance with amgen , we expect to continue the phase 3 development of omecamtiv mecarbil for the potential treatment of heart failure . we expect to continue the development of ck-274 to assess the potential of ck‑274 to improve exercise capacity and relieve symptoms in patients with hyperdynamic ventricular contraction due to hcm . clinical development timelines , the likelihood of success and total completion costs vary significantly for each drug candidate and are difficult to estimate . we anticipate that we will determine on an ongoing basis which research and development programs to pursue and how much funding to direct to each program , taking into account the scientific and clinical success of each drug candidate . the lengthy process of seeking regulatory approvals and subsequent compliance with applicable regulations requires the expenditure of substantial resources . any failure by us to obtain and maintain , or any delay in obtaining , regulatory approvals could cause our research and development expenditures to increase and , in turn , could have a material adverse effect
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we received net proceeds from the transaction of approximately $ 3.7 million , after deducting the underwriter 's discounts and other offering expenses payable . on october 7 , 2011 , we entered into a collaborative development and license agreement ( the agreement ) with vgx int ' l . under the agreement , we will co-develop with vgx int ' l our syncon ® therapeutic vaccines for hepatitis b and c infections ( the products ) . under the terms of the agreement , vgx int ' l will receive marketing rights for the products in asia , excluding japan , and in return will fully fund ind-enabling and initial phase i and ii clinical studies with respect to the products . we will receive from vgx int ' l payments based on the achievement of clinical milestones and royalties based on sales of the products in the licensed territories , retaining all commercial rights to the products in all other territories . on september 27 , 2011 , we entered into a cooperative research and development agreement ( crada ) with the united states department of homeland security ( dhs ) science and technology directorate plum island animal disease center . this collaboration will evaluate the efficacy of our syncon ® vaccines for foot & mouth disease ( fmd ) in important animal models including cattle , sheep , and pigs . on january 27 , 2011 , we entered into investor purchase agreements with investors relating to the issuance and sale of ( a ) 21,130,400 shares of common stock , and ( b ) warrants to purchase a total of 10,565,200 shares of common stock with an exercise price of $ 1.40 per share , for an aggregate purchase price of approximately $ 24.3 million . the shares of common stock and warrants were sold in units , consisting of one share of common stock and a warrant to purchase 0.50 of a share of common stock , at a purchase price of $ 1.15 per unit . the warrants have a five-year term from the date of issuance and are first exercisable commencing on the 180th day after the date of issuance . we may call the warrants if the closing bid price of the common stock has been at least $ 2.80 over 20 trading days and certain other conditions are met . we received net proceeds from the transaction of approximately $ 23.0 million , after deducting the placement agent 's fee and other offering expenses . on march 24 , 2010 , we entered into our agreement with vgx int ' l . under the vgx int ' l agreement , we granted vgx int ' l an exclusive license to the product , i.e. , our syncon ® universal influenza vaccine delivered with electroporation to be developed in certain countries in asia . as consideration for the license granted to 54 vgx int ' l , we have received payment of $ 3.0 million as a research and development initiation fee , and will receive research support , annual license maintenance fees and royalties on net product sales . in addition , contingent upon achievement of clinical and regulatory milestones , we will receive development payments over the term of the vgx int ' l agreement . the vgx int ' l agreement also provides us with exclusive rights to supply devices for clinical and commercial purposes ( including single use components ) to vgx int ' l for use in the product . the term of the vgx int ' l agreement commenced upon execution and will extend on a country by country basis until the last to expire of all royalty periods for the territory ( as such term is defined in the vgx int ' l agreement ) for any product in that country , unless the vgx int ' l agreement is terminated earlier in accordance with its provisions as a result of breach , by mutual agreement , or by vgx int ' l 's right to terminate without cause upon prior written notice . in january 2010 , we announced that we expanded our existing license agreement with the university of pennsylvania , adding exclusive worldwide licenses for technology and intellectual property for novel dna vaccines against pandemic influenza , chikungunya , and foot-and-mouth disease . the amendment also encompasses new chemokine and cytokine molecular adjuvant technologies . the technology was developed in the university of pennsylvania laboratory of professor david b. weiner , a pioneer in the field of dna vaccines , and chairman of our scientific advisory board . under the terms of the original license agreement completed in 2007 , we obtained exclusive worldwide rights to develop multiple dna plasmids and constructs with the potential to treat and or prevent hiv , hcv , hpv and influenza and included molecular adjuvants . these prior and most recent agreements and amendments provide for royalty payments , based on future sales , to the university of pennsylvania . as of december 31 , 2011 , we had an accumulated deficit of $ 210.1 million . we expect to continue to incur substantial operating losses in the future due to our commitment to our research and development programs , the funding of preclinical studies , clinical trials and regulatory activities and the costs of general and administrative activities . critical accounting policies the sec defines critical accounting policies as those that are , in management 's view , important to the portrayal of our financial condition and results of operations and require management 's judgment . our discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements , which have been prepared in accordance with u.s. gaap . there have been no changes to our critical accounting policies during the year ended december 31 , 2011 other than the adoption of recent accounting pronouncements discussed below . story_separator_special_tag the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenue and expenses . we base our estimates on experience and on various assumptions 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 those estimates . our critical accounting policies include : revenue recognition . grant revenue we receive non-refundable grants under available government programs . government grants towards current expenditures are recorded as revenue when there is reasonable assurance that we have complied with all conditions necessary to receive the grants , collectability is reasonably assured , and as the expenditures are incurred . 55 license fee and milestone revenue we have adopted a strategy of co-developing or licensing our gene delivery technology for specific genes or specific medical indications . accordingly , we have entered into collaborative research and development agreements and have received funding for pre-clinical research and clinical trials . prior to the adoption of the financial accounting standards board 's ( fasb ) accounting standards update ( asu ) no . 2009-13 , revenue recognition ( topic 605 ) : multiple-deliverable revenue arrangements , we recorded payments under these agreements , which are non-refundable , as revenue as the related research expenditures were incurred pursuant to the terms of the agreements and provided collectability was reasonably assured . for new collaborative agreements or material modifications of existing collaborative agreements entered into after december 31 , 2010 , we follow the provisions of asu no . 2009-13. in order to account for the multiple-element arrangements , we identify the deliverables included within the agreement and evaluate which deliverables represent separable units of accounting . analyzing the arrangement to identify deliverables requires the use of judgment , and each deliverable may be an obligation to deliver services , a right or license to use an asset , or another performance obligation . a delivered item is considered a separate unit of accounting when the delivered item has value to the collaborator on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement . arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price . the relative selling price for each deliverable is determined using vendor specific objective evidence ( vsoe ) , of selling price or third-party evidence of selling price if vsoe does not exist . if neither vsoe nor third-party evidence of selling price exists , we use our best estimate of the selling price for the deliverable . the amount of allocable arrangement consideration is limited to amounts that are fixed or determinable . the consideration received is allocated among the separate units of accounting , and the applicable revenue recognition criteria are applied to each of the separate units . changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement . upfront license fee payments are recognized upon delivery of the license if facts and circumstances dictate that the license has standalone value from the undelivered items , the relative selling price allocation of the license is equal to or exceeds the upfront license fee , persuasive evidence of an arrangement exists , our price to the collaborator is fixed or determinable , and collectability is reasonably assured . upfront license fee payments are deferred if facts and circumstances dictate that the license does not have standalone value . the determination of the length of the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period . prior to the adoption of asu no . 2010-17 , revenue recognition ( topic 605 ) : milestone method of revenue recognition ( milestone method ) , we recognized non-refundable milestone payments upon the achievement of specified milestones upon which we had earned the milestone payment , provided the milestone payment was substantive in nature and the achievement of the milestone was not reasonably assured at the inception of the agreement . we deferred payments for milestone events that were reasonably assured and recognized them ratably over the minimum remaining period of our performance obligations . payments for milestones that were not reasonably assured were treated as the culmination of a separate earnings process and were recognized as revenue when the milestones were achieved . effective january 1 , 2011 , we adopted on a prospective basis the milestone method of asu no . 2010-17. under the milestone method , we will recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety . a milestone is considered substantive when it meets all of the following criteria : 1. the consideration is commensurate with either the entity 's performance to achieve the milestone or the enhancement of the value of the delivered item ( s ) as a result of a specific outcome resulting from the entity 's performance to achieve the milestone , 56 2. the consideration relates solely to past performance , and 3. the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement . a milestone is defined as an event ( i ) that can only be achieved based in whole or in part on either the entity 's performance or on the occurrence of a specific outcome resulting from the entity 's performance , ( ii ) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and ( iii ) that would result in additional payments being due to the company .
| these increases were also attributable to higher revenue recognized under our path malaria vaccine initiative ( mvi ) contract of $ 740,000 for the year ended december 31 , 2011 as compared to $ 303,000 for the same period in 2010. path is an international nonprofit organization funded by private donors . we have a research program and agreement with the path mvi to evaluate in a preclinical feasibility study our syncon ® dna vaccine development platform to target antigens from plasmodium species and deliver them intradermally using the cellectra ® electroporation device . the initial agreement with mvi was for $ 685,000 and was completed in february 2010. in september 2010 we entered into an amended agreement with path to further this study in non-human primates . the amended agreement had a total value of $ 804,000 and was completed in august 2011. the overall increase in grants and miscellaneous revenue was also due to higher revenue recognized from our subcontract with drexel university of $ 491,000 for the year ended december 31 , 2011 as compared to $ 18,000 for the year ended december 31 , 2010 and higher revenues recognized from our subcontract with the university of pennsylvania of $ 124,000 for the year ended december 31 , 2011 as compared to $ 14,000 for the year ended december 31 , 2010. these increases were partially offset by no revenue recognized in 2011 related to the grant awarded in october 2010 under the patient protection and affordable care act of 2010 ( ppaca ) for $ 733,000. this grant was related to three of our projects , including the phase ii clinical trial of vgx-3100 , a therapeutic vaccine for cervical dysplasia and cancer as well as development projects for syncon ® universal flu and dengue vaccines . the ppaca provided small and mid-sized biotech , pharmaceutical and medical device companies with up to a 50 % tax credit for investments in qualified therapeutic discoveries for
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the $ 58,890 decrease in our income before income taxes was primarily due to the following factors : site level gross margin in excess of site level operating expense decreased $ 39,434 , which primarily resulted from the $ 70,229 benefit recognized in connection with the federal biodiesel blenders ' tax credit during 2019 , which included approximately $ 34,000 of benefit for 2018 , and decreases in fuel and nonfuel gross margin of $ 45,366 and $ 67,702 , respectively , as a result of the impact of the covid-19 pandemic during 2020 , partially offset by a decrease in site level operating expense of $ 73,481 and the $ 29,521 benefit recognized in connection with the federal biodiesel blenders ' tax credit during 2020 ; and depreciation and amortization expense increased $ 27,529 , which primarily resulted from the $ 13,715 held for sale impairment charge related to qsl during 2020 , the $ 8,072 write off of certain assets related to programs that were canceled during 2020 , $ 6,574 of impairment charges relating to certain low performing standalone qsl restaurants during 2020 , the $ 3,046 goodwill impairment charge recognized during 2020 with respect to our qsl business and the $ 834 write off of intangible assets associated with three franchised qsl standalone restaurants that closed during 2020 , partially offset by the $ 2,369 of impairment charges relating to certain low performing standalone qsl restaurants during 2019. the above factors were partially offset by : selling , general and administrative expense decreased $ 10,436 , which primarily resulted from the elimination of approximately 130 positions as part of the reorganization plan during 2020 , approximately 120 corporate employees furloughed in response to the covid-19 pandemic during 2020 , as well as a reduction in marketing and travel related expenses , partially offset by $ 5,364 of non-recurring restructuring costs associated with the reorganization plan and other separation costs and expenses related to executive officer retirement and separation agreements during 2020 ; and real estate rent expense decreased $ 2,019 , primarily the result of our acquisition in january 2019 of 20 travel centers from svc that we previously leased from svc , which reduced our annual minimum rent due to svc , a decrease in percentage rent due to svc as a result of the decrease in our nonfuel revenues during 2020 as compared to 2019 and $ 579 of impairment charges to our operating lease assets relating to certain low performing standalone qsl restaurants during 2019 , partially offset by $ 1,262 of impairment charges to our operating lease assets related to certain low performing standalone qsl restaurants during 2020. effects of fuel prices and supply and demand factors our revenues and income are subject to fluctuations , sometimes material , as a result of market prices and the availability of , and demand for , diesel fuel and gasoline . these factors are subject to the worldwide petroleum products supply chain , which historically has experienced price and supply volatility as a result of , among other things , severe weather , terrorism , political crises , military actions and variations in demand that are often the result of changes in the macroeconomic environment . also , concerted efforts by major oil producing countries and cartels to influence oil supply , as well as other actions by governments regarding trade policies , may impact fuel prices . over the past several years there have been significant changes in the cost of fuel . during the year ended december 31 , 2020 , fuel prices trended downward , ending at a lower price than at the start of the year . during the year ended december 31 , 2019 , fuel prices trended slightly upward , ending at a higher price than at the start of the year . the average fuel price during the year ended december 31 , 2020 , was 37.4 % below the average fuel price during the year ended december 31 , 2019. the decrease in average fuel prices for the year ended december 31 , 2020 , primarily resulted from a 52.7 % decrease in march and april 2020 as a result of the sharp decrease in demand resulting from the covid-19 pandemic and the related economic downturn . we generally are able to pass changes in our cost for fuel products to our customers , but typically with a delay , such that during periods of rising fuel commodity prices , fuel gross margin per gallon tends to be lower than it otherwise may have been and during periods of falling fuel commodity prices , fuel gross margin per gallon tends to be higher than it otherwise may have been . increases in the prices we pay for fuel can have negative effects on our sales and profitability and increase our working capital requirements . since december 31 , 2020 , average fuel prices have been generally increasing and if average fuel prices continue to increase , these increases may have an impact on our fuel gross margin . 45 due to the volatility of our fuel costs and our methods of pricing fuel to our customers , we believe that fuel revenues are not a reliable metric for analyzing our results of operations from period to period . solely as a result of changes in fuel prices , our fuel revenues may materially increase or decrease , in both absolute amounts and on a percentage basis , without a comparable change in fuel sales volume or in fuel gross margin , as evidenced in 2020. we therefore consider fuel sales volume and fuel gross margin to be better measures of our performance . we believe that demand for fuel by trucking companies and motorists for a constant level of miles driven will continue to decline over time because of technological innovations that improve fuel efficiency of motor vehicle engines , other fuel conservation practices and alternative fuels and technologies . story_separator_special_tag although we believe these factors , combined with competitive pressures , impact the level of fuel sales volume we realize , fuel sales volume increased both on a consolidated and same site basis during the year ended december 31 , 2020 , as compared to the year ended december 31 , 2019. these increases primarily resulted from improved market conditions within the freight industry and the success of our marketing initiatives . factors affecting comparability covid-19 pandemic see our discussion regarding the covid-19 pandemic and its impact on us and our business above . reorganization plan on april 30 , 2020 , we committed to and initiated the reorganization plan to improve the efficiency of our operations . as part of the reorganization plan , we reduced our headcount and eliminated certain positions , which we expect to result in approximately $ 13,100 of net annual savings in selling , general and administrative expense . in addition , we have made certain changes in our leadership and their roles and created both a corporate development team and a procurement team . the costs of the reorganization plan were $ 4,288 , which were comprised primarily of severance , outplacement services , stock based compensation expense associated with the accelerated vesting of previously granted stock awards for certain employees and fees for recruitment of certain executive positions . these costs were recognized in selling , general and administrative expense in our consolidated statements of operations and comprehensive ( loss ) income . please refer to note 16 to the consolidated financial statements included in part iv , item 15. of this annual report for more information about the reorganization plan . growth and cost control strategies we have commenced numerous initiatives across our organization under our transformation plan for the purpose of expanding our travel center network , improving and enhancing operational efficiencies and profitability and in support of our core mission to `` return every traveler to the road better than they came . '' we believe these and certain other initiatives will expand our franchise base , increase diesel fuel and gasoline gross margin and fuel sales volume , increase market share in the truck service industry , improve merchandising and gross margin in store and retail services and improve operating effectiveness in our food service offerings while focusing on opportunities to continue to control costs in field operations . since the beginning of 2019 , we entered into franchise agreements covering 33 travel centers to be operated under our travel center brand names , including 21 new agreements in 2020. four of these franchised travel centers began operations during 2019 , 10 began operations during 2020 , one began operations thus far in 2021 and we anticipate 18 franchised travel centers will begin operations by the end of the 2022 first quarter . federal biodiesel blenders ' tax credit in december 2019 , the u.s. government retroactively reinstated the federal biodiesel blenders ' tax credit for 2018 and 2019 , as well as approved the federal biodiesel blenders ' tax credit through 2022. as a result , we recognized a benefit to our fuel cost of goods sold of $ 70,229 in the fourth quarter of 2019 that related to the federal biodiesel blenders ' tax credit for both 2018 and 2019 and a benefit to our fuel cost of goods sold of $ 29,521 during 2020 . 46 lease amendments and travel center purchases in january 2019 , we acquired from svc 20 previously leased travel centers for $ 309,637 , which amount includes $ 1,437 of transaction related costs , and amended our five existing leases with svc such that : ( i ) the 20 purchased travel centers were removed from the applicable leases and our annual minimum rent was reduced by $ 43,148 ; ( ii ) the term of each of the leases was extended by three years ; ( iii ) the amount of the deferred rent obligation to be paid to svc was reduced from $ 150,000 to $ 70,458 and we began to pay that amount in 16 equal quarterly installments commencing on april 1 , 2019 and ending january 1 , 2023 ; and ( iv ) commencing with the year ended december 31 , 2020 , we began pay to svc an additional amount of percentage rent equal to one-half percent ( 0.5 % ) of the excess of the annual nonfuel revenues at leased sites over the nonfuel revenues for each respective site for the year ending december 31 , 2019. these lease amendments are further described in note 8 to the consolidated financial statements included in part iv , item 15. of this annual report . 47 results of operations we present our results of operations on a consolidated basis . currently all of our company operated locations are same site locations with the exception of two standalone truck service facilities and one standalone restaurant . same site operating results would not provide materially different information from our consolidated results and are not presented as part of this discussion and analysis . story_separator_special_tag roman ' , sans-serif ; font-size:10pt ; font-style : italic ; font-weight:400 ; line-height:120 % '' > real estate rent expense . real estate rent expense for 2020 decreased by $ 2,019 , or 0.8 % , as compared to 2019 , primarily the result of our acquisition in january 2019 of 20 travel centers from svc that we previously leased from svc , which reduced our annual minimum rent due to svc , a decrease in percentage rent due to svc as a result of the decrease in our nonfuel revenues during 2020 as compared to 2019 and $ 579 of impairment charges to our operating lease assets relating to certain low performing standalone qsl restaurants during 2019 , partially offset by $ 1,262 of impairment charges to our operating lease assets related to certain low performing standalone qsl restaurants during 2020. depreciation and amortization expense .
| in addition , in 2019 we benefited from a particularly strong financial performance in truck service and store and retail services as a result of the extreme cold weather experienced during the beginning of 2019 , as compared to unseasonably mild weather experienced during the beginning of 2020. these decreases were partially offset by increases in def sales as a result of an increase in newer trucks on the road that require def and our qsrs which benefited from certain fsr closures and our marketing initiatives . rent and royalties from franchisees revenues . rent and royalties from franchisees revenues for 2020 increased by $ 153 , or 1.1 % , as compared to 2019 , primarily as a result of 14 franchised travel centers and seven franchised standalone qsl restaurants that began operations since the beginning of 2019 , partially offset by the closure of five franchised standalone qsl restaurants , our purchase of one standalone qsl restaurant from a former franchisee since the beginning of 2019 , and the temporary closures of certain franchised standalone qsl restaurants as a result of the covid-19 pandemic . fuel gross margin . fuel gross margin for 2020 decreased by $ 45,366 , or 12.0 % , as compared to 2019 , primarily as a result of the $ 70,229 benefit recognized in 2019 in connection with the federal biodiesel blenders ' tax credit earned in 2018 and 2019 , and a $ 2,840 one time benefit due to the reversal of loyalty award accruals recognized in connection with introducing a revised customer loyalty program during 2019 , partially offset by a more favorable fuel purchasing environment , primarily in the first and second quarters of 2020 , the $ 29,521 benefit recognized in connection with the federal biodiesel blenders ' tax credit in 2020 and an increase in fuel sales volume . nonfuel gross margin . nonfuel gross margin for 2020 decreased by $ 67,702 , or 6.0 % , as compared to
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we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms , or at all . if we fail to raise capital or enter into such agreements as and when needed , we may have to significantly delay , reduce or eliminate the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions . because of the numerous risks and uncertainties associated with product development , we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability . even if we are able to generate product sales , we may not become profitable . if we fail to become profitable or are unable to sustain profitability on a continuing basis , then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations . as of december 31 , 2020 , we had cash and cash equivalents and marketable securities of $ 291.2 million . there have been several changes to our financial reporting as we have expanded our operations in the u.s. in 2019 , we began reporting our financial results with u.s. dollars as the presentation currency . with the expansion of our business operations in the u.s. , we determined that our functional currency had changed to u.s. dollars in 2020. the change was made to reflect that u.s. dollars had become the currency of the primary economic environment in which we operate , counting for a significant part of our labor , operations and financing . the change was implemented prospectively . as of june 30 , 2020 , we lost our status as a “ foreign private issuer ” as such term is defined in rule 405 of the united states securities act of 1933 , or the u.s. securities act given that ( i ) 50 % of our outstanding common shares are held by u.s. residents and ( ii ) the majority of our directors are u.s. citizens . consequently , we were required to comply with u.s. domestic issuer requirements beginning january 1 , 2021. a summary of the key risks associated with becoming a u.s. domestic issuer can be found under the item 1a . “ risk factors ” . as a u.s. domestic issuer , we have adopted u.s. generally accepted accounting principles for the first time with the presentation of our consolidated financial statements for the years ended december 31 , 2020 and 2019. previously , our interim quarterly consolidated financial statements for 2020 and our annual and interim quarterly consolidated financial statements for 2019 were presented under ifrs . 47 impact of the covid-19 pandemic in march 2020 , the world health organization declared covid-19 a global pandemic , and since that time covid-19 , has spread globally . efforts to contain the spread of covid-19 have intensified and the united states , europe and asia have implemented severe travel restrictions , social distancing requirements , and stay-at-home orders , among other restrictions , which have led to delays in the commencement of non-covid-19-related clinical trials . as a result , the covid-19 pandemic has caused significant disruptions to the u.s. , regional and global economies and has contributed to significant volatility and negative pressure in financial markets . we have been carefully monitoring the covid-19 pandemic and its potential impact on our business and have taken important steps to ensure the safety of employees and their families and to reduce the spread of covid-19 . to date , the pandemic has resulted in a slowdown of the enrollment of patients in our clinical trials . such slowdowns have had more of an impact on our tti-621 clinical trial which recruits ctcl patients who have more indolent disease and can opt to delay participation in a clinical trial . the slower enrollment was more pronounced in the second quarter of 2020 but has improved for both products with tti-622 currently enrolling at an expected pace . we have worked closely with our cros to ensure that our clinical sites are well prepared to address any issues that may arise as a result of the pandemic , including but not limited to , ensuring sufficient drug inventory at clinical sites and ensuring proper steps were undertaken to allow for full remote monitoring of our clinical trials . there have been no significant disruptions to our drug supply chain although some raw materials used in drug production have taken longer to source and we have experienced delays in scheduled manufacturing campaigns due to covid-19 vaccine production using manufacturing capacity at our cmo . we have sufficient drug inventory on hand to complete existing studies and have secured drug manufacturing slots through 2021 that we expect will provide continuity of drug supply , although risks of delays are elevated due to ongoing impacts related to covid-19 . we have also implemented important measures to protect the health of our employees by suspending all business travel and implementing a work-from-home policy for all employees other than essential lab personnel who follow a strict protective protocol while on-site . although we believe we have taken reasonable measures to address the impacts of the covid-19 pandemic to date , it is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations . the impact of the covid-19 pandemic will depend on future developments , which are highly uncertain and can not be predicted with confidence , including the scope , severity and duration of the pandemic , the impact of new strains of the virus , the effectiveness and availability of vaccines , 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 . see “ item 1a . story_separator_special_tag risk factors ” for a discussion of the potential adverse impacts of the covid-19 pandemic on our business , results of operations and financial condition . financial operations overview since our inception , we have devoted substantial resources to developing our sirpαfc programs , including activities to manufacture product candidates , undertake preclinical studies and conduct clinical trials , as well as provide general and administrative support for these operations . we have not generated any revenue from product sales . 48 we have incurred net losses in each year since inception . our net losses were $ 59.3 and $ 38.1 million for the years ended december 31 , 2020 and 2019 , respectively . as of december 31 , 2020 , we had an accumulated deficit of $ 249.4 million . substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations . we expect to continue to incur significant expenses and increasing operating losses over at least the next several years . we expect our expenses will increase substantially in connection with our ongoing activities , as we : · advance product candidates tti-621 and tti-622 into multiple phase 1b/2 trials ; · manufacture our product candidates to supply these expanded trials ; · seek regulatory approval for our product candidates ; and · add personnel to support our product development and commercialization efforts . as a result , we will need substantial additional funding to support our continued operations . to date , we have principally raised capital through registered direct offerings and underwritten public offerings of our common and preferred stock and the exercise of warrants and stock options . as of december 31 , 2020 , we had approximately $ 291.2 million in cash and cash equivalents and marketable securities . because of the numerous risks and uncertainties associated with product development , we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability . even if we are able to generate revenues from the sale of our products , we may not become profitable . if we fail to become profitable or are unable to sustain profitability on a continuing basis , then we may be unable to continue our operations at planned levels and be forced to reduce our operations . revenue to date , we have not generated any revenues from product sales . in june 2020 , we entered into a right-to-use license agreement for one of our small molecule compounds , with initial license fees of $ 0.1 million . sales-based royalties , anniversary payments , and milestone payments will be recognized when earned in future periods . research and development expenses research and development expenses consist primarily of costs incurred for the development of our tti-621 and tti-622 product candidates , which include : · expenses incurred under agreements with third-party contract organizations and investigative clinical trial sites that conduct research and development activities on our behalf ; · costs related to production of clinical materials , including fees paid to contract manufacturers ; · laboratory and vendor expenses related to the execution of clinical trials ; · employee-related expenses , which include salaries , benefits and stock-based compensation ; · costs associated with our regulatory and quality control operations ; and · facilities , depreciation , and other expenses , which include lease expenses and expenses for the maintenance of facilities , information technology , insurance , and other supplies in support of research and development activities . we expense all research and development costs in the periods in which they are incurred . costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors , clinical sites , and third-party service providers . the costs of intangible assets that are purchased from others for a particular research and development project and that have no alternative future uses are considered research and development costs and are expensed when incurred . nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized . the capitalized amounts are then expensed as the related goods are delivered and as services are performed . the largest component of our operating expenses has historically been our investment in research and development activities related to the clinical development of tti-621 and tti-622 . we recognize the funds from research and development grants as a reduction of research and development expense when the related eligible research costs are incurred . we expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates , as our product candidates advance into later stages of development , and as we initiate new clinical trials . the process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming , and the successful development of our product candidates is highly uncertain . as a result , we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates . 49 general and administrative expenses general and administrative expenses consist primarily of personnel-related costs and professional services expenses , including legal , human resources , audit and accounting services , insurance , directors ' fees and expenses associated with obtaining and maintaining patents . personnel-related costs consist of salaries , benefits and stock-based compensation . we anticipate general and administrative expenses will increase if research and development advances or expands .
| general and administrative general and administrative expenses were $ 36.3 million for the year ended december 31 , 2020 , compared to $ 5.7 million for the year ended december 31 , 2019. the increase of $ 30.5 million was primarily due to the following : · $ 21.1 million of increased dsu revaluation expense relating to fair valuation of the dsu liability prior to reclassification to equity on june 30 , 2020 , and increased professional fees , including legal and audit fees ; · $ 7.9 million of increased stock-based compensation expense mainly relating to the fair valuation of stock option liabilities ; · $ 0.8 million of increased employee salary and benefits ; and · $ 0.5 million increase in director and officer insurance premiums . interest income and costs and foreign exchange gains and losses net interest income , consisting of interest earned on cash and cash equivalents and marketable securities , for the year ended december 31 , 2020 was $ 2.0 million , and was higher than the prior year income of $ 0.6 million due to higher cash and cash equivalents and marketable securities balances resulting from the january 2020 and september 2020 financing activities . during the year ended december 31 , 2020 , we recorded a net foreign currency gain of $ 0.2 million , compared to a net foreign currency loss of $ 0.8 million for the year ended december 31 , 2020. the net foreign currency gain in the current period reflected a strengthening of the canadian dollar versus the u.s. dollar while holding net canadian dollar denominated assets . liquidity and capital resources cash , working capital and debt since inception , we have financed our operations primarily from sales of equity , proceeds from the exercise of warrants and stock options and from interest income on funds available for investment . our primary capital needs are for funds to support our scientific research and development activities including staffing , facilities , manufacturing , preclinical studies , clinical trials , administrative costs and for working capital . 51 we expect that our existing combined cash and cash equivalents and marketable securities as at december 31 , 2020 of $ 291.2 million
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the international effective tax rate was 12.7 % and 12.1 % for 2014 and 2013 , respectively . the tax increase prevention act of 2014 , signed into law in december 2014 , retroactively extended certain tax credits and incentives through tax year 2014. the impact of this tax law change to the 2014 tax year was considered a discrete tax benefit when recorded in the fourth quarter of 2014 . 30 as a result of the above , net income in 2015 increased to $ 1.2 billion ( $ 2.85 per share ) , compared with $ 1.0 billion ( $ 2.38 per share ) in 2014 and $ 1.2 billion ( $ 2.71 per share ) in 2013. the increase in earnings per share in 2015 compared with 2014 reflects the lower intangible asset impairment charge ( $ 0.23 per share in 2015 compared with $ 0.70 per share in 2014 ) and improved operating performance , partially offset by the negative impact from foreign currency . the decrease in earnings per share in 2014 compared with 2013 reflects the goodwill and intangible asset impairment charge in 2014 , partially offset by improved operating performance . refer to additional discussion in the information by business segment section below . information by business segment management at each of the coalitions has direct control over and responsibility for its revenues and operating income , hereinafter termed coalition revenues and coalition profit , respectively . vf management evaluates operating performance and makes investment and other decisions based on coalition revenues and coalition profit . common costs such as information systems processing , retirement benefits and insurance are allocated to the coalitions based on appropriate metrics such as sales , usage or employment . the following tables present a summary of the changes in coalition revenues and coalition profit during the last two years : replace_table_token_5_th the following section discusses the changes in revenues and profitability by coalition : outdoor & action sports replace_table_token_6_th 31 the outdoor & action sports coalition includes the following brands : the north face ® , vans ® , timberland ® , kipling ® ( outside of north america ) , napapijri ® , jansport ® , reef ® , smartwool ® , eastpak ® , lucy ® and eagle creek ® . global revenues for outdoor & action sports increased 3 % in 2015 , reflecting 9 % operational growth despite the warmer weather in the fourth quarter and the softer retail environment compared with 2014. the operational growth was partially offset by a negative 6 % impact from foreign currency . the 53 rd week in 2014 also negatively impacted 2015 revenue growth . revenues in the americas region increased 8 % in 2015 , including a 2 % negative impact from foreign currency . revenues in the asia pacific region increased 10 % in 2015 despite a 5 % negative impact from foreign currency . european revenues declined 10 % in 2015 , including a 16 % negative impact from foreign currency . global revenues for the north face ® brand increased 1 % in 2015 over 2014 , as operational growth in the direct-to-consumer channel was partially offset by a negative 4 % impact from foreign currency . sales for the north face ® brand were negatively impacted by the warm weather in 2015 , particularly during the fourth quarter when consumer demand for cold-weather products is typically at its peak . vans ® brand global revenues were up 7 % in 2015 , reflecting operational growth in both the direct-to-consumer and wholesale channels , partially offset by a negative 7 % impact from foreign currency . global revenues for the timberland ® brand were up 2 % in 2015 driven by strong wholesale revenues , partially offset by a negative 8 % impact from foreign currency and reduced consumer demand for outdoor apparel and footwear as a result of the warm weather noted above . global direct-to-consumer revenues for outdoor & action sports grew 6 % in 2015 over 2014 , driven by new store openings and an expanding e-commerce business . foreign currency negatively impacted direct-to-consumer revenues by 5 % in 2015. wholesale revenues were up 1 % in 2015 , including an 8 % negative impact from foreign currency . the outdoor & action sports coalition revenues increased 13 % in 2014 over 2013 primarily due to growth in the north face ® , vans ® and timberland ® brands , which achieved global revenue growth of 11 % , 17 % and 13 % , respectively . revenues in the americas , european and asia pacific regions increased 14 % , 9 % and 17 % , respectively . direct-to-consumer revenues rose 22 % in 2014 driven by increases of 31 % and 24 % for the north face ® and vans ® brands , respectively . new store openings and comparable sales growth , which includes an expanding e-commerce business , all contributed to the direct-to-consumer revenue growth . operating margin decreased 110 basis points in 2015 due to the negative impact from foreign currency and increased investments in direct-to-consumer businesses , partially offset by the leverage of operating expenses on higher revenues . operating margin increased 90 basis points in 2014 driven by a shift in business mix towards higher margin businesses and the leverage of operating expenses on higher revenues , partially offset by increased investments in direct-to-consumer businesses and marketing . jeanswear replace_table_token_7_th the jeanswear coalition consists of the global jeanswear businesses , led by the wrangler ® and lee ® brands . 32 global jeanswear revenues were flat in 2015 compared with 2014 , reflecting operational growth offset by a negative 4 % impact from foreign currency . the 53 rd week in 2014 also negatively impacted 2015 revenue growth . revenues in the americas region increased 1 % in 2015 , reflecting a 2 % negative impact from foreign currency . revenues in the asia pacific region increased 5 % in 2015 despite a 4 % negative impact from foreign currency . story_separator_special_tag european revenues decreased 15 % in 2015 , including an 18 % negative impact from foreign currency . global revenues for the wrangler ® brand were flat in 2015 compared with 2014 , as 4 % operational growth driven by continued strength in the mass business was offset by a negative 4 % impact from foreign currency . global revenues for the lee ® brand were also flat in 2015 compared with 2014 , as continued growth in china and europe , strong wholesale growth in india , and recent product launches in the u.s. were partially offset by a negative 5 % impact from foreign currency . revenues for the rock & republic ® brand were down 11 % in 2015 compared with 2014. global jeanswear revenues were flat in 2014 over 2013 , as an increase in global wrangler ® brand revenues was offset by decreases in global lee ® ( driven by declines in the u.s. ) and rock & republic ® brand revenues . in 2014 , revenues in the americas region declined 3 % . lee ® brand revenues in the americas region declined 9 % in 2014 , due to ongoing pressure in the u.s. mid-tier and department store channels , and unfavorable consumer trends in women 's denim . wrangler ® brand revenues in the americas region increased 2 % in 2014 driven by increases in both the western specialty and mass businesses . partially offsetting the overall decrease in the americas region were increases in europe and the asia pacific region of 5 % and 14 % , respectively . the increases in both europe and the asia pacific region were primarily due to wholesale and direct-to-consumer growth in the lee ® brand . revenues in the americas ( non-u.s. ) region declined 5 % in 2014 compared with 2013 , due to the negative impact of foreign currency translation . operating margin increased 40 basis points in 2015 over 2014 , primarily due to lower product costs , partially offset by the negative impact from foreign currency . operating margin declined 60 basis points in 2014 over 2013 , primarily due to initiatives to liquidate excess inventory , and lower sales volume in north america , partially offset by effective control of operating expenses . imagewear replace_table_token_8_th the imagewear coalition consists of vf 's image business ( occupational apparel and uniforms , including the red kap ® and bulwark ® brand industrial businesses ) and licensed sports group ( lsg ) business ( athletic apparel and fanwear , which includes the majestic ® brand business ) . imagewear revenues decreased 2 % in 2015 compared with 2014 , partially due to the impact of the 53 rd week in 2014. the image business revenues decreased 6 % compared with 2014 primarily due to the impact of considerably lower levels of oil and gas exploration , which negatively impacted sales of the bulwark ® brand . revenues for the lsg business were up 4 % in 2015 compared with 2014 , driven by strong major league baseball and national basketball association sales . coalition revenues increased 4 % in 2014 compared with 2013. the image business grew 4 % , driven by a 10 % increase in the red kap ® brand business . revenues from the lsg business were up 3 % in 2014 primarily 33 due to strong national football league sales . effective in the first quarter of 2014 , the lsg business strategically transitioned the youth business for major league baseball to a licensed model , which negatively impacted coalition revenues by 2 % in 2014 compared with 2013. the 30 basis point decline in operating margin in 2015 compared with 2014 was negatively impacted by lower gross margins primarily due to business mix . the 60 basis point improvement in operating margin in 2014 compared with 2013 was positively impacted by favorable product mix in both the image and lsg businesses . sportswear replace_table_token_9_th the sportswear coalition consists of the nautica ® and kipling ® brand businesses in north america ( the kipling ® brand outside of north america is managed by the outdoor & action sports coalition ) . coalition revenues decreased 2 % in 2015 over 2014 , partially due to the impact of the 53 rd week in 2014. nautica ® brand revenues decreased 4 % in 2015 due in part to the unseasonably warm weather in the fourth quarter , which reduced consumer demand for fleece , sweaters and outerwear . nautica ® brand direct-to-consumer revenues were down 9 % in 2015 compared with 2014 due to reduced traffic and the exit of less profitable stores . wholesale revenues for the nautica ® brand were only down 1 % in 2015 despite continuing challenges in the u.s. department store channel . kipling ® brand revenues in north america increased 8 % , driven by growth in the direct-to-consumer and wholesale channels . coalition revenues increased 4 % in 2014 over 2013 primarily due to a 21 % increase in kipling ® brand revenues in north america , reflecting growth in the brand 's direct-to-consumer and wholesale channels . nautica ® brand revenues increased 1 % in 2014 , as growth in the direct-to-consumer business was partially offset by declines in wholesale revenues due to challenges in the u.s. department store channel . new store openings and comparable sales growth , which includes higher e-commerce revenues , contributed to a 14 % increase in the coalition 's direct-to-consumer business . operating margin increased 40 basis points in 2015 over 2014 , primarily driven by a shift in business mix to the higher margin kipling ® brand business and lower levels of promotional activity in the wholesale channel for the nautica ® brand , partially offset by reduced expense leverage on lower sales volume and increased investments in direct-to-consumer businesses .
| the following table presents the percentage relationship to total revenues for components of the consolidated statements of income : replace_table_token_4_th gross margin declined 50 basis points to 48.3 % in 2015 compared with 48.8 % in 2014 primarily due to foreign currency exchange rate fluctuations , which negatively impacted gross margin by 80 basis points in 2015 compared with 2014. excluding this impact , gross margin improved 30 basis points in 2015 due to lower product costs and the continued shift in our revenue mix towards higher margin businesses , including outdoor & action sports , direct-to-consumer and international , partially offset by aggressive efforts to manage inventory levels . in 2014 , gross margin increased 70 basis points to 48.8 % compared with 48.1 % in 2013 , with improvements in nearly every coalition . the increase in gross margin reflected the continued shift in our revenue mix towards higher margin businesses , including outdoor & action sports , international and direct-to-consumer . in addition , the 2014 change in classification of retail concession fees improved gross margin by 20 basis points and increased the ratio of selling , general and administration expenses to revenues compared with 2013. selling , general and administrative expenses as a percentage of total revenues decreased 10 basis points in 2015 compared with 2014. this decrease is primarily due to lower incentive compensation , leverage of operating expenses on higher revenues , and the benefit from a $ 16.6 million gain on the sale of a vf outlet ® location in 2015 , partially offset by increased investments in our direct-to-consumer businesses and global product development , which includes our strategic innovation centers . selling , general and administrative expenses as a percentage of total revenues were 30 basis points higher in 2014 compared with 2013. excluding the impact of the aforementioned change in classification of retail concession fees , the percentage of selling , general and administrative expenses to revenues did not change in 2014 compared with 2013 , as the impact from increased investments in direct-to-consumer businesses and marketing was offset by the leverage of operating expenses on higher revenues . as part of its annual impairment testing performed in the fourth quarter of 2015 , vf recorded a $ 143.6 million pre-tax , noncash impairment charge to reduce the carrying value of intangible assets related to our 7 for
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) $ 0.1 gross profit , sg & a , and operating income at a consolidated level , gross profit as a percent of sales was higher in 2020 , as compared with 2019 , due to customer pricing discipline ( the decline in cost of sales from lower raw material costs was slightly more than the decrease in lower average selling prices ) and an increase in sales volumes for the irrigation segment and associated operating leverage of fixed costs . gross profit improved for the ess , utility , and irrigation segments in 2020 , but was lower for coatings due to lower sales volumes . the company saw an increase in selling , general , and administrative ( sg & a ) expense in 2020 , as compared to 2019. the increase was due to recording a partial impairment of goodwill and tradename for the access systems business , higher compensation related costs including sales commissions for the north american infrastructure businesses , higher incentives due to improved operations , and restructuring activities . these increases were partially offset by lower travel costs , foreign currency translation effects , and reduced sg & a deferred compensation expense ( offset by an increase of the same amount in other expense ) . net interest expense and debt net interest expense in 2020 was higher than 2019 , due to a higher average borrowings during the year . interest income was lower in 2020 , as compared to 2019 , due to lower interest rates . other income/expense the change in other income/expenses in 2020 , as compared to 2019 , was due to the change in valuation of deferred compensation assets which resulted in lower other income of $ 3.5 million . this amount is shown as `` gain on investments ( unrealized ) '' on the consolidated statements of earnings . the change related to deferred compensation assets are offset by an opposite change of the same amount in sg & a expense . the remaining change was due to fluctuations in foreign currency transaction gains/losses and a higher pension benefit in 2020. income tax expense our effective income tax rate in 2020 and 2019 was 25.7 % and 23.9 % , respectively . the increase in the effective tax rate is a result of the partial impairment of goodwill and tradename for the access systems business that is not fully tax deductible . 27 earnings attributable to noncontrolling interests earnings attributable to noncontrolling interests was lower in 2020 as compared to 2019 , due to the acquisition of the remaining noncontrolling interests of agsense and partial acquisition of the noncontrolling interest of covert in the first quarter of 2020. cash flows from operations our cash flows provided by operations was $ 316.3 million in fiscal 2020 , as compared with $ 307.6 million provided by operations in fiscal 2019. the increase in operating cash flow in 2020 , as compared with 2019 , was due to the $ 40.9 million increase in non-current contract liability partially offset by the increase in accounts receivable and the early payment ( december 2020 ) of the required 2021 annual contribution to the delta pension plan . engineered support structures ( ess ) segment net sales were lower in 2020 as compared to 2019 , primarily driven by lower sales volumes for access systems . sales were higher for the lighting , traffic , and highway safety and communication products businesses and lower for access systems . global lighting , traffic , and highway safety product sales in 2020 were higher by $ 6.3 million , as compared to 2019. sales volumes in north america increased due to a stronger transportation market and higher pricing . europe sales volumes were lower due to the temporary plant shutdown in france and market demand disruptions due to covid-19 . lighting , traffic , and highway safety product sales in the asia-pacific region decreased in 2020 , as compared to 2019 , due primarily to continued market weakness in india attributed to covid-19 . communication product line sales were higher by $ 1.3 million in 2020 as compared with 2019. communication product sales in europe improved due to an increase in volume in the u.k. and asia-pacific sales volumes decreased marginally . in north america , communication product sales volumes decreased due to lower demand for communication towers and components . access systems product line net sales decreased by $ 26.1 million in 2020 , as compared to 2019. in early 2020 , we decided to exit the detention center systems product line , which contributed to the sales decline along with unfavorable foreign currency translation effects . impacts from subdued construction spending in australia and covid-19 impacts in asia-pacific also contributed to a decrease in sales volume . gross profit was higher in 2020 , as compared to 2019 , due to lower cost of raw materials across the segment and an approximate $ 7.0 million one-time loss recognized on certain access systems projects in 2019 that did not recur in 2020. sg & a was higher in 2020 versus 2019 due to recording a partial goodwill and tradename impairment for the access systems business of $ 16.6 million , restructuring costs of $ 6.6 million , and higher sales commissions in north america . operating income decreased in 2020 due to the goodwill and tradename impairment of the access systems business and restructuring costs , partially offset by lower raw material costs for all businesses and a one-time $ 7 million loss recorded on certain access systems projects in third quarter of 2019 that did not recur in 2020. utility support structures ( utility ) segment in the utility segment , sales increased in 2020 , as compared with 2019 , due to large project work for the international solar tracking solutions and offshore and other complex structures product lines and improved sales volumes for steel and concrete structures in north america . story_separator_special_tag a number of our sales contracts in north america contain provisions that tie the sales price to published steel index pricing at the time our customer issues their purchase order . this resulted in a decrease to the average selling prices for our steel utility structures product line for 2020 , as compared with 2019. offshore and other complex steel structures sales increased $ 29.9 million and solar tracking solutions sales increased $ 38.9 million in 2020 , as compared to 2019 , due to an increase in sales volumes attributed to large projects . gross profit increased in 2020 , as compared to 2019 , due to higher sales volumes and its associated operating leverage of fixed costs . in addition , the business incurred approximately $ 3.0 million of inspection costs during 2019 to 28 finalize the requirements from a 2015 commercial settlement that did not recur in 2020. we recognized a $ 2.8 million impairment of a facility in 2020 that was sold in the fourth quarter . sg & a expense was higher in 2020 , as compared with 2019 , due to higher sales commissions and incentives related to improved operating results in north america and a $ 2.7 million allowance recognized in third quarter 2020 against an international accounts receivable . certain other restructuring actions , including the early retirement program , also contributed to the increase in sg & a . operating income increased primarily due to higher sales volumes in 2020 compared to 2019. coatings segment coatings segment sales decreased in 2020 , as compared to 2019 , due to lower volumes in north america and asia , reduced sales pricing attributed to lower zinc costs , and unfavorable foreign currency translation . sales volumes decreased in north america in 2020 , as compared to 2019 , due primarily to decreased industrial production attributed largely to the economic impacts from covid-19 . in asia-pacific region , sales volumes improved in australia , which were more than offset by decreased volumes in asia that were impacted by the economic disruptions from covid-19 . sales pricing also declined in asia-pacific due to lower zinc costs and customer mix . sg & a expense in 2020 was comparable to 2019. sg & a expense in 2020 included one-time costs related to closing down a coatings location in north america and the early retirement program that was offset by one-time expenses associated with a legal settlement in 2019 that did not recur in 2020. operating income was lower in 2020 , compared to 2019 , due to sales volume decreases in north america and asia and the associated operating deleverage of fixed costs . irrigation segment the increase in irrigation segment net sales in 2020 , as compared to 2019 , is primarily due to higher sales volumes for international irrigation . the sales improvement is offset by unfavorable foreign currency translation effects and slightly lower sales pricing due to the reduced cost of steel . the sales volume increase for international irrigation of approximately $ 74 million was attributed to deliveries on the multi-year egypt project and a strong market in brazil . the increase was offset by unfavorable currency translation effects of approximately $ 21 million from a weaker brazilian real and south african rand . in north america , higher sales volumes for systems and parts was partially offset by sales pricing due to lower steel costs . in 2020 , sales of technology-related products and services continued to increase , as growers continued adoption of technology to reduce costs and enhance profitability . sg & a was higher in 2020 , as compared to 2019 , due to higher product development expenses , one-time costs associated with the early retirement program , and higher incentives due to improved business performance . operating income increased in 2020 over 2019 , due to higher sales volumes in international markets and lower raw material costs . net corporate expense corporate sg & a expense was higher in 2020 as compared to 2019. the increase can be attributed to higher incentive expenses due to improved business performance and one-time costs associated with the early retirement program . the increase was partially offset by the change in valuation of deferred compensation plan assets which resulted in lower expense . the change in deferred compensation plan assets is offset by the same amount in other income/expenses . 29 story_separator_special_tag roman ' , sans-serif ; font-size:10pt ; font-weight:400 ; line-height:120 % '' > our effective income tax rate in 2019 and 2018 was 23.9 % and 29.7 % , respectively . the 2018 tax rate was higher due to certain restructuring costs and impairment charges for which no tax benefits were recorded . earnings attributable to noncontrolling interests noncontrolling interest expense in 2019 was consistent with 2018 . 31 cash flows from operations our cash flows provided by operations was $ 307.6 million in 2019 , as compared with $ 153.0 million provided by operations in 2018. the increase in operating cash flows was due to improved working capital management offset by higher contributions to the delta pension plan . the lower working capital is primarily due to a larger liability for customer billings in excess of costs and earnings ( accrued expenses ) . this was partially offset by the 2019 delta pension plan contribution ( the 2018 annual payment was contributed early in december 2017 ) which is a use of cash flows from operations . engineered support structures ( ess ) segment the increase in sales in 2019 as compared with 2018 , was due to recent acquisitions , improved communication product line sales , and improved sales pricing . sales were partially offset by unfavorable foreign currency translation effects of $ 28.3 million . global lighting and traffic , and highway safety product sales in 2019 were $ 2.3 million higher as compared to 2018 , due to higher sales pricing and increased sales volumes .
| connect-it wireless , inc. ( `` connect-it '' ) in the second quarter of 2019 , a domestic communication components business ( ess ) . the company divested of its grinding media business in the second quarter of 2018 , which resulted in a pre-tax loss of approximately $ 6.1 million . the grinding media business is reported in other and the loss was recorded in other income ( expenses ) on the consolidated statements of earnings . restructuring plan in february 2018 , the company announced a restructuring plan related to certain operations in 2018 , primarily in the ess segment , through consolidation and other cost-reduction activities ( the `` 2018 plan '' ) . the company incurred pre-tax expenses from the 2018 plan of $ 34.0 million in 2018 . 30 currency translation in 2019 , we realized a reduction in operating profit , as compared with fiscal 2018 , due to currency translation effects . the breakdown of this effect by segment was as follows : total ess utility coatings irrigation other corporate full year $ ( 1.9 ) $ ( 0.8 ) $ 0.1 $ ( 0.5 ) $ ( 0.8 ) $ — $ 0.1 gross profit , sg & a , and operating income at a consolidated level , the increase in gross margin ( gross profit as a percent of sales ) in 2019 , as compared with 2018 , can be attributed to restructuring costs incurred in 2018 of $ 18.4 million , lower raw material costs , and improved selling prices across our infrastructure businesses . the ess and utility segments realized an increase in gross margin in 2019 , while irrigation and coatings realized a decrease in gross margin . the company saw a decrease in selling , general , and administrative ( sg & a ) expense in 2019 , as compared to 2018. the decrease was driven by higher nonrecurring expenses in 2018 including impairment of the goodwill and trade name of the offshore and other complex structures ( `` offshore '' ) business totaling $ 15.8 million , restructuring costs of $ 15.6 million , expenses from recently acquired businesses of $ 9.0
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management 's determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors . however , this evaluation is inherently subjective as it requires material estimates of , among other things , expected default probabilities , loss once loans default , expected commitment usage , the amounts and timing of expected future cash flows on impaired loans , value of collateral , estimated losses , and general amounts for historical loss experience . the process also considers economic conditions , uncertainties in estimating losses and inherent risks in the loan portfolio . all of these factors may be susceptible to significant change . to the extent actual outcomes differ from management estimates , additional provisions for loan losses may be required which would adversely impact earnings in future periods . in addition , the bank 's regulators could require additional provisions for loan losses as part of their examination process . additional discussion of the allowance for loan losses is included in `` item 1. business - allowances for losses on loans and foreclosed assets . '' inherent in this process is the evaluation of individual significant credit relationships . from time to time certain credit relationships may deteriorate due to payment performance , cash flow of the borrower , value of collateral , or other factors . in these instances , management may revise its loss estimates and assumptions for these specific credits due to changing circumstances . in some cases , additional losses may be realized ; in other instances , the factors that led to the deterioration may improve or the credit may be refinanced elsewhere and allocated allowances may be released from the particular credit . no significant changes were made to management 's overall methodology for evaluating the allowance for loan losses during the periods presented in the financial statements of this report . on january 1 , 2021 , the company adopted the new accounting standard related to the allowance for credit losses . for assets held at amortized cost basis , this standard eliminates the probable initial recognition threshold in current gaap and , instead , requires an entity to reflect its current estimate of all expected credit losses . see note 1 of the accompanying audited financial statements for additional information . in addition , the company considers that the determination of the valuations of foreclosed assets held for sale involves a high degree of judgment and complexity . the carrying value of foreclosed assets reflects management 's best estimate of the amount to be realized from the sales of the assets . while the estimate is generally based on a valuation by an independent appraiser or recent sales of similar properties , the amount that the company realizes from the sales of the assets could differ materially from the carrying value reflected in the financial statements , resulting in losses that could adversely impact earnings in future periods . goodwill and intangible assets goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently if circumstances indicate their value may not be recoverable . goodwill is tested for impairment using a process that estimates the fair value of each of the company 's reporting units compared with its carrying value . the company defines reporting units as a level below each of its operating segments for which there is discrete financial information that is regularly reviewed . as of december 31 , 2020 , the company has one reporting unit to which goodwill has been allocated – the bank . if the fair value of a reporting unit exceeds its carrying value , then no impairment is recorded . if the carrying value amount exceeds the fair value of a reporting unit , further testing is completed comparing the implied fair value of the reporting unit 's goodwill to its carrying value to measure the amount of impairment . intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values . at december 31 , 2020 , goodwill consisted of $ 5.4 million at the bank reporting unit , which included goodwill of $ 4.2 million that was recorded during 2016 related to the acquisition of 12 branches from fifth third 68 bank . other identifiable intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years . at december 31 , 2020 , the amortizable intangible assets consisted of core deposit intangibles of $ 1.5 million , including $ 1.3 million related to the fifth third bank transaction in january 2016 , $ 200,000 related to the valley bank transaction in june 2014 and $ 31,000 related to the boulevard bank transaction in march 2014. these amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value . see note 1 of the accompanying audited financial statements for additional information . for purposes of testing goodwill for impairment , the company used a market approach to value its reporting unit . the market approach applies a market multiple , based on observed purchase transactions for each reporting unit , to the metrics appropriate for the valuation of the operating unit . significant judgment is applied when goodwill is assessed for impairment . this judgment may include developing cash flow projections , selecting appropriate discount rates , identifying relevant market comparables and incorporating general economic and market conditions . story_separator_special_tag based on the company 's goodwill impairment testing , management does not believe any of the company 's goodwill or other intangible assets were impaired as of december 31 , 2020. while management believes no impairment existed at december 31 , 2020 , different conditions or assumptions used to measure fair value of the reporting unit , or changes in cash flows or profitability , if significantly negative or unfavorable , could have a material adverse effect on the outcome of the company 's impairment evaluation in the future . current economic conditions changes in economic conditions could cause the values of assets and liabilities recorded in the financial statements to change rapidly , resulting in material future adjustments in asset values , the allowance for credit losses , or capital that could negatively impact the company 's ability to meet regulatory capital requirements and maintain sufficient liquidity . following the housing and mortgage crisis and correction beginning in mid-2007 , the united states entered an economic downturn . unemployment rose from 4.7 % in november 2007 to peak at 10.0 % in october 2009. since that time , economic conditions improved considerably , as indicated by higher consumer confidence levels , increased economic activity and low unemployment levels . the economy continued to operate at historically strong levels until the impact of the covid-19 pandemic began to take its toll in the first quarter of 2020. the economy plunged into a recession in the first quarter of 2020 , as efforts to contain the spread of covid-19 forced all but essential business activity , or any work that could not be done from home , to stop , closing factories , restaurants , entertainment and sports venues , retail shops , personal services locations , and more . the cares act , enacted in march 2020 , injected approximately $ 3 trillion into the economy through direct payments to individuals and grants to small businesses designed to keep employees on their payrolls and fuel a bounce-back in economic activity . also , as the crisis unfolded , the federal reserve acted decisively , employing a wide arsenal of tools including slashing its benchmark interest rate to zero and ensuring credit availability to businesses , households , and municipal governments . to help our customers navigate through the pandemic , we offered paycheck protection program ( ppp ) loans and short-term modifications to loan terms . ppp loans and modifications were made in accordance with guidance from banking regulatory authorities . these modifications did not result in the loans being classified as troubled debt restructurings . severely impacted industries in our loan portfolio include retail , hotel and restaurants . more than 22 million jobs were lost nationally in march and april 2020 , as firms closed their doors or reduced their operations , sending employees home on furlough or layoffs . at home , with uncertain incomes and limited buying opportunities , consumer spending plummeted . as a result , gross domestic product ( gdp ) , the broadest measure of the nation 's economic output , plunged . improvements in consumer spending , the gdp and employment have since occurred . around 56 % of those jobs lost in early 2020 have come back , with a return to full employment anticipated by the end of 2022. while the u.s. economic recovery began with a robust rebound from the pandemic-induced recession , challenges remain with millions still out of work and many businesses still closed or operating under reduced hours or capacity . social distancing measures continue to restrict economic activity , and intermittent closures and re-openings have dampened household and business sentiment . 69 the federal reserve continues to maintain a highly accommodative monetary policy by maintaining short-term rates firmly at the zero lower bound and purchasing treasury and agency mortgage-backed securities to keep long-term interest rates low . with consumer interest rates at record lows and with 30-year fixed-rate mortgages below 3 % , the housing market has boomed . home sales have been above their pre-pandemic levels , and construction activity has picked up in response . the federal reserve 's quantitative easing is expected to begin tapering in 2022 , while the zero-interest-rate policy will likely remain in place until the economy is near full employment and inflation is firmly above the federal reserve 's 2 % inflation target , which is not expected until early 2023. under the biden administration and new congress , additional fiscal stimulus packages are expected for 2021. the “ american rescue plan ” is an economic relief measure in the $ 1.9 trillion range with an emphasis on vaccination and individual and small business relief . later in 2021 , the “ build back better ” recovery package , with an emphasis on infrastructure , research and development , education and green energy transition , is expected to be pursued . increases in corporate and individual tax rates may be used to fund these initiatives . in december 2020 , employment declined by approximately 140,000 jobs from the previous month and the unemployment rate was unchanged from november 2020 at 6.7 % , but down from 7.9 % in september 2020. the decline in payroll employment reflects an increase in covid cases and efforts to contain the pandemic . in december 2020 , job losses in leisure and hospitality as well as private education were partially offset by gains in professional and business services , retail trade , and construction . employment in leisure and hospitality declined by 498,000 , with three-quarters of the decrease in food services and drinking establishments . since february 2020 , employment in leisure and hospitality is down by 3.9 million , or 23.2 % . retail trade added 121,000 jobs in december 2020 with nearly half of the growth occurring in general merchandise stores , while professional and business services added 161,000 jobs .
| million as the result of higher average 93 interest rates on loans . the average yield on loans increased from 5.07 % during the year ended december 31 , 2018 to 5.37 % during the year ended december 31 , 2019. interest income increased $ 12.8 million as a result of higher average loan balances , which increased from $ 3.91 billion during the year ended december 31 , 2018 , to $ 4.16 billion during the year ended december 31 , 2019. the higher average balances were primarily due to organic loan growth in commercial real estate loans , one- to four- family residential loans , and other residential ( multi-family ) loans , partially offset by decreases in consumer loans . on an on-going basis , the company has estimated the cash flows expected to be collected from the acquired loan pools . for each of the loan portfolios acquired , the cash flow estimates have increased , based on the payment histories and the collection of certain loans , thereby reducing loss expectations of certain loan pools , resulting in adjustments to be spread on a level-yield basis over the remaining expected lives of the loan pools . the entire amount of the discount adjustment has been and will be accreted to interest income over time . for the years ended december 31 , 2019 and 2018 , the adjustments increased interest income and pre-tax income by $ 7.4 million and $ 5.1 million , respectively . as of december 31 , 2019 , the remaining accretable yield adjustment that will affect interest income was $ 7.6 million . of the remaining adjustments affecting interest income , we expect to recognize $ 5.6 million of interest income during 2020. apart from the yield accretion , the average yield on loans was 5.19 % during the year ended december 31 , 2019 , compared to 4.94 % during the year ended december 31 , 2018 , as a result of higher current market rates on adjustable rate loans and
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the amendments will become effective for public companies for fiscal years that begin after december 15 , 2014. the company does not expect this guidance to have a significant impact on the consolidated financial statements . critical accounting policies certain accounting policies are important to the understanding of our financial condition , since they require management to make difficult , complex or subjective judgments , some of which may relate to matters that are inherently uncertain . estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances , including , but without limitation , changes in interest rates , performance of the economy , financial condition of borrowers and laws and regulations . the following are the accounting policies we believe are critical . 38 allowance for loan losses . we recognize that losses will be experienced on loans and that the risk of loss will vary with , among other things , the type of loan , the creditworthiness of the borrower , general economic conditions and the quality of the collateral for the loan . we maintain an allowance for loan losses to absorb losses inherent in the loan portfolio . the allowance for loan losses represents management 's estimate of probable losses based on all available information . the allowance for loan losses is based on management 's evaluation of the collectability of the loan portfolio , including past loan loss experience , known and inherent losses , information about specific borrower situations and estimated collateral values , and current economic conditions . the loan portfolio and other credit exposures are regularly reviewed by management in its determination of the allowance for loan losses . the methodology for assessing the appropriateness of the allowance includes a review of historical losses , internal data including delinquencies among others , industry data , and economic conditions . as an integral part of their examination process , the office of the comptroller of the currency will periodically review our allowance for loan losses and may require us to make additional provisions for estimated losses based upon judgments different from those of management . in establishing the allowance for loan losses , loss factors are applied to various pools of outstanding loans . loss factors are derived using our historical loss experience and may be adjusted for factors that affect the collectability of the portfolio as of the evaluation date . commercial business loans that are criticized are evaluated individually to determine the required allowance for loan losses and to evaluate the potential impairment of such loans under fasb asc 310 receivables . although management believes that it uses the best information available to establish the allowance for loan losses , future adjustments to the allowance for loan losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations . because future events affecting borrowers and collateral can not be predicted with certainty , there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of loans deteriorate as a result of the factors discussed previously . any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations . the allowance is based on information known at the time of the review . changes in factors underlying the assessment could have a material impact on the amount of the allowance that is necessary and the amount of provision to be charged against earnings . such changes could impact future results . valuation of investment securities . substantially all of our investment securities are classified as available-for-sale and recorded at current fair value . unrealized gains or losses , net of deferred taxes , are reported in other comprehensive income as a separate component of shareholders ' equity . in general , fair value is based upon quoted market prices of identical assets , when available . if quoted market prices are not available , fair value is based upon valuation models that use cash flow , security structure and other observable information . where sufficient data is not available to produce a fair valuation , fair value is based on broker quotes for similar assets . broker quotes may be adjusted to ensure that financial instruments are recorded at fair value . adjustments may include unobservable parameters , among other things . no adjustments were made to any broker quotes received by us . we conduct a quarterly review and evaluation of our investment securities to determine if any declines in fair value are other than temporary . in making this determination , we consider the period of time the securities were in a loss position , the percentage decline in comparison to the securities ' amortized cost , the financial condition of the issuer , if applicable , and the delinquency or default rates of underlying collateral . we consider our intent to sell the investment securities and the likelihood that we will not have to sell the investment securities before recovery of their cost basis . if impairment exists , credit related impairment losses are recorded in earnings while noncredit related impairment losses are recorded in accumulated other comprehensive income . deferred income taxes . we use the asset and liability method of accounting for income taxes as prescribed in fasb asc 740 income taxes . using this method , deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases . if current available information raises doubt as to the realization of the deferred tax assets , a valuation allowance is established . deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled . story_separator_special_tag we exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets . these judgments require us to make projections of future taxable income . the judgments and estimates we make in determining our deferred tax assets , which are inherently subjective , are reviewed on an ongoing basis as regulatory and business factors change . a reduction in estimated future taxable income could require us to record a valuation allowance . changes in levels of valuation allowances could result in increased income tax expense , and could negatively affect earnings . 39 financial condition introduction . total assets increased $ 28.58 million , or 5.6 % , to $ 539.11 million at june 30 , 2014 , from $ 510.53 million at june 30 , 2013. the loan portfolio increased $ 59.31 million or 27.6 % , to $ 273.99 million at june 30 , 2014. securities available-for-sale decreased $ 29.41 million or 13.4 % , to $ 189.55 million at june 30 , 2014. total liabilities increased by $ 26.10 million , or 5.7 % , to $ 487.40 million at june 30 , 2014 , from $ 461.30 million at june 30 , 2013. total deposits increased $ 9.30 million or 2.2 % , to $ 427.05 million at june 30 , 2014. federal home loan bank ( fhlb ) advances and other borrowings increased $ 16.59 million or 47.6 % , to $ 51.45 million at june 30 , 2014. balance sheet details . almost all categories of securities available-for-sale decreased during the period with the largest decrease in collateralized mortgage obligations of $ 14.87 million or 31.2 % . the only increase during the period was in mortgage-backed securities which increased $ 2.23 million or 8.4 % . the main components of the increase in loans receivable of $ 59.31 million were residential mortgage loans which increased by $ 21.87 million , commercial real estate loans increasing by $ 17.64 million and commercial loans increasing by $ 12.63 million . home equity , consumer loans and construction loans also increased . total loan originations were $ 297.78 million for the year ended june 30 , 2014 , with single family mortgages accounting for $ 212.76 million of the total . home equity and construction loan originations totaled $ 12.92 million and $ 10.27 million , respectively , for the same period . commercial real estate and land loan originations totaled $ 41.42 million . consumer loans originated totaled $ 8.23 million . commercial loans originated totaled $ 12.18 million , with $ 3.34 million originating from loan syndication programs with borrowers residing outside of montana . loans held-for-sale decreased $ 3.56 million , to $ 17.25 million at june 30 , 2014 from $ 20.81 million at june 30 , 2013. one of the chief objectives of the sterling branch acquisition was to expand the bank 's footprint across southern montana . the amount of loans acquired was relatively small in comparison to the deposits acquired . as a result , the bank 's loan to deposit ratio declined substantially . the bank 's strategy has been to actively market and solicit commercial and commercial real estate loans while using investment portfolio proceeds to help fund the loan growth . growth occurred across most deposit products with the exception of time certificates of deposits which decreased slightly during the period . noninterest checking increased $ 5.46 million or 10.3 % , to $ 58.43 million at june 30 , 2014 , and money market accounts increased $ 2.53 million , or 3.0 % . interest bearing checking accounts increased $ 2.16 million , or 3.3 % , to $ 68.03 million at june 30 , 2014. management attributes the organic increase in deposits to increased marketing of checking accounts as well as customers ' preference for placing funds in secure , federally insured accounts . certificates of deposits decreased $ 5.30 million , or 3.4 % , to $ 152.20 million at june 30 , 2014. advances from the fhlb and other borrowings increased $ 16.59 million primarily due to the use of short-term fhlb advances to fund the bank 's mortgage banking operations during the quarter ended june 30 , 2014. total stockholders ' equity increased $ 2.48 million or 5.0 % , to $ 51.71 million at june 30 , 2014 from $ 49.23 million at june 30 , 2013. this was primarily a result of net income of $ 2.11 million and a decrease in accumulated other comprehensive loss of $ 1.13 million ( mainly due to a decrease in net unrealized losses on securities available-for-sale ) partially offset by dividends paid of $ 1.14 million . analysis of net interest income the bank 's earnings have historically depended primarily upon net interest income , which is the difference between interest income earned on loans and investments and interest paid on deposits and any borrowed funds . it is the single largest component of eagle 's operating income . net interest income is affected by ( i ) the difference between rates of interest earned on loans and investments and rates paid on interest-bearing deposits and borrowings ( the “ interest rate spread ” ) and ( ii ) the relative amounts of loans and investments and interest-bearing deposits and borrowings . the following table includes average balances for balance sheet items , as well as , interest and dividends and average yields related to the average balances .. all average balances are daily average balances . non-accrual loans were included in the computation of average balances , but have been reflected in the table as loans carrying a zero yield . the yields include the effect of deferred fees and discounts and premiums that are amortized or accreted to interest income or expense . 40 replace_table_token_18_th ( 1 ) interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities .
| net interest income and noninterest income are offset by provisions for loan losses , general administrative and other expenses , including salaries and employee benefits and occupancy and equipment costs , as well as by state and federal income tax expense . american federal savings bank has a strong mortgage lending focus , with the majority of its loan originations in single-family residential mortgages , which has enabled it to successfully market home equity loans , as well as a wide range of shorter term consumer loans for various personal needs ( automobiles , recreational vehicles , etc. ) . in recent years we have also focused on adding commercial loans to our portfolio , both real estate and non-real estate . we have made significant progress in this initiative . as of june 30 , 2014 , commercial real estate and land loans and commercial business loans represented 33.3 % and 12.4 % of the total loan portfolio , respectively . the purpose of this diversification is to mitigate our dependence on the mortgage market , as well as to improve our ability to manage our interest rate spread . with the acquisition of the sterling bank branches , the investment portfolio grew substantially during the prior fiscal year . as such , management is also focused on decreasing the investment portfolio as a percentage of total assets and offsetting this with growth in the loan portfolio . american federal savings bank 's management recognizes that fee income will also enable it to be less dependent on specialized lending and it now maintains a significant loan serviced portfolio , which provides a steady source of fee income . as of june 30 , 2014 , we had mortgage servicing rights , net of $ 3.76 million compared to $ 3.19 million as of june 30 , 2013. gain on sale of loans also provides significant fee income or noninterest income in periods of high mortgage loan origination volumes . such income will be adversely affected in periods of lower mortgage
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our dmss are typically integrated with oem data processing systems that enable automotive retailers to order vehicles and parts , receive vehicle records , process warranties , and check recall campaigns and service bulletins while helping them to fulfill their franchisee responsibilities to their oem franchisors . the company is organized into two main operating groups . the company 's first operating group is cdk north america which is comprised of two reportable segments , rsna and advertising north america ( `` ana '' ) . the second operating group , which is also a reportable segment , is cdki . a brief description of each of these three segments ' operations is provided below . retail solutions north america through our rsna segment , we provide technology-based solutions , including our dms products , a broad portfolio of layered software applications and services , a robust and secure interface to the dms through our partner program , data management and business intelligence solutions , a variety of professional services , and a full range of customer support solutions . these solutions help automotive retailers , oems , consumers and other industry participants manage the acquisition , sale , financing , insuring , parts supply , and repair and maintenance of vehicles . our solutions help our customers streamline their operations , better target and serve their customers , and enhance the financial performance of their retail operations . in addition to providing solutions to retailers and manufacturers of automobiles , we also provide solutions to retailers and manufacturers of heavy trucks , construction equipment , agricultural equipment , motorcycles , boats , and other marine and recreational vehicles . in addition to providing solutions to automotive retailers and oems , our rsna segment also provides solutions to retailers and manufacturers of heavy trucks , construction equipment , agricultural equipment , motorcycles , boats , and other marine and recreational vehicles . advertising north america through our ana segment , we provide advertising solutions , including management of digital advertising spend , for primarily north american automotive retailers , automotive retailer associations , and oems . these solutions provide a coordinated offering across multiple marketing channels to help achieve customer marketing and sales objectives and coordinate execution between oems and their retailer networks . cdk international through our cdki segment , we provide automotive retailers with core dms solutions and we offer automotive retailers and oems a variety of professional services , custom programming , consulting , implementation and training solutions , as well as a full range of customer support solutions in approximately 100 countries outside of the united states ( `` u.s. '' ) and canada . the solutions that we provide within this segment allow our customers to streamline their business operations and enhance their financial performance within their local marketplace , and in some cases where we deal directly with oems , across international borders . customers of this segment include automotive retail dealers and oems across europe , the middle east , asia , africa , and latin america . 28 business transformation plan during fiscal year ended june 30 , 2015 ( `` fiscal 2015 '' ) , we initiated a three-year business transformation plan designed to increase operating efficiency and improve the cost structure of our global operations . as we execute the business transformation plan , we continually monitor , evaluate and refine its structure , including its design , goals , term , and our estimate and allocation of total restructuring expenses . as part of this ongoing review process , in fiscal year ended june 30 , 2017 ( `` fiscal 2017 '' ) we extended the business transformation plan by one year through fiscal 2019. we estimated the cost to execute the plan through fiscal 2019 to be approximately $ 250.0 million and updated our target of additional consolidated adjusted ebitda generated to more than $ 300.0 million over four years with a targeted adjusted ebitda exit margin of 40 % or above for fiscal 2019. based on additional opportunities we identified to further improve our cost structure , we have increased the estimated cost to execute the plan through fiscal 2019 to be approximately $ 300.0 million , an increase of $ 50.0 million from previous estimates . the incremental cost savings will allow us to fund investment opportunities while maintaining the adjusted 40 % ebitda exit margin . we estimate approximately $ 100.0 million of restructuring expense and approximately $ 200.0 million of other expenses to implement the business transformation plan . for additional information on fiscal 2019 targets , see `` non-gaap measures '' below . the following table describes the key workstreams through which we monitor and evaluate our performance under the business transformation plan . workstream description moveup ! migrate customers to latest software versions ; engineer to reduce customizations streamline implementation streamline installation and training process through improved technology , process , tools , and workflow enhance customer service decrease resolution times through optimized case management and technology-enabled , intelligent , user-driven support optimize sales and product offering adjust sales structure ; reduce product complexity ; expand bundling ; optimize discount management ; standardize pricing simplify quote to cash reduce business complexity through integrated go-to-market model that leverages an automated contracting process , sku rationalization , and streamlined invoicing workforce efficiency and footprint increase efficiency through fewer layers and larger spans of control , geographic wage arbitrage , and reduced facility footprint strategic sourcing disciplined vendor management and vendor consolidation cdk international comprehensive optimization across back office , r & d , implementation , and support other restructuring expenses associated with the business transformation plan included employee-related costs , which represent severance and other termination-related benefits , and contract termination costs , which include costs to terminate facility leases . we recognized $ 20.9 million , $ 18.4 million , and $ 20.2 million of restructuring expenses for fiscal years ended june 30 , 2018 ( `` fiscal 2018 '' ) , 2017 and 2016 ( `` fiscal 2016 '' ) , respectively . story_separator_special_tag since the inception of the business transformation plan , we have recognized cumulative restructuring expenses of $ 61.9 million . restructuring expenses are presented separately on the consolidated statements of operations . restructuring expenses are recorded in the other segment , as these initiatives are predominantly centrally directed and are not included in internal measures of segment operating performance . 29 accruals for restructuring expenses were included within accrued expenses and other current liabilities on the consolidated balance sheets as of june 30 , 2018 and 2017 . the following table summarizes the activity for the restructuring accrual for fiscal 2018 and 2017 : replace_table_token_4_th in addition to the restructuring expenses discussed above , we incur additional costs to implement the business transformation plan , including consulting , training , and transition costs . we incur accelerated depreciation and or amortization expenses when the expected useful lives of our assets are adjusted . while these costs are directly attributable to our business transformation plan , they are not included in restructuring expenses on our consolidated statements of operations . we recognized $ 51.1 million , $ 80.6 million , and $ 39.7 million of other business transformation expenses , inclusive of stock-based compensation expense and accelerated depreciation , for fiscal 2018 , 2017 , and 2016 , respectively . since the inception of the business transformation plan in the fourth quarter of fiscal 2015 , we have recognized cumulative other business transformation expenses of $ 173.3 million . in december 2015 , we announced our intent to return $ 1.0 billion to our stockholders in the form of dividends and share repurchases . in december 2016 , we completed the $ 1.0 billion return of capital plan . in february 2017 , we announced our intent to return $ 750 million to $ 1.0 billion of capital to shareholders per calendar year through 2019 through a combination of dividends and share repurchases . we believe that the execution of our business transformation plan will continue to result in increased earnings , which will drive free cash flow ( the amount of cash generated from operating activities less capital expenditures and capitalized software ) . we intend to continue to return free cash flow to our stockholders as our business transformation plan progresses . our new return of capital plan has been and is expected to continue to be , funded through a combination of free cash flow and incremental borrowings intended to bring leverage , measured as financial debt , net of cash , divided by adjusted ebitda , to a range of 2.5x to 3.0x over the period . sources of revenues and expenses revenues . we generally receive fee-based revenue by providing services to customers . in our rsna segment , we have the following sources of revenue : subscription : for software and technology solutions provided to automotive retailers and oems , which includes : dmss and layered applications , which may be installed on-site at the customer 's location , or hosted and provided on a saas basis , including ongoing maintenance and support ; interrelated services such as installation , initial training , and data updates ; websites , search marketing , and reputation management services ; and hardware on a service basis , meaning no specific assets are identified or a substantive right of substitution exists . transaction : fees per transaction to process credit reports , vehicle registrations , and automotive equity mining . other : consulting and professional services , sales of hardware , and other miscellaneous revenues . in our ana segment , revenues are primarily earned for placing internet advertisements for oems and automotive retailers . 30 cdki revenues are generated primarily from subscription revenue as described above , aside from the absence of layered applications and website offerings . expenses . expenses generally relate to the cost of providing services to customers in our three reportable segments . in the rsna and cdki segments , significant expenses include employee payroll and other labor-related costs , the cost of hosting customer systems , third-party costs for transaction-based solutions and licensed software utilized in our solution offerings , computer hardware , software , telecommunications , transportation and distribution costs , third-party content for website offerings , the cost of hosting customer websites , computer hardware , software , and other general overhead items . in the ana segment , significant expenses include third-party internet-based advertising placements , employee payroll and other labor-related costs , computer hardware , software , and other general overhead items . we also have some company-wide expenses attributable to management compensation and corporate overhead . potential material trends and uncertainties in our marketplace a number of material trends and or uncertainties in our marketplace could have either a positive or negative impact on our ability to conduct business , our results of operations , and or our financial condition . the following is a summary of trends or uncertainties that have the potential to affect our liquidity , capital resources , or results of operations : our revenues , operating earnings , and profitability have varied in the past as a result of these trends and uncertainties and are likely to continue to vary from quarter to quarter , which may lead to volatility in our stock price . these trends or uncertainties could occur in a variety of different areas of our business and the marketplace . changing market trends , including changes in the automotive marketplace , both in north america and internationally , could have a material impact on our business . from time to time , the economic trends of a region could have an impact on the volume of automobiles sold at retail within one or more of the geographic markets in which we operate . to some extent , our business is impacted by these trends , either directly through a shift in the number of transactions processed by customers of our transactional business , or indirectly through changes in our customers ' spending habits based on their own changes in profitability .
| by adjusting for these items we believe we have more precise inputs for use as factors in ( i ) our budgeting process , ( ii ) making financial and operational decisions , ( iii ) evaluating ongoing segment and overall operating performance on a consistent period-to-period basis and relative to our competitors , ( iv ) target leverage calculations , ( v ) debt covenant calculations , and ( vi ) determining incentive-based compensation . we believe our non-gaap financial measures are helpful to users of the financial statements because they ( i ) provide investors with meaningful supplemental information regarding financial performance by excluding certain items , ( ii ) permit investors to view performance using the same tools that management uses , and ( iii ) otherwise provide supplemental information that may be useful to investors in evaluating our ongoing operating results on a consistent basis . we believe that the presentation of these non-gaap financial measures , when considered in addition to with the corresponding gaap financial measures and the reconciliations to those measures disclosed below , provides investors with a fuller understanding of the factors and trends affecting our business than could be obtained absent these disclosures . we use constant currency revenues and constant currency adjusted earnings before income taxes as a way to review revenues and adjusted earnings before income taxes on a constant currency basis to understand underlying business trends . to present these results on a constant currency basis , current period results for entities reporting in currencies other than the u.s. dollar were translated into u.s. dollars using the average monthly exchange rates for the comparable prior period . as a result , constant currency results neutralize the effects of foreign currency . effective july 1 , 2017 , we incorporated additional adjustments within our calculations of adjusted earnings before income taxes , adjusted provision for income taxes , adjusted net earnings attributable to cdk , adjusted diluted net earnings attributable to cdk per share , adjusted ebitda , and adjusted ebitda margin where management has deemed it appropriate to better reflect our underlying operations . for fiscal 2018 , management modified the fiscal 2017 and fiscal 2016 adjustments for ( i ) other business transformation expenses and ( ii ) officer transition expense to remove stock-based compensation expense since we will exclude total stock-based compensation expense and certain legal and regulatory expenses
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we own and lease sites located in pennsylvania , new jersey , ohio , new york , massachusetts , kentucky , new hampshire , maine , florida , maryland , delaware , tennessee , virginia , illinois , indiana and west virginia . we also distribute motor fuel in georgia and north carolina . as a result of the erickson and landmark acquisitions in 2015 , we own and lease sites in minnesota , michigan , wisconsin , south dakota and texas . based on the most recent data available from the energy information agency , of the 23 states in which we distribute motor fuel , nine were among the top ten consumers of gasoline in the united states and eight were among the top ten consumers of on-highway diesel fuel in the united states for 2013. recent developments acquisition of general partner by cst on october 1 , 2014 , cst consummated the sale to cst of 100 % of the membership 's interest in our general partner from dmi , an entity wholly owned by the topper trust for which joseph v. topper , jr. is the trustee ( the gp purchase ) , and all of the membership interests in limited liability companies formed by trusts for which each of mr. topper and john b. reilly , iii serves as trustee , which limited liability companies own all of the idrs . cst is one of the largest independent retailers of motor fuels and convenience merchandise in north america . the general partner manages the operations and activities of the partnership . the partnership is managed and operated by the board of directors and executive officers of the general partner . as a result of the gp purchase , cst controls the general partner and has the right to appoint all members of the board of directors of the general partner . immediately following the gp purchase , we changed the name of the partnership from lehigh gas partners lp to crossamerica partners lp and began trading on the new york stock exchange under the symbol capl. 45 voting agreement mr. topper entered into a voting agreement dated as of october 1 , 2014 , by and among mr. topper , the topper trust , dmi , an entity wholly owned by the topper trust for which mr. topper is the trustee ( collectively , the topper sellers ) and cst ( the voting agreement ) pursuant to which each of the topper sellers agrees that at any meeting of the holders of shares of cst common stock or common units or subordinated units of the partnership it will vote or cause to be voted such topper seller 's shares or units , respectively , in accordance with the recommendation of the board of directors of cst or the board of directors of the general partner , respectively . the voting agreement will remain in effect with respect to any topper seller for so long as any such topper seller is ( a ) a director or officer of cst or affiliate thereof , including the partnership , ( b ) the beneficial owner of more than 3 % of the outstanding common stock of cst or ( c ) the beneficial owner of 10 % or more of the outstanding common units or subordinated units of the partnership . board of directors on and effective as of october 1 , 2014 , melinda b. german , warren s. kimber , jr. , john f. malloy , maura e. topper and robert l. wiss , each a member of the board of directors of the general partner , resigned in his or her capacity as such . mr. topper and mr. reilly remain members of the board of directors of the general partner . cst has agreed to cause the appointment of mr. topper as a director of the general partner for a period of at least five years commencing on october 1 , 2014 or until a change in control of cst including circumstances in which cst no longer controls the general partner . further , mr. topper may be removed from the board of directors of the general partner in certain circumstances where cause exists . on and effective as of october 1 , 2014 , cst , as the owner of the general partner , appointed each of the following as members to the board of directors of the general partner : kimberly s. lubel , chief executive officer , president and chairman of the board of directors of cst , clayton e. killinger , senior vice president and chief financial officer of cst , and stephan f. motz , senior vice president and chief development officer of cst , as directors of the board of directors of the general partner , and gene edwards and justin a. gannon as independent directors of the board of directors of the general partner . employment agreement mr. topper and cst services entered into an employment agreement dated as of october 1 , 2014 ( the topper employment agreement ) , pursuant to which mr. topper was appointed as the chief executive officer and president of the general partner . the topper employment agreement has a term of one year and will automatically renew for an additional one year term unless the parties agree otherwise or either party gives 60-day written notice prior to the end of the initial term . mr. topper 's base salary is $ 525,000 per year . he is eligible to receive a short-term incentive award equal to 75 % of his base salary and an equity award equal to 200 % of his base salary . mr. topper is entitled to participate in all employee benefit plans and programs generally available to similarly situated executives of cst services llc . cst services may terminate mr. topper 's employment at any time for any reason . story_separator_special_tag per the terms of the topper employment agreement , mr. topper agrees that , during his employment and for a period equal to the greater of ( i ) the balance of his employment term and ( ii ) one year following termination for cause or his resignation without good reason ( the restricted period ) , ( x ) he will not solicit or in any way be involved with any prior , current or prospective customer , client , consultant , broker or business partner of , or any person who had dealings with , cst services or the partnership and ( y ) he will not solicit for employment any person who is or was within the preceding six months an employee or consultant of cst services or the partnership . per the terms of the topper employment agreement , during the restricted period , mr. topper also agrees that he will not associate in any way with any business that at any time during the restricted period is engaged in the business of cst services or the partnership other than those activities and businesses that mr. topper controls as of october 1 , 2014. amended and restated omnibus agreement we also entered into an amended and restated omnibus agreement , dated october 1 , 2014 , by and among the partnership , the general partner , dmi , cst services , lgo and mr. topper ( the amended omnibus agreement ) , which amends and restates the original omnibus agreement . the terms of the amended omnibus agreement were approved by the former conflicts committee of the board of directors of the general partner , which is comprised solely of independent directors . 46 general . pursuant to the amended omnibus agreement , cst services agrees , among other things , to provide , or cause to be provided , to the partnership the management services previously provided by dmi on substantially the same terms and conditions as were applicable to dmi under the original omnibus agreement . pursuant to the terms of a transition services agreement by and between dmi and cst services , dmi provided the management services it provided under the original omnibus agreement to the partnership on behalf of cst services through december 31 , 2014. the initial term of the amended omnibus agreement is five years and will automatically renew for additional one year terms unless any party provides written notice to the other parties 180 days prior to the end of the then current term . the partnership has the right to terminate the agreement at any time upon 180 days ' prior written notice . rights of first refusal . the amended omnibus agreement provides that mr. topper , dmi and lgo agree , and are required to cause their controlled affiliates to agree , that for so long as mr. topper is an officer or director of the general partner or cst , if ( a ) mr. topper , dmi , lgo , or any of their controlled affiliates have the opportunity to acquire assets used , or a controlling interest in any business primarily engaged , in the wholesale motor fuel distribution or retail gas station operation businesses , and ( b ) the assets or businesses proposed to be acquired have a value exceeding $ 5.0 million in the aggregate , then mr. topper , dmi , lgo , or their controlled affiliates will offer such acquisition opportunity to the partnership and give the partnership a reasonable opportunity to acquire , at the same price plus any related transaction costs and expenses , such assets or business , either before or promptly after the consummation of such acquisition by mr. topper , dmi , lgo , or their controlled affiliates . the decision to acquire or not acquire any such assets or businesses requires the approval of the conflicts committee of the board of directors of the general partner . any assets or businesses that the partnership does not acquire pursuant to the right of first refusal may be acquired and operated by mr. topper , dmi , lgo , or their controlled affiliates . rights of first offer . the amended omnibus agreement provides that mr. topper , dmi and lgo agree , and are required to cause their controlled affiliates to agree , for so long as mr. topper is an officer or director of the general partner or cst , to notify the partnership of their desire to sell any of their assets or businesses if ( a ) mr. topper , dmi , lgo , or any of their controlled affiliates , decides to attempt to sell ( other than to another controlled affiliate of mr. topper , dmi or lgo ) any assets used , or any interest in any business primarily engaged , in the wholesale motor fuel distribution or retail gas station operation businesses , to a third party and ( b ) the assets or businesses proposed to be sold have a value exceeding $ 5.0 million in the aggregate . prior to selling such assets or businesses to a third party , mr. topper , dmi and lgo are required to negotiate with the partnership exclusively and in good faith for a reasonable period of time in order to give the partnership an opportunity to enter into definitive documentation for the purchase and sale of such assets or businesses on terms that are mutually acceptable to mr. topper , dmi , lgo , or their controlled affiliates , and the partnership .
| 51 rent income - we evaluate our sites ' performance based , in part , on the rent income we earn from them . for leased sites , we consider the rent income after payment of our lease obligations for the site . we use this information in combination with the fuel-related metrics noted previously to assess the effectiveness of pricing strategies for our leases , the performance of a site as compared to other sites we own or lease , and compare rent income of sites we seek to acquire or lease . ebitda , adjusted ebitda and distributable cash flow - our management uses ebitda , adjusted ebitda and distributable cash flow to analyze our performance as more fully described in non-gaap financial measures later in item 7. comparison of years ended december 31 , 2014 and 2013 the following table sets forth our statements of operations for the years ended december 31 , 2014 and 2013 ( in thousands ) : replace_table_token_7_th 52 the partnership began operating in two reportable segments commencing september 1 , 2013. effective with the pmi acquisition , the partnership now also engages in the operation of convenience stores and branded quick-service restaurants . given these changes , the partnership conducts its business in two segments : 1 ) the wholesale segment and 2 ) the retail segment . unallocated costs consist primarily of interest expense associated with the credit facility , selling , general and administrative expenses , income taxes and the elimination of the retail segment 's intersegment cost of revenues from fuel sales against the wholesale segment 's intersegment revenues from fuel sales . the profit in ending inventory generated by the intersegment fuel sale is also eliminated . the table below presents our results for the year ended december 31 , 2014 by segment ( in thousands ) . replace_table_token_8_th 53 the table below presents our results for the year ended december 31 , 2013 by segment ( in thousands ) . replace_table_token_9_th revenues and costs from fuel sales our aggregate revenues from fuel sales , which include revenues from fuel sales to related
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the effective tax rates for 2015 , 2014 and 2013 are lower than the u.s. statutory rate of 35 % primarily due to lower tax rates on non-u.s. earnings , the vast majority of which we intend to permanently reinvest outside the united states . the company currently expects the effective tax rate for 2016 to be approximately 26.5 % . the effective tax rate can vary from quarter to quarter due to unusual or infrequently occurring items , the resolution of income tax audits , changes in tax laws or other items such as pension mark-to-market adjustments . net income attributable to honeywell replace_table_token_8_th earnings per share of common stockassuming dilution increased in 2015 compared with 2014 primarily driven by increased segment profit in each of our business segments and lower pension and other postretirement expense , partially offset by increased tax expense and lower other income ( principally due to the absence of a realized gain related to the prior year sale of marketable equity securities ) . earnings per share of common stockassuming dilution increased in 2014 compared with 2013 primarily due to increased segment profit in each of our business segments and lower repositioning and other charges , partially offset by higher pension and other postretirement expense and increased tax expense . business overview our consolidated results are principally impacted by : change in global economic growth rates and industry conditions and demand in our key end markets ; overall sales mix , in particular the mix of aerospace original equipment and aftermarket sales and the mix of acs products , distribution and services sales ; the impact of fluctuations in foreign currency exchange rates ( in particular the euro ) , relative to the u.s. dollar ; the extent to which cost savings from productivity actions are able to offset or exceed the impact of material and non-material inflation ; and the impact of the pension discount rate and asset returns on pension expense , including mark-to-market adjustments , and funding requirements . our 2016 areas of focus are supported by the honeywell enablers , including hos gold , are generally applicable to each of our operating segments and include : driving profitable growth through r & d , technological excellence and optimized manufacturing capability to deliver innovative products that customers value ; expanding margins by maintaining and improving the company 's cost structure through manufacturing and administrative process improvements , repositioning , and other actions , which will drive productivity and enhance the flexibility of the business as it works to proactively respond to changes in end market demand ; 17 driving strong cash flow conversion through effective working capital management which will enable the company to deploy capital for strategic acquisitions , capital expenditures and returning cash to shareholders ; driving organic growth through expansion of our localized footprint in high growth regions , including china , india , eastern europe , the middle east and latin america ; executing disciplined , rigorous m & a and integration processes to deliver inorganic growth through previously announced acquisitions while also identifying appropriate acquisitions to further deploy our capital effectively ; aligning and prioritizing capital expenditures for long-term growth , while considering short-term demand volatility ; actively monitoring trends in the oil and gas industry end markets , principally the demand from midstream and downstream customers for products and services provided by process solutions and uop ; monitoring both suppliers and customers for signs of liquidity constraints , limiting exposure to any resultjing inability to meet delivery commitments or pay amounts due , and identifying alternate sources of supply as necessary ; proactively managing raw material costs through formula and long-term supply agreements and hedging activities , where feasible and prudent ; and controlling corporate and other non-operating costs , including costs incurred for asbestos and environmental matters , pension and other post-retirement expenses and tax expense . review of business segments replace_table_token_9_th 18 aerospace replace_table_token_10_th replace_table_token_11_th 2015 compared with 2014 aerospace sales decreased primarily due to the unfavorable impact from foreign currency translation and the friction materials divestiture , partially offset by an increase in organic sales , as discussed below , and a decrease in incentives predominantly to air transport and regional aviation original equipment manufacturers ( oem incentives ) . commercial original equipment sales increased by 11 % ( increased 5 % organic ) primarily driven by a decrease in oem incentives and higher business and general aviation engine shipments . commercial aftermarket sales increased by 2 % ( increased 2 % organic ) primarily driven by higher repair and overhaul activities , partially offset by lower retrofits , modifications and upgrades for business and general aviation customers . defense and space sales decreased by 1 % ( flat organic ) primarily due to lower u.s. government revenue , partially offset by growth in international programs . transportation systems sales decreased by 19 % ( increased 3 % organic ) primarily due to the unfavorable impact from foreign currency translation and the friction materials divestiture , partially offset by continued growth from new platform launches and higher global turbo gas penetration . aerospace segment profit increased primarily due to an 8 % increase in operational segment profit and a 6 % favorable impact of acquisitions , divestitures and other ( predominantly the absence of higher prior year oem incentives ) , as discussed above , partially offset by a 4 % unfavorable impact of foreign currency translation . the increase in operational segment profit is primarily driven by productivity , net of inflation , and favorable pricing , partially offset by continued investments for growth . cost of products and services sold decreased primarily due to the favorable impact of foreign currency translation , the friction materials divestiture , and productivity , net of inflation , partially offset by continued investments for growth . 2014 compared with 2013 aerospace sales decreased primarily due to the friction materials divestiture and an increase in oem incentives , partially offset by an increase in organic sales , as discussed below . story_separator_special_tag commercial original equipment sales decreased by 2 % ( increased by 3 % organic ) primarily due to an increase in oem incentives to air transport and regional original equipment manufacturers ( oems ) , partially offset by higher air transport volumes , consistent with the oems ' higher production rates , and business and general aviation engine shipments . commercial aftermarket sales increased by 3 % driven primarily by higher sales of spare parts to air transport and regional customers , partially offset by a decline in retrofits , modifications and 19 upgrades and lower repair and overhaul activities for our business and general aviation customers . defense and space sales decreased by 2 % primarily due to lower u.s. government services revenue and the absence of a prior year royalty gain , partially offset by growth in international programs . transportation systems sales decreased by 3 % ( increased by 5 % organic ) primarily due to the friction materials divestiture , partially offset by continued growth from new platform launches , higher global turbo gas penetration and increased commercial vehicle demand in europe . aerospace segment profit increased primarily due to an 8 % increase in operational segment profit , partially offset by a 6 % unfavorable impact from acquisitions , divestitures and other ( predominantly higher oem incentives and the absence of a prior year royalty gain ) , as discussed above . the increase in operational segment profit is driven primarily by favorable price and productivity , net of inflation . cost of products and services sold decreased primarily due to the factors discussed above ( excluding price ) . automation and control solutions replace_table_token_12_th replace_table_token_13_th 2015 compared with 2014 acs sales decreased primarily due to the unfavorable impact of foreign currency translation , partially offset by organic sales growth and growth from acquisitions , net of divestitures . sales in energy , safety & security decreased by 2 % ( increased by 2 % organic ) principally due to the unfavorable impact of foreign currency translation partially offset by organic sales growth and acquisitions , net of divestitures . organic sales growth was primarily due to increased sales volumes , most significantly in security and fire across all regions , as well as sensing & productivity solutions . sales in building solutions & distribution decreased by 4 % ( increased by 2 % organic ) principally due to the unfavorable impact of foreign currency translation . organic sales growth was primarily due to increased sales volume in americas distribution partially offset by softness in the project installation and u.s. energy retrofit businesses , which is expected to continue . acs segment profit increased due to an increase in operational segment profit and acquisitions , net of divestitures partially offset by the unfavorable impact of foreign currency translation . the increase in operational segment profit is primarily due to the positive impact of price and productivity net of inflation and higher organic sales volumes partially offset by continued investments for growth . cost of products and services decreased primarily due to the favorable impact of foreign currency translation and productivity partially offset by higher organic sales volume and inflation . 20 2014 compared with 2013 acs sales increased primarily due to growth from acquisitions , net of divestitures and organic sales growth , partially offset by the unfavorable impact of foreign currency translation . sales in energy , safety & security increased by 11 % ( 4 % organic ) principally due to ( i ) acquisitions , net of divestitures , ( ii ) higher global sales volumes in our environmental & energy solutions business driven by strong u.s. residential market conditions and new product introductions , ( iii ) increases in sales volumes in our security and fire and industrial safety businesses driven by organic growth in all regions and ( iv ) increases in sales volumes in our sensing & productivity solutions business in the second half of 2014. sales in building solutions & distribution increased by 1 % ( 2 % organic ) principally due to increased sales volumes in our americas distribution business partially offset by softness in the u.s. energy retrofit business . building solutions backlog increased in 2014. acs segment profit increased due to an increase in operational segment profit and acquisitions , net of divestitures , partially offset by the unfavorable impact of foreign currency translation . the increase in operational segment profit is primarily the result of higher sales volumes as discussed above , and the positive impact of price and productivity , net of inflation partially offset by continued investment for growth . cost of products and services sold increased primarily due to higher sales volume , acquisitions , net of divestitures and inflation , partially offset by productivity and the favorable impact of foreign currency translation . performance materials and technologies replace_table_token_14_th replace_table_token_15_th 2015 compared with 2014 performance materials and technologies ( pmt ) sales decreased due to a decrease in organic sales volumes and the unfavorable impact of foreign currency translation . uop sales decreased 7 % ( decreased 6 % organic ) driven primarily by lower gas processing revenues due to a significant slowdown in customer projects , which is expected to continue , and decreased equipment , engineering and licensing revenues partially offset by increased catalyst revenues . process solutions sales decreased 12 % ( decreased 3 % organic ) driven primarily by the unfavorable impact of foreign currency translation and lower volumes primarily due to weakness in projects and field products , which is expected to moderate during 2016. advanced materials sales decreased 10 % ( decreased 7 % organic ) primarily driven by lower raw material pass-through pricing and unplanned plant outages in resins and chemicals partially offset by increased volumes in fluorine products . we anticipate volatility in raw materials pass-through pricing to continue in 2016 primarily in resins and chemicals where sales fluctuate with the market price of certain raw materials , which are correlated to the price of oil .
| 2014 compared with 2013 cash provided by operating activities increased by $ 689 million primarily due to ( i ) a $ 508 million increase of net income before the non-cash pension mark-to-market adjustment , ( ii ) reduced net payments for repositioning and other charges of $ 233 million primarily due to the collection of a $ 130 million asbestos receivable due from one of our insurance carriers and lower asbestos related payments of $ 98 million , ( iii ) reduced cash contributions to our pension and other postretirement plans of $ 131 million and ( iv ) lower cash tax payments of approximately $ 129 million , partially offset by a $ 93 million unfavorable impact from working capital primarily driven by higher inventory to support sales growth . cash used for investing activities decreased by $ 83 million primarily due to a decrease in cash paid for acquisitions of $ 1,129 million most significantly intermec and rae systems , inc. in 2013 and an increase in proceeds from the sales of businesses of $ 157 million ( most significantly friction materials ) , partially offset by ( i ) a net $ 688 million increase in investments primarily short-term marketable securities , ( ii ) an increase of approximately $ 371 million in settlement payments of foreign currency exchange contracts used as economic hedges on certain non-functional currency 23 denominated monetary assets and liabilities and ( iii ) a $ 147 million increase in expenditures for property , plant and equipment . cash used for financing activities increased by $ 1,839 million primarily due to a decrease in the net proceeds from debt issuances of $ 1,589 million , an increase in cash dividends paid of $ 157 million and lower net proceeds from the issuance of common stock of $ 33 million . liquidity each of our businesses is focused on implementing strategies to increase operating cash flows through revenue growth , margin expansion and improved working capital turnover . considering the current economic environment in which each of the businesses operate and their business plans and strategies , including the focus on growth , cost reduction and productivity initiatives , we believe that cash balances and operating cash flow will continue to be our principal source of liquidity . in addition to the available cash and operating cash flows , additional sources of liquidity include committed credit lines , short-term debt from the commercial paper markets , long-term borrowings , and access to the public debt
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” overview we were formed in april 2017 as a specialty pharmaceutical company focused on developing and commercializing innovative pharmaceutical products utilizing the fda 's 505 ( b ) ( 2 ) regulatory pathway . our business model is to develop proprietary innovative products that fulfill an unmet patient need . since our formation , we have focused our efforts on the development of our initial product candidates , engaging in preliminary discussions with the fda concerning the regulatory pathway for certain additional product candidates , registration filings of our initial product candidates and the licensing of late-stage product candidates . we have established a diversified pipeline of product candidates in various stages of development , four of which have been submitted to the fda and are under review . we intend to focus on product candidates that are liquid in formulation , including injectables , oral liquids and ophthalmics , and qualify under the fda 's 505 ( b ) ( 2 ) regulatory pathway . our corporate strategy is to pursue what we perceive to be low-risk product candidates where existing published literature , historical clinical trials , or physician usage has established safety and or efficacy of the molecule , thereby reducing the incremental clinical burden required for us to bring the product to patients . we intend to pursue product candidates that require a single small phase 3 trial , a bio-equivalence trial , or literature-based filings . prior to initiating significant development activities on a product candidate , we typically meet with the fda to establish a defined clinical and regulatory path to approval . we believe our product candidates can address situations where patient needs are not being met by current fda-approved pharmaceutical products . this may include products that are being supplied on an unapproved basis , products that are currently being compounded , and products that are approved and widely used internationally but not approved in the united states . 54 story_separator_special_tag payments , clinical trial activities , manufacturing and control-related activities and regulatory costs . r & d expenses are charged to operations as incurred . we review and accrue r & d expenses based on services performed and rely upon estimates of those costs applicable to the stage of completion of each project . significant judgments and estimates are made in determining the accrued balances at the end of any reporting period . actual results could differ from our estimates . upfront payments and milestone payments made for the licensing of technology for products that are not yet approved by the fda are expensed as r & d in the period in which they are incurred . nonrefundable advance payments for goods or services to be received in the future for use in r & d activities are recorded as prepaid expenses and are expensed as the related goods are delivered or the services are performed . warrant liability we estimated the fair value of certain warrants at each reporting period using level 3 inputs . the estimates in valuation models were based , in part , on subjective assumptions , including but not limited to stock price volatility , the expected life of the warrants , the risk-free interest rate and the exercise price of the warrants , and could differ materially in the future . changes in the fair value of the warrant liability during the periods prior to the ipo were recorded as a component of other income ( expense ) . we continued to adjust the fair value of the warrant liability at the end of each reporting period for changes in fair value until the earlier of the exercise or expiration of the applicable warrants or when the number of shares issuable upon exercise of these warrants became fixed which occurred with our ipo in november 2018. beneficial conversion feature prior to the ipo in november 2018 , we classified our series a preferred as temporary equity due to a possible cash redemption feature in the event that an ipo or alternate financing was not available by december 31 , 2018. at the ipo date , the series a preferred automatically converted into shares of our common stock . the conversion share calculation was based on the $ 3.00 initial issue price for the series a preferred plus any accrued but unpaid dividends and converted to our common stock using a stated divisor conversion price equal to 50 % of the ipo price to the public which was $ 6.00 per share . in accordance with relevant accounting literature , since the stated terms of the conversion option did not permit us to compute the additional number of shares that we would need to issue upon conversion of the series a preferred when the contingent event would occur , we recorded the beneficial conversion amount as a deemed dividend at the date of the ipo in november 2018. off balance sheet transactions we do not have any off-balance sheet transactions . 57 jobs act transition period in april 2012 , the jumpstart our business startups act of 2012 ( the “ jobs act ” ) , was enacted . section 107 of the jobs act provides that an “ emerging growth company ” can take advantage of the extended transition period provided in section 7 ( a ) ( 2 ) ( b ) of the securities act for complying with new or revised accounting standards . thus , an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies . we have irrevocably elected not to avail ourselves of this extended transition period and , as a result , we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies . we are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the story_separator_special_tag ” overview we were formed in april 2017 as a specialty pharmaceutical company focused on developing and commercializing innovative pharmaceutical products utilizing the fda 's 505 ( b ) ( 2 ) regulatory pathway . our business model is to develop proprietary innovative products that fulfill an unmet patient need . since our formation , we have focused our efforts on the development of our initial product candidates , engaging in preliminary discussions with the fda concerning the regulatory pathway for certain additional product candidates , registration filings of our initial product candidates and the licensing of late-stage product candidates . we have established a diversified pipeline of product candidates in various stages of development , four of which have been submitted to the fda and are under review . we intend to focus on product candidates that are liquid in formulation , including injectables , oral liquids and ophthalmics , and qualify under the fda 's 505 ( b ) ( 2 ) regulatory pathway . our corporate strategy is to pursue what we perceive to be low-risk product candidates where existing published literature , historical clinical trials , or physician usage has established safety and or efficacy of the molecule , thereby reducing the incremental clinical burden required for us to bring the product to patients . we intend to pursue product candidates that require a single small phase 3 trial , a bio-equivalence trial , or literature-based filings . prior to initiating significant development activities on a product candidate , we typically meet with the fda to establish a defined clinical and regulatory path to approval . we believe our product candidates can address situations where patient needs are not being met by current fda-approved pharmaceutical products . this may include products that are being supplied on an unapproved basis , products that are currently being compounded , and products that are approved and widely used internationally but not approved in the united states . 54 story_separator_special_tag payments , clinical trial activities , manufacturing and control-related activities and regulatory costs . r & d expenses are charged to operations as incurred . we review and accrue r & d expenses based on services performed and rely upon estimates of those costs applicable to the stage of completion of each project . significant judgments and estimates are made in determining the accrued balances at the end of any reporting period . actual results could differ from our estimates . upfront payments and milestone payments made for the licensing of technology for products that are not yet approved by the fda are expensed as r & d in the period in which they are incurred . nonrefundable advance payments for goods or services to be received in the future for use in r & d activities are recorded as prepaid expenses and are expensed as the related goods are delivered or the services are performed . warrant liability we estimated the fair value of certain warrants at each reporting period using level 3 inputs . the estimates in valuation models were based , in part , on subjective assumptions , including but not limited to stock price volatility , the expected life of the warrants , the risk-free interest rate and the exercise price of the warrants , and could differ materially in the future . changes in the fair value of the warrant liability during the periods prior to the ipo were recorded as a component of other income ( expense ) . we continued to adjust the fair value of the warrant liability at the end of each reporting period for changes in fair value until the earlier of the exercise or expiration of the applicable warrants or when the number of shares issuable upon exercise of these warrants became fixed which occurred with our ipo in november 2018. beneficial conversion feature prior to the ipo in november 2018 , we classified our series a preferred as temporary equity due to a possible cash redemption feature in the event that an ipo or alternate financing was not available by december 31 , 2018. at the ipo date , the series a preferred automatically converted into shares of our common stock . the conversion share calculation was based on the $ 3.00 initial issue price for the series a preferred plus any accrued but unpaid dividends and converted to our common stock using a stated divisor conversion price equal to 50 % of the ipo price to the public which was $ 6.00 per share . in accordance with relevant accounting literature , since the stated terms of the conversion option did not permit us to compute the additional number of shares that we would need to issue upon conversion of the series a preferred when the contingent event would occur , we recorded the beneficial conversion amount as a deemed dividend at the date of the ipo in november 2018. off balance sheet transactions we do not have any off-balance sheet transactions . 57 jobs act transition period in april 2012 , the jumpstart our business startups act of 2012 ( the “ jobs act ” ) , was enacted . section 107 of the jobs act provides that an “ emerging growth company ” can take advantage of the extended transition period provided in section 7 ( a ) ( 2 ) ( b ) of the securities act for complying with new or revised accounting standards . thus , an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies . we have irrevocably elected not to avail ourselves of this extended transition period and , as a result , we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies . we are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the
| we currently have nine employees that support our overall product development and we also have facility and operating costs for a laboratory that will support product development . we do not track internal costs by product for our employees and laboratory expenses and they are listed as indirect expenses in the table below ( amounts are in thousands ) . replace_table_token_1_th liquidity and capital resources as of december 31 , 2018 , we had total assets of $ 28.3 million and working capital of $ 25.5 million . we had previously capitalized our operations primarily from the june 2017 private placement of approximately $ 20.1 million of series a preferred stock , par value $ 0.001 ( the “ series a preferred ” ) . our series a preferred accumulated dividends at the rate of 6 % per annum and those shares of stock plus all accrued but unpaid dividends automatically converted into shares of our common stock concurrent with our ipo in november 2018 at the conversion price of 50 % of the ipo price . the ipo provided us with net proceeds of $ 22.0 million which we believe should be sufficient for at least the next twelve months of our operations including through securing regulatory approval and commencement of commercial sales for at least one product candidate . we do not anticipate requiring additional funding after that point , however our projected estimates for our product development spending , administrative expenses and our working capital requirements could be inaccurate , or we may experience growth more quickly or on a larger scale than we expect , any of which could result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional financing earlier than we expect to support our operations . 55 cash flows the following table sets forth a summary of our cash flows for the periods ended december 31 , 2018 and 2017 ( amounts are in thousands ) : replace_table_token_2_th the increase in cash used in operating activities is primarily a result of higher operating losses due to our business expansion including
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investing in land and land development in desirable markets , while controlling the level of land and lots we own in each market relative to the local new home demand . continuing to seek opportunities to expand the portion of our land and finished lots controlled through purchase contracts by assisting forestar with its operations and expanding our relationships with land developers across the country . controlling the cost of goods purchased from both vendors and subcontractors . improving the efficiency of our land development , construction , sales and other key operational activities . controlling our selling , general and administrative ( sg & a ) expense infrastructure to match production levels . opportunistically evaluating potential acquisitions to enhance our operations and improve returns . ensuring that our financial services business provides high quality mortgage and title services to homebuyers efficiently and effectively . investing in the construction of single-family and multi-family rental properties to meet rental demand in high growth suburban markets and selling these properties profitably . we believe our operating strategy , which has produced positive results in recent years , will allow us to successfully operate through changing economic conditions to maintain and improve our financial and competitive position . however , we can not provide any assurances that the initiatives listed above will continue to be successful , and we may need to adjust components of our strategy to meet future market conditions . 29 story_separator_special_tag east : delaware , georgia ( savannah only ) , maryland , new jersey , north carolina , pennsylvania , south carolina and virginia midwest : colorado , illinois , indiana , iowa , minnesota and ohio southeast : alabama , florida , georgia , mississippi and tennessee south central : louisiana , oklahoma and texas southwest : arizona and new mexico west : california , hawaii , nevada , oregon , utah and washington the following tables and related discussion set forth key operating and financial data for our homebuilding operations by reporting segment as of and for the fiscal years ended september 30 , 2020 and 2019. for similar operating and financial data and discussion of our fiscal 2019 results compared to our fiscal 2018 results , refer to item 7 , “ management 's discussion and analysis of financial condition and results of operations ” under part ii of our annual report on form 10-k for the fiscal year ended september 30 , 2019 , which was filed with the sec on november 25 , 2019. replace_table_token_4_th _ ( 1 ) net sales orders represent the number and dollar value of new sales contracts executed with customers ( gross sales orders ) , net of cancelled sales orders . replace_table_token_5_th _ ( 1 ) cancellation rate represents the number of cancelled sales orders divided by gross sales orders . 32 net sales orders the number of net sales orders increased 39 % during 2020 compared to 2019 , with significant increases in all of our regions . the value of net sales orders increased 40 % to $ 23.6 billion ( 78,458 homes ) in 2020 from $ 16.8 billion ( 56,565 homes ) in 2019. the average selling price of net sales orders during fiscal 2020 was $ 300,900 , up 1 % from the prior year . the markets contributing most to the increases in sales volumes in our regions were as follows : the carolina markets ( particularly myrtle beach and charlotte ) in the east ; the denver , minneapolis and indiana markets in the midwest ; the florida markets ( particularly tampa ) in the southeast ; the houston and dallas markets in the south central ; the phoenix market in the southwest ; and the california and nevada markets in the west . our sales order cancellation rate ( cancelled sales orders divided by gross sales orders for the period ) was 20 % in 2020 compared to 21 % in 2019. the increase in our sales orders reflects the increase in demand for our homes in the second half of the year fueled by increased buyer urgency due to lower interest rates on mortgage loans , the limited supply of homes at affordable price points across most of our markets and to some extent the lower levels of home sales from mid-march through early april , which caused some pent-up demand . replace_table_token_6_th sales order backlog sales order backlog represents homes under contract but not yet closed at the end of the period . many of the contracts in our sales order backlog are subject to contingencies , including mortgage loan approval and buyers selling their existing homes , which can result in cancellations . a portion of the contracts in backlog will not result in closings due to cancellations . replace_table_token_7_th 33 home sales revenue revenues from home sales increased 16 % to $ 19.6 billion ( 65,388 homes closed ) in 2020 from $ 16.9 billion ( 56,975 homes closed ) in 2019. home sales revenues increased in all of our regions primarily due to an increase in the number of homes closed . the number of homes closed in fiscal 2020 increased 15 % from 2019. the markets contributing most to the increase in closing volumes in our regions were as follows : the new jersey , myrtle beach and charlotte markets in the east ; the denver and indianapolis markets in the midwest ; the florida markets ( particularly tampa ) in the southeast ; the houston , dallas and san antonio markets in the south central ; the tucson market in the southwest ; and the portland and southern california markets in the west . homebuilding operating margin analysis replace_table_token_8_th home sales gross profit gross profit from home sales increased to $ 4.3 billion in 2020 from $ 3.4 billion in 2019 and increased 160 basis points to 21.8 % as a percentage of home sales revenues . story_separator_special_tag the percentage increase resulted from improvements of 150 basis points due to a decrease in the average cost of our homes closed while the average selling price increased slightly , 20 basis points from a decrease in the amount of purchase accounting adjustments related to prior year acquisitions and 10 basis points due to a decrease in the amortization of capitalized interest , partially offset by increased warranty and construction defect costs of 20 basis points . we remain focused on managing the pricing , incentives and sales pace in each of our communities to optimize the returns on our inventory investments and adjust to local market conditions and new home demand . these actions could cause our gross profit margins to fluctuate in future periods . if a prolonged economic recession and a resulting decline in new home demand occur due to c-19 or otherwise , we would expect our gross profit margins to decline from current levels . land/lot sales and other revenues land/lot sales and other revenues from our homebuilding operations were $ 83.1 million and $ 91.9 million in fiscal 2020 and 2019 , respectively . we continually evaluate our land and lot supply , and fluctuations in revenues and profitability from land sales occur based on how we manage our inventory levels in various markets . we generally purchase land and lots with the intent to build and sell homes on them . however , some of the land that we purchase includes commercially zoned parcels that we may sell to commercial developers . we may also sell residential lots or land parcels to manage our supply or for other strategic reasons . as of september 30 , 2020 , our homebuilding operations had $ 28.3 million of land held for sale that we expect to sell in the next twelve months . 34 inventory and land option charges at the end of each quarter , we review the performance and outlook for all of our communities and land inventories for indicators of potential impairment and perform detailed impairment evaluations and analyses when necessary . as of september 30 , 2020 , we performed detailed impairment evaluations of communities with a combined carrying value of $ 36.1 million and determined that no communities were impaired . homebuilding impairment charges during fiscal 2020 and 2019 were $ 1.7 million and $ 24.9 million , respectively . as we manage our inventory investments across our operating markets to optimize returns and cash flows , we may modify our pricing and incentives , construction and development plans or land sale strategies in individual active communities and land held for development , which could result in the affected communities being evaluated for potential impairment . if the housing market or economic conditions are adversely affected for a prolonged period due to c-19 or otherwise , we may be required to evaluate additional communities for potential impairment . these evaluations could result in additional impairment charges that could be significant . during fiscal 2020 and 2019 , earnest money and pre-acquisition cost write-offs related to land purchase contracts that we have terminated or expect to terminate were $ 21.2 million and $ 28.3 million , respectively . selling , general and administrative ( sg & a ) expense sg & a expense from homebuilding activities increased 8 % to $ 1.6 billion in fiscal 2020 from $ 1.5 billion in fiscal 2019. sg & a expense as a percentage of homebuilding revenues was 8.2 % and 8.7 % in fiscal 2020 and 2019 , respectively . employee compensation and related costs represented 75 % of sg & a costs in fiscal 2020 compared to 72 % in fiscal 2019. these costs increased 13 % to $ 1.2 billion in 2020 from $ 1.1 billion in 2019. our homebuilding operations employed 7,281 and 6,810 employees at september 30 , 2020 and 2019 , respectively . we attempt to control our sg & a costs while ensuring that our infrastructure adequately supports our operations ; however , we can not make assurances that we will be able to maintain or improve upon the current sg & a expense as a percentage of revenues . interest incurred we capitalize interest costs incurred to inventory during active development and construction ( active inventory ) . capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer . interest incurred by our homebuilding operations decreased 11 % to $ 93.0 million in fiscal 2020 from $ 104.7 million in fiscal 2019. the decrease was due to lower average interest rates on our homebuilding debt , as well as a 2 % decrease in our average homebuilding debt in fiscal 2020 compared to the prior year . interest charged to cost of sales was 0.8 % and 0.9 % of total cost of sales ( excluding inventory and land option charges ) in fiscal 2020 and 2019 , respectively . other income other income , net of other expenses , included in our homebuilding operations was $ 11.7 million in fiscal 2020 compared to $ 9.5 million in fiscal 2019. other income consists of interest income , rental income and various other types of ancillary income , gains , expenses and losses not directly associated with sales of homes , land and lots . the activities that result in this ancillary income are not significant , either individually or in the aggregate . business acquisition in october 2020 , we acquired the homebuilding operations of braselton homes for approximately $ 23 million in cash . braselton homes operates in corpus christi , texas . the assets acquired included approximately 90 homes in inventory , 95 lots and control of approximately 840 additional lots through purchase contracts . we also acquired a sales order backlog of approximately 125 homes .
| horton totaled 10,164 compared to 3,728. forestar 's pre-tax income was $ 78.1 million compared to $ 45.7 million . forestar 's pre-tax income was 8.4 % of forestar revenues compared to 10.7 % . forestar 's cash and cash equivalents totaled $ 394.3 million compared to $ 382.8 million . forestar 's inventories totaled $ 1.3 billion compared to $ 1.0 billion . forestar 's owned and controlled lots totaled 60,500 compared to 38,300. of these lots , 30,400 were under contract to sell to or subject to a right of first offer with d.r . horton compared to 23,400. forestar 's debt was $ 641.1 million compared to $ 460.5 million . forestar 's debt to total capital was 42.4 % compared to 36.3 % . financial services : financial services revenues increased 32 % to $ 584.9 million compared to $ 441.7 million . financial services pre-tax income increased 47 % to $ 245.2 million compared to $ 166.3 million . financial services pre-tax income was 41.9 % of financial services revenues compared to 37.6 % . consolidated results : consolidated pre-tax income increased 40 % to $ 3.0 billion compared to $ 2.1 billion . consolidated pre-tax income was 14.7 % of consolidated revenues compared to 12.1 % . income tax expense was $ 602.5 million compared to $ 506.7 million . net income attributable to d.r . horton increased 47 % to $ 2.4 billion compared to $ 1.6 billion . diluted net income per common share attributable to d.r . horton increased 49 % to $ 6.41 compared to $ 4.29. cash provided by operations was $ 1.4 billion compared to $ 892.1 million . stockholders ' equity was $ 11.8 billion compared to $ 10.0 billion . book value per common share increased to $ 32.53 compared to $ 27.20. debt to total capital was 26.6 % compared to 25.3 % . 31 results of operations — homebuilding our operating segments are our 53 homebuilding divisions , our majority-owned forestar lot development operations , our financial services operations and our other business activities . the homebuilding operating segments are aggregated
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our products are provided through user-friendly online and mobile interfaces and are supported by educational content and customer support . our consumer interactive segment serves consumers through both direct and indirect channels . in addition , corporate provides shared services for each of the segments , holds investments , raises capital , and conducts enterprise functions . certain costs incurred in corporate that are not directly attributable to one or more of the segments remain in corporate . these costs are typically enterprise-level costs and are primarily administrative in nature . story_separator_special_tag business and international footprint and to enter new markets . during 2018 we completed the following acquisitions : on october 15 , 2018 , we acquired 100 % of the equity of rubixis , inc. ( “ rubixis ” ) . rubixis is an innovative healthcare revenue cycle solutions company that helps providers maximize reimbursement from insurance payers . rubixis brings specialized expertise in the management of denials and underpayments , two significant pain points for healthcare providers . the results of operations of rubixis , which are not material to our consolidated financial statements , have been included as part of our usis segment in our consolidated statements of income since the date of the acquisition . on june 29 , 2018 , we acquired 100 % of the equity of iovation , inc. ( “ iovation ” ) . iovation is a provider of advanced device identity and consumer authentication services that helps businesses and consumers safely transact in a digital world . the results of operations of iovation , which are not material to our consolidated financial statements , have been included as part of our usis segment in our consolidated statements of income since the date of the acquisition . on june 22 , 2018 , we increased our noncontrolling interest investment in savvymoney , inc. ( “ savvymoney ” ) . our initial investment in savvymoney was made on august 30 , 2016. savvymoney is a provider of credit information services for bank and credit union users . we measure our investment in savvymoney at our initial cost , minus any impairments , plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments in savvymoney , with any adjustments recorded in other income and expense . we will record any future dividends in other income and expense when received . on june 19 , 2018 , we acquired 100 % of the equity of callcredit information group , ltd. ( “ callcredit ” ) . callcredit is a u.k. based information solutions company founded in 2000 that provides data , analytics and technology solutions to help businesses and consumers make informed decisions . the results of operations of callcredit have been included as part of our international segment in our consolidated statements of income since the date of the acquisition . see part ii , item 8 , “ notes to consolidated financial statements , ” note 2 , “ business acquisitions , ” for further information about this acquisition . on june 1 , 2018 , we acquired 100 % of the equity of healthcare payment specialists , llc ( “ hps ” ) . hps provides expertise and technology solutions to help medical care providers maximize medicare reimbursements . the results of 42 operations of hps , which are not material to our consolidated financial statements , have been included as part of our usis segment in our consolidated statements of income since the date of the acquisition . key components of our results of operations revenue the following is a more detailed description of how we derive and report revenue for our three reportable segments : u.s. information services u.s. information services ( or “ usis ” ) provides consumer reports , risk scores , analytical and decisioning services to businesses . these businesses use our services to acquire new customers , assess consumers ' ability to pay for services , identify cross-selling opportunities , measure and manage debt portfolio risk , collect debt , verify consumer identities and investigate potential fraud . the core capabilities and delivery methods in our usis segment allow us to serve a broad set of customers across industries . we report disaggregated revenue of our usis segment for the following verticals : financial services : the financial services vertical , which accounts for 53 % of our 2018 usis revenue , consists of our consumer lending , mortgage , auto and cards and payments lines of business . our financial services clients consist of most banks , credit unions , finance companies , auto lenders , mortgage lenders , online-only lenders ( fintech ) , and other consumer lenders in the united states . we also distribute our solutions through most major resellers , secondary market players and sales agents . beyond traditional lenders , we work with a variety of credit arrangers , such as auto dealers and peer-to-peer lenders . we provide solutions across every aspect of the lending lifecycle ; customer acquisition and engagement , fraud and id management , retention and recovery . our products are focused on mitigating risk and include credit reporting , credit marketing , analytics and consulting , identity verification and authentication and debt recovery solutions . emerging verticals : emerging verticals include healthcare , insurance , collections , property management , public sector and other diversified markets . our solutions in these verticals are similar to the solutions in our financial services vertical and also address the entire customer lifecycle . we offer onboarding and retention solutions , transaction processing products , scoring products , marketing solutions , analytics and consulting , identity management and fraud solutions , and revenue optimization and collections solutions . international the international segment provides services similar to our usis segment to businesses in select regions outside the united states . depending on the maturity of the credit economy in each country , services may include credit reports , analytics and decisioning services , and other value-added risk management services . story_separator_special_tag in addition , we have insurance , business and automotive databases in select geographies . these services are offered to customers in a number of industries including financial services , insurance , automotive , collections , and communications , and are delivered through both direct and indirect channels . the international segment also provides consumer services similar to those offered by our consumer interactive segment that help consumers proactively manage their personal finances . we report disaggregated revenue of our international segment for the following regions : canada , latin america , the united kingdom , africa , india , and asia pacific . consumer interactive consumer interactive offers solutions that help consumers manage their personal finances and take precautions against identity theft . services in this segment include credit reports and scores , credit monitoring , fraud protection and resolution , and financial management . our products are provided through user-friendly online and mobile interfaces and are supported by educational content and customer support . our consumer interactive segment serves consumers through both direct and indirect channels . cost of services costs of services include data acquisition and royalty fees , personnel costs related to our databases and software applications , consumer and call center support costs , hardware and software maintenance costs , telecommunication expenses and occupancy costs associated with the facilities where these functions are performed . selling , general and administrative selling , general and administrative expenses include personnel-related costs for sales , administrative and management employees , costs for professional and consulting services , advertising and occupancy and facilities expense of these functions . 43 non-operating income and expense non-operating income and expense includes interest expense , interest income , earnings from equity-method investments , dividends from cost-method investments , impairments of equity-method and cost-method investments , if any , expenses related to successful and unsuccessful business acquisitions , loan fees , debt refinancing expenses , certain acquisition-related gains and losses and other non-operating income and expenses . results of operations— twelve months ended december 31 , 2018 , 2017 and 2016 key performance measures over the past few years , we have completed a significant number of acquisitions , including the two largest acquisitions in our company 's history . we have also developed a significant number of new product offerings that have further diversified our portfolio of businesses . as a result of the evolution of our business , we have changed the information that we provide to our codm to better align with how we currently manage the business . accordingly , we are also aligning our disclosures around the disaggregation of our revenue and the measure of segment profit , and have recast all periods presented to conform to this new presentation in this annual report on form 10-k. we have not changed our segments and these changes do not impact our consolidated results . see part ii , item 8 , “ financial statements and supplementary data , ” note 18 , “ reportable segments , ” for further information about this change . management , including our codm , evaluates the financial performance of our businesses based on a variety of key indicators . these indicators include the non-gaap measures adjusted revenue and consolidated adjusted ebitda , and the gaap measures of revenue , segment adjusted ebitda , cash provided by operating activities and cash paid for capital expenditures . for the twelve months ended december 31 , 2018 , 2017 and 2016 , these key indicators were as follows : replace_table_token_3_th 44 replace_table_token_4_th nm : not meaningful as a result of displaying amounts in millions , rounding differences may exist in the table above . 1. we define adjusted revenue as gaap revenue adjusted for certain acquisition-related deferred revenue and non-core contract-related revenue . we define adjusted ebitda as net income ( loss ) attributable to the company before net interest expense , income tax provision ( benefit ) , depreciation and amortization and other adjustments noted in the table above . we present adjusted revenue as a supplemental measure of revenue because we believe its provides a basis to compare revenue between periods . we present adjusted ebitda as a supplemental measure of our operating performance because it eliminates the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance . also , adjusted ebitda is a measure frequently used by securities analysts , investors and other interested parties in their evaluation of the operating performance of companies similar to ours . in addition , our board of directors and executive management team use adjusted ebitda as a compensation measure under our incentive compensation plan . furthermore , under the credit agreement governing our senior secured credit facility , our ability to engage in activities such as incurring additional indebtedness , making investments and paying dividends is tied to a ratio based on adjusted ebitda . see “ management 's discussion and analysis of financial condition and results of operations - liquidity and capital resources - debt. ” adjusted ebitda does not reflect our capital expenditures , interest , income tax , depreciation , amortization , stock-based compensation and certain other income and expense . other companies in our industry may calculate adjusted ebitda differently than we do , limiting its usefulness as a comparative measure . because of these limitations , adjusted ebitda should not be considered in isolation or as a substitute for performance measures calculated in accordance with gaap . adjusted ebitda is not a measure of financial condition or profitability under gaap and should not be considered as an alternative to cash flows from operating activities , as a measure of liquidity or as an alternative to operating income or net income as indicators of operating 45 performance . we believe that the most directly comparable gaap measure to adjusted ebitda is net income attributable to transunion . the table above provides a reconciliation from our net income ( loss ) attributable to transunion to consolidated adjusted ebitda for the twelve months ended december 31 , 2018 , 2017 and 2016 .
| as customers have gained the ability to rapidly aggregate and analyze data generated by their own activities , they are increasingly expecting access to real-time data and analytics from their information providers as well as solutions that fully integrate into their workflows . as economies in emerging markets continue to develop and mature , we believe there will continue to be favorable socio-economic trends , such as an increase in the size of the middle class and a significant increase in the use of financial services by currently under-served and under-banked customers . demand for consumer solutions is rising , with higher consumer awareness of the importance and usage of their credit information , increased risk of identity theft due to data breaches , and more readily available free credit information . the complexity of regulations , including from the consumer financial protection bureau ( “ cfpb ” ) and the dodd-frank wall street reform and consumer protection act and new capital requirements , continue to make operations for businesses more challenging . effects of inflation we do not believe that inflation has had a material effect on our business , results of operations or financial condition . recent developments on december 31 , 2018 , we made a prepayment of $ 60.0 million towards our senior secured term loan b-3 , funded from our cash on hand . on december 17 , 2018 , we entered into interest rate swap agreements with various counter-parties that fixes our libor exposure on an additional portion of our existing senior secured term loans or similar replacement debt at approximately 2.647 % to 2.706 % . we have designated these swap agreements as cash flow hedges . the current aggregate notional amount under these agreements is $ 1,450.0 million , decreasing each quarter until the second agreement terminates on december 30 , 2022 . 41 during the third quarter of 2018 , we repaid the remaining outstanding senior secured revolving line of credit balance of $ 75.0 million . during the second quarter of 2018 , we borrowed a significant amount of additional debt against our senior secured credit facility to fund the purchase of
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we expect to commence the pivotal phase 3 protect study in the second quarter of 2019. we expect public disclosure early in the second half of 2019 of top-line data from an niddk sponsored study conducted at trialnet sites of prv-031 for preventing disease progression in patients at high risk of developing t1d . prv-015 ( anti-il-15 mab ) for the treatment of gluten-free diet non-responding celiac disease . we are planning a phase 2b clinical trial ( the proactive trial ) in celiac patients with gluten-free diet non-responsive celiac disease and will undertake additional chronic toxicology studies to support this trial as needed . we expect to commence the phase 2b proactive study in the first half of 2020 prv-6527 ( oral csf-1r inhibitor ) for the treatment of crohn 's disease we are conducting a phase 2a clinical trial ( the prince study ) in approximately 80 patients who have moderate to severe crohn 's disease . we expect to report top line data from the phase 2a prince study in the second half of 2019. prv-300 ( anti-tlr3 mab ) for the treatment of ulcerative colitis in the third quarter of 2018 , we completed the target enrollment for a phase 1b clinical trial ( the pulse study ) in 37 patients who have moderate to severe uc . we are evaluating potential studies of prv-300 in severe influenza , respiratory syncytial virus and emerging viral diseases . we expect to report top line data from the phase 1b pulse study in the second quarter of 2019. prv-3279 ( humanized anti-cd32b and cd79b bispecific ) for the treatment of lupus we are designing a phase 1b/2a study ( the prevail study ) that will evaluate the safety and the effects of prv-3279 in healthy volunteers and patients with lupus . we expect to commence a phase 1b/2a study in the second half of 2019. prv-101 ( polyvalent coxsackie virus b vaccine ) for the prevention of acute cvb and the prevention of t1d onset we are developing a polyvalent vaccine at intravacc , our strategic partner in vaccine manufacturing process development . we expect to file a clinical trial application ( cta ) by the end of the fourth quarter of 2019. we expect to start the first-in-human study in the first half of 2020 provention intends to leverage its distinctive competences and drug development strategy ; advance its carefully selected portfolio of product candidates ; in-license or acquire additional targeted development assets , and apply its disease interception and prevention approach to multiple autoimmune and immune-mediated inflammatory diseases . 82 financial operations overview research and development expenses research and development expenses consist primarily of clinical studies , other internal operating expenses , the cost of manufacturing our drug candidate for clinical study , and the cost of conducting preclinical activities . expenses also include the cost of salaries , benefits and other related costs , including stock-based compensation , for personnel serving in our research and development functions . in addition , our research and development expenses include payments to third parties , as well as the fair value of stock issuances to third parties for the license rights to products in development ( prior to marketing approval ) . our expenses related to clinical trials are primarily related to activities at contract research organizations , or cros , that design , obtain regulatory approval , and conduct clinical trials on our behalf . our expenses related to the production of drug substance or drug product for our clinical trials and development programs are primarily related to activities performed by licensors , strategic partners or contract manufacturing organizations , or cmos , on our behalf . our development efforts from inception through december 31 , 2018 , were principally related to the acquisition and development of our six programs detailed in the pipeline description immediately above . all research and development expenses are charged to operations as incurred in accordance with financial accounting standards board accounting standards codification topic , or 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 and finance and accounting functions . general and administrative expenses also include professional fees for legal , including patent-related expenses , consulting , insurance , board of director fees , tax and accounting services . we anticipate that we will incur increased general and administrative expenses related to audit , legal , regulatory , and tax-related services associated with maintaining compliance with exchange listing and sec requirements , director and officer insurance premiums , and investor relations costs associated with being a public company . change in fair value of warrant liability change in fair value of warrant liability represents the re-measurement of our liability classified warrants using the black-scholes option-pricing model at each financial reporting period . the fair value is 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 interest income interest income consists of interest income earned on our cash and cash equivalents . 83 story_separator_special_tag style= '' font : 10pt times new roman , times , serif ; margin : 0 '' > research and development expenses research and development expenses during the year ended december 31 , 2017 included non-cash product acquisition costs of $ 3.4 million , which represented the fair value of shares of common stock issued in connection with the vactech license agreement for prv-101 in april 2017 , $ 3.1 million in external clinical development expenses primarily related to prv-6527 and prv-300 , and $ 1.1 million of internal clinical development costs consisting mostly of compensation and related expenses , including stock-based compensation . there were no research and development expenses for the period from october 4 , 2016 ( inception ) through december 31 , 2016. general and administrative expenses general and administrative expenses were $ 1.5 million for the year ended december 31 , 2017 and $ 0.2 million for the period from october 4 , 2016 ( inception ) through december 31 , 2016. general and administrative expenses in 2017 primarily included $ 0.7 million in compensation costs , including stock-based compensation , and $ 0.3 million in professional fees and legal expenses as compared to $ 0.2 million of legal expenses for the period from october 4 , 2016 ( inception ) through december 31 , 2016 . 85 change in fair value of warrant liability change in fair value of warrant liability was a loss of approximately $ 0.1 million during the year ended december 31 , 2017. this loss represents the change in fair value of our warrant liability using a black-scholes option-pricing model with updated assumptions as of december 31 , 2017 and was primarily impacted by a change in the fair value of our series a convertible redeemable preferred stock . interest income interest income was $ 0.1 million during the year ended december 31 , 2017 and related to interest earned on our cash and cash equivalents during the period . the company did not earn any interest during the period from october 4 , 2016 ( inception ) through december 31 , 2016. income tax benefit we did not record any income tax benefit or provision during the year ended december 31 , 2017 or during the period from october 4 , 2016 ( inception ) through december 31 , 2016. 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 funded our operations to date through an offering of equity securities . we expect to continue to incur losses , as we plan to fund development activities . as of december 31 , 2018 , we had cash and cash equivalents of $ 58.5 million . we will need to raise additional capital to fund our operations , to develop and commercialize prv-031 , prv-015 , prv-6527 , prv-300 , prv-3279 , and prv-101 , and to develop , acquire , or in-license other products . we believe that our current cash and cash equivalents will be sufficient to fund our projected operating requirements into the middle of 2020. we plan to raise additional capital through equity offerings . such additional funding will be necessary to continue to develop our potential 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 . in the event that the we are able to raise capital , subject to certain terms and conditions set forth in the amgen agreement described herein , amgen has agreed to make an equity investment of up to $ 20.0 million in our securities . this equity investment is expected to coincide with our potential future financing events , if any , or potential receipt of non-dilutive milestone payment from a third party including but not limited to janssen related to our csf-1r program . 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 shares . 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 in 2019 will be impacted by a number of factors , the most significant of which are expenses related to the initiation of the protect clinical study of prv-031 , the prince clinical study of prv-6527 , the pulse clinical study of prv-300 , the initiation of the prevail clinical study of prv-3279 , and development efforts for prv-101 and prv-015 . in april 2017 , we completed a private offering of 11,381,999 shares of our series a convertible redeemable preferred stock , at a price of $ 2.50 per share , resulting in net cash proceeds from the sale of the shares , after deducting the underwriter 's discount and offering expenses , of $ 26.7 million .
| general and administrative expenses were $ 1.5 million for the year ended december 31 , 2017 and were primarily comprised of $ 0.7 million in personnel costs , including stock-based compensation , and $ 0.6 million in professional fees and legal expenses . 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 , compared to a loss of $ 0.1 million during the year ended december 31 , 2017. 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 . 84 interest income interest income was $ 0.7 million during the year ended december 31 , 2018 compared to $ 0.1 million during the year ended december 31 , 2017. the increase in interest income in 2018 related primarily to an increase in average cash and cash equivalents balances that resulted from the net proceeds from our ipo in july 2018. income tax benefit we recorded an income tax benefit of $ 0.2 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 we did not record any income tax benefit or provision during the year ended december 31 , 2017. comparison of
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certain preceding statements could be considered forward-looking statements under the private securities litigation reform act of 1995 and are subject to certain risks and uncertainties including , but not limited to , a significant change in economic conditions , loss of key customers or suppliers , or similar unforeseen events . fiscal year 2013 story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > . furniture segment furniture segment results follow : replace_table_token_16_th the fiscal year 2013 net sales decrease in the furniture segment compared to fiscal year 2012 resulted primarily from decreased net sales of hospitality furniture and to a lesser extent from decreased net sales of office furniture . the lower hospitality furniture net sales were due to two unusually large custom projects that were completed during fiscal year 2012. the decrease in office furniture net sales was due to decreased sales volumes which more than offset the positive impact of price increases net of incremental discounting . the largest driver of the decreased office furniture sales volumes was lower sales to the federal government . fiscal year 2013 sales of newly introduced office furniture products which have been sold for less than twelve months approximated $ 8.9 million . open orders of furniture products at june 30 , 2013 increased 33 % from the orders open as of june 30 , 2012 on higher orders of both office furniture and hospitality furniture . open orders at a point in time may not be indicative of future sales trends . fiscal year 2013 furniture segment gross profit as a percent of net sales declined 0.4 of a percentage point when compared to fiscal year 2012 . items unfavorably impacting the year-over-year gross margin comparison were the loss of leverage due to lower current year sales volumes , an unfavorable sales mix , a prior year favorable impact resulting from a decrease in the lifo inventory reserve , and a prior year recovery of previously paid import duties related to a retroactive change in a tariff rate . fiscal year 2013 gross profit as a percent of net sales was favorably impacted by sales price increases net of incremental discounting and by lower commodity costs . compared to fiscal year 2012 , fiscal year 2013 selling and administrative expenses as a percent of net sales increased 1.9 percentage points largely due to the lower sales volumes and also due to a 2.1 % absolute dollar increase in selling and administrative expenses driven by higher incentive compensation costs which were partially offset by decreased sales and marketing costs and decreased commission expense . risk factors within this segment include , but are not limited to , general economic and market conditions , increased global competition , financial stability of customers and suppliers , supply chain cost pressures , and relationships with strategic customers and product distributors . additional risk factors that could have an effect on our performance are located within item 1a - risk factors . fiscal year 2012 results of operations financial overview - consolidated fiscal year 2012 consolidated net sales were $ 1.14 billion compared to fiscal year 2011 net sales of $ 1.20 billion , a 5 % decrease , resulting from a 15 % net sales decrease in the ems segment which more than offset a 9 % net sales increase in the furniture segment . fiscal year 2012 net income was $ 11.6 million , or $ 0.31 per class b diluted share , inclusive of $ 2.1 million , or $ 0.06 per class b diluted share , of after-tax restructuring costs primarily related to the european consolidation plan . the company recorded net income for fiscal year 2011 of $ 4.9 million , or $ 0.14 per class b diluted share , inclusive of $ 0.6 million , or $ 0.01 per class b diluted share , of after-tax restructuring costs primarily related to the european consolidation plan . 22 consolidated gross profit as a percent of net sales improved to 18.4 % for fiscal year 2012 from 16.2 % in fiscal year 2011 due to margin improvement in both the ems and furniture segments coupled with a shift in sales mix ( as depicted in the table below ) toward the furniture segment which operates at a higher gross profit percentage than the ems segment . gross profit is discussed in more detail in the segment discussions below . replace_table_token_17_th fiscal year 2012 consolidated selling and administrative expenses decreased 1.6 % in absolute dollars , but increased as a percent of net sales , compared to fiscal year 2011 , on decreased operating leverage due to lower revenue . we recorded $ 3.1 million less expense within selling and administrative expenses in fiscal year 2012 than fiscal year 2011 related to the normal revaluation to fair value of the company 's serp liability . the revaluation of the serp liability recorded in selling and administrative expenses is exactly offset by the revaluation of the serp investment recorded in other income ( expense ) ; therefore , there was no effect on net earnings . partially offsetting the lower serp expense was an increase in incentive compensation expenses in fiscal year 2012 as compared to fiscal year 2011. fiscal year 2012 other expense , net totaled $ 0.7 million compared to other income , net of $ 2.0 million for fiscal year 2011. other income ( expense ) consisted of the following : replace_table_token_18_th the impairment loss on privately-held investment , the impairment loss on convertible debt securities , and the gain ( loss ) on stock warrants listed in the table above all relate to kimball 's investment in one privately-held company . see the notes to consolidated financial statements for more detailed information . the fiscal year 2012 effective tax rate was 34.3 % . story_separator_special_tag the fiscal year 2011 effective tax rate was ( 10.9 ) % as relatively low pre-tax income coupled with the favorable impact of the company 's earnings mix and the research and development credit resulted in a tax benefit despite our pre-tax income . the mix of earnings between u.s. and foreign jurisdictions largely contributed to the overall tax benefit due to losses in the u.s. which have a higher statutory tax rate than our foreign operations which were profitable in fiscal year 2011. see note 8 - income taxes of notes to consolidated financial statements for more information . 23 electronic manufacturing services segment ems segment results follow : replace_table_token_19_th fiscal year 2012 ems segment net sales to customers in the medical , industrial , and public safety industries decreased compared to fiscal year 2011 which more than offset an increase in net sales to customers in the automotive industry . the decline in net sales to the medical industry was attributable to the expiration of a contract with one medical customer ( bayer ag ) late in fiscal year 2011 which accounted for a $ 130.7 million decline in net sales in fiscal year 2012. excluding this customer , net sales to the medical industry , as well as the overall ems segment net sales , increased in fiscal year 2012 compared to fiscal year 2011. open orders as of june 30 , 2012 were up 3 % compared to june 30 , 2011. fiscal year 2012 ems segment gross profit as a percent of net sales improved 1.4 percentage points when compared to fiscal year 2011. the improvement was primarily driven by the benefit from a sales mix shift toward higher margin product and benefits realized related to restructuring activities in which two facilities were closed during the second quarter of fiscal year 2012. ems segment selling and administrative expenses in absolute dollars decreased 11 % in fiscal year 2012 as compared to fiscal year 2011 , but increased as a percent of net sales on the lower sales volumes . the selling and administrative expenses declined primarily due to benefits realized from restructuring activities within this segment . ems segment other income ( expense ) for fiscal year 2012 totaled expense of $ 0.3 million , compared to expense of $ 1.9 million in fiscal year 2011. the variance in other income ( expense ) was primarily related to net foreign currency exchange movement . included in this segment were a significant amount of sales to bayer ag affiliates in fiscal year 2011 which accounted for the following portions of consolidated net sales and ems segment net sales : replace_table_token_20_th kimball 's sales to bayer ag declined due to the expiration of our primary manufacturing contract with this customer . this contract accounted for a majority of the sales to bayer ag during fiscal year 2011. margins on the bayer ag product were generally lower than the company 's other ems products . 24 furniture segment furniture segment results follow : replace_table_token_21_th the fiscal year 2012 net sales increase in the furniture segment compared to fiscal year 2011 resulted primarily from increased net sales of hospitality furniture and to a lesser extent from increased net sales of office furniture . the increase in net sales of hospitality furniture was driven by large custom projects during fiscal year 2012. the increase in office furniture net sales was due to the positive impact of price increases net of incremental discounting which more than offset a decrease in sales volume . fiscal year 2012 sales of newly introduced office furniture products which have been sold for less than twelve months approximated $ 13.5 million . open orders of furniture products at june 30 , 2012 decreased 20 % from the orders open as of june 30 , 2011 primarily due to lower office furniture orders from the u.s. federal government and a large hospitality custom project received near the end of fiscal year 2011 which was included in the june 30 , 2011 open orders . fiscal year 2012 furniture segment gross profit as a percent of net sales improved 0.7 percentage points when compared to fiscal year 2011. fiscal year 2012 gross profit as a percent of net sales was favorably impacted by sales price increases net of incremental discounting , by a recovery of previously paid import duties related to a retroactive change in a tariff rate , and by the favorable impact resulting from a decrease in the lifo inventory reserve . the improvement in fiscal year 2012 gross profit as a percent of net sales was partially offset by commodity cost increases , higher freight and fuel costs , and the impact of excess operating capacity at select locations . fiscal year 2012 selling and administrative expenses increased in absolute dollars by 3.9 % , but decreased as a percent of net sales on the higher sales volumes , when compared to fiscal year 2011. the selling and administrative expenses were impacted by higher salary expenses , higher incentive compensation costs , and increased travel expenses . liquidity and capital resources working capital at june 30 , 2013 was $ 214.4 million compared to working capital of $ 191.0 million at june 30 , 2012 . the current ratio was 2.0 at both june 30 , 2013 and june 30 , 2012 . our measure of accounts receivable performance , also referred to as days sales outstanding ( dso ) , for fiscal year 2013 of 44.0 days improved compared to the 45.7 days for fiscal year 2012 . we define dso as the average of monthly accounts and notes receivable divided by an average day 's net sales . our production days supply on hand ( pdsoh ) of inventory measure for fiscal year 2013 declined to 55.6 days from 58.9 days for fiscal year 2012 . the improved pdsoh compared to the prior fiscal year resulted from ongoing successful initiatives to reduce or maintain ems segment inventory levels as the business grows .
| the revaluation of the serp liability recorded in selling and administrative expenses is exactly offset by the revaluation of the serp investment recorded in other income ( expense ) , and thus there was no effect on net income . employee contributions comprise approximately 90 % of the serp investment . fiscal year 2013 other expense , net totaled $ 0.3 million compared to $ 0.7 million for fiscal year 2012 . other income ( expense ) consisted of the following : replace_table_token_13_th the impairment loss on privately-held investment and the loss on stock warrants listed in the table above both relate to the company 's investment in one privately-held company . see the notes to consolidated financial statements for more detailed information . the fiscal year 2013 effective tax rate of 12.3 % was favorably impacted by a high mix of earnings in foreign jurisdictions which have lower statutory tax rates than the u.s. the fiscal year 2012 effective tax rate was 34.3 % . see note 8 - income taxes of notes to consolidated financial statements for more information . comparing the balance sheet as of june 30 , 2013 to june 30 , 2012 , the increase in accounts receivable was primarily a result of higher ems segment sales volumes and a shift in the mix of ems segment sales at the end of fiscal year 2013 toward customers with longer payment terms . kimball 's accounts payable balance increased primarily due to higher costs resulting from increased ems segment production volumes . 20 electronic manufacturing services segment ems segment results follow : replace_table_token_14_th fiscal year 2013 ems segment net sales to customers in the automotive , medical , industrial , and public safety industries all increased compared to fiscal year 2012 . open orders as of june 30 , 2013 were up 2 % compared to june 30 , 2012. open orders at a point in time may not be indicative of future
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rj joint venture transaction on june 14 , 2013 , ah llc contributed its remaining ownership interest in rj american homes 4 rent investments , llc ( rj llc ) to the company , 653,492 3.5 % convertible perpetual preferred units of limited partnership interests in our operating partnership held by ah llc were converted into 653,492 class a units and the company issued 705,167 additional class a units to 40 ah llc . upon ah llc contributing its remaining ownership interest in rj llc to the company , we gained control over rj american homes 4 rent one , llc ( rj1 ) and rj american homes 4 rent two , llc ( rj2 ) and , accordingly , began consolidating the operations of the 377 single-family properties owned by rj1 and rj2 . initial public offering and concurrent private placements in august 2013 , we raised $ 811,764,000 before offering costs of $ 41,981,000 in our initial public offering ( the ipo ) . concurrently with the ipo , we raised an additional $ 75,000,000 in private placements , which were made concurrently with the ipo offering price and without payment of any underwriting discount , to ah llc and apfc . expanded credit facility on september 30 , 2013 , we expanded our credit facility to , among other things : ( 1 ) add an additional lender , ( 2 ) increase the maximum amount available for borrowings under our credit facility from $ 500 million to $ 800 million , ( 3 ) extend the period to repay borrowings under our credit facility to september 30 , 2018 , ( 4 ) provide for borrowings under our credit facility to bear interest at the one-month libor plus 2.75 % until march 2017 and , thereafter , at one-month libor plus 3.125 % , ( 5 ) change the tangible net worth covenant to require our adjusted tangible net worth at all times to be not less than 85 % of our adjusted tangible net worth as of september 30 , 2013 plus 85 % of the net proceeds of any additional equity capital raises completed by us on or after september 30 , 2013 and ( 6 ) change the minimum liquidity covenant to require us at all times to maintain cash , cash equivalents and borrowing capacity under any credit facilities in an aggregate amount of at least $ 15,000,000 , of which at least $ 7,500,000 must be in cash and cash equivalents . all other provisions and terms of our credit facility remain substantially the same as the terms under the prior credit facility . preferred shares in october 2013 , we raised $ 126,500,000 before estimated offering costs of $ 7,319,000 through the sale of 5,060,000 series a participating preferred shares . in december 2013 and january 2014 , we raised an additional $ 110,000,000 in aggregate before estimated offering costs of $ 6,585,000 through the sale of 4,400,000 series b participating preferred shares . factors that affect our results of operations and financial condition our results of operations and financial condition are affected by numerous factors , many of which are beyond our control . key factors that impact our results of operations and financial condition include our ability to identify and acquire properties , our pace of property acquisitions , the time and cost required to gain access to the properties and then to renovate and lease a newly acquired property at acceptable rental rates , occupancy levels , rates of tenant turnover , the length of vacancy in properties between tenant leases , our expense ratios , our ability to raise capital and our capital structure . property acquisitions since our formation we have rapidly but systematically grown our portfolio of single-family homes and intend to continue to do so . our ability to identify and acquire single-family homes that meet our investment criteria is impacted by home prices in our target markets , the inventory of properties available for sale through our acquisition channels , competition for our target assets and our available capital . our pace of acquisitions has slowed recently as a result of our efforts to match our capital investments with our capital raising activities . we expect that our level of acquisition activity will fluctuate based on the number of suitable investments and the level of capital available to invest . ah llc 's acquisition and renovation platform , together with the breadth and depth of our executive team has provided processes and systems to accumulate and regularly evaluate relevant data on a real-time basis to track and manage key aspects of our business , such as acquisition costs , renovation costs and the amount of time required to convert an acquired single-family home to a rental property . property operations the acquisition of properties involves expenditures in addition to payment of the purchase price , including payments for acquisition fees , property inspections , closing costs , liens , title insurance , transfer taxes , recording fees , broker commissions , property taxes and homeowner association ( hoa ) fees ( when applicable ) . in addition , we typically incur costs between $ 5,000 and $ 25,000 to renovate a home to prepare it for rental . renovation work varies , but may include paint , flooring , carpeting , cabinetry , appliances , plumbing hardware and other items required to prepare the home for rental . the time and cost involved in accessing our homes and 41 preparing them for rental can significantly impact our financial performance . the time to renovate a newly acquired property can vary significantly among properties for several reasons , including the property 's acquisition channel , the age and condition of the property and whether the property was vacant when acquired . our operating results also are impacted by the amount of time it takes to market and lease a property , as well as the length of stay by our tenants . story_separator_special_tag the period of time to market and lease a property can vary greatly and is impacted by local demand , our marketing techniques and the size of our available inventory . we actively monitor these measures and trends . revenue our revenue is derived primarily from rents collected under lease agreements with tenants for our single-family properties . these include short-term leases that we enter into directly with our tenants , which typically have a term of one year . our rental rates and occupancy levels are affected by macroeconomic factors and local and property-level factors , including market conditions , seasonality and tenant defaults , and the amount of time it takes to renovate and re-lease properties when tenants vacate . we generally do not offer free rent or other concessions in connection with leasing our properties . we expect that the overall occupancy of our portfolio will increase as the proportion of recently acquired properties declines relative to the size of our entire portfolio . nevertheless , in the near term , our ability to drive revenue growth will depend in large part on our ability to efficiently renovate and lease newly acquired properties , maintain occupancy in the rest of our portfolio and acquire additional properties , both leased and vacant . we believe that our platform will allow us to achieve strong tenant retention and lease renewal rates at our properties . based on our experience with 1,844 leases that reached full term maturation during the year ended december 31 , 2013 , 71.1 % of the tenants renewed their leases at an average increase in rental rate of 2.5 % . as we have limited experience in evaluating tenant retention since most of our properties were acquired in the last 12 months and our leases are generally for a one-year term , this performance may not be indicative of future renewals . expenses we monitor the following categories of expenses that we believe most significantly affect our results of operations . property operating expenses once a property is available for lease , which we refer to as rent-ready , we incur ongoing property-related expenses , primarily hoa fees ( when applicable ) , property taxes , insurance , marketing expenses , and repairs and maintenance , which may not be subject to our control . property management expenses prior to the management internalization on june 10 , 2013 , our former property manager provided all property management functions for our properties . these functions included overseeing and directing the leasing , management and advertising of our single-family properties , including collecting rents and interacting with our tenants . we paid our former property manager a fee equal to 6 % of collected rents and a leasing fee equal to one-half of one month 's rent for a twelve-month term ( prorated for the actual term of the lease ) upon execution of each lease and renewal . in addition to these fees , we also were responsible for all direct property expenses . upon completion of the management internalization , we now incur costs such as salary expenses for property management personnel , lease expenses for property management offices and technology expenses for maintaining the property management platform . property management and leasing fees incurred to our former property manager have been discontinued . during the year ended december 31 , 2013 , we incurred approximately $ 1,051,000 of one-time termination fees and other costs in connection with transitioning certain of our markets onto our property management platform . these costs have been included in vacant single-family property operating expenses and other in the accompanying consolidated statements of operations . as of december 31 , 2013 , our entire portfolio of single-family properties was internally managed through our proprietary property management platform , or was in the final phases of transition to internalization . general and administrative expense and advisory fees general and administrative expense primarily consists of payroll and personnel costs , trustees ' and officers ' insurance expenses , audit and tax fees , trustee fees and other expenses associated with our corporate and administrative functions . general and administrative expense also includes an allocation of general and administrative expenses incurred by ah llc that were either clearly applicable to or reasonably allocated to the operations of contributed properties prior to the date of contribution by ah llc . 42 prior to the management internalization on june 10 , 2013 , our corporate and administrative functions were provided by our former manager under the terms of an advisory management agreement . rather than directly incurring the costs of our corporate and administrative functions , we previously engaged our former manager and paid it an advisory fee that was calculated as 1.75 % per year of shareholders ' equity ( as defined ) . upon completion of the management internalization , we no longer pay the advisory fee and now directly incur all expenses related to our corporate and administrative functions , which are included within general and administrative expense . note regarding our historical operations and presentation of our financial results from our formation through june 10 , 2013 , we were externally managed and advised by our former manager and the leasing , managing and advertising of our properties was overseen and directed by our former property manager , both of which were subsidiaries of ah llc . on june 10 , 2013 , we entered into the management internalization and acquired our former manager and our former property manager from ah llc in exchange for 4,375,000 series d units and 4,375,000 series e units in our operating partnership . we now have an integrated operating platform that consists of approximately 430 personnel dedicated to property management , marketing , leasing , financial and administrative functions .
| the increases are primarily attributable to the overall growth of the size of our portfolio and increases in our total portfolio occupancy . total portfolio occupancy as of december 31 , 2013 , 2012 and 2011 was 75 % , 32 % and 58 % ( december 31 , 2011 occupancy based on a total of 33 properties ) , respectively . property operating expenses property operating expenses , which primarily consist of direct property operating expenses and the costs associated with operating our property management platform , were $ 73,752,000 , $ 3,590,000 and $ 39,000 for the years ended december 31 , 2013 and 2012 and the period from june 23 , 2011 to december 31 , 2011 , respectively . the increases are primarily due to the overall growth in size of our portfolio and development of our property management platform . we believe that our proprietary internal property management platform provides an effective structure for managing our properties and will continue to grow more efficient with further scale in our portfolio of single-family properties . general and administrative expense and advisory fees general and administrative expense primarily consists of payroll and personnel costs , trustees ' and officers ' insurance expense , audit and tax fees , trustee fees and other expenses associated with our corporate and administrative functions . general and administrative expense was $ 8,845,000 , $ 7,199,000 and $ 47,000 for the years ended december 31 , 2013 and 2012 and the period from june 23 , 2011 to december 31 , 2011 , respectively . general and administrative expense also includes an allocation of general and administrative expenses incurred by ah llc that were either clearly applicable to or reasonably allocated to the operations of contributed properties prior to the date of contribution by ah llc . allocated general and administrative expenses prior to the date of respective property contribution by ah llc were $ 993,000 , $ 6,949,000 and $ 47,000 for the years ended december 31 , 2013 and 2012 and the period from june 23 , 2011 to december 31 , 2011 , respectively . prior to
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this is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials , which vary significantly over the life of a project as a result of unanticipated events arising during clinical development , including with respect to : the number of clinical sites included in the trial ; the length of time required to enroll suitable subjects ; the number of subjects that ultimately participate in the trials ; and the efficacy and safety results of our clinical trials and the number of additional required clinical trials . our expenditures are subject to additional uncertainties , including the terms and timing of regulatory approvals . in addition , we may obtain unexpected or unfavorable results from our clinical trials . we may elect to discontinue , delay or modify clinical trials of some drug candidates or focus on others . a change in the outcome of any of the foregoing variables in the development of a drug candidate could mean a significant change in the costs and timing associated with the development of that drug candidate . for example , if the fda or other regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate , or if we experience significant delays in any of our clinical trials , we would be required to expend significant additional financial resources and time on the completion of clinical development . additionally , future commercial and regulatory factors beyond our control will evolve and therefore impact our clinical development programs and plans over time . 58 we anticipate that overall research and development costs may increase as we continue to advance our ganetespib program through the galaxy-2 trial , our phase 3 trial in second-line advanced nsclc , towards commercialization , conduct a full year of the i-spy 2 breast cancer trial , and advance sta-12-8666 , the lead drug candidate from our hdc platform , into clinical development . beyond our current lead drug candidates , we anticipate that we will select drug candidates and research projects for further development on an ongoing basis in response to their preclinical and clinical success , as well as commercial potential . general and administrative general and administrative expense consists primarily of salaries , bonuses and related expenses for personnel in executive , finance , business and commercial development , investor and medical community relations , human resources and administrative functions . other costs include stock-based compensation costs , directors ' and officers ' liability insurance premiums , legal costs of pursuing patent protection of our intellectual property , fees for general legal , accounting , public-company requirements and compliance , and other professional services , as well as overhead-related costs not otherwise included in research and development . we anticipate that general and administrative expense may increase in 2015 depending upon the rate at which we expand our pre-commercialization activities related to ganetespib . critical accounting policies and estimates our management 's discussion and analysis of our financial condition and results of operations are based on our financial statements which have been prepared in accordance with u.s. generally accepted accounting principles , or gaap . the preparation of these financial statements requires us to make estimates and judgments 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 reported periods . we are required to make estimates and judgments with respect to contract research accruals , the recoverability of long-lived assets , measurement of stock-based compensation and the periods of performance under collaboration and license agreements . we base our estimates on historical experience , known trends and events , and 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 and the reported amounts of revenues and expenses . actual results may differ from these estimates under different assumptions or conditions . revenue recognition collaboration and license agreements our principal source of revenue to date has been our former collaboration and license agreements , which included upfront license payments , development milestones , reimbursement of research and development costs , potential profit sharing payments , commercial and sales-based milestones and royalties . the accounting for collaboration and license agreements requires subjective analysis and requires management to make estimates and assumptions about whether deliverables within multiple-element arrangements are separable from the other aspects of the contractual arrangement into separate units of accounting and to determine the arrangement consideration to be allocated to each unit of accounting . for multiple-element arrangements entered into or materially modified after january 1 , 2011 , we follow the provisions of financial accounting standards board ( fasb ) accounting standards update ( asu ) no . 2009-13 multiple-deliverable revenue arrangements ( asu no . 2009-13 ) . asu no . 2009-13 amended certain provisions of accounting standards codification ( asc ) topic 605 revenue recognition . this standard addresses the determination of the unit ( s ) of accounting for multiple-element arrangements and how an arrangement 's consideration should be allocated to each unit of accounting . 59 pursuant to this standard , each required deliverable is evaluated to determine if it qualifies as a separate unit of accounting . for us this determination includes an assessment as to whether the deliverable has `` stand-alone value '' to the customer separate from the undelivered elements . the arrangement 's consideration is then allocated to each separate unit of accounting based on the relative selling price of each deliverable . the estimated selling price of each deliverable is determined using the following hierarchy of values : ( i ) vendor-specific objective evidence of fair value , ( ii ) third-party evidence of selling price , or ( iii ) our best estimate of the selling price ( besp ) . story_separator_special_tag the besp reflects our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis . we expect , in general , to use besp for allocating consideration to each deliverable in future collaboration agreements . in general , the consideration allocated to each unit of accounting is then recognized as the related goods or services are delivered limited to the consideration not contingent upon future deliverables . we did not recognize any revenue related to collaboration and license agreements during the years ended december 31 , 2014 , 2013 and 2012. we account for development milestones under collaboration and license agreements pursuant to asu no . 2010-17 milestone method of revenue recognition ( asu no . 2010-17 ) . asu no . 2010-17 codified a method of revenue recognition that has been common practice . under this method , contingent consideration from research and development activities that is earned upon the achievement of a substantive milestone is recognized in its entirety in the period in which the milestone is achieved . at the inception of each arrangement that includes milestone payments , we evaluate whether each milestone is substantive . this evaluation includes an assessment of whether ( a ) the consideration is commensurate with either ( 1 ) the entity 's performance to achieve the milestone , or ( 2 ) the enhancement of the value of the delivered item ( s ) as a result of a specific outcome resulting from the entity 's performance to achieve the milestone , ( b ) the consideration relates solely to past performance and ( c ) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement . we evaluate factors such as the scientific , clinical , regulatory , commercial and other risks that must be overcome to achieve the respective milestone , the level of effort and investment required and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment . we do not have any ongoing collaboration and license agreements under which milestones may be achieved . royalty revenues are based upon a percentage of net sales . royalties from the sales of products will be recorded on the accrual basis when results are reliably measurable , collectability is reasonably assured and all other revenue recognition criteria are met . commercial and sales-based milestones , which are based upon the achievement of certain agreed-upon sales thresholds , will be recognized in the period in which the respective sales threshold is achieved and collectability is reasonably assured . we do not have any ongoing collaboration and license agreements under which royalties or commercial and sales-based milestones may be achieved . accrued expenses and accrued contract research liabilities as part of the process of preparing our financial statements , we are required to estimate accrued expenses . this process involves identifying services which have been performed on our behalf , and estimating the level of service performed and the associated cost incurred for such service as of each balance sheet date in our financial statements . given our current business , the primary area of uncertainty concerning accruals which could have a material effect on our operating results is with respect to service fees paid to contract manufacturers in conjunction with the production of clinical drug supplies and to contract research organizations in connection with our preclinical studies and clinical trials . in connection with all of the foregoing service fees , our estimates are most affected by our understanding of the status and timing of services provided . the majority of our service providers , including contract research organizations , invoice us in arrears for services performed . in the event that we do not identify some costs which have begun to be incurred , or we under or over estimate the level 60 of services performed or the costs of such services in a given period , our reported expenses for such period would be understated or overstated . we currently reflect the over or under accrual of expenses directly in our operations in the period the amount was determined . our arrangements with contract research organizations in connection with clinical trials often provide for payment prior to commencing the project or based upon predetermined milestones throughout the period during which services are expected to be performed . we recognize expense relating to these arrangements based on the various services provided over the estimated time to completion . the date on which services commence , the level of services performed on or before a given date , and the cost of such services are often determined based on subjective judgments . we make these judgments based upon the facts and circumstances known to us based on the terms of the contract and our ongoing monitoring of service performance . during the years ended december 31 , 2014 , 2013 and 2012 , we had arrangements with multiple contract research organizations whereby these organizations commit to performing services for us over multiple reporting periods . we currently recognize and plan to continue to recognize the expenses associated with these arrangements based on our expectation of the timing of the performance of components under these arrangements by these organizations . generally , these components consist of the costs of setting up the trial , monitoring the trial , closing the trial and preparing the resulting data . costs related to patient enrollment in clinical trials are accrued as patients are enrolled in the trial . with respect to financial reporting periods presented in this annual report on form 10-k , and based on our receipt of invoices from our third party providers , the timing of our actual costs incurred have not differed materially from our estimated timing of such costs .
| external costs overall decreased by $ 4.1 million due to $ 10.4 million in net increases resulting from the advancement of patient enrollment in the galaxy-2 trial that commenced enrollment in april 2013 and the initiation of the i-spy-2 breast cancer trial in october 2014 that were offset by $ 14.5 million in net decreases principally related to the wind-down of the galaxy-1 trial , the enchant-1 trial and other company-sponsored trials , as well as costs incurred in 2013 for the conduct of nda-enabling clinical pharmacology studies and registrational and validation drug manufacturing that were not incurred in 2014. we anticipate that costs under the ganetespib program may increase as we continue 62 to advance the program through the galaxy-2 trial , our phase 3 trial in second-line advanced nsclc , towards commercialization and conduct a full year of the i-spy 2 breast cancer trial . in 2013 as compared to 2012 , costs incurred under our ganetespib program increased by $ 19.4 million , including increases of $ 1.0 million for personnel-related costs , related research supplies , operational overhead and stock compensation , and $ 18.4 million for external costs . these increases were principally due to the conduct of start-up activities and patient- related costs that began following the commencement of enrollment in april 2013 in connection with the galaxy-2 trial , our phase 3 trial in second- line advanced nsclc , and the clinical conduct in connection with the enchant-1 trial , our phase 2 trial in first-line her2+ breast cancer and tnbc , that was initiated in 2012. in addition , we completed clinical pharmacology studies and incurred net increases related to supporting drug supply and other non-clinical activities in 2013. elesclomol in 2014 as compared to 2013 , costs incurred under our elesclomol program increased by $ 0.4 million , principally due to increases of $ 0.1 million in personnel-related costs , related research supplies , operational overhead and stock compensation , and $ 0.3 million in external costs . these increases were principally related to the pace of the ongoing clinical trial in ovarian cancer . we anticipate that future costs under our elesclomol program will remain at low levels as the ongoing clinical trial in ovarian cancer being conducted by the gynecological oncology group ( gog ) nears completion . in 2013 as compared to 2012 , costs incurred under our elesclomol program decreased by $ 0.6 million , including decreases of $ 0.4 million for personnel-related costs , related research supplies , operational overhead and stock compensation , and $ 0.2 million for external costs . cracm
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these additional allowances could materially affect the company 's future financial results . income taxes — in order to prepare our consolidated financial statements , we are required to make estimates of income taxes , if applicable , in each jurisdiction in which we operate . the process incorporates an assessment of any current tax exposure together with temporary differences resulting from different treatment of transactions for tax and financial statement purposes . these differences result in deferred tax assets and liabilities that are included in our consolidated balance sheets . the recovery of deferred tax assets from future taxable income must be assessed and , to the extent recovery is not likely , we will establish a valuation allowance . an increase in the valuation allowance results in recording additional tax expense and any such adjustment may materially affect the company 's future financial result . if the ultimate tax liability differs from the amount of tax expense we have reflected in the consolidated statements of operations , an adjustment of tax expense may need to be recorded and this adjustment may materially affect the company 's future financial results and financial condition . revenue recognition — revenues are recognized when control of the promised service is transferred to our clients , in an amount that reflects the consideration expected in exchange for the services . revenue is recorded net of sales or other transaction taxes collected from clients and remitted to taxing authorities . revenues from contracts are recognized over time , based on hours worked by the company 's professionals . the performance of the agreed-to service over time is the single performance obligation for revenues . certain clients may receive discounts ( for example , volume discounts or rebates ) to the amounts billed . these discounts or rebates are considered variable consideration . management evaluates the facts and circumstances of each contract and client relationship to estimate 18 the variable consideration assessing the most likely amount to recognize and considering management 's expectation of the volume of services to be provided over the applicable period . rebates are the largest component of variable consideration and are estimated using the most likely amount method prescribed by accounting standards codification ( “ asc ” ) topic 606 , contracts terms and estimates of revenue . revenues are recognized net of variable consideration to the extent that it is probable that a significant reversal of revenues will not occur in subsequent periods . stock-based compensation — under our 2014 performance incentive plan , officers , employees , and outside directors have received or may receive grants of restricted stock , stock units , options to purchase common stock or other stock or stock-based awards . under our espp , eligible officers and employees may purchase our common stock in accordance with the terms of the plan . the company estimates the fair value of share-based payment awards on the date of grant using an option-pricing model . the company determines the estimated value of restricted stock awards using the closing price of our common stock on the date of grant . we have elected to use the black-scholes option-pricing model for our stock options and stock-based awards issued under our espp which takes into account assumptions regarding a number of highly complex and subjective variables . these variables include the expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors . additional variables to be considered are the expected term , expected dividends and the risk-free interest rate over the expected term of our employee stock options . in addition , because stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest , it is reduced for estimated forfeitures . forfeitures are estimated at the time of grant and revised , if necessary , in subsequent periods if actual forfeitures differ from those estimates . forfeitures are estimated based on historical experience . if facts and circumstances change and we employ different assumptions in future periods , the compensation expense recorded may differ materially from the amount recorded in the current period . the company uses its historical volatility over the expected life of the stock option award and espp to estimate the expected volatility of the price of its common stock . the risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options . the impact of expected dividends ( $ 0.13 per share for each quarter during fiscal 2019 and $ 0.12 per share for each quarter of fiscal 2018 ) is also incorporated in determining the estimated value per share of employee stock option grants and espp . such dividends are subject to quarterly board of director approval . the company 's expected life of stock option grants is 5.7 years for non-officers and 8.3 years for o fficers and expected life of espp is 6 months . the company reviews the underlying assumptions related to stock-based compensation at least annually or more frequently if the company believe s triggering events exist . valuation of long-lived assets — we assess the potential impairment of long-lived tangible and intangible assets periodically or whenever events or changes in circumstances indicate the carrying value may not be recoverable . identifiable intangible assets are amortized over their lives , typically ranging from three to ten years . goodwill is not subject to amortization . this asset is considered to have an indefinite life and its carrying value is required to be assessed by us for impairment at least annually . depending on future market values of our stock , our operating performance and other factors , these assessments could potentially result in impairment reductions of this intangible asset in the future and this adjustment may materially affect the company 's future financial results and financial condition . story_separator_special_tag business combinations — we allocate the fair value of the purchase consideration of our acquisitions to the tangible assets , liabilities , and intangible assets acquired based on their estimated fair values . purchase price allocations for business acquisitions require significant judgments , particularly with regards to the determination of value of identifiable assets , liabilities , and goodwill . often third - party specialists are used to assist in valuation s requiring complex estimation . the excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill . acquisition-related expenses are recognized separately from the business combination and are expensed as incurred . purchase agreements related to certain business acquisitions may include provisions for the payment of additional cash consideration if certain future performance conditions are met . these contingent consideration arrangements are recognized at their acquisition date fair value and included as part of the purchase price at the acquisition date . the estimated fair value of these contingent consideration arrangements are classified as accrued liabilities or other long - term liabilities on our consolidated balance sheets . the fair value is remeasured each reporting period with any change in fair value being recognized in the applicable period 's results of operations . measuring the fair value of contingent consideration at the acquisition date , and for all subsequent remeasurement periods , requires a careful examination of the facts and circumstances to determine the probable resolution of the contingency ( ies ) . the estimated fair value of the contingent consideration is based primarily on our estimates of meeting the applicable contingency conditions as per the terms of the applicable agreements . these include estimates of various operating performance and other measures and our assessment of the probability of meeting such results , with the probability-weighted earn-out then discounted to estimate fair value . 19 results of operations the following tables set forth , for the periods indicated , our consolidated statements of operations data . these historical results are not necessarily indicative of future results . our operating results for the periods indicated are expressed as a percentage of revenue below . replace_table_token_5_th we also assess the results of our operations using adjusted ebitda and adjusted ebitda margin . we define adjusted ebitda as net income before amortization of intangible assets , depreciation expense , interest and income taxes plus stock-based compensation expense and plus or minus contingent consideration adjustments . adjusted ebitda margin is calculated by dividing adjusted ebitda by revenue . these measures assist management in assessing our core operating performance . the following table presents adjusted ebitda and adjusted ebitda margin for the periods indicated and includes a reconciliation of such measures to net income , the most directly comparable gaap financial measure : replace_table_token_6_th the financial measures and key performance indicators we use to assess our financial and operating performance above are not defined by , or calculated in accordance with , gaap . a non-gaap financial measure is defined as a numerical measure of a company 's financial performance that ( i ) excludes amounts , or is subject to adjustments that have the effect of excluding amounts , that are included in the comparable measure calculated and presented in accordance with gaap in the consolidated statement of operations ; or ( ii ) includes amounts , or is subject to adjustments that have the effect of including amounts , that are excluded from the comparable measure so calculated and presented . adjusted ebitda and adjusted ebitda margin are non-gaap financial measures . we believe adjusted ebitda and adjusted ebitda margin provide useful information to our investors because they are financial measures used by management to assess the core performance of the company . adjusted ebitda and adjusted ebitda margin are not measurements of financial performance or liquidity under gaap and should not be considered in isolation or construed as substitutes for net income or other cash flow data prepared in accordance with gaap for purposes of analyzing our profitability or liquidity . these measures should be considered in addition to , and not as a substitute for , net income , earnings per share , cash flows or other measures of financial performance prepared in conformity with gaap . 20 further , adjusted ebitda and adjusted ebitda margin have the following limitations : · although depreciation and amortization are non-cash charges , the assets being depreciated and amortized will often have to be replaced in the future and adjusted ebitda do not reflect any cash requirements for such replacements ; · equity based compensation is an element of our long-term incentive compensation program , although we exclude it as an expense from adjusted ebitda when evaluating our ongoing operating performance for a particular period ; · we exclude the changes in the fair value of the contingent consideration obligation related to a business acquisition from adjusted ebitda ; and · other companies in our industry may calculate adjusted ebitda and adjusted ebitda margin differently than we do , limiting their usefulness as a comparative measure . because of these limitations , adjusted ebitda and adjusted ebitda margin should not be considered a substitute for performance measures calculated in accordance with gaap . 21 year ended may 25 , 2019 compared to year ended may 26 , 2018 amounts are in millions unless otherwise stated . percentage change computations are based upon amounts in thousands . revenue . revenue increased $ 7 4.9 million , or 11.5 % , to $ 729.0 million for the year ended may 25 , 2019 from $ 654 . 1 million for the year ended may 26 , 2018. the increase in revenue is primarily attributable to the full year impact of our acquisitions of accretive and taskforce , which were completed during the third and second quarter of fiscal 2018 , respectively . in addition , bill rates improved 0 .
| on an annual basis , we have generated positive cash flows from operations since inception , and we continued to do so for the year ended may 25 , 2019. our ability to generate positive cash flow from operations in the future will be , at least in part , dependent on continued stable global economic conditions . as of may 25 , 2019 , the company had $ 43.0 million of cash and cash equivalents including $ 25.6 million held in international operations . 25 we entered into the facility in october 2016 , which is available for working capital and general corporate purposes , including potential acquisitions and stock repurchases . the facility allows the company to choose the interest rate applicable to advances . borrowings under the facility bear interest at a rate per annum of either , at the company 's option , ( i ) libor plus a margin of 1.25 % or 1.50 % or ( ii ) an alternate base rate , plus margin of 0.25 % or 0.50 % with the applicable margin depending on the company 's consolidated leverage ratio . the alternate base rate is the highest of ( i ) bank of america 's prime rate , ( ii ) the federal funds rate plus 0.50 % and ( iii ) the eurodollar rate plus 1.0 % . the company pays an unused commitment fee on the average daily unused portion of the facility at a rate of 0.15 % to 0.25 % depending upon on the company 's consolidated leverage ratio . the facility expires october 17 , 2021. the company 's borrowings on the facility were $ 43.0 million as of may 25 , 2019 and the company had $ 1.3 million of outstanding letters of credit issued under the facility as of may 25 , 2019. subsequent to year end , on june 28 , 2019 , the company made a $ 5.0 million principal payment on the facility . the facility contains both affirmative and negative covenants . the company was in compliance with all financial covenants under the facility as of may 25 , 2019. additional information regarding the facility is included in note 6 — long term debt in the notes to consolidated financial statements included in part
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a settling state that has diligently enforced its qualifying escrow statute in the year in question may be able to avoid allocation of the npm adjustment to the payments made by the manufacturers for the benefit of that settling state . for 2003 through 2012 , liggett and vector tobacco , as applicable , disputed that they owed the settling states the npm adjustments as calculated by the independent auditor . as permitted by the msa , liggett and vector tobacco paid subject to dispute , withheld payment or paid into a disputed payment account the amounts associated with these npm adjustments . notwithstanding provisions in the msa requiring arbitration , litigation was filed in 49 settling states involving the application of the npm adjustment for 2003 and whether it was to be determined through litigation or arbitration . these actions related to the potential npm adjustment for 2003 , which the independent auditor under the msa previously determined to be as much as $ 1,200,000 for all participating manufacturers . all but one of the 48 courts that decided the issue ruled that the 2003 npm adjustment dispute was arbitrable . in response to a proposal from the opms and many of the spms , 45 of the settling states , representing approximately 90 % of the allocable share of the settling states , entered into an agreement providing for a nationwide arbitration of the dispute with respect to the npm adjustment for 2003. in june 2010 , the three person arbitration panel was selected . in november 2011 , the participating manufacturers advised the arbitration panel that they were not contesting diligent enforcement of 16 settling states . substantive hearings commenced in april 2012 and were completed in june 2013. effective december 17 , 2012 , the participating manufacturers entered into a “ term sheet ” with 20 settling states setting out terms for settlement of the npm adjustment for 2003 through 2012 and addressing the npm adjustment with respect to those states for future years . certain of the non-settling states objected to the settlement . in march 2013 , the arbitration panel entered a stipulated partial settlement and award which , among other things , overruled the objections of the non-settling states and directed the independent auditor to implement certain terms of the term sheet effective with the april 15 , 2013 msa payments . in may 2013 , two additional states joined the settlement . several non-settling states are attempting to vacate the settlement award by filing state court actions . in idaho , a trial court denied that state 's motion to vacate , and the state noticed an appeal of that denial . although certain terms of the settlement were implemented by the independent auditor on april 15 , 2013 , no assurance can be given as to the ultimate outcome of the non-settling states ' challenges . it is possible that liggett or vector tobacco might be required to make additional payments in connection with this dispute . as a result of the settlement , in the first quarter of 2013 liggett and vector tobacco recognized income of $ 5,602 . following the additional two states joining the settlement in may 2013 , liggett and vector tobacco recognized an additional $ 1,345 of income in the second quarter of 2013. the remaining npm adjustment accrual of $ 27,600 at december 31 , 2013 relates to the disputed amounts liggett and vector tobacco have withheld from the non-settling states for 2004 through 2010. approximately $ 16,600 remains in the disputed payments accounts relating to the 2011 and 2012 npm adjustment dispute with these non-settling states . in september 2013 , the panel issued its decisions with respect to the 15 states that did not enter into the stipulated partial settlement and award , finding that six states did not diligently enforce their msa escrow statutes in 2003. as a result , in april 2014 , liggett is entitled to receive a credit for the 2003 npm adjustment , in the amount of $ 5,987 including interest . this amount was recognized in the third quarter of 2013. all six of the states that were found to be non-diligent have filed motions in state court seeking to vacate the arbitration award . no assurance can be given as to the ultimate outcome of these challenges . 34 redemption of debentures . on october 29 , 2013 , we issued a notice of optional redemption to each holder of our 3.875 % variable interest senior convertible debentures due 2026. pursuant to the notice of optional redemption , we intended to redeem all of the remaining debentures outstanding under the indenture on november 29 , 2013. during november 2013 , all of the outstanding $ 43,222 was converted into 2,970,168 shares of our common stock . the conversions resulted in non-cash accelerated interest expense of $ 12,414 for the year ended december 31 , 2013. the debt conversion resulted in a reduction of debt and an increase to equity in the amount of $ 43,222 . 7.75 % senior secured notes due 2021. in february 2013 , we issued $ 450,000 of our 7.75 % senior secured notes due 2021 in a private offering to qualified institutional investors in accordance with rule 144a of the securities act of 1933. in june 2013 , we completed an offer to exchange the 7.75 % senior secured notes issued in february 2013 for an equal amount of newly issued 7.75 % senior secured notes due 2021. the new 7.75 % senior secured notes have substantially the same terms as the original notes , except that the new 7.75 % senior secured notes have been registered under the securities act . the 7.75 % senior secured notes pay interest on a semi-annual basis at a rate of 7.75 % per year and mature on february 15 , 2021. we may redeem some or all of the 7.75 % senior secured notes at any time prior to february 15 , 2016 at a make-whole redemption price . story_separator_special_tag on or after february 15 , 2016 we may redeem some or all of the 7.75 % senior secured notes at a premium that will decrease over time , plus accrued and unpaid interest and liquidated damages , if any , to the redemption date . the 7.75 % senior secured notes are guaranteed subject to certain customary automatic release provisions on a joint and several basis by all of our 100 % owned domestic subsidiaries that are engaged in the conduct of our cigarette businesses . in addition , some of the guarantees are collateralized by second priority or first priority security interests in certain collateral of some of the subsidiary guarantors , including their common stock , pursuant to security and pledge agreements . the indenture contains covenants that restrict the payment of dividends if our consolidated earnings before interest , taxes , depreciation and amortization , as defined in the indenture , for the most recently ended four full quarters is less than $ 75,000. the indenture also restricts the incurrence of debt if our leverage ratio and our secured leverage ratio , as defined in the indenture , exceed 3.0 and 1.5 , respectively . the aggregate net proceeds from the sale of the 7.75 % senior secured notes were approximately $ 438,250 after deducting offering expenses . we used the net proceeds of the issuance for the cash tender offer described below and the redemption price for any existing 11 % senior secured notes that are not tendered , plus accrued and unpaid interest plus any related fees and expenses . tender offer . on january 29 , 2013 , we announced we were commencing a cash tender offer with respect to any and all of the outstanding $ 415,000 of our 11 % senior secured notes due 2015. we retired $ 336,315 of the 11 % senior secured notes at a premium of 104.292 % , plus accrued and unpaid interest , on february 12 , 2013. the remaining $ 78,685 of the 11 % senior secured notes were called and were retired on march 14 , 2013 at a redemption price of 103.667 % plus accrued and unpaid interest . we recorded a loss on the extinguishment of the debt of $ 21,458 for the twelve months ended december 31 , 2013 , which included $ 17,820 of premium and tender offer costs and non-cash interest expense of $ 3,638 related to the write-off of net unamortized debt discount and deferred fin ance costs . coral beach . in december 20 13 , a subsidiary of new valley invested $ 3,030 to acquire a 49 % interest in a joint venture that acquired a 52 -acre site in bermuda . the property consists of the horizons hotel , which includes 56 hotel units , and coral beach and tennis club , which includes 31 hotel units , in bermuda . the coral beach and tennis club is open while the horizons hotel is closed . renovation will begin on the coral beach and tennis club in 2014 and the project is expected to be completed in 20 15 . 8701 c ollins avenue . in december 2013 , a subsidiary of new valley invested $ 3,750 in a joint venture to acquire a 15 % interest in the howard johnson 's dezerland beach hotel in miami beach , florida , which will be redeveloped into modern hotel and residential condominium units . st portfolio . in november 2013 , new valley invested $ 16,365 for an approximate 16.34 % interest in a joint venture that owns four class a multi-family rental assets in partnership with winthrop realty trust . the four buildings are located in : houston , texas ; phoenix , arizona ; san pedro , california ; and stamford , connecticut . the buildings include 761 apartment units and 25,000 square feet of retail space . escena . in october 2013 , the company sold 200 single-family residential lots for approximately $ 22,700 net of selling costs . the remaining project consists of 667 residential lots , consisting of both single family and multi-family lots , an 18 -hole golf course , clubhouse restaurant and golf shop , and a seven -acre site approved for a 450 -room hotel . park lane hotel . in july 2013 , a subsidiary of new valley acquired an 5 % interest in a joint venture that has agreed to acquire the park lane hotel , which is presently a 47 -story , 605 -room independent hotel owned and operated by the helmsley family trust and estate . the joint venture is developing plans for a hotel and luxury residential condominiums . the development 35 is estimated to take approximately 30 months from commencement of construction . new valley had invested $ 19,331 in the joint venture as of december 31 , 2013 . 101 murray street . in may 2013 , a subsidiary of new valley acquired a 25 % interest in a joint venture , which had the rights to acquire a 15 -story building on a 31,000 square-foot lot in the tribeca neighborhood of manhattan , ny . the former owner will vacate the building by july 2014. the joint venture plans to build a 150 -unit , luxury condominium building on the building 's site . development will begin in 2014 and is expected to be completed in september 2017. in july 2013 , the joint venture closed on the acquisition of the property . new valley had invested $ 19,256 in the joint venture as of december 31 , 2013 in the form of capital contributions and a loan bearing interest at 12 % per annum , compounded quarterly , to the joint venture partner . investment in indian creek . in march 2013 , new valley invested $ 7,616 for an approximate 80 % interest in timbo llc ( `` indian creek '' ) which owns a residential real estate conversion project located on indian creek , florida .
| for the year ended december 31 , 2013 , tobacco revenues were $ 1,014,341 compared to $ 1,084,546 for the year ended december 31 , 2012 . revenues declined by 6.5 % ( $ 70,205 ) due to a decline in sales volume of $ 116,608 ( approximately 1,019.9 million units ) offset by a favorable price variance of $ 46,403 primarily related to increases in the price of pyramid . real estate revenues . on december 13 , 2013 , an affiliate of new valley llc acquired an additional 20.59 % interest in douglas elliman from prudential real estate financial services of america , inc. for a purchase price of $ 60,000 . the acquisition increased our ownership position in douglas elliman from 50 % to 70.59 % . consequently , after december 13 , 2013 , we consolidate the operations and financial position of douglas elliman in our financial statements . real estate revenues of $ 41,859 for the year ended december 31 , 2013 related to the half-month of douglas elliman revenues of $ 19,125 and the october 2013 sale of 200 of the 867 residential lots of new valley llc 's escena project for approximately $ 22,734 , net of selling costs . cost of goods sold . total cost of goods sold were $ 747,186 for the year ended december 31 , 2013 compared to $ 823,452 for the year ended december 31 , 2012. the $ 76,266 ( 9.3 % ) decline in cost of goods sold was due to a $ 94,059 decline in tobacco cost of goods sold offset by the douglas elliman real estate commissions expense of $ 17,793 . tobacco cost of goods sold . our tobacco cost of goods sold declined from $ 823,452 for the year ended december 31 , 2012 to $ 729,393 for the year ended december 31 , 2013 . the major components of our tobacco cost of goods sold are federal excise taxes , expenses under the msa , fda legislation and tobacco buyout , which are variable costs based on the number of units sold , and tobacco
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overview and strategy we serve as a holding company for the bank , which is our primary asset and only operating subsidiary . we follow a business plan that emphasizes the delivery of customized banking services in our market area to customers who desire a high level of personalized service and responsiveness . the bank conducts a traditional banking business , making commercial loans , consumer loans and residential and commercial real estate loans . in addition , the bank offers various non-deposit products through non-proprietary relationships with third party vendors . the bank relies upon deposits as the primary funding source for its assets . the bank offers traditional deposit products . many of our customer relationships start with referrals from existing customers . we then seek to cross sell our products to customers to grow the customer relationship . for example , we will frequently offer an interest rate concession on credit products for customers that maintain a noninterest-bearing deposit account at the bank . this strategy has helped maintain our funding costs and the growth of our interest expense even as we have substantially increased our total deposits . it has also helped fuel our significant loan growth . we believe that the bank 's significant growth and increasing profitability demonstrate the need for and success of our brand of banking . our results of operations depend primarily on our net interest income , which is the difference between the interest earned on our interest-earning assets and the interest paid on funds borrowed to support those assets , primarily deposits . net interest margin is the difference between the weighted average rate received on interest-earning assets and the weighted average rate paid to fund those interest-earning assets , which is also affected by the average level of interest-earning assets as compared with that of interest-bearing liabilities . net income is also affected by the amount of noninterest income and noninterest expenses . general the following discussion and analysis presents the more significant factors affecting the company 's financial condition as of december 31 , 2016 and 2015 and results of operations for each of the years in the three-year period ended december 31 , 2016. the md & a should be read in conjunction with the consolidated financial statements , notes to consolidated financial statements and other information contained in this report . - 28 - operating results overview net income for the year ended december 31 , 2016 was $ 31.1 million , a decrease of $ 10.2 million , or 24.8 % , compared to net income of $ 41.3 million for 2015. net income available to common shareholders for the year ended december 31 , 2016 was $ 31.1 million , a decrease of $ 10.1 million , or 24.6 % , compared to net income available to common shareholders of $ 41.2 million for 2015. diluted earnings per share were $ 1.01 for 2016 , a 25.7 % decrease from $ 1.36 for 2015. the change in net income from 2015 to 2016 was attributable to the following : · increased net interest income of $ 13.0 million primarily due to organic growth , · increased provision for loan and lease losses of $ 26.1 million primarily due to an increase in additional reserves specifically allocated to the company 's taxi medallion portfolio , resulting from the transfer of the portfolio to loans held-for-sale , · decrease in noninterest income of $ 1.3 million primarily resulting from a prior year insurance recovery ( $ 2.2 million ) , offset by current year increases in boli income ( $ 0.8 million ) , · noninterest expense increased approximately $ 4.0 million primarily due to an increase in salaries and employee benefits ( $ 3.4 million ) , occupancy and equipment ( $ 1.0 million ) , fdic insurance ( $ 0.8 million ) , data processing ( $ 0.4 million ) and other expenses ( $ 0.6 million ) , offset by a prior year loss on extinguishment of debt ( $ 2.4 million ) , and · decreased income tax expense of $ 8.2 million resulting from decrease in income before taxes . net income for the year ended december 31 , 2015 was $ 41.3 million , an increase of $ 22.7 million , or 123.4 % , compared to net income of $ 18.6 million for 2014. net income available to common shareholders for the year ended december 31 , 2015 was $ 41.2 million , an increase of $ 22.7 million , or 123.3 % , compared to net income available to common shareholders of $ 18.5 million for 2014. diluted earnings per share were $ 1.36 for 2015 , a 72.2 % increase from $ 0.79 for 2014. the change in net income from 2014 to 2015 was attributable to the following : · increased net interest income of $ 37.8 million primarily due to the impact of the merger and organic growth , · increased provision for loan and lease losses of $ 7.9 million primarily due to an increase in organic loan growth during 2015 , higher levels of specific reserves including $ 4.5 million related to the taxi medallion portfolio and $ 1.3 million related to the union center 's former operations center that was repositioned as a lease financing receivable and the maturity and extension of acquired portfolio loans , · increased noninterest income of $ 3.7 million primarily resulting from an insurance recovery ( $ 2.2 million ) and an increase in net gains on sale of investment securities ( $ 1.1 million ) , · noninterest expense remained relatively flat due to an increase in salaries and employee benefits ( $ 8.9 million ) , occupancy and equipment ( $ 2.3 million ) , and professional and consulting ( $ 1.3 million ) , offset by impact of the merger ( including direct merger charges of $ 12.4 million in 2014 ) , and · increased income tax expense of $ 11.1 million resulting from higher pretax income in 2015 offset by nondeductible merger-related story_separator_special_tag expenses incurred in 2014. net interest income fully taxable equivalent net interest income for 2016 totaled $ 133.0 million , an increase of $ 13.3 million , or 11.1 % , from 2015. the increase in net interest income was due to an increase in average interest-earning assets , which grew by 16.7 % to $ 3.9 billion . partially offsetting the increase in interest-earning assets was a 17 basis-point contraction in the net interest margin . the decrease in the net interest margin was attributed to higher levels of cash held at the federal reserve bank , lower accretion of purchase accounting adjustments related to the merger , long-term subordinated debt issued in june 2016 , and an increase in rates paid on deposits . average total loans increased by 20.1 % to $ 3.4 billion in 2016 from $ 2.8 billion in 2015. fully taxable equivalent net interest income for 2015 totaled $ 119.7 million , an increase of $ 37.9 million , or 46.4 % , from 2014. the increase in net interest income was due to an increase in average interest-earning assets , which grew by 47.3 % to $ 3.4 billion principally as a result of the merger , which was effective on july 1 , 2014. partially offsetting the increase in interest-earning assets was a 2 basis-point contraction in the net interest margin . during 2015 , the bank 's funding costs were higher due to an increase in longer-term funding , including time deposits and subordinated debt . average total loans increased by 64.6 % to $ 2.8 billion in 2015 from $ 1.7 billion in 2014 . - 29 - average balance sheets the following table sets forth certain information relating to our average assets and liabilities for the years ended december 31 , 2016 , 2015 and 2014 and reflect the average yield on assets and average cost of liabilities for the periods indicated . such yields are derived by dividing income or expense by the average balance of assets or liabilities , respectively , for the periods shown . replace_table_token_7_th ( 1 ) average balances are based on amortized cost . ( 2 ) interest income is presented on a tax equivalent basis using 35 % federal tax rate . ( 3 ) includes loan fee income . ( 4 ) loans include nonaccrual loans . ( 5 ) amount does not reflect netting of debt issuance costs of $ 621 , $ 812 and $ - as of december 31 , 2016 , december 31 , 2015 and december 31 , 2014 , respectively . ( 6 ) represents difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and is presented on a tax equivalent basis . ( 7 ) represents net interest income on a tax equivalent basis divided by average total interest-earning assets - 30 - rate/volume analysis the following table presents , by category , the major factors that contributed to the changes in net interest income . changes due to both volume and rate have been allocated in proportion to the relationship of the dollar amount change in each . replace_table_token_8_th provision for loan and lease losses in determining the provision for loan and lease losses , management considers national and local economic trends and conditions ; trends in the portfolio including orientation to specific loan types or industries ; experience , ability and depth of lending management in relation to the complexity of the portfolio ; effects of changes in lending policies , trends in volume and terms of loans ; levels and trends in delinquencies , impaired loans and net charge-offs and the results of independent third party loan and lease review . for the year ended december 31 , 2016 , the provision for loan and lease losses was $ 38.7 million , an increase of $ 26.1 million , compared to the provision for loan and lease losses of $ 12.6 million for 2015. the increase was largely attributable to an increase in reserves allocated to the bank 's taxi medallion portfolio of approximately $ 27.7 million resulting from the transfer of the portfolio to loans held-for-sale , offset by a reduction in reserves of $ 1.5 million related to the movement of loans from the acquired portfolio into loans held-for-investment . for the year ended december 31 , 2015 , the provision for loan and lease losses was $ 12.6 million , an increase of $ 7.9 million , compared to the provision for loan and lease losses of $ 4.7 million for the same period in 2014. the increase resulted from an increase in organic loan growth during 2015 , higher levels of specific reserves including $ 4.5 million related to the taxi medallion portfolio and $ 1.3 million related to the union center 's former operations center that was repositioned as a lease financing receivable and the maturity and extension of acquired portfolio loans . noninterest income noninterest income for the full-year 2016 decreased by $ 1.3 million , or 11.2 % to $ 9.9 million from $ 11.2 million in 2015. the decrease was primarily the result of a 2015 insurance recovery of $ 2.2 million , offset by an increase in boli income of $ 0.8 million and higher net investment securities gains , increasing by $ 0.3 million to $ 4.2 million for the year ended december 31 , 2016 from $ 3.9 million for the year ended december 31 , 2015 .
| residential mortgages include loans secured by first liens on residential real estate , and are generally made to existing customers of the bank to purchase or refinance primary and secondary residences . home equity loans and lines of credit include loans secured by first or second liens on residential real estate for primary or secondary residences . consumer loans are made to individuals who qualify for auto loans , cash reserve , credit cards and installment loans . during 2016 and 2015 , loan portfolio growth was positively impacted in several ways including ( i ) an increase in demand for small business lines of credit , and business term loans as economic conditions have stabilized and begun to improve , ( ii ) industry consolidation and lending restrictions involving larger competitors allowing the bank to gain market share , ( iii ) an increase in refinancing strategies employed by borrowers during the current low rate environment , and ( iv ) the bank 's success in attracting highly experienced commercial loan officers with substantial local market knowledge . - 32 - total gross loans at december 31 , 2016 totaled $ 3.5 billion , an increase of $ 378 million , or 12.2 % , over gross loans at december 31 , 2015 of $ 3.1 billion . as of december 31 , 2016 , the bank had transferred $ 77.8 million of loans to loans held-for-sale , consisting primarily of $ 65.6 million of taxi medallion loans ( part of commercial loans ) , $ 7.7 million of commercial real estate loans and $ 4.5 million in non-taxi commercial loans . excluding this transfer , total gross loans at december 31 , 2016 increased by $ 455 million , or 14.7 % over gross loans at december 31 , 2015. the increase in gross loans was attributable to organic loan growth . the largest component of our loan portfolio at december 31 , 2016 and december 31 , 2015 was commercial real estate loans . our commercial real estate loans ( including multifamily loans ) at december 31 , 2016 totaled $ 2.2 billion , an
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in some cases , additional losses may be realized ; in other instances , the factors that led to the deterioration may improve or the credit may be refinanced elsewhere and allocated allowances may be released from the particular credit . in the fourth quarter of 2014 , the company began using a three-year average of historical losses for the general component of the allowance for loan loss calculation . the company had previously used a five-year average . the company believes that the three-year average provides a better representation of the current risks in the loan portfolio . this change was made after consultation with our regulators and third-party consultants , as well as a review of the practices used by the company 's peers . no significant changes were made to management 's overall methodology for evaluating the allowance for loan losses during the periods presented in the financial statements of this report . beginning in 2020 , the company will adopt the new accounting standard related to the allowance for credit losses . for assets held at amortized cost basis , this standard eliminates the probable initial recognition threshold in current gaap and , instead , requires an entity to reflect its current estimate of all expected credit losses . see note 1 of the accompanying audited financial statements for additional information . in addition , the company considers that the determination of the valuations of foreclosed assets held for sale involves a high degree of judgment and complexity . the carrying value of foreclosed assets reflects management 's best estimate of the amount to be realized from the sales of the assets . while the estimate is generally based on a valuation by an independent appraiser or recent sales of similar properties , the amount that the company realizes from the sales of the assets could differ materially from the carrying value reflected in the financial statements , resulting in losses that could adversely impact earnings in future periods . carrying value of loans acquired in fdic-assisted transactions and indemnification asset the company considers that the determination of the carrying value of loans acquired in the fdic-assisted transactions and the carrying value of the related fdic indemnification asset involves a high degree of judgment and complexity . the carrying value of the acquired loans and , prior to june 30 , 2017 , the fdic indemnification asset reflect management 's best ongoing estimates of the amounts to be realized on each of these assets . the company has now terminated all loss sharing agreements with the fdic and , accordingly , no longer has an indemnification asset . the company determined initial fair value accounting estimates of the acquired assets and assumed liabilities in accordance with fasb asc 805 , business combinations . however , the amount that the company realizes on its acquired loan assets could differ materially from the carrying value reflected in its financial statements , based upon the timing of collections on the acquired loans in future periods . because of the loss sharing agreements with the fdic on certain of these assets , the company did not expect to incur any significant losses related to these assets . to the extent the actual values realized for the acquired loans are different from the estimates , the indemnification asset was generally impacted in an offsetting manner due to the loss sharing support from the fdic . subsequent to the initial valuation , the company continued to monitor identified loan pools for changes in estimated cash flows projected for the loan pools , anticipated credit losses and changes in the accretable yield . analysis of these variables requires significant estimates and a high degree of judgment . see note 4 of the accompanying audited financial statements for additional information regarding the teambank , vantus bank , sun security bank , interbank and valley bank fdic-assisted transactions . 64 as noted above , in 2020 , the company will adopt the new accounting standard related to the allowance for credit losses . the adoption of this standard will required the company to reclassify any remaining non-accretable yield adjustment to the allowance for credit losses . fdic-assisted acquired loans will still be evaluated in their original pools that were determined at the acquisition date of the loans . see note 1 of the accompanying audited financial statements for additional information . goodwill and intangible assets goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently if circumstances indicate their value may not be recoverable . goodwill is tested for impairment using a process that estimates the fair value of each of the company 's reporting units compared with its carrying value . the company defines reporting units as a level below each of its operating segments for which there is discrete financial information that is regularly reviewed . as of december 31 , 2019 , the company has one reporting unit to which goodwill has been allocated – the bank . if the fair value of a reporting unit exceeds its carrying value , then no impairment is recorded . if the carrying value amount exceeds the fair value of a reporting unit , further testing is completed comparing the implied fair value of the reporting unit 's goodwill to its carrying value to measure the amount of impairment . intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values . at december 31 , 2019 , goodwill consisted of $ 5.4 million at the bank reporting unit , which included goodwill of $ 4.2 million that was recorded during 2016 related to the acquisition of 12 branches from fifth third bank . other identifiable intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years . story_separator_special_tag at december 31 , 2019 , the amortizable intangible assets consisted of core deposit intangibles of $ 2.7 million , including $ 1.9 million related to the fifth third bank transaction in january 2016 , $ 600,000 related to the valley bank transaction in june 2014 and $ 153,000 related to the boulevard bank transaction in march 2014. these amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value . see note 1 of the accompanying audited financial statements for additional information . for purposes of testing goodwill for impairment , the company used a market approach to value its reporting unit . the market approach applies a market multiple , based on observed purchase transactions for each reporting unit , to the metrics appropriate for the valuation of the operating unit . significant judgment is applied when goodwill is assessed for impairment . this judgment may include developing cash flow projections , selecting appropriate discount rates , identifying relevant market comparables and incorporating general economic and market conditions . based on the company 's goodwill impairment testing , management does not believe any of the company 's goodwill or other intangible assets were impaired as of december 31 , 2019. while management believes no impairment existed at december 31 , 2019 , different conditions or assumptions used to measure fair value of the reporting unit , or changes in cash flows or profitability , if significantly negative or unfavorable , could have a material adverse effect on the outcome of the company 's impairment evaluation in the future . current economic conditions changes in economic conditions could cause the values of assets and liabilities recorded in the financial statements to change rapidly , resulting in material future adjustments in asset values , the allowance for loan losses , or capital that could negatively impact the company 's ability to meet regulatory capital requirements and maintain sufficient liquidity . following the housing and mortgage crisis and correction beginning in mid-2007 , the united states entered a prolonged economic downturn . unemployment rose from 4.7 % in november 2007 to peak at 10.0 % in october 2009. the elevated unemployment levels negatively impacted consumer confidence , which had a detrimental impact on industry-wide performance nationally as well as in the company 's midwest market area . economic conditions have significantly improved since then , as indicated by consumer confidence levels , increased economic activity and low unemployment levels . in december 2019 , the economy marked its 111th straight month of net job gains with 145,000 jobs added . hiring was below economists ' estimates of 164,000 added jobs but the national unemployment rate held steady at 3.5 % . the rate compares to a 3.9 % rate at december 2018 and is still the lowest rate of unemployed americans recorded since december 1969. employment in health care and in professional and business services continued to trend higher . as of december 2019 , the u.s. labor force participation rate ( the share of working-age americans employed or actively looking for a job ) was 63.2 % and the employment population ratio was 61.0 % , with both ratios unchanged over the past few months . the unemployment rate for the midwest , where most of the company 's 65 business is conducted , remained stable and in-line with the national average at 3.5 % in december 2019. unemployment rates for december 2019 were : missouri at 3.3 % , arkansas at 3.6 % , kansas at 3.2 % , iowa at 2.7 % , minnesota at 3.3 % , illinois at 3.7 % , oklahoma at 3.4 % , texas at 3.5 % , georgia at 3.2 % and colorado at 2.5 % . of the metropolitan areas in which the company does business , the st. louis area had the highest unemployment level at 3.3 % as of december 2019 while the unemployment rate for the springfield market areas was at 3.2 % , below the national average . metropolitan areas in iowa , missouri , nebraska and minnesota continued to boast unemployment levels amongst the lowest in the nation . sales of newly built single-family homes fell 0.4 % in december 2019. however , 2019 was the strongest year for home sales since 2006. sales were a seasonally adjusted annual rate of 681,000 according to the u.s. census bureau and the department of housing and urban development estimates increased 10.3 % from the 2018 seasonally adjusted annual rate of 617,000. the median sales price of new houses sold in december 2019 was $ 331,400 , up slightly from $ 329,700 a year earlier . the december 2019 average sales price of $ 382,300 was down slightly from $ 384,000 a year ago . the inventory of new homes for sale at the end of december would support 5.7 months ' supply at the current sales pace , down from 6.6 months ' supply as of december 2018. according to the national association of realtors ( nar ) , u.s. existing-home sales grew to a seasonally adjusted rate of 5.54 million in december 2019. overall sales increased by 10.8 % from 5.00 million in december 2018. sales in the midwest reflected a 1.6 % decline from november 2019 but an annual gain of 8.9 % during 2019. on a full-year basis , total existing-home sales ended at 5.34 million , the same level as in 2018 , with sales in the south region ( +2.2 % ) offsetting declines in the west ( -1.8 % ) and midwest ( -1.6 % ) . total housing inventory at the end of december 2019 was at 1.4 million units , down 14.6 % from november 2019 and 8.5 % from one year ago ( 1.53 million units ) . unsold inventory totals have dropped for seven consecutive months and are causing home sales declines due to a lack of inventory .
| interest income – loans during the year ended december 31 , 2018 compared to the year ended december 31 , 2017 , interest income on loans increased due to higher average interest rates and higher average balances . interest income increased $ 17.0 million as the result of higher average interest rates on loans . the average yield on loans increased from 4.63 % during the year ended december 31 , 2017 to 5.07 % during the year ended december 31 , 2018. this increase was primarily due to increased yields in most loan categories as a result of increased libor and federal funds interest rates . interest income increased $ 4.5 million as the result of higher average loan balances , which increased from $ 3.81 billion during the year ended december 31 , 2017 , to $ 3.91 billion during the year ended december 31 , 2018. the higher average balances were primarily due to organic loan growth in commercial construction loans , commercial real estate loans and other residential ( multi-family ) loans , partially offset by decreases in consumer loans . on an on-going basis , the company estimates the cash flows expected to be collected from the acquired loan pools . for each of the loan portfolios acquired , the cash flow estimates have increased , based on the payment histories and the collection of certain loans , thereby reducing loss expectations of certain loan pools , resulting in adjustments to be spread on a level-yield basis over the remaining expected lives of the loan pools . the loss sharing agreements for the team bank , vantus bank and sun security bank transactions were terminated in april 2016 , and the related indemnification assets were reduced to $ -0- at that time . the loss sharing agreements for interbank were terminated in june 2017 , and the related indemnification asset was reduced to $ -0- at that time . the valley bank transaction does not include a loss sharing agreement with the fdic . the entire amount of the discount adjustment has been and will be accreted to interest income over time with no further offsetting impact to non-interest income . for the years ended december 31 ,
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cib marine recognizes the inherent imprecision in estimates of losses due to various uncertainties and variability related to the factors used to estimate loan losses . if different assumptions or conditions were to prevail and it is determined that the allowance is not adequate to absorb the new estimate of probable losses , an additional provision for loan losses would be made , which amount may be material to the consolidated financial statements . 26 income taxes cib marine recognizes expense for federal and state income taxes currently payable as well as for deferred federal and state taxes for estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the consolidated balance sheets , as well as loss carryforwards and tax credit carryforwards . realization of deferred tax assets is dependent upon cib marine generating sufficient taxable income in either the carryforward or carryback periods to cover net operating losses generated by the reversal of temporary differences . a valuation allowance is provided by way of a charge to income tax expense if it is determined that it is not more likely than not that some portion or all of the deferred tax asset will be realized . if different assumptions and conditions were to prevail , the valuation allowance may not be adequate to absorb unrealized deferred taxes and the amount of income taxes payable may need to be adjusted by way of a charge or credit to expense . furthermore , income tax returns are subject to audit by the irs , state taxing authorities , and foreign government taxing authorities . income tax expense for current and prior periods is subject to adjustment based upon the outcome of such audits . cib marine believes it has adequately accrued for all probable income taxes payable and provided valuation allowances for deferred tax assets where it has been determined to be not more likely than not that such assets are realizable . accrual of income taxes payable and valuation allowances against deferred tax assets are estimates subject to change based upon the outcome of future events . cib marine has entered into tax allocation agreements with its subsidiary entities included in the consolidated u.s. federal and unitary and combined state income tax returns , including u.s. operations of companies held for sale or disposal . these agreements govern the timing and amount of income tax payments required by the various entities . due to the significant losses incurred in 2006 through 2008 , management has determined that it is not more likely than not that the entire net deferred tax asset of $ 101.3 million at december 31 , 2008 , which includes the entire net deferred tax asset of companies held for sale or disposal of $ 3.9 million , will be realized . therefore , a valuation allowance for the entire amount has been established , including net deferred tax assets of companies held for sale or disposal . introduction the following is a discussion and analysis of cib marine 's consolidated financial condition as of december 31 , 2008 and 2007 , and its changes in financial condition and results of operations for the three years ended december 31 , 2008 , 2007 and 2006. references in the discussion below to “ cib marine ” include cib marine 's subsidiaries unless otherwise specified . this discussion and analysis should be read in conjunction with the consolidated financial statements and notes contained in part ii , item 8 of this form 10-k. overview during 2008 , cib marine continued to focus on the comprehensive capital plan outlined in its 2007 form 10-k. the primary goal of the capital plan was to bring the trups interest payments current as soon as practicable . in addition to the execution of the capital plan , management continued its efforts to improve the efficiency of cib marine by focusing on increasing revenue through the addition of commercial bankers in its subsidiary banks ' markets , continuing cost savings initiatives started in 2007 , and maintaining a high level of customer service while actively seeking new business opportunities . these activities included the sale of the branches , deposits , and most of the loans for citrus bank , na . net loss increased to $ 34.4 million in 2008 compared to a net loss of $ 13.8 million in 2007 and $ 9.3 million in 2006. total assets declined to $ 0.9 billion compared to $ 1.0 billion at december 31 , 2007. this largely reflected the sale of assets and deposits of citrus bank , na during 2008. the continuing losses of cib marine have resulted in decreases in consolidated capital ratios at december 31 , 2008. total equity to assets at year end 2008 was 1.63 % compared to 6.01 % at december 31 , 2007 . 27 in light of the current operating environment and net losses in each of the six years ended december 31 , 2008 , cib marine and the banks have continued to work closely with their respective regulators . cib marine remains under the agreement with its regulator , the reserve bank , which continues to impose certain restrictions and reporting requirements including , but not limited to : · restrictions on dividend payments and redemption of shares of cib marine stock without regulatory approval ; · adoption of a comprehensive plan to improve earnings ; · development of a plan to correct and prevent violations of banking laws and regulations related to affiliate transactions . in march 2009 marine bank stipulated to a c & d which was signed by the fdic and the wdfi in early april 2009 , and is expected to become effective in the near future . the c & d primarily resulted from the high level of nonperforming assets of marine bank and the resulting impact on its financial condition . story_separator_special_tag the c & d requires marine bank to take certain corrective actions focusing on reducing exposure to non-performing loans , charging off all loans classified as loss , imposes restrictions on lending to credits with existing non-performing loans , and accruing interest on certain delinquent loans in addition to charging off previously accrued interest on those loans . key provisions also include a restriction on paying dividends without regulatory approval , a requirement to maintain a minimum tier 1 leverage ratio of 10 % at marine bank , retaining qualified management , revising lending policies and procedures focused on documentation , maintaining an appropriate loan review and grading system , and adopting a comprehensive budget . failure to adhere to the requirements of the actions mandated by the c & d , once it becomes effective , can result in more severe restrictions and civil monetary penalties . the c & d added no additional requirements to the asset quality and loan review program previously implemented and currently maintained by marine bank . cib marine and marine bank also remain committed to maintaining adequate capital levels . generally , enforcement actions such as the c & d can be lifted only after subsequent examinations substantiate complete correction of the underlying issues . notwithstanding cib marine 's efforts to raise new equity and a capital infusion through the renegotiation of the trups , federal or bank regulators could take enforcement action , which could include placing cib marine and or the banks into receivership . during 2008 the cib marine parent company contributed $ 5.0 million of capital to the banks and , subsequent to year end , contributed an additional $ 2.0 million of capital to the banks . in addition , bank regulators could continue to increase minimum capital levels at the banks . the circumstances described in part ii , item 8 , note 13-stockholders ' equity and in part i , item 1a-risk factors of this form 10-k , combined with the continued net losses and in consideration of existing regulatory matters , , raise substantial doubt concerning the ability of cib marine to continue as a going concern . story_separator_special_tag align= '' center '' > replace_table_token_5_th ( 1 ) in the future , cib marine does not expect to realize all of the tax benefits associated with tax-exempt assets due to substantial losses it has incurred , and at december 31 , 2008 , 2007 and 2006 no u.s. federal or state loss carryback potential remains . accordingly , 2008 , 2007 and 2006 are not presented on a tax-equivalent basis . if 2008 , 2007 and 2006 had been shown on a tax-equivalent basis of 35 % , the net interest margin would have been 2.20 % , 2.43 % and 2.34 % , respectively . ( 2 ) loan balance totals include nonaccrual loans . ( 3 ) interest earned on loans includes amortized loan fees of $ 0.4 million , $ 0.6 million and $ 0.6 million for the years ended december 31 , 2008 , 2007 and 2006 , respectively . ( 4 ) includes fixed assets and deposits of branches held for sale or sold during 2008 , 2007 and 2006 . ( 5 ) interest rates and amounts include the effects of derivatives entered into for interest rate risk management and accounted for as fair value hedges . ( 6 ) net interest rate spread is the difference between the average rates on interest-earning assets and interest-bearing liabilities . ( 7 ) net interest margin is the ratio of net interest income , on a tax-equivalent basis , to average interest-earning assets . net interest income decreased $ 1.0 million , or 4.4 % , from $ 22.6 million in 2007 to $ 21.6 million in 2008. the decrease was mainly attributable to a greater decline in interest income versus the decline in interest expense resulting primarily from declines during the first and fourth quarters 2008 in the federal funds rate , the prime rate and short-term us dollar libor rates , which are used to reset interest rates on variable rate loans . this was partially offset by the net interest income derived from the increased volume of total interest-earning assets . cib marine has various strategies to improve net interest income , including growing loans extended to local commercial banking relationships and reducing the costs of deposits , managing investments to improve performance of the portfolio , using collateralized borrowings such as fhlb advances and repurchase agreements when they have a relative cost advantage over other bank funding sources and it is consistent with cib marine 's liquidity strategy , adjusting its deposit interest rates , which often lag key banking indices when those indices change rapidly , and implementing strategies to reduce the level of interest accruals related to its junior subordinated debentures ( see discussion of cib marine 's capital plan outlined in the “ liquidity and capital plan update ” section in this part ii , item 7 ) . net interest income decreased $ 0.6 million , or 2.8 % , from $ 23.2 million in 2006 to $ 22.6 million in 2007. the decrease was mainly attributable to the change in rates paid on liabilities relative to those earned on assets . while the average yield on interest-earning assets increased 57 basis points in 2007 compared to 2006 , the average costs of interest-bearing liabilities increased 59 basis points . the following table presents an analysis of changes in net interest income resulting from changes in average volumes of interest-earning assets and interest-bearing liabilities , and average rates earned and paid . 30 replace_table_token_6_th ( 1 ) in the future , cib marine does not expect to realize all of the tax benefits associated with tax-exempt assets due to substantial losses it has incurred , and at december 31 , 2008 , 2007 and 2006 no u.s. federal or state loss carryback potential remains . accordingly , 2008 , 2007 and 2006 are not presented on a tax-equivalent basis .
| the $ 7.2 million increase in noninterest expense was the result of a $ 3.4 million settlement expense related to the lewis litigation and a $ 2.8 million increase in write down and losses on assets during 2008 compared to 2007. the increase in write down and losses on assets was mainly due to the charge-off of cib marine 's investment in four statutory trusts during the fourth quarter of 2008. see “ other assets ” discussion for further information . see item 3-legal proceedings in part i of this form 10-k for further information regarding the litigation settlement . professional services increased $ 1.5 million primarily reflecting legal and accounting expense related to specific transactions , lawsuits and efforts related to the capital plan . 28 cib marine 's net loss increased $ 4.5 million from a net loss of $ 9.3 million in 2006 to a net loss of $ 13.8 million in 2007. loss from continuing operations increased $ 5.4 million from $ 9.8 million in 2006 to $ 15.2 million in 2007. net income from discontinued operations increased $ 0.9 million from $ 0.6 million to $ 1.4 million during the same respective periods mainly due to a partial reversal of a tax exposure item related to a sold subsidiary . see the income tax discussion for further information on this exposure item . the $ 5.4 million increase in net loss from continuing operations from 2006 to 2007 was primarily due to a $ 10.8 million change in the provision for credit losses from a net recovery of $ 4.4 million in 2006 as compared to a provision of $ 6.4 million in 2007 , and a $ 1.5 million decrease in net gain on sale of branches . the change in the provision for credit losses was driven by net charge-offs during 2007 as compared to net recoveries in 2006 and an increase in the provision for the fixed rate home equity pools cib marine purchased in 2006 and the first quarter of 2007. the decreases in net income resulting from the provision and branch sales were partially offset by a $ 7.7 million decrease in noninterest expense . the 2006 noninterest expense included a $ 1.8 million settlement expense related to the hadley litigation and $ 1.1 million impairment on securities . additionally ,
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because of such low margins , price fluctuations occurring in the futures markets may create profits and losses that are greater , in relation to the amount invested , than are customary in other forms of investments . the minimum amount of margin required in connection with a particular futures contract is set from time to time by the exchange on which such contract is traded , and may be modified from time to time by the exchange during the term of the contract . “ variation margin ” is assessed daily to reflect changes in the value of the position . brokerage firms carrying accounts for traders in futures contracts may not accept lower , and generally require higher , amounts of margin as a matter of policy in order to afford further protection for themselves . margin requirements are computed each day by a commodity broker . when the market value of a particular open futures contract position changes to a point where the margin on deposit does not satisfy maintenance margin requirements , a margin call is made by the commodity broker . if the margin call is not met within a reasonable time , the broker may close out the fund 's position . with respect to the managing owner 's trading , only the managing owner , and not the fund or its shareholders personally , will be subject to margin calls . net asset value nav means the total assets of the fund , including , but not limited to , all currency futures contracts , cash and investments less total liabilities of the fund , each determined on the basis of u.s. generally accepted accounting principles ( “ u.s . gaap ” ) , consistently applied under the accrual method of accounting . all open currency futures contracts will be calculated at their then current market value , which will be based upon the settlement price for that particular currency futures contract traded on the applicable primary exchange on the date with respect to which nav is being determined . securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith following procedures approved by the managing owner . the amount of any distribution is a liability of the fund from the day when the distribution is declared until it is paid . nav per share is the nav of the fund divided by the number of outstanding shares . market risk trading in futures contracts involves the fund entering into contractual commitments to sell a particular currency at a specified date and price . the market risk associated with the fund 's commitments to purchase currencies is limited to the gross or face amount of the contracts held . the fund 's exposure to market risk is also influenced by a number of factors including the volatility of interest rates and foreign currency exchange rates , the liquidity of the markets in which the contracts are traded and the relationships among the contracts held . the inherent uncertainty of the fund 's trading as well as the development of drastic market occurrences could ultimately lead to a loss of all or substantially all of the investors ' capital . credit risk when the fund enters into futures contracts , the fund is exposed to credit risk that the counterparty to the contract will not meet its obligations . the counterparty for futures contracts traded on united states and on most foreign futures exchanges is the clearing house associated with the particular exchange . in general , clearing houses are backed by their corporate members who may be required to share in the financial burden resulting from the nonperformance by one of their members and , as such , is designed to disperse and mitigate the credit risk posed by any one member . in cases where the clearing house is not backed by the clearing members ( i.e. , some foreign exchanges ) , it may be backed by a consortium of banks or other financial institutions . there can be no assurance that any counterparty , clearing member or clearinghouse will meet its obligations to the fund . the commodity broker , when acting as the fund 's futures commission merchant in accepting orders for the purchase or sale of domestic futures contracts , is required by cftc regulations to separately account for and segregate as belonging to the fund all assets of the fund relating to domestic futures trading . the commodity broker is not allowed to commingle such assets with other assets of 24 the commodity broker . in addition , cftc regulations also require the commodity broker to hold in a secure account assets of the fund related to foreign futures trading . while these legal requirements are designed to protect the customers of futures commission merchants , a failure by the commodity broker to comply with those requirements would be likely to have a material adverse effect on the fund in the event that the commodity broker became insolvent or suffered other financial distress . liquidity the fund 's entire source of capital is derived from the fund 's offering of shares to authorized participants . the fund in turn allocates its net assets to currency futures trading . a significant portion of the nav is held in united states treasury obligations , which may be used as margin for the fund 's trading in currency futures contracts and united states treasury obligations , money market mutual funds , cash and t-bill etfs , if any , which may be used for cash management purposes . the percentage that united states treasury obligations bear to the total net assets will vary from period to period as the market values of the fund 's currency futures change . a portion of the fund 's united states treasury obligations is held for deposit with the commodity broker to meet margin requirements . story_separator_special_tag all remaining cash , money market mutual funds , t-bill etfs , if any , and united states treasury obligations are on deposit with the custodian . interest earned on the fund 's interest-bearing funds and dividends from the fund 's holdings of money market mutual funds are paid to the fund . any dividends or distributions of capital gains received from the fund 's holdings of t-bill etfs , if any , are paid to the fund . the fund 's currency futures contracts may be subject to periods of illiquidity because of market conditions , regulatory considerations or for other reasons . for example , u.s. futures exchanges and some foreign exchanges have regulations that limit the amount of fluctuation in futures contract prices that may occur during a single business day . these limits are generally referred to as “ daily price fluctuation limits ” or “ daily limits , ” and the maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “ limit price. ” once a limit price has been reached in a particular contract , it is usually the case that no trades may be made at a different price than specified in the limit . the duration of limit prices generally varies . limit prices may have the effect of precluding the fund from trading in a particular contract or requiring the fund to liquidate contracts at disadvantageous times or prices . either of those outcomes could adversely affect the fund 's ability to pursue its investment objective or achieve favorable performance . because the fund trades futures contracts , its capital is at risk due to changes in the value of futures contracts ( market risk ) or the inability of counterparties ( including the commodity broker and or exchange clearinghouses ) to perform under the terms of the contracts ( credit risk ) . on any business day , an authorized participant may place an order with the transfer agent to redeem one or more blocks of 100,000 shares ( “ creation units ” ) . redemption orders must be placed by 1:00 p.m. , eastern time . the day on which the managing owner receives a valid redemption order is the redemption order date . the day on which a redemption order is settled is the redemption order settlement date . as provided below , the redemption order settlement date may occur up to two business days after the redemption order date . redemption orders are irrevocable . the redemption procedures allow authorized participants to redeem creation units . individual shareholders may not redeem directly from the fund . instead , individual shareholders may only redeem shares in integral multiples of 100,000 and only through an authorized participant . unless otherwise agreed to by the managing owner and the authorized participant as provided in the next sentence , by placing a redemption order , an authorized participant agrees to deliver the creation units to be redeemed through dtc 's book-entry system to the fund no later than the redemption order settlement date as of 2:45 p.m. , eastern time , on the business day immediately following the redemption order date . upon submission of a redemption order , the authorized participant may request the managing owner to agree to a redemption order settlement date up to two business days after the redemption order date . by placing a redemption order , and prior to receipt of the redemption proceeds , an authorized participant 's dtc account is charged the non-refundable transaction fee due for the redemption order . redemption orders may be placed either ( i ) through the continuous net settlement ( “ cns ” ) clearing processes of the national securities clearing corporation ( the “ nscc ” ) ( the “ cns clearing process ” ) or ( ii ) if outside the cns clearing process , only through the facilities of the depository trust company ( “ dtc ” or the “ depository ” ) ( the “ dtc process ” ) , or a successor depository , and only in exchange for cash . by placing a redemption order , and prior to receipt of the redemption proceeds , an authorized participant 's dtc account is charged the non-refundable transaction fee due for the redemption order and such fee is not borne by the fund . capital resources the fund does not have any material commitments for capital expenditures as of the end of the latest fiscal period . the fund is unaware of any ( i ) anticipated known demands , commitments or capital expenditures ; ( ii ) material trends , favorable or unfavorable , in its capital resources ; or ( iii ) trends or uncertainties that will have a material effect on its operations . 25 cash flows a primary cash flow activity of the fund is to raise capital from authorized participants through the issuance of shares . this cash is used to invest in united states treasury obligations , money market mutual funds and t-bill etfs , if any , and to meet margin requirements as a result of the positions taken in dx contracts to match the fluctuations of the index . as of the date of this report , each of abn amro clearing chicago llc , bank of america merrill lynch , bmo capital markets corp. , bnp paribas securities corp. , cantor fitzgerald & co. , citadel securities llc , citigroup global markets inc. , credit suisse securities ( usa ) llc , deutsche bank securities inc. , goldman sachs & co. , goldman sachs execution & clearing lp , interactive brokers llc , jefferies llc , jp morgan securities inc. , merrill lynch professional clearing corp. , morgan stanley & co. llc , nomura securities international inc. , rbc capital markets llc , ubs securities llc , virtu americas llc and virtu financial capital markets llc has executed a participant agreement and are the only authorized participants .
| please note also that the fund 's objective is to track the index ( not the long index–tr ) and the fund does not attempt to outperform or underperform the index . summary of the long index–tr tm and underlying dx contract returns for the years ended december 31 , 2020 and 2019 replace_table_token_6_th if the fund 's treasury income , money market income and t-bill etf income were to exceed the fund 's fees and expenses , the aggregate return on an investment in the fund would be expected to outperform the index and underperform the long index–trtm . the only difference between ( i ) the index ( the “ excess return index ” ) and ( ii ) the long index-trtm ( the “ total return index ” ) is that the excess return index does not include interest income from fixed income securities while the total return index does include such a component . thus , the difference between the excess return index and the total return index is attributable entirely to the interest income attributable to the fixed income securities reflected in the total return index . the total return index does not actually hold any fixed income securities . if the fund 's treasury income , money market income and t-bill etf income , if any , exceeds the fund 's fees and expenses , then the amount of such excess is expected to be distributed periodically . the market price of the shares is expected to closely track the excess return index . the aggregate return on an investment in the fund over any period is the sum of the capital appreciation or depreciation of the shares over the period , plus the amount of any distributions during the period . consequently , the fund 's aggregate return is expected to outperform the excess return index by the amount of the excess , if any , of the fund 's treasury income , money market income and t-bill etf income over its fees and expenses . as a result of the fund 's fees and expenses , however , the aggregate return on the fund is expected to underperform the total return index . if
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compensation on june 30 , 2010 , the company entered into a consulting agreement , with a board of director 's consulting firm , futureworth capital corp. the terms of the agreement include annual compensation of $ 60,000 , payable monthly . the company story_separator_special_tag the following discussion of the business , financial condition and results of operation of the company should be read in conjunction with the financial statements of the company for the years ended december 31 , 2018 and 2017 and the notes to those statements that are included elsewhere in this annual report on form 10-k. our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties , such as our plans , objectives , expectations and intentions . actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors , including those set forth under the section titled “ risk factors. ” overview can-cal resources ltd. is a publicly traded exploration stage company engaged in seeking the acquisition and exploration of metals mineral properties . as part of its growth strategy , the company will focus its future activities in the usa , with an emphasis on the pisgah mountain , california property . at december 31 , 2018 , we had cash on hand of approximately $ 54 available to sustain operations . at december 31 , 2017 , cash on hand was $ 769. accordingly , we are uncertain as to whether the company may continue as a going concern . while we may seek additional investment capital , or possible funding or joint venture arrangements with other mining companies , we have no assurance that such investment capital or additional funding and joint venture arrangements will be available to the company . we expect in the near term to continue to rely on outside financing activities to finance our operations . we used investment proceeds realized during 2012 for ( i ) completion of work-up of two potential extraction processes to determine which process we will employ to potentially prove up any precious metals , platinum groups elements and or other base metals on the pisgah , california property . if any ; ( ii ) strategic working capital reserve and ( iii ) to finance our operations . in addition to our historic exploration activities , we are currently undertaking alternative revenue producing opportunities at our pisgah property . on january 23 , 2012 , the company entered into a mineral lease agreement with a goodcorp inc. to purchase material from the property . this mineral lease agreement is for an initial period of ten ( 10 ) years , with an additional five ( 5 ) year extension at the option of the lessee . sale prices of minerals are set at diminishing prices in $ 0.50 increments between $ 12 per ton and $ 10 per ton for each 20,000 tons of material removed . as of the date hereof , no material has been sold under this agreement and no revenue has been received by the company . on april 9 , 2013 , the company entered into the original msa with candeo and the amended msa on march 3 , 2014. pursuant to the amended msa , candeo is entitled to purchase material from the pisgah property at a price equal to the greater of $ 15 per ton and the net sales margin per ton removed from the pisgah property realized as follows : ( i ) 35 % of the net sales margins during the first year of mining ; and ( ii ) 50 % of the net sales margins for the subsequent years during the term of the amended msa . under the amended msa , candeo has the right to remove an initial amount of up to 1,000,000 tons of material from the pisgah property and additional amounts of 1,000,000 tons each , upon the successful removal of the initial amount from the pisgah property . candeo 's right to remove the additional amounts from the pisgah property is on the basis that once candeo has removed the first additional amount of the material from the pisgah property , it shall have the right to remove subsequent additional amounts of material from the property , so long as it removes its then current additional amount . as such , candeo 's right to extend the term of the amended msa is entirely based on candeo 's successful performance of its material removal commitments under the terms of the amended msa . 24 under the amended msa , candeo is required to purchase a minimum of ten thousand ( 10,000 ) tons of material during each of the first three years of the term of the agreement , all at a purchase price of $ 15.00 per ton , for a total payment of $ 150,000 per year in each of the first three years of the term , with credit being given by the company to candeo for all pre-paid tons of material that have already been purchased and paid for under the original msa . the pre-purchased material will remain on the pisgah property until candeo commences its production operations or engages the company to mine and remove material on candeo 's behalf . in the event that candeo engages the company to mine and remove any of the material , candeo shall pay all of the company 's reasonable costs and expenses in conducting such mining and removal operations plus a fee of 15 % . all mining and removal operations on the pisgah property will be subject to all necessary regulatory and other third-party approvals being obtained . the pre-purchased payments will not be refundable to candeo but shall be credited against the first production payments . the term of the amended msa has been extended from an initial term of ten story_separator_special_tag compensation on june 30 , 2010 , the company entered into a consulting agreement , with a board of director 's consulting firm , futureworth capital corp. the terms of the agreement include annual compensation of $ 60,000 , payable monthly . the company story_separator_special_tag the following discussion of the business , financial condition and results of operation of the company should be read in conjunction with the financial statements of the company for the years ended december 31 , 2018 and 2017 and the notes to those statements that are included elsewhere in this annual report on form 10-k. our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties , such as our plans , objectives , expectations and intentions . actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors , including those set forth under the section titled “ risk factors. ” overview can-cal resources ltd. is a publicly traded exploration stage company engaged in seeking the acquisition and exploration of metals mineral properties . as part of its growth strategy , the company will focus its future activities in the usa , with an emphasis on the pisgah mountain , california property . at december 31 , 2018 , we had cash on hand of approximately $ 54 available to sustain operations . at december 31 , 2017 , cash on hand was $ 769. accordingly , we are uncertain as to whether the company may continue as a going concern . while we may seek additional investment capital , or possible funding or joint venture arrangements with other mining companies , we have no assurance that such investment capital or additional funding and joint venture arrangements will be available to the company . we expect in the near term to continue to rely on outside financing activities to finance our operations . we used investment proceeds realized during 2012 for ( i ) completion of work-up of two potential extraction processes to determine which process we will employ to potentially prove up any precious metals , platinum groups elements and or other base metals on the pisgah , california property . if any ; ( ii ) strategic working capital reserve and ( iii ) to finance our operations . in addition to our historic exploration activities , we are currently undertaking alternative revenue producing opportunities at our pisgah property . on january 23 , 2012 , the company entered into a mineral lease agreement with a goodcorp inc. to purchase material from the property . this mineral lease agreement is for an initial period of ten ( 10 ) years , with an additional five ( 5 ) year extension at the option of the lessee . sale prices of minerals are set at diminishing prices in $ 0.50 increments between $ 12 per ton and $ 10 per ton for each 20,000 tons of material removed . as of the date hereof , no material has been sold under this agreement and no revenue has been received by the company . on april 9 , 2013 , the company entered into the original msa with candeo and the amended msa on march 3 , 2014. pursuant to the amended msa , candeo is entitled to purchase material from the pisgah property at a price equal to the greater of $ 15 per ton and the net sales margin per ton removed from the pisgah property realized as follows : ( i ) 35 % of the net sales margins during the first year of mining ; and ( ii ) 50 % of the net sales margins for the subsequent years during the term of the amended msa . under the amended msa , candeo has the right to remove an initial amount of up to 1,000,000 tons of material from the pisgah property and additional amounts of 1,000,000 tons each , upon the successful removal of the initial amount from the pisgah property . candeo 's right to remove the additional amounts from the pisgah property is on the basis that once candeo has removed the first additional amount of the material from the pisgah property , it shall have the right to remove subsequent additional amounts of material from the property , so long as it removes its then current additional amount . as such , candeo 's right to extend the term of the amended msa is entirely based on candeo 's successful performance of its material removal commitments under the terms of the amended msa . 24 under the amended msa , candeo is required to purchase a minimum of ten thousand ( 10,000 ) tons of material during each of the first three years of the term of the agreement , all at a purchase price of $ 15.00 per ton , for a total payment of $ 150,000 per year in each of the first three years of the term , with credit being given by the company to candeo for all pre-paid tons of material that have already been purchased and paid for under the original msa . the pre-purchased material will remain on the pisgah property until candeo commences its production operations or engages the company to mine and remove material on candeo 's behalf . in the event that candeo engages the company to mine and remove any of the material , candeo shall pay all of the company 's reasonable costs and expenses in conducting such mining and removal operations plus a fee of 15 % . all mining and removal operations on the pisgah property will be subject to all necessary regulatory and other third-party approvals being obtained . the pre-purchased payments will not be refundable to candeo but shall be credited against the first production payments . the term of the amended msa has been extended from an initial term of ten
| for the year ended december 31 , 2017 , interest expense was $ 12,451. net loss : net loss for the year ended december 31 , 2018 was $ 200,179 compared to $ 349,237 in 2017. the decrease in the net loss is due to the lower general and administrative costs and gain on settlement of accounts payable . 26 liquidity and capital resources the following table summarizes total assets , accumulated deficit , stockholders ' equity ( deficit ) and working capital at december 31 , 2018 and 2017. replace_table_token_4_th at december 31 , 2018 , we had total assets of $ 54 , consisting of prepaid expenses and cash , compared to assets of $ 6,559 in 2017. we have implemented financial controls in the business to ensure each expense is warranted and needed . our cash on hand at december 31 , 2018 was $ 54. off balance sheet arrangements we do not have any off-balance sheet arrangements of any kind . contractual obligations an agreement was signed effective june 10 , 2016 with for life financial for the office administration of the company and can be terminated by either party with one month 's written notice . an agreement was signed effective september 10 , 2016 to manage the company . the contract is effective until december 31 , 2018 and will continue until the earlier of the completion of the services or the termination of the agreement . termination of the agreement may be for any or no reason upon four months written notice . the company may , in its sole discretion , request for life financial to cease performing services during the four-month period . for life financial may terminate this agreement for any or no reason upon two months written notice . on september 1 , 2017 , an agreement was signed with red to black inc. to perform the accounting for the company . the contract is effective until december 31 , 2017 and will automatically renew and can be terminated by either party with thirty-day notice . critical accounting policies and estimates the
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i n addition , the cares act , as extended by the coronavirus response and relief supplemental appropriations act ( a part of the consolidated appropriations act , 2021 ) , also provides financial institutions the option to temporarily suspend certain requirements under gaap related to tdrs for a limited period of time to account for the effects of covid-19 . on august 3 , 2020 , the ffiec issued a joint statement on additional loan accommodations related to covid-19 , which , among other things , encouraged financial institutions to consider prudent additional loan accommodation options when borrowers are unable to meet their obligations due to continuing financial challenges . accommodation options should be based on prudent risk management and consumer protection principles . in addition to the policy responses described above , management expects other covid-19 relief programs to be enacted in 2021 at federal , state , and local levels . effects on our business . the covid-19 pandemic and the specific developments referred to above have had and will continue to have an impact on our business . in particular , we anticipate that a significant portion of the bank 's borrowers in retail shopping centers , limited service restaurants , hotels , assisted living and nursing homes and residential rental industries may continue to endure significant economic distress , which may cause them to draw on their existing lines of credit and adversely affect their ability and willingness to repay existing indebtedness , and may adversely impact the value of collateral . these developments , together with economic conditions generally , may impact our commercial real estate portfolio , particularly with respect to real estate with exposure to these industries and the value of certain collateral securing our loans . as a result , we anticipate that our financial condition , capital levels and results of operations will be significantly adversely affected , as described in further detail below . our response . we have taken numerous steps in response to the covid-19 pandemic , including the following : the fdic and the board of governors of the federal reserve system , in consultation with state financial regulators , issued a revision to the interagency statement on loan modifications by financial institutions working with customers affected by the coronavirus issued on march 22 , 2020. the revised interagency statement encourages financial institutions to work constructively with borrowers impacted by covid-19 , provides additional information regarding loan modifications , and clarifies the interaction between the interagency statement and related relief provided by the cares act . the statement provides guidance on handling payment modification requests for impacted borrowers without triggering tdr classifications , by allowing up to 6-months of payment deferrals or interest only to assist our customers at this time . between march 31 , 2020 and december31 , 2020 , we processed 184 customer payment modification requests for customers who had loan balances of $ 200.4 million , and at december 31 , 2020 , 24 customers remained on payment relief with loan balances totaling $ 16.8 million , an improvement of 83.3 % since september 30 , 2020. management had already made investments in the company 's digital banking operations over the past several years . management has expanded the use of digital signatures for documents as well as videoconferencing in response to covid-19 . management established a pandemic planning task force that met frequently on a scheduled basis and on an as-needed basis , and will continue to do so until deemed not necessary . the bank 's senior leadership committee also met regularly in response to covid-19 . in 2020 , he bank processed 904 loan applications during the first round of ppp totaling $ 106.2 million through the sba . these loans are being funded through $ 99.7 million of borrowings from the federal reserve ppp liquidity facility so as not to reduce the bank 's available liquidity . as of december 31 , 2020 , there were $ 37.8 million in ppp loans outstanding . we are currently working with ppp borrowers to help them through the process of forgiveness of their ppp loans . during the second round of ppp , which began funding january 13 , 2021 , the bank has processed 283 loan applications totaling $ 25.9 million through february 28 , 2021. approximately 80 % of the bank 's employees worked remotely as of december 31 , 2020. in our branch network , the drive throughs have been open and our lobbies are open by appointment . our lobbies reopened to walk-in customer traffic on march 1 , 2021 . 36 in january 2020 , we announced a stock repurchase plan of up to 673,000 shares effective until january 23 , 2023. as of december 31 , 2020 , we had repurchased 570,852 shares through the plan . in february 2021 , w e announced that we have extended our common stock repurchase plan to include an additional 609,000 shares through february 16 , 2024 , and have no plans to suspend our common stock dividend . the board and m anagement will continue to evaluate our capital plans as our credit metrics and capital levels change . in addition , we will not be permitted to make capital distributions ( including for dividends and repurchases of stock ) or pay discretionary bonuses to executive officers without restriction if we do not maintain 2.5 % in common equity tier 1 capital attributable to a capital conservation buffer . executive overview we are the holding company for investors community bank , which is headquartered in manitowoc , wisconsin . our results of operations depend primarily on our net interest income . net interest income is the difference between the interest income we earn on our interest-earning assets , such as loans , and the interest we pay on interest-bearing liabilities , such as deposits . we generate most of our revenue from interest on loans and investments and loan servicing fees . story_separator_special_tag our loan portfolio consists of a mix of agricultural , commercial real estate , commercial , residential real estate and installment and consumer loans . our primary source of funding is deposits . our largest expenses are interest on these deposits and salaries and related employee benefits . we measure our performance through various metrics , including our net income , net interest margin , efficiency ratio , return on average assets , return on average common shareholders ' equity , earnings per share , and non-performing assets to total assets . we must also maintain appropriate regulatory leverage and risk-based capital ratios . the following table sets forth the key financial metrics we use to measure our performance . replace_table_token_5_th ( 1 ) this measure is not recognized under gaap and is therefore considered to be a non-gaap financial measure . see below for a reconciliation of this measure to its most directly comparable gaap measure . ( 2 ) non-performing assets consist of nonaccrual loans and other real estate owned . replace_table_token_6_th ( 3 ) in our judgment , the adjustments made to non-interest expense allow investors to better assess our operating expenses in relation to our core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items that are unrelated to our core business . 37 replace_table_token_7_th ( 1 ) management uses the return on average common shareholders ' equity to review our core operating results and our performance . replace_table_token_8_th ( 2 ) the adjustments made to non-performing assets allow management to better assess asset quality and monitor the amount of capital coverage necessary for non-performing assets . critical accounting policies and estimates certain of our accounting policies are important to the portrayal of our financial condition since they require management to make difficult , complex or subjective judgments , some of which may relate to matters that are inherently uncertain . estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances . facts and circumstances which could affect these judgments include , but are not limited to , changes in interest rates , changes in the performance of the economy and changes in the financial condition of borrowers . our significant accounting policies are discussed in detail in note 1 to our consolidated financial statements included in item 8 of this form 10-k. those significant accounting policies that we consider to be most critical are described below . our policies with respect to the methodology for the determination of goodwill , allowance for loan losses , loan servicing rights , fair value of financial instruments , and deferred tax assets involve a degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters . changes in these judgments , assumptions or estimates could materially impact our results of operations . these critical policies and their application are reviewed with the board of directors annually and prior to any change in policy . goodwill goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in an acquisition and is included as an asset on the consolidated balance sheets . goodwill is not amortized but is subject to impairment tests on at least an annual basis . management will periodically review the carrying value of its long-lived and intangible assets to determine if any impairment has occurred or whether changes in circumstances have occurred that would require a revision to the remaining useful life , in which case an impairment charge would be recorded as an expense in the period of impairment . in making such determination , management evaluates whether there are any adverse qualitative factors indicating that an impairment may exist , as well as the performance , on an undiscounted basis , of the underlying operations or assets which give rise to the intangible . 38 during the first quarter of 2020 , goodwill was evaluated for impairment due to economic disruption and unknown growth and credit risk related to the covid-19 pandemic . three valuation models were weighted and evaluated : discounted cash flow model ( 60 % ) , guideline public company method ( 30 % ) and transaction method ( 10 % ) . the transaction method was weighted the lowest as the identified transactions happened prior to the covid-19 pandemic and could not be relied upon as comparable values as of march 31 , 2020. more weighting was put toward cash flows as management believes the value of the company is tied to overall earnings . for the discounted cash flow method , the analysis discounted projected earnings by 14.5 % based on an evaluation of required returns for similar public companies . adjusted for an expected size and company-specific premium . through this evaluation , it was determined that as of march 31 , 2020 , the fair value of the company did not exceed the current carrying value by an amount in excess of the carrying amount of the goodwill ; therefore , the goodwill was deemed to be fully impaired . goodwill was $ 5.0 million at december 31 , 2019 and $ 0 at december 31 , 2020 as a result of the impairment . allowance for loan losses the allowance for loan losses is established through a provision for loan losses charged to expense , which affects our earnings directly . loans are charged against the allowance for loan losses when management believes that the collectability of all or some of the principal is unlikely . subsequent recoveries are added to the allowance . the allowance is an amount that reflects management 's estimate of the level of probable incurred losses in the loan portfolio .
| income tax expense for the year ended december 31 , 2020 was $ 3.1 million compared to $ 4.6 million for the year ended december 31 , 2019. the effective tax rates as a percent of pre-tax income were approximately 36 % and 22 % for the years ended december 31 , 2020 and 2019 , respectively . the increase in the effective tax rate for the year ended december 31 , 2020 compared to the year ended december 31 , 2019 was primarily the result of the non-deductibility of the goodwill impairment for tax purposes . in addition , the company 's recognized a one-time tax credit of $ 1.4 million in 2019 for its investment in a historic tax credit partnership . analysis of net interest income net interest income represents the difference between income we earn on our interest-earning assets and the expense we pay on interest-bearing liabilities . net interest income depends on the volume of interest-earning assets and interest-bearing liabilities and the interest rates earned on such assets and paid on such liabilities . 46 average balances and yields . the following table sets forth average balance sheets , average yields and rates , income and expenses , and certain other information for the periods indicated . all average balances are daily average balances . nonaccrual loans were included in the computation of average balances , but have been reflected in the table as loans carrying a zero yield . the yields set forth below include the effects of deferred fees , discounts and premiums that are amortized or accreted to interest income or expense . replace_table_token_18_th ( 1 ) average balances are calculated on amortized cost . ( 2 ) includes loan fee income , nonaccrual loan balances and interest received on such loans . ( 3 ) interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities . ( 4 ) net interest margin represents net interest income divided by average total interest-earning assets . 47 rate/volume analysis . the following table presents the effects of changing rates and volumes on our net interest income for the periods indicated . the rate column shows
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the table below provides a reconciliation of our consolidated reserves for loss and loss adjustment expense payable , net of reinsurance ceded , the amount of our paid claims , and our net paid loss ratio . replace_table_token_18_th the amount of claims paid fluctuates year-over-year due to our mix of business , the timing of claims settlement and catastrophic events . our net paid loss ratio decreased slightly in both 2012 and 2011 due to offsetting changes in the amount of claims paid across our different lines of business , such that our net loss payments have increased at a slower rate than our net earned premium . we commuted certain loss reserves on large contracts included in our exited lines for $ 27.5 million in 2012 and $ 26.7 million in 2011. the commutations had no material effect on net earnings but increased our net paid loss ratios by 1.2 and 1.3 percentage points in 2012 and 2011 , respectively . policy acquisition costs policy acquisition costs relate to direct costs we incur to issue insurance policies , including commissions , premium taxes and compensation of our underwriters . the percentage of policy acquisition costs to net earned premium was 12.5 % in all three years . we record profit commissions due from reinsurers as an offset to policy acquisition costs , which impacted our policy acquisition cost percentages as follows : replace_table_token_19_th after excluding profit commissions , the difference between years primarily relates to changes in the mix of business . other operating expense other operating expense increased 9 % in 2012 and 2 % in 2011. in 2012 , 61 % of our other operating expense related to compensation and benefits for our 1,870 employees , compared to 62 % in 2011 and 61 % in 2010. the 2012 increase in other operating expense was primarily due to increased compensation expense , including higher bonus expense directly related to higher pretax earnings in 2012 , and the year-over-year fluctuation in foreign currency benefit/expense . the 2011 increase related to higher compensation and benefits and information technology expense . we recognized foreign currency expense of $ 6.2 million in 2012 , compared to a benefit of $ 1.1 million in 2011 and expense of $ 1.6 million in 2010 , primarily related to fluctuations in the british pound sterling . 38 other operating expense included $ 13.2 million , $ 12.4 million and $ 13.6 million of stock-based compensation expense in 2012 , 2011 and 2010 , respectively . stock-based compensation expense was lower in 2012 and 2011 due to the timing of vesting and forfeitures of awards . in 2012 , we granted $ 11.2 million of restricted stock awards and units , with a weighted-average life of 3.2 years . at december 31 , 2012 , there was approximately $ 24.8 million of total unrecognized compensation expense related to unvested options and restricted stock awards and units that is expected to be recognized over a weighted-average period of 3.0 years . in 2013 , we expect to recognize $ 9.9 million of expense for all stock-based awards outstanding at year-end 2012. interest expense interest expense on debt and short-term borrowings was $ 25.6 million , $ 23.1 million and $ 21.3 million in 2012 , 2011 and 2010 , respectively . our interest expense has increased due to a higher amount of outstanding borrowings on our $ 600.0 million revolving loan facility , primarily to fund purchases of our common stock . interest expense included $ 19.3 million per year for our senior notes . income tax expense our income taxes are due to u.s. federal , state , local and foreign jurisdictions . our effective income tax rate was 29.4 % for 2012 , compared to 28.1 % for 2011 and 29.5 % for 2010. the higher effective rates in 2012 and 2010 are due to the relationship of pretax income and tax-exempt investment income . our pretax income was substantially higher in 2012 and 2010 than in 2011 , whereas our tax-exempt investment income increased slightly each year . the lower effective rate in 2011 related to the increased benefit from tax-exempt investment income relative to a lower pretax income base . segment operations each of our insurance segments bears risk for insurance coverage written within its portfolio of insurance products . each segment generates income from premium written by our underwriting agencies , through third party agents and brokers , or on a direct basis . the insurance segments also write facultative or individual account reinsurance , as well as treaty reinsurance business . in some cases , we purchase reinsurance to limit the segments ' net losses from both individual policy losses and multiple policy losses from catastrophic risks . our segments maintain disciplined expense management and a streamlined management structure , which results in favorable expense ratios . a description of the type of products , distribution channels , risk exposure and other key facts about our five insurance underwriting segments is included in the segment and geographic information section of item 1 , business . the following provides operational information about our five insurance underwriting segments and our investing segment . u.s. property & casualty segment the following tables summarize the operations of the u.s. property & casualty segment . replace_table_token_20_th 39 replace_table_token_21_th our u.s. property & casualty segment pretax earnings increased 2 % in 2012 due to higher net earned premium and a lower net loss ratio . the segment 's pretax earnings decreased 40 % in 2011 primarily due to : 1 ) lower net earned premium , 2 ) a reduced amount of favorable development in 2011 compared to 2010 , 3 ) $ 6.2 million of catastrophe losses in 2011 , 4 ) higher operating expenses and 5 ) the effect of a $ 5.0 million gain in 2010 related to termination of a derivative contract . story_separator_special_tag net earned premium was higher in 2012 due to $ 14.3 million of additional premium from our new technical property , primary casualty and excess casualty underwriting teams , as well as increases in aviation , public risk , contingency , residual value and other premium . premium grouped in other includes numerous types of specialty insurance products , including the technical property , primary casualty and excess casualty lines of business . these new teams wrote $ 57.0 million of gross premium in 2012 , compared to $ 16.7 million in 2011 and a minimal amount in 2010. in 2011 and again in 2012 , we wrote less premium in some lines of business , particularly aviation and e & o , due to continued competition . our public risk premium has grown primarily due to increased participation in one particular area of this business , as well as higher retention of the business beginning in 2011. changes in the segment 's net written premium relative to gross written premium are due to changes in timing and the amount of our reinsurance programs . the segment experienced accident year net catastrophe losses of $ 11.3 million in 2012 , compared to $ 6.2 million in 2011 , of which $ 7.0 million and $ 5.0 million , respectively , related to our public risk line of business . the segment had net adverse loss development of $ 2.3 million in 2012 , compared to net favorable development of $ 3.1 million in 2011 and $ 15.9 million 40 in 2010. in 2012 , the segment experienced favorable development in aviation and various lines of business included in other , which was more than offset by adverse development in the e & o and public risk lines of business . the 2011 net favorable development primarily related to offsetting favorable and adverse loss development for products grouped in other . the 2010 net favorable loss development primarily related to an assumed quota share contract that is in runoff , as well as aviation , public risk , and smaller product lines included in other . aviation experienced higher 2011 accident year losses and e & o experienced higher 2010 accident year losses , as well as adverse loss development in 2010 related to the 2006 2009 underwriting years . the segment 's expense ratio was higher in 2012 and 2011 , primarily due to increasing compensation costs . in 2010 , we terminated our interest in a derivative contract , which generated $ 8.0 million of other revenue and $ 3.0 million of other direct expenses in that year . the segment 's remaining other revenue relates to fee and commission income earned by our agencies from third party insurance companies . professional liability segment the following tables summarize the operations of the professional liability segment . replace_table_token_22_th 41 the professional liability segment pretax earnings increased $ 74.6 million in 2012 , compared to 2011 , due to an improved accident year loss ratio and changes in loss development . segment earnings decreased in 2011 , compared to 2010 , due to lower net earned premium and net adverse loss development , partially offset by increased income related to profit commissions due from reinsurers . gross written premium decreased 4 % in 2012 , primarily due to reduced writings in our dfp line of business ( included in u.s. d & o ) as we re-underwrote the dfp book of business in 2012. gross written premium decreased 6 % in 2011 because we wrote less d & o business in the united states due to pricing competition . net written premium fluctuated year-over-year due to a change in our reinsurance program in both years . the segment had net favorable loss development of $ 25.9 million in 2012 , compared to net adverse development of $ 47.1 million in 2011 and $ 9.6 million in 2010. the 2012 development consisted of $ 9.0 million in u.s. d & o and $ 16.9 million in international d & o . the 2012 development related to lower than expected reported loss development in underwriting years 2003 2006 , partially offset by higher expected losses in the 2008 underwriting year . the 2011 and 2010 development primarily related to our dfp line of business , which provides coverage for private equity partnerships , hedge funds , investment managers and similar groups . in 2011 , dfp recorded $ 104.2 million of adverse development , as well as $ 37.3 million of additional losses related to our increase in the ultimate loss ratio for accident year 2011. these reserve changes resulted primarily from revised assumptions with regards to the frequency and severity of claims in the 2008 2011 accident years . our u.s. d & o and international d & o lines of business had favorable development of $ 32.2 million and $ 24.9 million , respectively , in 2011 , which partially offset the adverse development from dfp . the favorable d & o development related to lower than expected reported loss development in accident years 2002 2005. u.s. d & o 's 2012 net loss ratio includes the impact of using dfp 's higher ultimate loss ratio in 2012 for dfp 's underwriting year 2011 premium that earned in 2012. the 2011 net loss ratio for u.s. d & o included the impact of dfp 's adverse development , partially offset by the favorable development for the u.s. d & o line of business . international d & o 's lower loss ratios in 2012 and 2011 , compared to 2010 , directly related to favorable development in those years . the fluctuations in the expense ratio primarily related to profit commissions of $ 5.1 million in 2012 and $ 13.5 million in 2011 , recognized in conjunction with the favorable development in those years . the profit commissions , which offset the segment 's other expense , reduced the 2012 and 2011 expense ratio by 1.3 and 3.3 percentage points , respectively .
| total revenue increased $ 151.8 million in 2012 , compared to 2011 , primarily due to higher net earned premium , net investment income and net realized investment gains . total revenue increased $ 71.8 million in 2011 , compared to 2010 , primarily due to higher net earned premium and net investment income , offset by lower other operating income and net realized investment gains . gross written premium , net written premium and net earned premium are detailed below by segment . replace_table_token_16_th the 2012 and 2011 growth in premium from our insurance underwriting segments occurred primarily in : 1 ) the u.s. property & casualty segment , from new business lines started in 2011 and increased public risk , residual value and other premium ; 2 ) the accident & health segment , from the growth of our medical stop-loss product and 3 ) the international segment , from new business and price increases in our energy and property treaty lines of business . see the segment operations section below for further discussion of the relationship and changes in premium revenue within each insurance segment . net investment income , which is included in our investing segment , increased 5 % in 2012 and 4 % in 2011 due to growth in our investment portfolio , partially offset by the effect of reduced yields . our fixed maturity securities portfolio increased 7 % in 2012 and 13 % in 2011 , from $ 5.2 billion at december 31 , 2010 to $ 5.9 billion at december 31 , 2011 and $ 6.3 billion at december 31 , 2012. in addition , we added publicly traded equity securities to our portfolio in 2012 and held $ 284.6 million at december 31 , 2012. the growth in investments resulted primarily from cash flow from operations and an increase of $ 105.6 million in the net unrealized gain on our available for sale securities during 2012. our investment expense increased in 2012 due to growth in the portfolio and management expenses for the equity securities . 36
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nonperforming assets were $ 3.7 million , or 0.42 % of total assets , at december 31 , 2018 compared to $ 4.2 million , or 0.56 % of total assets , at december 31 , 2017. nonperforming assets consisted of nonperforming loans and real estate owned of $ 3.0 million and $ 701,000 , respectively , at december 31 , 2018 and $ 3.7 million and $ 492,000 , respectively , at december 31 , 2017. at december 31 , 2018 , nonperforming loans consisted primarily of residential mortgage , home equity and commercial mortgage loans . federal bank stocks . federal bank stocks were comprised of fhlb stock and frb stock of $ 5.0 million and $ 1.3 million , respectively , at december 31 , 2018. these stocks are purchased and redeemed at par as directed by the federal banks and levels maintained are based primarily on borrowing and other correspondent relationships between the corporation and the federal banks . bank-owned life insurance ( boli ) . the corporation maintains single premium life insurance policies on certain current and former officers and employees of the bank . in addition to providing life insurance coverage , whereby the bank as well as the officers and employees receive life insurance benefits , the appreciation of the cash surrender value of the boli will serve to offset and finance existing and future employee benefit costs . boli increased $ 3.2 million , or 26.9 % , to $ 14.9 million at december 31 , 2018 from $ 11.7 million at december 31 , 2017. this included the addition of $ 2.8 million of boli acquired from cfb and increases in the cash surrender value of the policies , partially offset by certain administrative expenses . premises and equipment . premises and equipment increased $ 901,000 , or 5.0 % , to $ 18.9 million at december 31 , 2018 from $ 18.0 million at december 31 , 2017. the overall increase in premises and equipment during the year was due to capital expenditures of $ 885,000 and the addition of $ 1.3 million of fixed assets acquired from cfb , partially offset by depreciation and amortization of $ 1.2 million . goodwill . goodwill increased $ 9.2 million , or 89.0 % , to $ 19.4 million at december 21 , 2018 from $ 10.3 million at december 31 , 2017. during 2018 , the corporation recorded $ 9.2 million of goodwill related to the acquisition of cfb . goodwill represents the excess of the total purchase price paid for the acquisition over the fair value of the identifiable assets acquired , net of the fair value of the liabilities assumed . goodwill is evaluated for impairment at least annually and more frequently if events and circumstances indicate that the asset might be impaired . management evaluated goodwill and concluded that no impairment existed at december 31 , 2018. core deposit intangible . the core deposit intangible was $ 1.4 million at december 31 , 2018 , compared to $ 481,000 at december 31 , 2016. during 2018 , the corporation recorded a core deposit intangible of $ 1.2 million related to the cfb acquisition . the core deposit intangible also includes amounts associated with the assumption of deposits in the 2017 nhb acquisition , the 2016 united american savings bank ( uasb ) acquisition and the 2009 titusville branch acquisition . this asset represents the long-term value of the core deposits acquired . in each instance , the fair value was determined using a third-party valuation expert specializing in estimating fair values of core deposit intangibles . the fair value was derived using an industry standard present value methodology . all-in costs and runoff balances by year were discounted by comparable term fhlb advance rates , used as an alternative cost of funds measure . this intangible asset amortizes over a weighted average estimated life of the related deposits . the core deposit intangible asset is not estimated to have a significant residual value . the corporation recorded $ 266,000 and $ 246,000 of intangible amortization in 2018 and 2017 , respectively . deposits . total deposits increased $ 106.9 million , or 16.3 % , to $ 761.5 million at december 31 , 2018 from $ 654.6 million at december 31 , 2017. noninterest bearing deposits increased $ 22.6 million , or 17.9 % , during the year while interest bearing deposits increased $ 84.3 million , or 16.0 % . deposits assumed from cfb totaled $ 106.1 million at the time of the acquisition in october 2018 and $ 91.7 million at december 31 , 2018. borrowed funds . borrowed funds increased $ 19.4 million , or 74.4 % , to $ 45.4 million at december 31 , 2018 from $ 46.0 million at december 31 , 2017. borrowed funds at december 31 , 2018 consisted of short-term borrowings of $ 12.9 million and long-term borrowings of $ 32.5 million . short-term borrowed funds at december 31 , 2018 consisted of $ 10.8 million in fhlb overnight advances with a rate of 2.62 % and $ 2.1 million outstanding on a line of credit with a correspondent bank at 5.75 % . long-term borrowed funds consisted of six $ 5.0 million fhlb term advances totaling $ 30.0 million , maturing between 2019 and 2023 and having fixed interest rates between 1.94 % and 2.85 % . in addition , the corporation had $ 2.5 million outstanding on a term advance with a correspondent bank at a fixed rate of 4.75 % . long-term advances are utilized primarily to fund loan growth and short-term advances are utilized primarily to compensate for the normal deposit fluctuations . stockholders ' equity . stockholders ' equity increased $ 20.9 million , or 35.4 % , to $ 80.0 million at december 31 , 2018 from $ 59.1 million at december 31 , 2017. the increase was primarily due to $ 15.6 million of common stock and $ 4.2 million of preferred stock issued in connection with the acquisition of cfb and net income of $ 4.2 story_separator_special_tag million for 2018 , partially offset by $ 2.7 million of common stock dividends paid , $ 91,000 of preferred dividends paid and a decrease in accumulated other income of $ 839,000. k-21 story_separator_special_tag securities increased $ 40,000 , or 1.7 % , to $ 2.4 million for 2018 , compared to $ 2.4 million for 2017. the average yield on securities increased 9 basis points to 2.48 % for 2018 versus 2.39 % for 2017 causing an $ 86,000 increase in interest income . offsetting this favorable variance , the average balance of securities decreased $ 1.9 million , or 1.9 % , causing a $ 46,000 decrease in interest income . interest expense . interest expense increased $ 893,000 , or 19.9 % , to $ 5.4 million for 2018 , compared to $ 4.5 million for 2017. this increase can be attributed to increases in interest expense on interest-bearing deposits of $ 1.4 million , partially offset by a decrease on borrowed funds of $ 556,000. interest expense on deposits increased $ 1.4 million , or 44.2 % , to $ 4.7 million for 2018 , compared to $ 3.3 million for 2017. the average balance of interest-bearing deposits increased $ 66.7 million , or 13.4 % , causing a $ 970,000 increase in interest expense . the average rate on interest-bearing deposits increased by 18 basis points to 0.84 % for 2018 versus 0.63 % for 2017 causing a $ 479,000 increase in interest expense . interest expense on borrowed funds decreased $ 556,000 , or 45.6 % , to $ 662,000 for 2018 , compared to $ 1.2 million for 2017. the average balance of borrowed funds decreased $ 16.3 million , or 40.2 % , to $ 24.3 million for 2018 , compared to $ 40.5 million for 2017 causing a $ 418,000 decrease in interest expense . additionally , the average cost of borrowed funds decreased 27 basis points to 2.73 % for 2018 versus 3.00 % for 2017 causing an additional $ 138,000 decrease in interest expense . provision for loan losses . the corporation records provisions for loan losses to maintain a level of total allowance for loan losses that management believes , to the best of its knowledge , covers all probable incurred losses estimable at each reporting date . management considers historical loss experience , the present and prospective financial condition of borrowers , current conditions ( particularly as they relate to markets where the corporation originates loans ) , the status of nonperforming assets , the estimated underlying value of the collateral and other factors related to the collectability of the loan portfolio . nonperforming loans decreased $ 665,000 , or 18.0 % , to $ 3.0 million at december 31 , 2018 from $ 3.7 million at december 31 , 2017. the decrease in nonperforming loans was primarily related to the payoff of an $ 830,000 commercial relationship , partially offset by an increase of $ 102,000 in loans past due more than 90 days and still accruing . the provision for loan losses increased $ 377,000 , or 41.7 % , to $ 1.3 million for 2018 from $ 903,000 for 2017. the corporation 's allowance for loan losses amounted to $ 6.5 million , or 0.91 % of the corporation 's total loan portfolio at december 31 , 2018 compared to $ 6.1 million or 1.05 % of total loans at december 31 , 2017. the allowance for loan losses , as a percentage of nonperforming loans at december 31 , 2018 and 2017 , was 214.9 % and 165.9 % , respectively . the allocation of the allowance for loan losses related to residential mortgage loans and commercial mortgage loans increased during the year as a result of growth in the loan portfolios , while the allocation related to commercial business loans decreased as the portfolio decreased . at december 31 , 2018 , there was no provision for loan losses allocated to loans acquired from uasb , nhb or cfb . noninterest income . noninterest income includes revenue that is related to services rendered and activities conducted in the financial services industry , including fees on depository accounts , general transaction and service fees , title premiums , security and loan sale gains and losses , and earnings on bank-owned life insurance ( boli ) . noninterest income decreased $ 814,000 , or 16.2 % , to $ 4.2 million in 2018 from $ 5.0 million in 2017. the decrease in noninterest income is primarily due to a $ 1.3 million bargain purchase gain recorded during 2017 related to the acquisition of nhb . also during 2017 , the corporation recorded a $ 508,000 other-than-temporary impairment charge on a subordinated debt investment issued by first nbc bank holding company . on april 28 , 2017 , the louisiana office of financial institutions closed first nbc bank , the wholly owned banking subsidiary of first nbc bank holding company , and named the fdic as receiver for the bank . adding to the decrease in noninterest income , gains on the sale of loans totaled $ 19,000 for 2018 compared to $ 248,000 during the same period in 2017. the corporation realized securities losses of $ 9,000 during 2018 , compared to $ 346,000 during 2017. additionally , the corporation recorded a gain of $ 690,000 on the 18,000 share of cfb stock owned at the time of the acquisition . customer service fees increased $ 282,000 as overdraft charges during 2018 outpaced the prior year . noninterest expense . noninterest expense increased $ 4.0 million , or 20.5 % , to $ 23.7 million for 2018 , compared to $ 19.6 million for 2017. this increase was primarily related to increases in acquisition costs , compensation and employee benefits , premises and equipment expense and professional fees of $ 2.5 million , $ 1.1 million , $ 190,000 and $ 128,000 , respectively .
| the changes attributable to the combined impact of volume/rate are allocated on a consistent basis between the volume and rate variances . changes in interest income on loans and securities reflect the changes in interest income on a fully tax equivalent basis . replace_table_token_13_th 2018 results compared to 2017 results the corporation reported net income available to common stockholders of $ 4.1 million and $ 4.3 million for 2018 and 2017 , respectively . the $ 157,000 , or 3.7 % , decrease in net income was attributed to a decrease in noninterest income of $ 814,000 and increases in noninterest expense , the provision for loan losses and preferred stock dividends of $ 4.0 million , $ 377,000 and $ 91,000 , respectively , partially offset by a $ 3.7 million increase in net interest income and a $ 1.5 million decrease in the provision for income taxes . returns on average equity and assets were 6.56 % and 0.53 % , respectively , for 2018 , compared to 7.52 % and 0.59 % , respectively , for 2017. net interest income . the primary source of the corporation 's revenue is net interest income . net interest income is the difference between interest income on earning assets , such as loans and securities , and interest expense on liabilities , such as deposits and borrowed funds , used to fund the earning assets . net interest income is impacted by the volume and composition of interest-earning assets and interest-bearing liabilities , and changes in the level of interest rates . tax equivalent net interest income increased $ 3.3 million to $ 25.8 million for 2018 , compared to $ 22.4 million for 2017. this increase in net interest income can be attributed to an increase in tax equivalent interest income of $ 4.2 million , partially offset by an increase in interest expense of $ 893,000. interest income . tax equivalent interest income increased $ 4.2 million , or 15.7 % , to $ 31.2 million for 2018 , compared to $ 26.9 million for 2017. this increase
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this compares to approximately $ 52.2 million for the year ended june 30 , 2011. the decrease in depreciation , depletion and amortization was primarily attributable to an overall decrease in production due to our eloise north well which stopped producing in october 2011 and was subsequently recompleted as our mary rose # 5 well in january 2012. since recompletion , this well has only produced intermittently . partially offsetting this decreased production is our vermilion 170 well which began producing in fiscal year 2012. depreciation , depletion and amortization for the year ended june 30 , 2011 was approximately $ 52.2 million . this compares to approximately $ 34.5 million for the year ended june 30 , 2010. the increase in depreciation , depletion and amortization was primarily attributable to an overall increase in production and increase in capitalized costs as a result of our ship shoal 263 and eloise south discoveries . also contributing to the increase in depreciation , depletion and amortization were increased produced volumes from our four mary rose wells , dutch # 4 and our eloise north wells , which had been shut-in for approximately 35 days in 2010 due to our ruptured 20 ” pipeline . this increase in depreciation , depletion and amortization was partially offset by temporarily shutting in our eloise south well in october 2010 and our eloise north well in february 2011 for remedial work . impairment of natural gas and oil properties . no impairment expense was recorded for the year ended june 30 , 2012. for the year ended june 30 , 2011 , the company recorded impairment expense of approximately $ 1.8 million related to the relinquishment of 14 lease blocks owned by contango and rex . for the year ended june 30 , 2010 , the company recorded impairment expense of approximately $ 1.0 million , related to the relinquishment of six lease blocks owned by rex and coe . general and administrative expenses . general and administrative expenses for the year ended june 30 , 2012 were approximately $ 10.4 million , compared to approximately $ 12.3 million for the year ended june 30 , 2011. major components of general and administrative expenses for the year ended june 30 , 2012 included approximately $ 6.6 million in salaries , bonuses , stock-based compensation , benefits and board compensation , $ 0.4 million in insurance costs , $ 0.7 million in accounting and tax services , $ 0.9 million in legal and consulting expenses , $ 0.7 million in franchise taxes , and $ 1.1 million in office administration and other expenses . general and administrative expenses for the year ended june 30 , 2011 were approximately $ 12.3 million , up from approximately $ 4.6 million for the year ended june 30 , 2010. the increase is principally attributable to higher bonus payments and stock option expenses in the year ended june 30 , 2011. major components of general and administrative expenses for the year ended june 30 , 2011 included approximately $ 9.6 million in salaries , bonuses , stock-based compensation , benefits and board compensation ( includes $ 1.3 million in non-cash expenses related to option awards ) , $ 0.9 million in office administration and other expenses , $ 0.5 million in insurance costs , $ 0.5 million in accounting and tax services , and $ 0.8 million in legal , consulting and other administrative expenses . general and administrative expenses for the year ended june 30 , 2010 were approximately $ 4.6 million . major components of general and administrative expenses for the year ended june 30 , 2010 included approximately $ 3.0 million in salaries , stock-based compensation , benefits and board compensation ( includes $ 0.7 million in non-cash expenses related to restricted stock and option awards ) , $ 0.5 million in office administration and other expenses , $ 0.5 million in insurance costs , $ 0.2 million in accounting and tax services , and $ 0.4 million in legal , consulting and other administrative expenses . discontinued operations . the table and discussions above , along with our financial statements , discuss only continuing operations for all fiscal years presented . not reflected are the company 's sold producing properties which generated approximately 0 % , 5 % and 1 % of combined revenues for the fiscal year ended june 30 , 2012 , 2011 and 2010 , respectively . see note 5 – discontinued operations of notes to consolidated financial statements included as part of this form 10-k , for a discussion of our discontinued operations . capital resources and liquidity cash from operating activities . cash flow from operating activities provided approximately $ 73.6 million in cash for the year ended june 30 , 2012 compared to $ 140.6 million for the same period in 2011. this decrease in cash provided by operating activities was primarily attributable to decreased natural gas , oil and ngl sales and production as well as higher amounts of taxes paid due to reduced drilling activities in 2012. cash flow from operating activities provided approximately $ 140.6 million in cash for the year ended june 30 , 2011 compared to $ 128.2 million for the same period in 2010. this increase in cash provided by operating activities was primarily attributable to increased sales due to increased natural gas , oil and ngl production attributable to our ship shoal 263 and eloise south wells , as well as from other wells which were shut-in for approximately 35 days in fiscal year 2010. cash from investing activities . cash used in investing activities for the year ended june 30 , 2012 was approximately $ 73.4 million , compared to $ 33.3 million used in investing activities for the year ended june 30 , 2011. the higher level of cash 36 index to financial statements used in investing activities in 2012 was primarily attributable to investing approximately $ 53.4 million in affiliates , partially offset by a decrease in capital expenditures for drilling exploration and development wells . story_separator_special_tag cash used in investing activities for the year ended june 30 , 2011 was approximately $ 33.3 million , compared to $ 97.7 million used in investing activities for the year ended june 30 , 2010. the lower level of cash used in investing activities in 2011 was primarily attributable to decreased capital expenditures for drilling exploration and development wells as well as $ 38.7 million received from the sale of oil and gas properties . cash from financing activities . cash used in financing activities for the year ended june 30 , 2012 were approximately $ 20.2 million , compared to $ 9.8 million used in financing activities for the same period in 2011. during the fiscal year ended june 30 , 2012 , the company invested significantly more to repurchase shares of its common stock pursuant to its share repurchase program . cash used in financing activities for the year ended june 30 , 2011 were approximately $ 9.8 million , compared to $ 22.4 million used in financing activities for the same period in 2010. during the fiscal year ended june 30 , 2011 , the company did not repurchase as many shares of its common stock pursuant to its share repurchase program , as it did in for the fiscal year ended june 30 , 2010. income taxes . during the year ended june 30 , 2012 , 2011 and 2010 , we paid approximately $ 50.7 million , $ 31.9 million , and $ 11.5 million , respectively , in federal and state income taxes , net of refunds received . capital budget . for the remainder of fiscal year 2013 , our capital expenditure budget calls for us to invest approximately $ 146.7 million from cash flow from operations and cash on hand as follows : we have budgeted to invest approximately $ 25.0 million to drill our ship shoal 134 ( “ eagle ” ) prospect . we have budgeted to invest approximately $ 28.0 million to drill our south timbalier 75 ( “ fang ” ) prospect . we have budgeted to invest approximately $ 7.2 million to complete laying flowlines and installing compression at our eugene island 11 and vermilion 170 platforms . we have budgeted to invest approximately $ 7.6 million for remaining leasehold costs and rental payments for the six blocks we bid on at the central gulf of mexico lease sale 216/222 . we have budgeted to invest approximately $ 30 million to drill two wildcat exploration wells in the gulf of mexico . we have budgeted to invest approximately $ 41.2 million in exaro energy iii llc ( remaining balance of $ 82.5 million commitment ) . we have budgeted to invest approximately $ 7.7 million in alta energy ( remaining balance of $ 20 million commitment ) . should we be successful in any of our offshore prospects , we will have the opportunity to spend significantly more capital to complete development and bring the discovery to producing status . the company often reviews acquisitions and prospects presented to us by third parties and may decide to invest in one or more of these opportunities . there can be no assurance that we will invest , or that any investment entered into will be successful . these potential investments are not part of our current capital budget and would require us to invest additional capital . natural gas and oil prices continue to be volatile and our resources may be insufficient to fund any of these opportunities . as of august 24 , 2012 , we had approximately $ 124.7 million in cash and cash equivalents and no debt outstanding . discontinued operations . the company , since its inception in september 1999 , has raised approximately $ 524 million in proceeds from property sales , and views periodic reserve sales as an opportunity to capture value , reduce reserve and price risk , in addition to being a source of funds for potentially higher rate of return natural gas and oil exploration investments . we believe these periodic natural gas and oil property sales are an efficient strategy to meet our cash and liquidity needs by providing us with immediate cash , which would otherwise take years to realize through the production lives of the fields sold . we have in the past and expect to in the future to continue to rely on the sales of assets to generate cash to fund our exploration investments and operations . these sales bring forward future revenues and cash flows , but our longer term liquidity could be impaired to the extent our exploration efforts are not successful in generating new discoveries , production , revenues and cash flows . additionally , our longer term liquidity could be impaired due to the decrease in our inventory of producing properties that could be sold in future periods . further , as a result of these property sales the company 's ability to collateralize bank borrowings is reduced which increases our dependence on more expensive mezzanine debt and potential equity sales . the availability of such funds will depend upon prevailing market conditions and other factors over which we have no control , as well as our financial condition and results of operations . 37 index to financial statements the table below sets forth the proceeds received from natural gas and oil property sales for the year ended june 30 , 2011 , the impact of these sales on our developed reserve quantities , and a measure of our developed reserves held at the end of each such fiscal year . see the reserve activity reported in the supplemental oil and gas disclosures on pages f-23 through f-26 for a more detailed discussion regarding our standardized measure .
| one barrel of oil , condensate or ngl is the energy equivalent of six thousand cubic feet ( “ mcf ” ) of natural gas . reported lease operating expenses include property and severance taxes . 33 index to financial statements replace_table_token_15_th not included in the table above is production information from our discontinued operations . for the fiscal year ended june 30 , 2012 , our discontinued operations produced approximately 1.7 mmcf of natural gas at an average price of $ 3.79 per mcf . for the fiscal year ended june 30 , 2011 , our discontinued operations produced approximately 1,892 mmcf of natural gas , 12.8 mbbls of condensate , and 2.6 million gallons of natural gas liquids at an average price of $ 3.45 per mcf , $ 86.91 per bbl and $ 0.96 per gallon , respectively . for the fiscal year ended june 30 , 2010 , our discontinued operations produced approximately 305 mmcf of natural gas , 1.2 mbbls of condensate , and 428 thousand gallons of natural gas liquids at an average price of $ 3.72 per mcf , $ 75.90 per bbl and $ 1.04 per gallon , respectively . natural gas , oil and ngl sales . all of our revenues are from the sale of our natural gas , oil and natural gas liquids production . our revenues may vary significantly from year to year depending on changes in commodity prices , which fluctuate widely , and production volumes . our production volumes are subject to wide swings as a result of new discoveries , weather 34 index to financial statements and mechanical related problems . in addition , our production declines over time as we produce our reserves . we reported revenues of approximately $ 179.3 million for the year ended june 30 , 2012 , compared to revenues of approximately $ 201.7 million for the year ended june 30 , 2011. this decrease in sales was principally attributable to lower equivalent production for the period ( discussed below ) as well as a lower average equivalent sales price received for the period .
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these financial statements reflect the combined historical results of operations , financial position and cash flows of 21cf 's domestic news , national sports and broadcast businesses and certain other assets and liabilities associated with such businesses . the consolidated and combined statements of operations for the years ended june 30 , 2019 and 2018 include , for the periods prior to march 19 , 2019 , allocations for certain support functions that were provided on a centralized basis within 21cf prior to the distribution and not recorded at the business unit level , such as certain expenses related to finance , legal , insurance , information technology , compliance and human resources management activities , among others . 21cf did not routinely allocate these costs to any of its business units . these expenses were allocated to fox on the basis of direct usage when identifiable , with the remainder allocated on a pro rata basis of combined revenues , headcount or other relevant measures . management believes the assumptions underlying the financial statements , including the assumptions regarding allocating general corporate expenses from 21cf , are reasonable . nevertheless , the financial statements may not include all of the actual expenses that would have been incurred by fox and may not reflect fox 's consolidated results of operations , financial position and cash flows had it been a standalone company during the entirety of the periods presented . actual costs that would have been incurred if fox had been a standalone company would depend on multiple factors , including organizational structure and strategic decisions made in various areas , including information technology and infrastructure . management 's discussion and analysis of financial condition and results of operations is intended to help provide an understanding of the company 's financial condition , changes in financial condition and results of operations . this discussion is organized as follows : overview of the company 's business —this section provides a general description of the company 's businesses , as well as developments that occurred either during the fiscal year ended june 30 , ( “ fiscal ” ) 2020 or early fiscal 2021 that the company believes are important in understanding its results of operations and financial condition or to disclose known trends . results of operations —this section provides an analysis of the company 's results of operations for fiscal 2020 , 2019 and 2018. this analysis is presented on both a consolidated/combined and a segment basis . in addition , a brief description is provided of significant transactions and events that impact the comparability of the results being analyzed . liquidity and capital resources —this section provides an analysis of the company 's cash flows for fiscal 2020 , 2019 and 2018 , as well as a discussion of the company 's outstanding debt and commitments , both firm and contingent , that existed as of june 30 , 2020. included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund the company 's future commitments and obligations , as well as a discussion of other financing arrangements . critical accounting policies —this section discusses accounting policies considered important to the company 's financial condition and results of operations , and which require significant judgment and estimates on the part of management in application . in addition , note 2—summary of significant accounting policies to the accompanying financial statements summarizes the company 's significant accounting policies , including the critical accounting policy discussion found in this section . caution concerning forward-looking statements —this section provides a description of the use of forward-looking information appearing in this annual report on form 10-k , including in management 's discussion and analysis of financial condition and results of operations . such information is based on management 's current expectations about future events which are subject to change and to inherent risks and uncertainties . refer to item 1a . “ risk factors ” in this annual report for a discussion of the risk factors applicable to the company . 32 overview of the company 's business the company is a news , sports and entertainment company , which manages and reports its businesses in the following segments : cable network programming , which principally consists of the production and licensing of news and sports content distributed primarily through traditional cable television systems , direct broadcast satellite operators and telecommunication companies ( “ traditional mvpds ” ) and online multi-channel video programming distributors ( “ digital mvpds ” ) , primarily in the u.s. television , which principally consists of the acquisition , marketing and distribution of broadcast network programming nationally under the fox brand and the operation of 29 full power broadcast television stations , including 11 duopolies , in the u.s. of these stations , 18 are affiliated with the fox network , 10 are affiliated with mynetworktv and one is an independent station . the television segment also includes tubi , inc. ( “ tubi ” ) , a free advertising-supported video-on-demand ( “ avod ” ) service . other , corporate and eliminations , which principally consists of the fox studio lot , credible labs inc. ( “ credible ” ) , corporate overhead costs and intracompany eliminations . the fox studio lot , located in los angeles , california , provides television and film production services along with office space , studio operation services and includes all operations of the facility . credible is a u.s. consumer finance marketplace . cable network programming and television the cable network programming and television industries continue to evolve rapidly , with changes in technology leading to alternative methods for the delivery and storage of digital content . these technological advancements have driven changes in consumer behavior as consumers seek more control over when , where and how they consume content . consumer preferences have evolved toward alternative offerings , such as subscription video-on-demand ( “ svod ” ) services , avod services , mobile and social media platforms . story_separator_special_tag these changes in technologies and consumer behavior have contributed to declines in the number of subscribers to traditional mvpd services , and these declines are expected to continue and possibly accelerate in the future . at the same time , technological changes have affected advertisers ' options for reaching their target audiences . there has been a substantial increase in the availability of programming with reduced advertising or without advertising at all . as consumers switch to digital consumption of video content , there is still to be developed a consistent , broadly accepted measure of audiences across the industry . furthermore , the pricing and volume of advertising may be affected by shifts in spending from more traditional media and toward digital and mobile offerings , which can deliver targeted advertising more promptly , or toward newer ways of purchasing advertising . given these changes in technology and consumption habits , the company believes its strength in “ appointment-based ” content provides the company with a strategic advantage . fox differentiates itself from its competitors by focusing on audiences at a meaningful scale watching premium content in real-time and by attracting sales from advertising customers who want to reach larger audiences within specified time parameters . as the share of live news and sports consumption has increased across television viewing overall from approximately 23 % of all live viewership in calendar 2015 to approximately 31 % in calendar 2019 , fox has strategically built one of the most-followed news and sports platforms in the country . real-time consumption of live news and sports programming has increased approximately 6 % from 2015 to 2019. fox 's franchises are leaders in these growing categories , generating strong demand from both advertisers and traditional and digital mvpds . as viewers increasingly move toward ad-free or delayed viewing , we believe the scale of our live audiences and premium nature of the content we deliver across our channels increasingly differentiate us from our competitors . audiences engage with fox 's content in real-time and , as a result , our offerings have become more valuable to distributors and advertisers , leading to higher revenues for fox . in addition , we have expanded the distribution of our premium content across digital mvpds . all of our key networks are offered in all major digital mvpd services and we are cultivating direct interactions between fox brands and consumers outside of traditional linear television . the company operates in a highly competitive industry and its performance is dependent , to a large extent , on the impact of changes in consumer behavior as a result of new technologies , the sale of advertising on its cable and broadcast networks and television stations , maintenance , renewal and terms of its carriage , affiliation and content agreements and programming rights , the popularity of its content , general economic conditions ( including financial market conditions ) , the company 's ability to manage its businesses effectively , and its relative strength and leverage in the industry . for more information , see item 1 . “ business ” and item 1a . “ risk factors ” included herein . 33 the company 's cable network programming and television segments derive a majority of their revenues from affiliate fees for the transmission of content and advertising sales . for fiscal 20 20 , the company generated revenues of $ 12.3 billion , of which approximately 48 % was generated from affiliate fees , approximately 43 % was generated from advertising , and approximately 9 % was generated from other operating activities . affiliate fees primarily include ( i ) monthly subscriber-based license and retransmission consent fees paid by programming distributors that carry our cable networks and our owned and operated television stations and ( ii ) fees received from television stations that are affiliated with the fox network . u.s. law governing retransmission consent provides a mechanism for the television stations owned by the company to seek and obtain payment from traditional mvpds who carry the company 's broadcast signals . affiliate fee revenues are net of the amortization of cable distribution investments ( capitalized fees paid to mvpds typically to facilitate the carriage of a cable network ) . the company defers the cable distribution investments and amortizes the amounts on a straight-line basis over the contract period . traditional mvpds are currently the predominant means of distribution of the company 's program services , while digital mvpds have become an increasingly significant share of overall distribution . revenues are impacted by rate changes , changes in the number of subscribers to the company 's content and changes in the expenditures by advertisers , which continue to be impacted by coronavirus disease 2019 ( “ covid-19 ” ) as discussed below . in addition , advertising revenues are subject to seasonality and cyclicality as a result of the impact of state , congressional and presidential elections cycles and special events that air on the company 's networks , including the national football league 's ( “ nfl ” ) super bowl , which is broadcast on the fox network on a rotating basis with other networks , major league baseball 's ( “ mlb ” ) world series , and the fédération internationale de football association ( “ fifa ” ) world cup , which occurs every four years ( for each of women and men ) , and other regular and post-season sports events , including one nfl divisional playoff game that is aired on a rotating annual basis with another network . the most significant operating expenses of the cable network programming segment and the television segment are acquisition and production expenses related to programming , marketing and promotional expenses , and expenses related to broadcasting the company 's programming . marketing and promotional expenses relate to improving the market visibility and awareness of the cable network or broadcaster and its programming . consistent with advertising revenues , sports programming and production expenses are subject to seasonality and cyclicality due to the timing of sports events as discussed above .
| operating expenses increased 7 % for fiscal 2020 , as compared to fiscal 2019 , primarily due to higher sports programming rights amortization and production costs at the television segment , including super bowl liv costs , the impact of the consolidation of bento box , credible and tubi , the recognition of a write-down of approximately $ 95 million related to programming rights as compared to approximately $ 55 million in the prior year ( see note 5—inventories , net to the accompanying financial statements ) and higher broadcast costs related to operating as a standalone public company . partially offsetting the increase in operating expenses was the broadcast of fewer sports events as a result of covid-19 , fewer broadcasts of fifa world cup events and one less nfl divisional playoff game . selling , general and administrative expenses increased 23 % for fiscal 2020 , as compared to fiscal 2019 , primarily due to higher costs in fiscal 2020 related to operating as a standalone public company as compared to a partial year of allocated costs in fiscal 2019 ( see note 1—description of business and basis of presentation to the accompanying financial statements under the heading “ basis of presentation ” for additional information ) , a full year of costs of operating the fox studio lot for third parties , increased bad debt expense and the impact of the consolidation of bento box and credible . also contributing to the increase in selling , general and administrative expenses in fiscal 2020 were incremental equity-based compensation costs of approximately $ 40 million related to the grant of restricted stock units and stock options in connection with the distribution under the fox corporation 2019 shareholder alignment plan ( see note 12 — equity-based compensation to the accompanying financial statements ) . 36 depreciation and amortization —depreciation and amortization expense increased 22 % for fiscal 2020 , as compared to fiscal 2019 , primarily due to higher costs in fiscal 20 20 related to operating as a standalone public company following the distribution as compared to a partial year of allocated costs in fiscal 201 9 and the impact of the consolidation of credible , tubi and three television stations . impairment and restructuring charges —see note 4 — restructuring programs to the accompanying financial statements . interest expense —interest expense increased 82 % for fiscal 2020 , as compared to fiscal 2019 , primarily due
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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 . there were no reports of bacteremia or sepsis . of patients that discontinued participation in the clinical trial , 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 . following the clearance in may 2018 , by the dsmb , we are proceeding with patient enrollment for our ago13 clinical trial . we recently determined to expand the number of clinical sites we would conduct our trials in an attempt to accelerate enrollment . the expansion of the number of clinical sites at which we would conduct our clinical trials is expected to add to our clinical trial costs . on october 15 , 2018 , we received clearance from the belgian health authority to activate the patient enrollment process in belgium . assuming we attain our patient enrollment milestones , we expect to report top-line results of the completed phase 2 clinical trial in early 2020. 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 . in june 2012 , we entered into the lantibiotic exclusive channel collaboration agreement ( “ lantibiotic ecc ” ) with intrexon for the development and commercialization of the native strain of mu1140 and related homologs using intrexon 's advanced transgene and cell engineering platforms . through our work with intrexon , 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 intrexon generated a substantial number of homologs of mu1140 , and we are continuing our research and development and collaboration efforts with intrexon to develop potential derivatives of the mu1140 molecule using genetically modified bacteria . 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 when compared to a vancomycin positive control . 60 the timing of the filing of an ind regarding og716 is subject to our having sufficient avai lable 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 a bility to complete the requisite studies , contingent on sufficient funding . based upon the funding available from our recent public offerings and the exercise of warrants we expect to conduct certain of the requisite studies . other product candidates and technologies . story_separator_special_tag 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 completion of underwritten public offering . on march 25 , 2019 , we announced the closing of an underwritten public offering for gross proceeds of approximately $ 12.5 million , which included the partial exercise of the underwriter 's over-allotment option to purchase additional shares and warrants , prior to deducting underwriting discounts and commissions and offering expenses . the offering is comprised of 16,666,668 shares of common stock , short-term warrants to purchase up to 8,333,334 shares of common stock , and long-term warrants to purchase up to 8,333,334 shares of common stock , at a price to the public of $ 0.75 per share and accompanying warrants . we granted the underwriter a 30-day option to purchase up to 2,500,000 additional shares of common stock and or short-term warrants to purchase 1,250,000 shares of common stock and long-term warrants to purchase 1,250,000 shares of common stock the public offering price , less underwriting discounts and commissions . the underwriter exercised its option to purchase the short-term warrants to purchase 1,250,000 shares of common stock and long-term warrants to purchase 1,250,000 shares of common stock effective as of the closing . each short-term warrant has an exercise price of $ 0.75 per share of common stock , is immediately exercisable , and will expire on the earlier of ( 1 ) the eighteen-month anniversary of the date of issuance and ( 2 ) twenty-one trading days following our release of top-line data related to its phase 2 double blind , placebo controlled clinical trial of ag013 . each long-term warrant has an exercise price of $ 0.90 per share of common stock , is immediately exercisable and will expire five years following the date of issuance . following the consummation of our underwritten public offering on march 25 , 2019 , and excluding certain offering expenses , we had approximately $ 29.8 in cash available to fund our ag013 research , clinical trials , pre-clinical development of the lantibiotics program , and for working capital and general corporate purposes . clearance for patient enrollment in the united kingdom , belgium , and germany . in october 2018 , we announced we had received clearance to enroll patients residing in belgium from the belgian health authority , the federal agency for medicines and health product into our phase 2 clinical trial of ag013 . in november 2018 , we announced we had received clearance to enroll patients residing in germany from the paul erlich institute and patients residing in the united kingdom from the medicines and healthcare products regulatory agency ( mhra ) into our phase 2 clinical trial of ag013 . full conversion of series d preferred . 1,496,000 shares of series d preferred stock were issued in the company 's july 2018 public offering ( the “ public offering ” ) , were outstanding at september 30 , 2018. as of october 3 , 2018 , all remaining shares of the company 's series d preferred stock have been voluntarily converted by the holders to the company 's common stock and no shares of series d preferred stock remain outstanding . the company received no additional proceeds from the conversions of series d preferred by the holders thereof . warrant exercises . in the company 's public offering , the company issued 13,800,000 warrants to acquire the company 's common stock at an exercise price of $ 1.00 per share ( the “ public offering warrants ” ) . as of november 13 , 2018 , 9,505,500 shares of company common stock have been issued as a result of the voluntary exercise of such public offering warrants by the holders thereof . the warrant exercises resulted in gross proceeds to the company of $ 9,505,500. texas a & m license termination . following a review of our research and development activities and a determination to focus our financial resources on our research activities for og716 and ag013 , we provided a notice to texas a & m of the termination of our license agreement with texas a & m which took effect in january 2019. about us we were incorporated in november 1996 and commenced operations in 1999. we consummated our initial public offering in june 2003. we have devoted substantially all of our available resources to our discovery efforts comprising research and development , clinical trials for our product candidates , protection of our intellectual property and the general and administrative support of these operations . we have generated limited revenues from grants and from our former consumer probiora3 product business , and have principally funded our operations through the sale of debt and equity securities , including the exercise of warrants issued in connection with financing transactions . in june of 2016 , we completed the sale of 61 our consumer probiotics busine ss to probiora health , llc and as a result , we will no longer generate revenue from sales of consumer probiotic products . our net revenues were $ 0 and $ 464,048 , for the years ended december 31 , 2017 and 2016 , respectively . as of december 31 , 2018 , we had an accumulated deficit of $ 111,373,608 and we have yet to achieve profitability . we incurred net losses of $ 9,914,141 and $ 6,731,525 for the years ended december 31 , 2018 and 2017 , respectively .
| the following table sets forth the primary sources and uses of cash for each of the periods indicated : replace_table_token_3_th during the years ended december 31 , 2018 and 2017 , our operating cash flows from operations used cash of $ 9,079,817 and $ 6,363,853 respectively . the use of cash in all periods primarily resulted from our net losses adjusted for non-cash items and 66 changes in operating assets and liabilities . we had working capital surplu s of $ 20,765,707 and $ 6,294,650 as of december 31 , 2018 and 2017 , 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 entered into a securities purchase agreement with three accredited investors , to purchase up to $ 3,000,000 of series a convertible preferred stock ( the “ series a preferred stock financing ” ) . the sale of the preferred stock took place in two separate closings and at the first closing which occurred on may 10 , 2017 , we received gross proceeds of approximately $ 1,302,000. the second closing occurred on july 25 , 2017 and we received gross proceeds of approximately $ 1,698,000 , which was the balance of the preferred stock financing . the full $ 3,000,000 of preferred stock , and after giving effect to the reverse stock split , is convertible into one million two hundred thousand shares of our common stock , based on a fixed conversion price of $ 2.50 per share on an as-converted basis . in addition , and after giving effect to the reverse stock split , we issued warrants to purchase an aggregate of 462,106 shares of common stock at the first closing and we issued an aggregate of 602,414 shares of common stock at the second closing ( “ summer 17 warrants ” ) . the summer 17 warrants have a term of seven years from the date of issuance are non-exercisable until 6 months after issuance , have an exercise
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two domestic company-operated shacks were temporarily closed as of the end of the fourth quarter 2020. furthermore , as of the end of the fourth quarter 2020 , approximately half of our domestic company-operated shacks had open dining rooms with varying capacity restrictions , with the majority of shacks also utilizing outdoor patio space , whenever possible . during the fourth quarter of 2020 , total digital sales , including orders placed on the shake shack app , website and third party delivery platforms , represented 59 % of total shack sales , with this trend continuing through the start of fiscal 2021 , with digital sales mix at 64 % in fiscal january 2021 and 63 % during the first three weeks of fiscal february 2021. in fiscal 2021 , through the first three weeks of fiscal february 2021 , company-owned app and web sales increased approximately 300 % compared to the same period in the prior year . furthermore , we added over 2 million first-time purchasers to our company-owned app and web channels between mid-march 2020 and the end of fiscal january 2021. shake shack inc. form 10-k | 54 the following table presents fiscal monthly information about our current trends in shack sales . replace_table_token_5_th ( 1 ) when excluding the impact of the 53rd week , total year-over-year sales were down 1 % . ( 2 ) represents the first three weeks of fiscal february 2021 . ( 3 ) average weekly sales is calculated by dividing total shack sales by the number of operating weeks for all shacks in operation during the period . for shacks that are not open for the entire period , fractional adjustments are made to the number of operating weeks open such that it corresponds to the period of associated sales . ( 4 ) `` same-shack sales '' or “ sss ” represents shack sales for the comparable shack base , which is defined as the number of domestic company-operated shacks open for 24 full fiscal months or longer . for days that shacks were temporarily closed , the comparative 2019 period was also adjusted . for fiscal december , same-shack sales excludes the impact of the sixth week and compares the five weeks from november 19 , 2020 through december 23 , 2020 to the five weeks from november 21 , 2019 through december 25 , 2019. average weekly sales were $ 62,000 in the fourth quarter 2020 , a 6.9 % increase compared to the third quarter 2020. this improvement is in addition to typically lower seasonal average weekly sales during the fourth quarter of any given year , and it continued through fiscal january 2021 with average weekly sales of $ 63,000. during the first three weeks of fiscal february 2021 average weekly sales were $ 60,000 , reflecting the impact of cold weather and snowstorms , which affected nearly all regions . our licensed business has shown overall steady recovery , as noted herein , however the business does continue to be impacted by the pandemic . our domestic licensed business still faces significant headwinds , with airport and stadium shacks still either closed or at significantly reduced traffic . as of the end of fiscal 2020 , 17 licensed shacks remained temporarily closed . furthermore , approximately half of our uk shacks were closed as of the end of fiscal 2020 , as the government maintained lockdowns to control the virus spread . the following table presents fiscal monthly information about our licensed sales trends . replace_table_token_6_th ( 1 ) when excluding the impact of the 53rd week , total year-over-year licensed sales were down 15 % . ( 2 ) represents the first three weeks of fiscal february 2021 . ( 3 ) weekly licensed sales is an operating measure and consists of sales from domestic licensed shacks and international licensed shacks . we do not recognize the sales from licensed shacks as revenue . of these amounts , revenue is limited to licensing revenue based on a percentage of sales from domestic and international licensed shacks , as well as certain up-front fees such as territory fees and opening fees . shake shack inc. form 10-k | 55 story_separator_special_tag compared to net income of $ 24.1 million and adjusted ebitda of $ 81.8 million in the same period last year . shake shack inc. form 10-k | 56 net loss attributable to shake shack inc was $ 42.2 million and adjusted pro forma net loss 2 , a non-gaap measure , was $ 22.3 million , or a loss of $ 0.56 per fully exchanged and diluted share in fiscal year 2020 , compared to net income attributable to shake shack inc. of $ 19.8 million , adjusted pro forma net income of $ 27.4 million , or $ 0.72 per fully exchanged and diluted share , in the same period last year . we opened 36 net system-wide shacks , comprised of 20 domestic company-operated shacks and 16 net licensed shacks . in the fourth quarter 2020 , we were notified by our landlord of the early termination of our lease at penn station , ny . the termination was due to the landlord 's plans to redevelop the long island rail road concourse following the successful completion of the east end gateway and opening of the moynihan train hall . this closure is effective as of fiscal february 2021 . ( 1 ) fiscal 2020 excludes the impact of the 53rd week . same-shack sales compares the 52 weeks from december 26 , 2019 through december 23 , 2020 to the 52 weeks from december 27 , 2018 through december 25 , 2019. in order to compare like-for-like periods for fiscal 2021 , same-shack sales will compare the 52 weeks from december 31 , 2020 through december 29 , 2021 to the 52 weeks from january 2 , 2020 through december 30 , 2020 . ( 2 ) this represents a non-gaap measure . story_separator_special_tag reconciliations to the most directly comparable financial measures presented in accordance with gaap are set forth in the schedules within “ non-gaap financial measures , ” herein . see “ non-gaap financial measures. ” shake shack inc. form 10-k | 57 results of operations the following table summarizes our results of operations for fiscal 2020 and fiscal 2019 : replace_table_token_7_th ( 1 ) we operate on a 52/53 week fiscal year that ends on the last wednesday of the calendar year . fiscal year 2020 was a 53-week year with the extra operating week ( the `` 53rd week `` ) falling in our fiscal fourth quarter . fiscal 2019 contained 52 weeks . ( 2 ) as a percentage of shack sales . shake shack inc. form 10-k | 58 shack sales shack sales represent the aggregate sales of food , beverages and shake shack branded merchandise at our domestic company-operated shacks . shack sales in any period are directly influenced by the number of operating weeks in such period , the number of open shacks and same-shack sales . same-shack sales means , for any reporting period , sales performance at our company-operated domestic shacks that have been open for at least 24 months . replace_table_token_8_th shack sales for the fiscal year ended december 30 , 2020 decreased 11.9 % to $ 506.3 million versus the prior year . this decrease is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020 , which resulted in incremental shack sales of $ 10.7 million . excluding the 53rd week , shack sales in fiscal year 2020 decreased 13.7 % . the decrease in shack sales for fiscal 2020 was primarily due a decline in same-shack sales due to the impact from the covid-19 pandemic , partially offset by the opening of 20 new domestic company-operated shacks during fiscal 2020. same-shack sales improved across all regions on a sequential basis when compared to the third quarter , with performance driven by increases in in-shack dining in both urban and suburban shacks , combined with a high retention of digital sales . most notably , same-shack sales have improved sequentially over each of the last nine months of fiscal 2020. for fiscal 2020 , same-shack sales were down 27.8 % , primarily driven by a 36.9 % decrease in guest traffic partially offset by an increase in price mix of 9.1 % . this increase in price mix was driven by an increase in average check , primarily from a higher digital sales mix combined with an overall increase in check , due to higher number of items per order since the start of the pandemic . for the purpose of calculating same-shack sales growth for fiscal 2020 , shack sales for 114 shacks were included in the comparable shack base at the end of fiscal 2020. licensing revenue licensing revenue is comprised of license fees , opening fees for certain licensed shacks and territory fees . license fees are calculated as a percentage of sales and territory fees are payments for the exclusive right to develop shacks in a specific geographic area . replace_table_token_9_th licensed revenue for the fiscal year ended december 30 , 2020 decreased 16.9 % to $ 16.5 million versus the prior year . this decrease is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020 , which resulted in incremental licensed revenue of $ 0.4 million . excluding the 53rd week , licensed revenue in fiscal year 2020 decreased 18.9 % . the decrease in licensing revenue for fiscal 2020 was primarily due to reduced sales related to the covid-19 pandemic , partially offset by a net increase of 16 shacks opened during fiscal 2020. our licensed business has shown gradual improvement , however the business continues to be impacted by the pandemic . our domestic licensed business still faces significant headwinds , with airport and stadium shacks still either closed or operating at significantly reduced traffic . as of the end of fiscal 2020 , 17 licensed shacks remained temporarily closed . furthermore , approximately half of the uk shacks were closed as of the end of fiscal 2020 , as the government maintained lockdowns to control the virus spread . shake shack inc. form 10-k | 59 food and paper costs food and paper costs include the direct costs associated with food , beverage and packaging of our menu items . the components of food and paper costs are variable by nature , changing with sales volume , and are impacted by menu mix and fluctuations in commodity costs , as well as geographic scale and proximity . replace_table_token_10_th the decrease in food and paper costs for fiscal 2020 was primarily due to a decline in sales volume related to the covid-19 pandemic , partially offset by the opening of 20 new domestic company-operated shacks during fiscal 2020. as a percentage of shack sales , the increase in food and paper costs for fiscal 2020 was primarily due to higher paper and packaging costs , with all orders packaged as 'to go ' orders since the start of the pandemic , and significant inflation in beef prices , partially offset by lower chicken costs . for a large part of the second quarter of fiscal 2020 , we experienced significant inflation in beef , with costs nearly double that of last year for most of june . beef prices returned to more normalized levels in the third quarter of fiscal 2020. labor and related expenses labor and related expenses include domestic company-operated shack-level hourly and management wages , bonuses , payroll taxes , equity-based compensation , workers ' compensation expense and medical benefits . as we expect with other variable expense items , we expect labor costs to grow as our shack sales grow . factors that influence labor costs include minimum wage and payroll tax legislation , health care costs , size and location of the shack and the performance of our domestic company-operated shacks .
| financial highlights for fiscal 2020 total revenue for the fiscal year ended december 30 , 2020 decreased 12.1 % to $ 522.9 million versus the prior year . this decrease is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020 , which resulted in incremental revenue of $ 11.1 million . excluding the 53rd week , total revenue in fiscal year 2020 decreased 13.9 % . shack sales for the fiscal year ended december 30 , 2020 decreased 11.9 % to $ 506.3 million versus the prior year . this decrease is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020 , which resulted in incremental shack sales of $ 10.7 million . excluding the 53rd week , shack sales in fiscal year 2020 decreased 13.7 % . same-shack sales 1 decreased 27.8 % , for the fiscal year ended december 30 , 2020 versus the prior year . licensed revenue for the fiscal year ended december 30 , 2020 decreased 16.9 % to $ 16.5 million versus the prior year . this decrease is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020 , which resulted in incremental licensed revenue of $ 0.4 million . excluding the 53rd week , licensed revenue in fiscal year 2020 decreased 18.9 % . shack system-wide sales decreased 13.0 % to $ 778.9 million , versus the prior year . this decrease is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020 , which resulted in incremental shack system-wide sales of $ 17.7 million . excluding the 53rd week , shack system-wide sales in the fiscal year 2020 decreased 15.0 % . operating loss for the fiscal year ended december 30 , 2020 was $ 43.9 million compared to operating income of $ 25.7 million versus the same period last year . this operating loss includes a non-cash impairment charge of $ 7.6 million related to two shacks and the expansion space of the company 's home office . shack-level operating profit 2 ,
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cgs in 2019 decreased due to foreign currency translation of $ 345 million , primarily in emea and americas , lower volume of $ 226 million , primarily in emea , lower costs in other tire-related businesses of $ 130 million , driven by lower third-party chemical sales in americas , and lower start-up costs of $ 36 million associated with our new plant in san luis potosi , mexico . these decreases were partially offset by higher raw material costs of $ 185 million , primarily in americas and emea , higher costs related to product mix of $ 76 million , primarily in emea and asia pacific , the year-over-year impact of favorable indirect tax settlements in brazil of $ 42 million , and higher conversion costs of $ 36 million , primarily in emea and asia pacific . cgs in 2019 included pension expense of $ 14 million compared to $ 15 million in 2018. cgs in 2019 and 2018 also included incremental savings from rationalization plans of $ 20 million and $ 41 million , respectively . cgs in 2019 included accelerated depreciation and asset write-offs of $ 15 million ( $ 12 million after-tax and minority ) and favorable indirect tax settlements in brazil of $ 11 million ( $ 7 million after-tax and minority ) and in the u.s. of $ 6 million ( $ 5 million after-tax and minority ) . cgs in 2018 included accelerated depreciation and asset write-offs of $ 4 million ( $ 3 million after-tax and minority ) and favorable indirect tax settlements in brazil of $ 53 million , of which $ 51 million ( $ 39 million after-tax and minority ) related to years prior to 2018 , and in the u.s. of $ 4 million ( $ 3 million after-tax and minority ) . 22 selling , administrative and general expense sag was $ 2,323 million in 2019 , increasing $ 11 million , or 0.5 % , from $ 2,312 million in 2018 . sag was 15.8 % of sales in 2019 compared to 14.9 % of sales in 2018 . the increase in sag was primarily due to higher wages and benefits of $ 65 million , primarily due to higher incentive compensation , and higher information technology expense of $ 11 million , partially offset by foreign currency translation of $ 68 million . sag in 2019 included pension expense of $ 15 million compared to $ 17 million in 2018. sag in 2019 and 2018 also included incremental savings from rationalization plans of $ 17 million and $ 34 million , respectively . rationalizations we recorded net rationalization charges of $ 205 million ( $ 165 million after-tax and minority ) in 2019. net rationalization charges include $ 115 million in emea , primarily related to a plan to modernize two of our manufacturing facilities in germany , and $ 90 million in americas , primarily related to a plan to curtail production of tires for declining , less profitable segments of the tire market at our gadsden , alabama manufacturing facility . we recorded net rationalization charges of $ 44 million ( $ 32 million after-tax and minority ) in 2018. net rationalization charges included charges of $ 31 million related to global plans to reduce sag headcount , $ 16 million related to plans to reduce manufacturing headcount and improve operating efficiency in emea , and $ 15 million related to the closure of our tire manufacturing facility in philippsburg , germany . net rationalization charges in 2018 also included reversals of $ 19 million for actions no longer needed for their originally intended purposes . upon completion of the 2019 plans , we estimate that annual segment operating income will benefit from an improvement in cgs of approximately $ 140 million . the savings realized in 2019 from rationalization plans totaled $ 37 million ( $ 20 million cgs and $ 17 million sag ) . for further information , refer to the note to the consolidated financial statements no . 3 , costs associated with rationalization programs , in this form 10-k. interest expense interest expense was $ 340 million in 2019 , increasing $ 19 million from $ 321 million in 2018 . the increase was primarily due to higher average debt balances of $ 6,408 million in 2019 compared to $ 6,218 million in 2018 and a higher average interest rate of 5.31 % in 2019 compared to 5.16 % in 2018. other ( income ) expense other ( income ) expense in 2019 was expense of $ 98 million , compared to income of $ 174 million in 2018 . the $ 272 million change in other ( income ) expense was primarily driven by the gain , net of transaction costs , of $ 272 million ( $ 207 million after-tax and minority ) recognized on the tirehub transaction in 2018 , a decrease in interest income on favorable indirect tax settlements in brazil of $ 30 million , and charges of $ 25 million ( $ 25 million after-tax and minority ) related to flooding at our beaumont , texas chemical facility in 2019. these increases in expense were partially offset by an increase in net gains on asset sales of $ 15 million , $ 12 million ( $ 12 million after-tax and minority ) in expenses related to hurricanes harvey and irma in 2018 , and a net gain on insurance recoveries of $ 4 million ( $ 3 million after-tax and minority ) in 2019. non-service related pension and other postretirement benefits expense of $ 118 million in 2019 includes pension settlement charges of $ 5 million ( $ 4 million after-tax and minority ) . story_separator_special_tag non-service related pension and other postretirement benefits expense of $ 121 million in 2018 includes pension settlement charges of $ 22 million ( $ 17 million after-tax and minority ) and a one-time charge of $ 9 million ( $ 7 million after-tax and minority ) related to the adoption of the new accounting standards update which no longer allows non-service related pension and other postretirement benefits cost to be capitalized in inventory . net ( gains ) losses on asset sales were a gain of $ 16 million ( $ 15 million after-tax and minority ) in 2019 as compared to a gain of $ 1 million ( $ 1 million after-tax and minority ) in 2018. other ( income ) expense in 2019 included interest income on favorable indirect tax settlements in brazil of $ 8 million ( $ 5 million after-tax and minority ) , compared to interest income on favorable indirect tax settlements in brazil of $ 38 million ( $ 29 million after-tax and minority ) in 2018. other ( income ) expense in 2019 included charges of $ 5 million ( $ 4 million after-tax and minority ) , compared to charges of $ 4 million ( $ 3 million after-tax and minority ) in 2018 , for non-asbestos legal claims related to discontinued products . other ( income ) expense in 2019 also included a net gain of $ 2 million ( $ 2 million after-tax and minority ) related to an acquisition and $ 2 million ( $ 2 million after-tax and minority ) of favorable foreign currency translation on indirect tax items . for further information , refer to the note to the consolidated financial statements no . 5 , other ( income ) expense , in this form 10-k. 23 income taxes income tax expense in 2019 was $ 474 million on income before income taxes of $ 177 million . in 2019 , income tax expense was unfavorably impacted by net discrete adjustments totaling $ 386 million ( $ 386 million after minority interest ) . discrete adjustments were due to non-cash charges of $ 334 million related to an acceleration of royalty income in the u.s. from the sale of certain european royalty payments to luxembourg and $ 150 million related to an increase in our valuation allowance on tax losses in luxembourg , which were partially offset by a non-cash tax benefit of $ 98 million related to a reduction of our u.s. valuation allowance for foreign tax credits . at december 31 , 2019 , our valuation allowance on certain of our u.s. federal , state and local deferred tax assets was $ 13 million , primarily related to state tax loss and credit carryforwards , and our valuation allowance on our foreign deferred tax assets was $ 969 million . at december 31 , 2018 , our valuation allowance on certain u.s. federal , state and local deferred tax assets was $ 113 million and our valuation allowance on our foreign deferred tax assets was $ 204 million . foreign source taxable income for the fourth quarter of 2019 includes accelerated royalty income in the u.s. of $ 2.1 billion received from luxembourg as payment for the purchase of the right to receive technology royalties from our european operations for a period of 12 years . external specialists assisted management with this transaction . the royalty sale transaction resulted in a u.s. tax charge of $ 334 million and a deferred tax asset and offsetting valuation allowance of $ 576 million in luxembourg . foreign source taxable income for the fourth quarter of 2019 also includes $ 320 million of accelerated cross-border sales of inventory from the u.s. to canada , resulting in a u.s. tax charge of approximately $ 70 million that was offset by the establishment of a deferred tax asset . the federal portion of the tax charges related to both the royalty acceleration and canadian prepayment transactions was fully offset by the utilization of foreign tax credits of approximately $ 310 million . in addition , as a result of these transactions , we released an existing u.s. valuation allowance on foreign tax credits of $ 98 million . we considered our current forecasts of future profitability in assessing our ability to realize our remaining net foreign tax credits of $ 403 million . these forecasts include the impact of recent trends , including various macroeconomic factors such as raw material prices , on our profitability , as well as the impact of tax planning strategies . macroeconomic factors , including raw material prices , possess a high degree of volatility and can significantly impact our profitability . as such , there is a risk that future foreign source income will not be sufficient to fully utilize these foreign tax credits . however , we believe our forecasts of future profitability along with three significant sources of foreign income as described in `` critical accounting policies '' provide us sufficient positive evidence to conclude that it is more likely than not that our foreign tax credits , net of remaining valuation allowances , will be fully utilized prior to their various expiration dates . income tax expense in 2018 was $ 303 million on income before income taxes of $ 1,011 million . in 2018 , income tax expense was unfavorably impacted by net discrete adjustments of $ 65 million ( $ 65 million after minority interest ) . discrete adjustments were primarily due to charges totaling $ 135 million related to deferred tax assets for foreign tax credits , including the establishment of a valuation allowance on foreign tax credits of $ 98 million , partially offset by a tax benefit of $ 88 million related to a worthless stock deduction created by permanently ceasing operations of our venezuelan subsidiary during the fourth quarter of 2018 .
| goodyear net loss in 2019 was $ 311 million , or $ 1.33 per diluted share , compared to goodyear net income of $ 693 million , or $ 2.89 per diluted share , in 2018 . the decrease in goodyear net income in 2019 was primarily driven by lower segment operating income , the net gain recognized on the tirehub transaction in 2018 , higher income tax expense and higher rationalization expense . our total segment operating income for 2019 was $ 945 million , compared to $ 1,274 million in 2018 . the $ 329 million , or 25.8 % , decrease in segment operating income was primarily due to the impact of higher raw material costs of $ 185 million , primarily in americas and emea , lower volume of $ 81 million , primarily in emea , higher selling , administrative and general expense ( `` sag '' ) of $ 47 million , primarily due to higher wages and benefits driven by higher incentive compensation , lower income in other tire-related businesses of $ 38 million , driven by lower third-party chemical sales in americas , the impact of unfavorable foreign currency translation of $ 38 million , and higher conversion costs of $ 36 million , primarily in emea and asia pacific . these decreases more than offset improvements in price and product mix of $ 120 million , primarily in americas and emea . refer to `` results of operations — segment information ” for additional information . liquidity at december 31 , 2019 , we had $ 908 million in cash and cash equivalents as well as $ 3,578 million of unused availability under our various credit agreements , compared to $ 801 million and $ 3,151 million , respectively , at december 31 , 2018 . cash flows from operating activities of $ 1,207 million , which are driven by the profitability of our strategic business units ( `` sbus '' ) and changes in working capital , were used to fund capital expenditures of $ 770 million , dividends paid on our common stock of $ 148 million ,
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since 1994 , we have been engaged and expect to continue to be primarily engaged , in funding and performing research and development activities relating to oled technologies and materials , and commercializing these technologies and materials . we derive our revenue primarily from the following : sales of oled materials for evaluation , development and commercial manufacturing ; intellectual property and technology licensing ; technology development and support , including third-party collaboration efforts and providing support to third parties for commercialization of their oled products ; and contract research services in the areas of chemical materials synthesis research , development and commercialization for non-oled applications . material sales relate to our sale of oled materials for incorporation into our customers ' commercial oled products or for their oled development and evaluation activities . material sales are generally recognized at the time title passes , which is typically at the time of shipment or at the time of delivery , depending upon the contractual agreement between the parties . we receive license and royalty payments under certain commercial , development and technology evaluation agreements , some of which are non-refundable advances . these payments may include royalty and license fees made pursuant to license agreements and also license fees included as part of certain commercial supply agreements . these payments are included in the estimate of total contract consideration by customer and recognized as revenue over the contract term based on material units sold at the estimated per unit fee over the life of the contract . in 2018 , we entered into a commercial license agreement with samsung display co. , ltd. ( sdc ) . this agreement , which covers the manufacture and sale of specified oled display materials , was effective as of january 1 , 2018 and lasts through the end of 2022 with an additional two-year extension option . under this agreement , we are being paid a license fee , payable in quarterly installments over the agreement term of five years . the agreement conveys to sdc the non-exclusive right to use certain of our intellectual property assets for a limited period of time that is less than the estimated life of the assets . at the same time that we entered into the current patent license agreement with sdc , we also entered into a material purchase agreement with sdc . under the material purchase agreement , sdc agrees to purchase from us a minimum amount of phosphorescent emitter materials for use in the manufacture of licensed products . this minimum commitment is subject to sdc 's requirements for phosphorescent emitter materials and our ability to meet these requirements over the term of the supplemental agreement . in 2015 , we entered into an oled patent license agreement and an oled commercial supply agreement with lg display co. , ltd. ( lg display ) , which were effective as of january 1 , 2015. the agreements have a term that is set to expire by the end of 2022. the patent license agreement provides lg display a non-exclusive , royalty bearing portfolio license to make and sell oled displays under our patent portfolio . the patent license calls for license fees , prepaid royalties and running royalties on licensed products . the agreements include customary provisions relating to warranties , indemnities , confidentiality , assignability and business terms . the agreements provide for certain other minimum obligations relating to the volume of material sales anticipated over the life of the agreements as well as minimum royalty revenue to be generated under the patent license agreement . we generate revenue under these agreements that are predominantly tied to lg display 's sales of oled licensed products . the oled commercial supply agreement provides for the sales of materials for use by lg display , which may include phosphorescent emitters and host materials . 31 in 2016 , we entered into long-term , multi-year oled patent license and material purchase agreements with tianma micro-electronics co. , ltd. ( tianma ) . under the license agreement , we have granted tianma non-exclusive license rights under various patents owned or controlled by us to manufacture and sell oled display products . the license agreement calls for license fees and running royalties on tianma 's sales of licensed products . additionally , we suppl y phosphorescent oled materials to tianma for use in its licensed products . in 2017 , we entered into long-term , multi-year agreements with boe technology group co. , ltd. ( boe ) . under these agreements , we have granted boe non-exclusive license rights under various patents owned or controlled by us to manufacture and sell oled display products . we also supply phosphorescent oled materials to boe for use in its licensed products . in 2018 , we entered into long-term , multi-year oled patent license and material purchase agreements with visionox technology , inc. ( visionox ) . under the license agreement , we have granted visionox non-exclusive license rights under various patents owned or controlled by us to manufacture and sell oled display products . the license agreement calls for license fees and running royalties on visionox 's sales of licensed products . additionally , we supply phosphorescent oled materials to visionox for use in its licensed products . in 2019 , we entered into an evaluation and commercial supply relationship with wuhan china star optoelectronics semiconductor display technology co. , ltd. ( csot ) . we have been collaborating with csot in the area of oled display product design and manufacture and expect to continue to do so . in 2016 , we acquired adesis , inc. ( adesis ) with operations in new castle , delaware . story_separator_special_tag adesis is a contract research organization ( cro ) that provides support services to the oled , pharma , biotech , catalysis and other industries . as of december 31 , 2019 , adesis employed a team of 94 research scientists , chemists , engineers and laboratory technicians . prior to our acquisition of adesis in 2016 , we utilized more than 50 % of adesis ' technology service and production output . we continue to utilize a significant portion of its technology research capacity for the benefit of our oled technology development , and adesis uses the remaining capacity to operate as a cro in the above-mentioned industries by providing contract research services for non-oled applications to those third-party customers . contract research services revenue is earned by providing chemical materials synthesis research , development and commercialization for non-oled applications on a contractual basis for those third-party customers . we also generate technology development and support revenue earned from development and technology evaluation agreements and commercialization assistance fees , along with , to a minimal extent , government contracts . relating to our government contracts , we may receive reimbursements by government entities for all or a portion of the research and development costs we incur . revenues are recognized as services are performed , proportionally as research and development costs are incurred , or as defined milestones are achieved . we anticipate fluctuations in our annual and quarterly results of operations due to uncertainty regarding , among other factors : the timing , cost and volume of sales of our oled materials ; the timing of our receipt of license fees and royalties , as well as fees for future technology development and evaluation ; the timing and magnitude of expenditures we may incur in connection with our ongoing research and development and patent-related activities ; and the timing and financial consequences of our formation of new business relationships and alliances . critical accounting policies and estimates the 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 u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and judgments that affect our reported assets and liabilities , revenues and expenses , and other financial information . actual results may differ significantly from our estimates under other assumptions and conditions . we believe that our accounting policies related to revenue recognition and deferred revenue , inventories and income taxes , as described below , are our “ critical accounting policies ” as contemplated by the sec . these policies , which have been reviewed with our audit committee , are discussed in greater detail below . 32 revenue recognition and deferred revenue material sales relate to the sale of our oled materials for incorporation into our customers ' commercial oled products or for their oled development and evaluation activities . revenue associated with material sales is generally recognized at the time title passes , which is typically at the time of shipment or at the time of delivery , depending upon the contractual agreement between the parties . revenue may be recognized after control of the material passes in the event the transaction price includes variable consideration . for example , a customer may be provided an extended opportunity to stock materials prior to use in mass production and given a general right of return not conditioned on breaches of warranties associated with the specific product . in such circumstances , revenue will be recognized at the earlier of the expiration of the customer 's general right of return or once it becomes unlikely that the customer will exercise its right of return . the rights and benefits to our oled technologies are conveyed to the customer through technology license agreements and material supply agreements . these agreements are combined and the licenses and materials sold under these combined agreements are not distinct from each other for financial reporting purposes and as such , are accounted for as a single performance obligation . accordingly , total contract consideration is estimated and recognized over the contract term based on material units sold during the period at their estimated per unit fee . total contract consideration includes fixed amounts designated in contracts with customers as license fees as well as estimates of material fees and royalties to be earned . various estimates are relied upon to recognize revenue . we estimate total material units to be purchased by our customers over the contract term based on historical trends , industry estimates and our forecast process and related amounts to be charged . additionally , our management estimates the total sales-based royalties based on the estimated net sales revenue of our customers over the contract term . accounting for income taxes we are subject to income taxes in both the u.s. and foreign jurisdictions . significant judgments and estimates are required in evaluating our tax positions for future realization and determining our provision for income taxes . our income tax expense , deferred tax assets and liabilities , and reserves for unrecognized tax benefits reflect management 's best assessment of estimated future taxes to be paid . in assessing the realizability of deferred tax assets , we consider whether it is more likely than not that some portion or all of our deferred tax assets will not be realized . the ultimate realization of deferred tax assets is dependent on our ability to generate future taxable income to obtain benefit from the reversal of temporary differences , net operating loss carryforwards and tax credits .
| research and development research and development expenses increased to $ 71.3 million for the year ended december 31 , 2019 , as compared to $ 53.7 million for the year ended december 31 , 2018. the increase in research and development expenses was primarily due to higher employee-related compensation expenses and operating costs , including increased contract research activity . selling , general and administrative selling , general and administrative expenses increased to $ 59.6 million for the year ended december 31 , 2019 , as compared to $ 47.0 million for the year ended december 31 , 2018. the increase in selling , general and administrative expenses was primarily due to higher employee-related compensation expenses . 34 amortization of acquired technology and other intangible assets amortization of acquired technology and other intangible assets was $ 22.0 million for both of the years ended december 31 , 2019 and 2018. see note 7 in notes to consolidated financial statements for further discussion . patent costs patent costs decreased to $ 6.8 million for the year ended december 31 , 2019 , as compared to $ 7.5 million for the year ended december 31 , 2018. the decrease was primarily due to lower outside counsel fees partially offset by higher talent related maintenance costs and higher internal patent prosecution related costs . royalty and license expense royalty and license expense increased to $ 11.8 million for the year ended december 31 , 2019 , as compared to $ 7.0 million for the year ended december 31 , 2018. the increase was due to increased royalties incurred under our amended license agreement with princeton , usc , and michigan , resulting from an increase in qualifying material sales . see note 10 in notes to consolidated financial statements for further discussion . interest and other income , net interest income , net was $ 10.8 million for the year ended december 31 , 2019 , as compared to $ 7.7 million for the year ended december 31 ,
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although the market for nuclear fuel is expected to remain oversupplied for the remainder of this decade , the market is expected to experience steady growth as the nuclear power industry expands around the world . after a 30-year hiatus in nuclear power plant construction , utilities in the united states are building five new reactors . according to the world nuclear association , there are 66 reactors under construction and 488 on order , planned or proposed around the world , compared to 439 currently in operation . this includes significant growth in china , korea and india . the new reactor builds will have the potential to improve market conditions in the long-term . much of this growth is driven by rising concern over climate change . nuclear power is the largest source of carbon-free energy in the united states ; globally it is second only to hydropower . climate negotiators in paris in 2015 agreed to target limiting global average temperature increases . this could have significant long-term importance to the nuclear industry since achieving this goal will require significant reductions in carbon emissions which might not be achieved absent a major contribution by nuclear energy . the international energy administration has estimated that nuclear energy capacity would have to more than double , from 396 gigawatts today to 930 gigawatts by 2050 , in order to prevent global average temperatures from rising more than 2 degrees celsius . the enrichment component of leu is customarily sold on long term contracts , with a typical duration of five to ten years and sometimes longer . the company retains an order book of such contracts with a total value of approximately $ 2.3 billion . certain contracts included in the order book have sales prices that are significantly above current market prices . some long-term contracts in our order book were established with milestones related to the deployment of the american centrifuge plant ( “ acp ” ) in piketon , ohio that permit termination with respect to portions of the contract under limited circumstances that vary across the contracts . some of these customers have indicated they expect to exercise their contract termination rights . while we have waived , eliminated or renegotiated 35 those termination rights where possible , we estimate that approximately $ 0.8 billion ( 35 % ) of our order book remains at various levels of risk due to milestones related to acp deployment . advanced technology , manufacturing , and engineering capability the company has a long record as a global leader in advanced technology , manufacturing and engineering . our manufacturing , engineering , testing and demonstration facilities in tennessee and ohio and our highly-trained workforce are deeply engaged in advancing the next generation of uranium enrichment technology . we are exploring a number of options for returning to domestic production , including deployment of our american centrifuge , centrus ' advanced uranium enrichment gas centrifuge technology . in october 2015 , doe issued a report to congress finding that the u.s. must restore its domestic uranium enrichment capability in the future . after evaluating a range of possible technologies , doe found that the american centrifuge is the “ most technically advanced and lowest risk option ” for restoring u.s. uranium enrichment capability to meet long-term national security requirements . from 2012-2013 , the u.s. government and centrus jointly funded the construction of a demonstration cascade of the american centrifuge technology in piketon , ohio . the demonstration cascade completed its mission after nearly two years of continuous operations , delivering valuable operational data to inform future deployment efforts . in september 2015 , doe announced the conclusion of the federally funded demonstration effort . effective october 1 , 2015 , funding for the demonstration cascade was discontinued and the program was consolidated at our engineering and testing facilities in oak ridge , tennessee . we anticipate that doe , through ut-battelle will extend our development work in oak ridge with a contract through september 30 , 2016. the company continued funding cascade operations in piketon from its own funds while it explored potential alternative use of the facility . subsequently , on february 19 , 2016 , we announced our decision to commence with the decontamination and decommissioning ( “ d & d ” ) of the piketon demonstration cascade , and to reduce staffing levels . we will preserve a core staff , expertise , and facilities at piketon to enable the facility to be used to support the company 's other business development initiatives as needed . we intend to resume commercial production when market conditions warrant . today , the economics for commercial deployment of new enrichment capacity are severely challenged by the current supply/demand imbalance in the market for leu and related downward pressure on market prices for separative work units ( “ swu ” ) , which are now at their lowest levels in more than a decade . market conditions are expected to improve in the long term . we currently intend to continue to maintain our nrc license to construct and operate a commercial enrichment facility in piketon . the 30-year license expires in 2037 and includes authorization to enrich uranium to a uranium-235 isotope ( “ u 235 ” ) assay of up to 10 % . the commercial license is based on a plant designed with an initial annual production capacity of 3.8 million swu . demobilization of the demonstration cascade in piketon we notified our american centrifuge employees in september 2015 of possible layoffs beginning in november 2015 as a result of doe 's decision to reduce funding under our then contract with ut-battelle , the operator of ornl . based on the level of funding reduction , we incurred a special charge of $ 8.7 million in the third quarter of 2015 for estimated termination benefits consisting primarily of payments under our severance plan . story_separator_special_tag we initiated a voluntary workforce reduction opportunity in october 2015 and commenced involuntary workforce reductions beginning in the first quarter of 2016. centrus expects to make payments for these workforce reductions through early 2017 . 36 other than severance costs included in special charges for workforce reductions , american centrifuge costs incurred by centrus that were outside of our contract with ut-battelle are included in advanced technology costs . such costs totaled $ 33.0 million in 2015 and $ 17.0 million in 2014. the company incurred $ 18.5 million in 2015 for demobilization and maintenance costs , including $ 10.8 million in the fourth quarter of 2015. in addition , although our ut-battelle agreement expired september 30 , 2015 , we continued to perform work at the expected reduced scope as the parties worked toward a successor agreement . costs for such work totaled $ 7.7 million and are included in advanced technology costs in the fourth quarter of 2015. advanced technology costs in 2015 included $ 6.8 million for an increase to the liability for the d & d of the piketon facility based on updated cost projections . in addition to the severance and demobilization costs , we are beginning to incur expenditures in 2016 as we perform d & d procedures in accordance with the requirements of the u.s. nuclear regulatory commission ( “ nrc ” ) and doe . estimates for such costs have been included in the liability for d & d of the piketon facility . the balance of this liability , included in current liabilities , was $ 29.4 million as of december 31 , 2015 based on cost projections . we expect the d & d effort will continue through the end of 2016. cash expenditures for d & d , employee severance and other demobilization costs are anticipated to occur primarily in 2016 and are projected in a range of $ 50 million to $ 60 million . centrus has previously provided financial assurance to the nrc and doe for d & d and lease turnover costs in the form of surety bonds of approximately $ 16 million and $ 13 million , respectively , which are fully cash collateralized by centrus . centrus expects cash deposits will be returned as surety bonds are cancelled following its performance of d & d or reduced based on our satisfaction of lease conditions . emergence from chapter 11 bankruptcy on march 5 , 2014 , usec inc. filed a voluntary petition for relief ( the “ bankruptcy filing ” ) under chapter 11 of title 11 of the united states code ( the “ bankruptcy code ” ) in the united states bankruptcy court for the district of delaware ( the “ bankruptcy court ” ) . the bankruptcy filing was “ pre-arranged ” and included the filing of a proposed plan of reorganization ( the “ plan of reorganization ” ) supported by certain holders of the claims and interests impaired under the plan of reorganization . on august 18 , 2014 , the company announced that the plan of reorganization was accepted by more than 99 % in both value and number of votes cast of holders of its convertible notes and that both holders of the company 's preferred equity voted in favor of the plan of reorganization . on september 5 , 2014 , the bankruptcy court entered an order approving and confirming the plan of reorganization . on september 30 , 2014 ( the “ effective date ” ) , the company satisfied the conditions of the plan of reorganization , the plan of reorganization became effective and the company emerged from bankruptcy . on the effective date , usec inc. changed its name to centrus energy corp. in accordance with accounting standards codification topic 852 , reorganizations , centrus adopted fresh start accounting upon emergence from chapter 11 bankruptcy . the recorded amounts of assets and liabilities were adjusted to reflect their estimated fair values on the effective date . these fair value adjustments : significantly reduce the future gross profit impact of revenues that were deferred at emergence ; result in the amortization of sales order book and customer relationship intangible assets that were created at emergence ; and result in higher cost of sales as a result of increasing inventory values at emergence . 37 business segments centrus has two reportable segments : the leu segment with two components , swu and uranium , and the contract services segment . leu segment revenue from sales of swu and uranium revenue from our leu segment is derived primarily from : sales of the swu component of leu , sales of both the swu and uranium components of leu , and sales of natural uranium . revenue for our leu segment accounted for approximately 85 % of our total revenue in 2015. the majority of our customers are domestic and international utilities that operate nuclear power plants , with international sales constituting 41 % of revenue from our leu segment in 2015. our agreements with electric utilities are primarily long-term , fixed-commitment contracts under which our customers are obligated to purchase a specified quantity of the swu component of leu ( or the swu and uranium components of leu ) from us . our agreements for natural uranium sales are generally shorter-term , fixed-commitment contracts . our revenues , operating results and cash flows can fluctuate significantly from quarter to quarter and year to year . revenue is recognized at the time leu or uranium is delivered under the terms of our contracts . customer demand is affected by , among other things , electricity markets , reactor operations , maintenance and the timing of refueling outages . utilities typically schedule the shutdown of their reactors for refueling to coincide with the low electricity demand periods of spring and fall . thus , some reactors are scheduled for annual or two-year refuelings in the spring or fall , or for 18-month cycles alternating between both seasons .
| in such cases , the combined results for 2014 provide for a more useful , normalized comparison to the results of the successor company for 2015. combined 2014 results for the consolidated statements of cash flows and for the elements of the consolidated statements of operations that are not categorized by segment are considered non-gaap . when evaluating results of operations below gross profit , management views the year ended december 31 , 2014 as a single , whole measurement period instead of a pair of distinct periods which must be divided and reported separately according to gaap . consequently , the company is presenting the operating results of the predecessor and successor on a combined basis for the year ended december 31 , 2014. this combined presentation is a non-gaap summation of the predecessor 's pre-reorganization results of operations for the period from january 1 , 2014 through september 30 , 2014 and the successor 's results of operations for the period from october 1 , 2014 through december 31 , 2014. management believes that the combined presentation provides additional information that enables meaningful comparison of the company 's financial performance during uniform 46 periods . the non-gaap combined results for 2014 are presented in addition to the gaap results for the three months ended december 31 , 2014 and the nine months ended september 30 , 2014. the following table presents elements of the accompanying consolidated statements of operations that are categorized by segment ( dollar amounts in millions ) : replace_table_token_5_th revenue revenue from the leu segment declined $ 93.9 million ( or 21 % ) in 2015 compared to 2014. the volume of swu sales declined 41 % , reflecting the expected decline in swu deliveries following the cessation of enrichment at the paducah gdp at the end of may 2013 , reduced purchases of russian swu for sale , and the variability in timing of utility customer orders . the average price billed to customers for
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the cares act includes , among other things , provisions relating to payroll tax credits and deferrals , net operating loss carryback periods , alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property . the cares act also established a paycheck protection program ( “ ppp ” ) , whereby certain small businesses are eligible for a loan to fund payroll expenses , rent , and related costs . on april 9 , 2020 , justice entered into a loan agreement ( “ sba loan - justice ” ) with cibc bank usa under the recently enacted cares act administered by the u.s. small business administration . the partnership received proceeds of $ 4,719,000 from the sba loan - justice . in accordance with the requirements of the cares act , justice has used proceeds from the loan primarily for payroll costs . as of june 30 , 2020 , justice had used $ 3,568,000 in qualified expenses such as payroll expenses , mortgage interests , utilities , etc. , and had a balance of $ 1,151,000 available for future qualified expenses . the sba loan - justice is scheduled to mature on april 9 , 2022 and has a 1.00 % interest rate . on april 27 , 2020 , intergroup entered into a loan agreement ( “ sba loan - intergroup ” ) with cibc bank usa under the cares act and received loan proceeds in the amount of $ 453,000. as of june 30 , 2020 , intergroup had used all of the $ 453,000 loan proceeds in qualified payroll expenses . the sba loan – intergroup is scheduled to mature on april 27 , 2022 and has a 1.00 % interest rate . both the sba loan – justice and sba loan – intergroup ( collectively the “ sba loans ” ) may be forgiven if the funds are used for payroll and other qualified expenses . all payments of principal and interests are deferred until october 2020. the sba loans are subject to the terms and conditions applicable to loans administered by the u.s. small business administration under the cares act . we anticipate applying for loan forgiveness shortly . all unforgiven portion of the principal and accrued interest will be due at maturity . story_separator_special_tag for the year ended june 30 , 2020 , the hotel generated operating income of $ 5,506,000 before non-recurring charges , interest , depreciation , and amortization on total operating revenues of $ 42,839,000 compared to operating income of $ 15,415,000 before non-recurring charges , interest , depreciation , and amortization on total operating revenues of $ 59,881,000 for the year ended june 30 , 2019. room revenues decreased by $ 14,778,000 for the year ended june 30 , 2020 compared to the year ended june 30 , 2019 , food and beverage revenue decreased by $ 1,824,000 , and revenue from garage decreased by $ 507,000. the year over year decline in all areas are result of the business interruption attributable to a variety of responses by federal , state , and local civil authority to the covid-19 outbreak in march 2020 which continues to affect us . revenue from other operating departments increased year over year mainly due to increase in cancellation revenue . the following table sets forth the monthly average occupancy percentage of the hotel for the fiscal years ended june 30 , 2020 and 2019. replace_table_token_5_th operating expenses decreased by $ 7,133,000 for the year ended june 30 , 2020 to $ 37,333,000 compared to the year ended june 30 , 2019 of $ 44,466,000 primarily due to decrease in salaries and wages , rooms commission , credit card fees , management fees , and franchise fees . the following table sets forth the average daily room rate , average occupancy percentage and room revenue per available room ( “ revpar ” ) of the hotel for the year ended june 30 , 2020 and 2019. replace_table_token_6_th the hotel 's revenues decreased by 28 % year over year . average daily rate decreased by $ 20 , average occupancy dropped 22 % , and revpar decreased by $ 74 for the twelve months ended june 30 , 2020 compared to the twelve months ended june 30 , 2019. in order to provide our guests with best in class technology experience , we completed the upgrade of our new internet system from cisco , and installed new 55 ” smart 4k televisions and hilton 's stay connected internet streaming products . we also replaced mattresses in all guestrooms during the fiscal year ended june 30 , 2020. the covid-19 pandemic and design delays have pushed back the plans for the conversion of the justice offices , fitness center and executive lounge ; projects that would add 19 guest rooms into our inventory . the long-term value of these rooms is in utilizing them as guest rooms , and we will work to implement a new timeline as business returns . part of this renovation will be funded by the hotel 's furniture , fixture and equipment reserve account with our lender as well as the key money incentive provided by interstate . lastly , the hotel completed the installation of a complete exterior building maintenance system which will enable periodic window washing , replaced and upgraded all computers in the business center and administrative offices . real estate operations revenue from real estate operations increased to $ 15,178,000 for the year ended june 30 , 2020 from $ 14,872,000 for the year ended june 30 , 2019 primarily as a result of increase in market rent . real estate operating expenses increased to $ 8,051,000 from $ 7,810,000 primarily as a result of increase in repairs and maintenance costs . story_separator_special_tag management continues to review and analyze the company 's real estate operations to improve occupancy and rental rates and to reduce expenses and improve efficiencies . investment transactions the company had a net loss on marketable securities of $ 1,913,000 for the year ended june 30 , 2020 compared to a net loss on marketable securities of $ 1,733,000 for the year ended june 30 , 2019. for the year ended june 30 , 2020 and 2019 , the company had a net unrealized loss of zero and $ 254,000 , respectively , related to the company 's investment in the common stock of comstock mining inc. ( “ comstock ” - nyse mkt : lode ) . as of june 30 , 2020 and 2019 , investments in comstock represent approximately 11 % and 7 % of the company 's investment portfolio , respectively . for the year ended june 30 , 2020 , the company had a net realized loss of $ 641,000 and a net unrealized loss of $ 1,272,000. for the year ended june 30 , 2019 , the company had a net realized loss of $ 806,000 and a net unrealized loss of $ 927,000 . 23 gains and losses on marketable securities may fluctuate significantly from period to period in the future and could have a significant impact on the company 's results of operations . however , the amount of gain or loss on marketable securities for any given period may have no predictive value and variations in amount from period to period may have no analytical value . for a more detailed description of the composition of the company 's marketable securities see the marketable securities section below . during the years ended june 30 , 2020 and 2019 , the company performed an impairment analysis of its other investments and determined that its investments had other than temporary impairment and recorded impairment losses of $ 219,000 and $ 98,000 , respectively . the company and its subsidiaries , portsmouth and santa fe , compute and file income tax returns and prepare discrete income tax provisions for financial reporting . the income tax benefit during the years ended june 30 , 2020 and 2019 represents primarily the combined income tax effect of portsmouth 's pretax ( loss ) income which includes its share in net ( loss ) income from the hotel and the pre-tax loss from intergroup ( standalone ) . marketable securities and other investments as of june 30 , 2020 and 2019 , the company had investments in marketable equity securities of $ 6,178,000 and $ 9,696,000 , respectively . the following table shows the composition of the company 's marketable securities portfolio by selected industry groups : replace_table_token_7_th replace_table_token_8_th as of june 30 , 2020 , the company 's investment portfolio is diversified with 59 different equity positions . the company holds two equity securities that comprised more than 10 % of the equity value of the portfolio . the largest security position represents 19.4 % of the portfolio and consists of the common stock of american realty investors , inc. which is included in the reits and real estate companies ' industry group . the following table shows the net loss on the company 's marketable securities and the associated margin interest and trading expenses for the respective years . replace_table_token_9_th 24 financial condition and liquidity historically , our cash flows have been primarily generated from our hotel operations . however , the responses by federal , state , and local civil authorities to the covid-19 pandemic has had a material detrimental impact on our liquidity . for the fiscal year ended june 30 , 2020 , our net cash flow used in operations was $ 3,454,000. for the fiscal year ended june 30 , 2019 , our net cash flow provided by operations was $ 14,269,000. we have taken several steps to preserve capital and increase liquidity at our hotel , including implementing strict cost management measures to eliminate non-essential expenses , postponing capital expenditures , renegotiating certain reoccurring expenses , and temporarily closing certain hotel services and outlets . as of june 30 , 2020 , we had cash , cash equivalents , and restricted cash of $ 28,286,000 which included $ 10,666,000 of restricted cash held by our hotel senior lender wells fargo bank , n.a . ( “ lender ” ) . of the $ 10,666,000 restricted cash , $ 7,486,000 was held for furniture , fixtures and equipment ( “ ff & e ” ) reserves and $ 2,432,000 was held for a possible future property improvement plan ( “ pip ” ) requested by our franchisor , hilton . however , hilton has confirmed that it will not require a pip for our hotel until relicensing which shall occur at the earlier of ( i ) january 2030 , which is six years after the maturity date of our current senior and mezzanine loans , or ( ii ) upon the sale of our hotel . on august 19 , 2020 , operating received pip deposits in the amount of $ 2,379,000 held by lender . the funds were utilized to fund operating expenses , including franchise and management fees and other expenses . on april 9 , 2020 , justice entered into a loan agreement ( “ sba loan - justice ” ) with cibc bank usa under the recently enacted cares act administered by the u.s. small business administration . the partnership received proceeds of $ 4,719,000 from the sba loan - justice . in accordance with the requirements of the cares act , justice has used proceeds from the loan primarily for payroll costs . as of june 30 , 2020 , justice had used $ 3,568,000 in qualified expenses such as payroll expenses , mortgage interests , utilities , etc.
| the key money cash incentive of $ 4,750,000 was received on july 1 , 2015. as of june 30 , 2020 and 2019 , the balance of the note was $ 3,008,000 and $ 3,325,000 , respectively , and are included in related party and other notes payable in the consolidated balance sheets . on february 1 , 2017 , justice entered into a hotel management agreement ( “ hma ” ) with interstate management company , llc ( “ interstate ” ) to manage the hotel with an effective takeover date of february 3 , 2017. the term of hma is for an initial period of 10 years commencing on the takeover date and automatically renews for an additional year not to exceed five years in the aggregate subject to certain conditions . the hma also provides for interstate to advance a key money incentive fee to the hotel for capital improvements in the amount of $ 2,000,000 under certain terms and conditions described in a separate key money agreement . as of june 30 , 2020 and 2019 , balance of the key money including accrued interests are $ 1,009,000 and $ 2,049,000 , respectively , and are included in restricted cash in the consolidated balance sheets . as of june 30 , 2020 and 2019 , balance of the unamortized portion of the key money are $ 1,646,000 and $ 1,896,000 , respectively , and are included in the related party notes payable in the consolidated balance sheets . on october 25 , 2019 , interstate merged with aimbridge hospitality , north america 's largest independent hotel management firm . with the completion of the merger , the newly combined company will be positioned under the aimbridge hospitality name in the americas . 21 in addition to the operations of the hotel , the company also generates income from the ownership and management of its real estate . properties include sixteen apartment complexes , one commercial real estate property , and three single-family houses as strategic investments . the properties are located throughout the united states , but are concentrated in texas and southern california . the company also has an
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our hpmc segment 's isothermal and hot-die forge press utilization continues to improve to meet aerospace demand growth , including new market share gains . restructuring our hpmc segment titanium operations to improve cost competitiveness , including the indefinite idling of the rowley , ut titanium sponge production facility , which resulted in $ 514 million of restructuring charges , including $ 11 million of titanium sponge inventory revaluation classified in cost of sales in the consolidated statement of operations . we entered into long-term , cost competitive supply agreements with several leading global producers of premium-grade and standard-grade titanium sponge , with the lower cost titanium 19 sponge purchased under these agreements replacing the titanium sponge produced at the rowley facility . we recognized a $ 471 million asset impairment charge for the rowley facility idling , along with $ 43 million primarily for related closure costs for rowley , charges to close a small , unprofitable titanium wire production facility in frackville , pa , and to consolidate certain titanium operations in albany , or . these charges were excluded from hpmc segment results . the hpmc restructuring actions are expected to improve ati 's operating earnings by approximately $ 50 million beginning in 2017. restructuring the frp business to focus on value , not volume . building on actions taken in 2015 , we permanently idled the midland , pa commodity stainless steel melt and sheet finishing facility , and the bagdad , pa goes finishing facility . we recognized $ 13 million in restructuring charges for contractual obligations , closure costs , and employment benefits for these facility closures . these actions have significantly lessened ati 's exposure to more commoditized products and markets in the frp segment . we continue to reposition the frp business to a higher value product mix , and achieved near-breakeven results in this segment in the fourth quarter of 2016 , after four years of operating losses . we also reduced the size of the frp salaried workforce by more than 250 employees , and recognized $ 12 million of pre-tax severance charges . these facility closure and severance charges were excluded from frp segment results . the frp restructuring actions related to severance and facility closures are expected to improve ati 's operating earnings by approximately $ 40 million , with benefits beginning in the third quarter of 2016. concluding difficult labor negotiations , ending a seven month work stoppage in march 2016. we incurred approximately $ 49 million in costs in the first half of 2016 , primarily in the frp segment , for operating inefficiencies and contractual obligations associated with the work stoppage and return to work of represented employees . the new labor agreement includes important changes to retirement benefit programs , including a freeze to new entrants to ati 's defined benefit pension plan and the elimination of retiree medical benefits for new employees , and other changes affecting plant operations that improve our cost competitiveness . maintaining a solid liquidity position , while addressing several near-term funding challenges , and ending the year with $ 230 million in cash on hand and $ 310 million of available borrowing capacity under our asset based domestic lending ( abl ) facility . we issued $ 288 million of six-year convertible notes to provide additional financial flexibility to fund our u.s. defined benefit pension plan and to support pension liability management actions , including an annuity buyout of small balance pensions . we amended our abl facility to add a $ 100 million term loan that matures in november 2017 to provide additional liquidity as we complete our significant restructuring actions and capital expenditure commitments . continuing to make capital investments to support our growth initiatives , with $ 202 million of capital expenditures in 2016 , including $ 85 million of scheduled payments on the hot rolling and processing facility , and the expansion of nickel alloy powder production capacity in the hpmc segment . we are at the end of a significant , multi-year period of capital expansions , and expect our capital expenditures to be well below depreciation expense for the next several years . outlook our hpmc segment is very well-positioned for profitable growth , especially in the next-generation jet engine platforms , and we expect 2017 hpmc segment sales growth of approximately 10 % , and operating profit as a percentage of sales to improve to the low-teens . our hpmc segment is expected to continue sustained profitable growth , supported by long-term agreements that provide significant growth and share gains for ati on next-generation airplanes and the jet engines that power them . we expect our cost structure to continue to improve throughout the year as a result of our 2016 titanium operations restructuring actions , including achieving a better balance of titanium raw material cost inputs following the idling of our rowley titanium sponge production facility . we have sufficient available capacity for the forecasted growth in demand over the next several years . the frp segment made tremendous progress throughout 2016 toward returning to profitability , but our work is not done . we continue the process of creating a smaller , more agile , streamlined , cohesive , and efficient flat-rolled products business that will be more focused on products and markets with significant technical barriers to entry . as we continue to reposition this business to a higher-value product mix , we expect shipments of our specialty coil and plate products to improve in 2017 and benefit from the hrpf capabilities , particularly for our 48 ” -wide nickel-based alloy sheet . in 2017 , we expect the frp segment to achieve sequential sales growth through the first two quarters of 2017 , however , our visibility in the second half of 2017 remains cautious , and market conditions remain challenging in certain key end markets . we expect the frp segment to reach a low-single digit operating profit level , as a percentage of sales . story_separator_special_tag we expect 2017 to be another step in our continuing journey toward our goals of long-term profitable growth and consistently earning a premium to our cost of capital . cash generation from operations will remain a key focus throughout 2017. we do not expect to pay any u.s. federal taxes in 2017 due to net operating loss carryforwards , and we intend to carefully balance our 20 working capital and other cash needs with the pace of our capital expenditure requirements , pension funding requirements , and debt obligations . we expect 2017 capital expenditures to be approximately $ 125 million , including 2016 carryover and approximately $ 40 million for the expansion at our 60 % owned chinese joint venture , stal . beyond 2017 , we continue to expect capital expenditures to average no more than $ 100 million annually for the next several years . depreciation and amortization expense in 2017 is forecast to be approximately $ 160 million . we currently expect 2017 pre-tax retirement benefit expense to be about $ 71 million , or approximately $ 23 million lower than 2016. we expect to make a $ 135 million cash contribution to the u.s. qualified defined benefit pension plan in 2017. story_separator_special_tag with ge aviation for the supply of premium titanium alloys , nickel-based alloys , and vacuum-melted specialty alloys products for commercial and military jet engine applications and with snecma ( safran ) for the supply of premium titanium alloys , nickel-based alloys , vacuum melted specialty alloys , and titanium investment castings for commercial and military jet engine applications . in addition , we have ltas with rolls-royce plc for the supply of nickel-based superalloy disc-quality products and precision forgings and castings for commercial jet engine applications . we have supply contracts with united technologies corporation for jet engine components through its pratt & whitney subsidiaries , as well as for structural components for airframe applications . we also supply products to other important parts of the aviation market such as helicopters and rotary engine fixed wing aircraft . the commercial aerospace market is transitioning to the next generation of single aisle and large twin aisle aircraft , and next-generation jet engines . new airframe designs contain a larger percentage of titanium alloys , and the jet engines that power them use newer nickel-based alloys and titanium-based alloys , in both cases for improved performance and more economical operating costs , compared to legacy airframe and engine designs . boeing and airbus have multi-year backlogs of orders for both legacy models and next-generation aircraft , and there are over 22,000 jet engines with firm orders ( aero engine news , january 2017 ) . both boeing and airbus have implemented production increases , and announced additional production increases over the next several years , which is expected to positively impact the demand for titanium-based alloys , nickel-based alloys and superalloys for jet engine and airframe applications . due to manufacturing cycle times , demand for our specialty materials leads the deliveries of new aircraft by between 6 to 12 months . our 2016 hpmc results reflect this demand growth , as the next-generation of aircraft and engines use significantly more of the products we make . sales of differentiated nickel-based superalloy mill products increased 55 % in 2016 compared to 2015 , including both external sales and intercompany sales to our forging operations . use of these newer materials , particularly for jet 23 engine applications , is expected to continue to increase for several years , with strong growth expected in powder metal alloys , including increased usage of isothermal forging and additive manufacturing production processes . additionally , new entrants to the commercial jet aircraft market for single aisle and regional jets are expected to increase demand for titanium- and nickel-based alloys over the next few years . in addition , as our specialty materials are used in rotating components of jet engines , demand for our products for spare parts is impacted by aircraft flight activity and engine refurbishment requirements of u.s. and foreign aviation regulatory authorities . as the number of aircraft in service increases , the need for our materials associated with engine refurbishment is expected to increase . precision forgings , castings and components sales increased 9 % in 2016 , reflecting improved commercial aerospace demand . sales of nickel-based alloys and specialty alloys mill products decreased 8 % compared to 2015 , as lower sales of legacy commercial engine alloys and lower demand from other key end markets , particularly oil & gas , offsetting stronger sales of differentiated nickel-based alloys . sales of titanium mill products were 4 % lower in 2016. comparative information for the segment 's major product categories , based on their percentages of 2016 and 2015 segment revenues is as follows : replace_table_token_15_th hpmc segment operating profit for 2016 increased 7 % compared to 2015 , to $ 168.7 million , or 8.7 % of sales , due primarily to improved utilization of our production assets from higher aerospace demand , as well as the benefits from our restructuring activities . the hpmc segment has achieved six quarters of sequential improvement in segment operating profit and operating profit as a percentage of segment sales through the fourth quarter of 2016 , where segment operating profit was 11.3 % of sales .
| these restructuring charges are comprised of $ 471.3 million of long-lived asset impairments , primarily for the indefinitely idled rowley , ut titanium sponge production facility , $ 43.0 million of facility closure costs and related inventory revaluations , and $ 24.2 million of severance charges and other employee benefit costs . business segment results in 2015 exclude $ 347.8 million of pre-tax charges , which included a $ 126.6 million charge for goodwill impairment , $ 54.5 million of long-lived asset impairment charges , $ 131.5 million of net realizable value ( nrv ) inventory reserve charges , a $ 25.4 million charge to revalue non-pq titanium sponge inventory based on current market prices , and $ 9.8 million of charges for severance actions and idling costs . 2014 results include $ 25.5 million of pre-tax curtailment and settlement gains relating to postretirement benefit plan changes , primarily included in frp segment results , and $ 63.1 million pre-tax hrpf commissioning and rowley pq qualification costs . pre-tax results were losses of $ 734.0 million in 2016 and $ 478.0 million in 2015 , while the 2014 pre-tax result from continuing operations was income of $ 1.5 million . the 2016 net loss attributable to ati was $ 640.9 million , or $ ( 5.97 ) per share , compared to a 2015 net loss attributable to ati of $ 377.9 million , or $ ( 3.53 ) per share , and a 2014 loss attributable to ati of $ 2.6 million , or $ ( 0.03 ) per share . results in 2016 and 2015 reflect below-normal income tax benefits as a percentage of the pre-tax losses due to $ 171.5 million and $ 74.5 million , respectively , of income tax valuation allowances on deferred tax assets , primarily due to cumulative losses from u.s. operations . results of discontinued operations were immaterial for all periods covered by this annual report . 21 comparative information for our overall revenues ( in millions ) by end market and their respective percentages of total revenues is as
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we expect our research and development expenses to continue to increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio . comparison of the years ended december 31 , 2015 and 2014 research and development expenses increased by $ 63.3 million , or 42 % , for the year ended december 31 , 2015 compared to the year ended december 31 , 2014. the increase was primarily due to increases in clinical trial , outside services and drug development related costs of $ 47.3 million , stock-based compensation expense of $ 6.1 million , employee-related costs of $ 6.5 million and depreciation expense of $ 0.6 million . clinical trial , outside services and drug development related costs increased as a result of the progression of the phase 3 trials for fg-4592 and the ongoing phase 2 trials for fg-3019 . stock-based compensation expense increased primarily due to expense related to our employee stock purchase plans ( “ espp ” ) , a higher valuation for stock option grants and the delay in the timing of granting annual awards in 2014. employee-related costs increased as a result of higher average compensation level . 130 comparison of the years ended december 31 , 2014 and 2013 research and development expenses increased by $ 65.1 million , or 76 % , for the year ended december 31 , 2014 compared to the year ended december 31 , 2013. the increase was due to an increase in personnel related costs of $ 18.6 million , of which $ 9.7 million related to an increase in headcount and related expenses and $ 9.0 million related to an increase in stock-based compensation expenses associated with new grants . we also experienced an increase in outside services expenses of $ 28.4 million primarily related to clinical trial costs for roxadustat and fg-3019 trials and an increase in drug development expenses of $ 5.4 million due to increased supply required for these trials . in addition , our overall clinical trials expenses increased $ 11.1 million , as a result of our increased use of cros as well as costs for data management . furthermore , facilities expense increased $ 0.6 million due to the costs associated with our facility in china . general and administrative expenses general and administrative expenses consist primarily of employee-related expenses for executive , operational , finance , legal , compliance and human resource functions . other general and administrative expenses include facility-related costs and professional fees , accounting and legal services , other outside services , recruiting fees and expenses associated with obtaining and maintaining patents . we anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our product candidates . we also anticipate increased expenses , including exchange listing and securities and exchange commission requirements , director and officer insurance premiums , legal , audit and tax fees , regulatory compliance programs and investor relations costs associated with being a public company and ceasing to be an emerging growth company . additionally , if and when we believe the first regulatory approval of one of our product candidates appears likely , we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations , especially as it relates to the sales and marketing of our product candidates . comparison of the years ended december 31 , 2015 and 2014 general and administrative expenses increased $ 7.5 million , or 20 % , for the year ended december 31 , 2015 compared to the year ended december 31 , 2014. the increase was primarily due to increases in facility expenses of $ 3.7 million , stock-based compensation expense of $ 2.9 million , outside services of $ 2.0 million , employee-related costs of $ 0.7 million . facility expenses increased primarily due to the additional assessed property tax during the fourth quarter of 2015. stock-based compensation expense increased primarily due to expense related to espp , a higher valuation for stock option grants and the delay in the timing of granting annual awards in 2014. outside services expenses increased for the nine months ended september 30 , 2015 compared to the same period a year ago primarily as a result of incremental maintenance costs associated with our intellectual property portfolio and expenses related to being a publicly traded company . employee-related costs increased primarily as a result of additional headcount and other costs to support being a public company . comparison of the years ended december 31 , 2014 and 2013 general and administrative expenses increased $ 12.5 million , or 51 % , for the year ended december 31 , 2014 compared to the year ended december 31 , 2013. the increase was primarily due to an increase in personnel related costs of $ 9.1 million , of which $ 2.6 million related to an increase in headcount and related expenses , $ 0.3 million under our corporate bonus program , and $ 6.3 million related to an increase in stock-based compensation expenses associated with new grants . in addition , professional fees increased $ 2.6 million due to increase in audit , tax , recruiting and other outside services costs . furthermore , facilities expense increased $ 0.9 million due to the costs associated with our facility in china . operating expenses for roxadustat covered under collaboration agreements we share responsibility with astrazeneca for clinical development activities required for u.s. regulatory approval of roxadustat . as of december 31 , 2015 , the $ 116.5 million cap on our share of development costs for roxadustat has been reached . as such , all future development and commercialization costs for roxadustat for the treatment of anemia in ckd in the u.s. , europe , japan and all other markets outside of china will be paid by story_separator_special_tag we expect our research and development expenses to continue to increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio . comparison of the years ended december 31 , 2015 and 2014 research and development expenses increased by $ 63.3 million , or 42 % , for the year ended december 31 , 2015 compared to the year ended december 31 , 2014. the increase was primarily due to increases in clinical trial , outside services and drug development related costs of $ 47.3 million , stock-based compensation expense of $ 6.1 million , employee-related costs of $ 6.5 million and depreciation expense of $ 0.6 million . clinical trial , outside services and drug development related costs increased as a result of the progression of the phase 3 trials for fg-4592 and the ongoing phase 2 trials for fg-3019 . stock-based compensation expense increased primarily due to expense related to our employee stock purchase plans ( “ espp ” ) , a higher valuation for stock option grants and the delay in the timing of granting annual awards in 2014. employee-related costs increased as a result of higher average compensation level . 130 comparison of the years ended december 31 , 2014 and 2013 research and development expenses increased by $ 65.1 million , or 76 % , for the year ended december 31 , 2014 compared to the year ended december 31 , 2013. the increase was due to an increase in personnel related costs of $ 18.6 million , of which $ 9.7 million related to an increase in headcount and related expenses and $ 9.0 million related to an increase in stock-based compensation expenses associated with new grants . we also experienced an increase in outside services expenses of $ 28.4 million primarily related to clinical trial costs for roxadustat and fg-3019 trials and an increase in drug development expenses of $ 5.4 million due to increased supply required for these trials . in addition , our overall clinical trials expenses increased $ 11.1 million , as a result of our increased use of cros as well as costs for data management . furthermore , facilities expense increased $ 0.6 million due to the costs associated with our facility in china . general and administrative expenses general and administrative expenses consist primarily of employee-related expenses for executive , operational , finance , legal , compliance and human resource functions . other general and administrative expenses include facility-related costs and professional fees , accounting and legal services , other outside services , recruiting fees and expenses associated with obtaining and maintaining patents . we anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our product candidates . we also anticipate increased expenses , including exchange listing and securities and exchange commission requirements , director and officer insurance premiums , legal , audit and tax fees , regulatory compliance programs and investor relations costs associated with being a public company and ceasing to be an emerging growth company . additionally , if and when we believe the first regulatory approval of one of our product candidates appears likely , we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations , especially as it relates to the sales and marketing of our product candidates . comparison of the years ended december 31 , 2015 and 2014 general and administrative expenses increased $ 7.5 million , or 20 % , for the year ended december 31 , 2015 compared to the year ended december 31 , 2014. the increase was primarily due to increases in facility expenses of $ 3.7 million , stock-based compensation expense of $ 2.9 million , outside services of $ 2.0 million , employee-related costs of $ 0.7 million . facility expenses increased primarily due to the additional assessed property tax during the fourth quarter of 2015. stock-based compensation expense increased primarily due to expense related to espp , a higher valuation for stock option grants and the delay in the timing of granting annual awards in 2014. outside services expenses increased for the nine months ended september 30 , 2015 compared to the same period a year ago primarily as a result of incremental maintenance costs associated with our intellectual property portfolio and expenses related to being a publicly traded company . employee-related costs increased primarily as a result of additional headcount and other costs to support being a public company . comparison of the years ended december 31 , 2014 and 2013 general and administrative expenses increased $ 12.5 million , or 51 % , for the year ended december 31 , 2014 compared to the year ended december 31 , 2013. the increase was primarily due to an increase in personnel related costs of $ 9.1 million , of which $ 2.6 million related to an increase in headcount and related expenses , $ 0.3 million under our corporate bonus program , and $ 6.3 million related to an increase in stock-based compensation expenses associated with new grants . in addition , professional fees increased $ 2.6 million due to increase in audit , tax , recruiting and other outside services costs . furthermore , facilities expense increased $ 0.9 million due to the costs associated with our facility in china . operating expenses for roxadustat covered under collaboration agreements we share responsibility with astrazeneca for clinical development activities required for u.s. regulatory approval of roxadustat . as of december 31 , 2015 , the $ 116.5 million cap on our share of development costs for roxadustat has been reached . as such , all future development and commercialization costs for roxadustat for the treatment of anemia in ckd in the u.s. , europe , japan and all other markets outside of china will be paid by
| we expect that any revenues we generate will fluctuate from quarter to quarter as a result of the uncertain timing and amount of such payments and sales . total revenue increased by $ 43.2 million , or 31 % for the year ended december 31 , 2015 compared to the year ended december 31 , 2014 , and increased by $ 35.4 million , or 35 % , for the year ended december 31 , 2014 compared to the year ended december 31 , 2013 for the reasons discussed in the sections below . 128 license and milestone revenue replace_table_token_16_th comparison of the years ended december 31 , 2015 and 2014 license and milestone revenue increased by $ 30.9 million , or 26 % for the year ended december 31 , 2015 compared to the year ended december 31 , 2014. license and milestone revenue recognized under our collaboration agreements with both astellas and astrazeneca increased compared to the year ended december 31 , 2014 primarily due to an increase in reimbursable co-development costs allocated to license and milestone revenues . in addition , license and milestone revenue recognized under our collaboration agreements with astrazeneca increased due to an upfront payment of $ 120.0 million and a development milestone payment of $ 15.0 million received and fully recognized during the second quarter of 2015 compared to an upfront payment of $ 110.0 million received during the second quarter of 2014. a portion of each of the upfront payments received under the collaboration agreements with astrazeneca were deferred as a result of applying the relative selling price method and assessing the timing of the provision of various deliverables . the milestone payment was recognized in its entirety upon receipt . comparison of the years ended december 31 , 2014 and 2013 license and milestone revenue increased by $ 22.2 million , or 23 % , for the year ended december 31 , 2014 compared to the year ended december 31 , 2013. this increase was primarily driven by license revenue recognized in connection with
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the related activity will be reported in the advanced materials segment until the agreements expire . after the expiration of these agreements , the advanced materials segment is expected to be discontinued and no longer be reported . 13 executive overview as discussed above , we completed the acquisition of vac during the third quarter of 2011. the increase in consolidated sales in 2012 compared to 2011 is due primarily to a full twelve months of sales of vac in the current year . sales and operating profits in magnetic technologies were bolstered in early 2012 by the positive effects of rare-earth pricing . however , as rare-earth pricing retreated throughout 2012 , these pricing benefits trended downward and then were essentially absent by fourth quarter 2012 , when the company recorded a lower of cost or market charge to write-down the value of its inventory to market . in battery technologies , the increase in sales and operating profit in 2012 was due primarily to non-u.s. defense sales , as well as higher medical volumes . in specialty chemicals , sales and operating profit were down due primarily to lower volumes , which were negatively impacted by the thailand flooding in the early part of the year , a weak electronics market and a weak european economy . in advanced materials , sales and operating profit were negatively impacted by the lower cobalt and copper price compared to prices in 2011 , as well as lower volumes due to product demand weakness in europe . 14 consolidated operating results for 2012 , 2011 and 2010 set forth below is a summary of the statements of consolidated operations for the years ended december 31 , replace_table_token_5_th 15 the company is providing adjusted operating profit ( loss ) , adjusted ebitda , and adjusted earnings per common share attributable to om group , inc. common stockholders - assuming dilution , which are non-gaap financial measures . the tables below present reconciliations of these amounts to the comparable u.s. gaap amounts . the company believes that the non-gaap financial measures presented in the tables facilitate a comparative assessment of the company 's operating performance and enhance investors ' understanding of the performance of the company 's operations . the non-gaap financial information set forth in the tables below are not alternatives to reported results determined in accordance with u.s. gaap . replace_table_token_6_th 16 replace_table_token_7_th magnetic technologies acquisition-related charges in 2012 totaled $ 38.6 million ( net of related tax benefit ) , representing the step-up value for inventory in purchase accounting that turned through cost of goods sold . other items impacting operating profit included a land sale gain of $ 2.9 million , net of tax in specialty chemicals , and expense of $ 2.5 million , net of tax related to a settlement charge associated with lump-sum cash settlements to certain participants in one of our u.s. defined benefit pension plans . below operating profit , the company recorded $ 6.0 million , net of tax of other income for a fourth quarter 2012 receipt of cash from an escrow account related to the battery technologies acquisition , and recorded interest expense of $ 6.5 million , net of tax in the second half of 2012 related to accelerated amortization of deferred financing fees as a result of early repayments of debt . magnetic technologies 2011 results include charges of $ 75.0 million , net of tax of inventory purchase accounting step-up charges and lower of cost or market charges , $ 18.2 million of acquisition related fees and $ 2.2 million of severance charges . 2010 includes acquisition-related charges of $ 4.9 million , net of tax . corporate acquisition-related charges relate to acquisition fees in each year . 2012 compared with 2011 the following table identifies , by segment , the components of change in net sales and operating profit in 2012 compared with 2011 : replace_table_token_8_th net sales increased $ 123.3 million , or 8.1 % , primarily due to the vac acquisition in august 2011 , for which 2012 includes a full twelve months of sales activity . sales in magnetic technologies were bolstered in 2012 by the positive effects of rare-earth pricing , which drove results higher . as rare-earth pricing retreated throughout 2012 , these pricing benefits trended downward and then were essentially absent by fourth quarter 2012. in battery technologies , the 17 increase in sales in 2012 was due primarily to non-us defense sales , as well as higher volumes for medical applications . in specialty chemicals , sales were down primarily due to lower volumes , which were negatively impacted by the 2011 thailand floods , a weak consumer electronics market and a weak european economy . in advanced materials , sales were negatively impacted by lower cobalt and copper prices compared to the prior year , as well as lower volumes due to weakness in europe . gross profit increased slightly to $ 256.4 million in 2012 , compared with $ 255.9 million in 2011 . the largest factors affecting the $ 0.5 million increase in gross profit were the full 12 months of vac results and favorable mix and higher volumes in battery technologies , partially offset by unfavorable prices and decreased volume in advanced materials and decreased volume in specialty chemicals . excluding vac inventory purchase accounting step-up charges , gross profit as a percentage of net sales was 19.1 % in 2012 compared with 23.9 % in 2011. selling , general and administrative expenses ( “ sg & a ” ) increased to $ 260.5 million in 2012 compared with $ 229.1 million in 2011 . the increase was primarily due to a full 12 months of vac results , partially offset by fees associated with acquisitions in 2011 of $ 17.8 million . 2012 results also include a $ 2.5 million settlement charge associated with lump-sum cash settlements to certain participants in a defined benefit pension plans . as a percentage of sales , sg & a increased to 15.9 % in 2012 from 15.1 story_separator_special_tag % in 2011 , primarily due to lower sales from businesses owned for all of 2011. the following table summarizes the components of other expense , net : replace_table_token_9_th the increase in interest expense is due to a full twelve months of borrowings and interest expense related to the vac acquisition in august 2011. during 2012 , we made accelerated principal payments of $ 197.0 million on our euro term b facility using cash on hand , and as a result recorded accelerated amortization of deferred financing fees of $ 6.5 million . the foreign exchange loss in 2012 is primarily related to the impact on our net euro debt position from the weakening of the usd against the euro in 2012 ; the opposite occurred in 2011 . other income ( expense ) , net in 2012 includes the $ 6.0 million escrow receipt related to the battery technologies acquisition as described above . in 2012 we changed from the cost method to the equity method of accounting for an investment in china . the company recorded a retrospective adjustment to the investment balance , results of operations and retained earnings as if the equity method had been in effect during all previous periods since august 2011 in which the investment was acquired . the effect of the change to the company 's 2011 consolidated results of operations was to increase other income by $ 4.1 million . the company recorded an income tax benefit of $ 2.8 million on pre-tax loss of $ 48.4 million for 2012 , resulting in an effective tax rate of 5.7 % . the effective tax rate was impacted by vac purchase accounting related inventory charges of $ 55.9 million , a tax expense of $ 10.4 million related to gtl which included a $ 5.6 million increase in the valuation allowance for prepaid tax asset ( see gtl prepaid tax discussion in critical accounting policies ) and $ 6.6 million for other gtl permanent differences . excluding the impact of vac purchase accounting related inventory charges and gtl discrete and permanent items , the effective tax rate for the year ended december 31 , 2012 would have been 30 % . this rate is lower than the u.s. statutory tax rate primarily due to income earned in tax jurisdictions with lower statutory rates than the u.s. , and a tax efficient financing structure , partially offset by losses and carry-forwards in certain jurisdictions ( including the u.s. and germany ) with no corresponding tax benefit . the company recorded an income tax benefit of $ 17.8 million on pre-tax income of $ 28.9 million for 2011 . the income tax benefit was due to the vac acquisition and discrete items . the largest discrete item in 2011 was related to gtl prepaid tax allowance reversal of $ 6.2 million ( see gtl prepaid taxes discussion in critical accounting policies ) . excluding the impact of the vac acquisition and discrete items , the effective income tax rate for the year ended 18 december 31 , 2011 would have been 12 % . this rate is lower than the u.s. statutory tax rate primarily due to income earned in tax jurisdictions with lower statutory rates than the u.s. , a tax efficient financing structure and a tax holiday in malaysia , partially offset by losses in certain jurisdictions ( including the u.s. ) with no corresponding tax benefit . the malaysian tax holiday expired on december 31 , 2011 . the loss attributable to the noncontrolling interest was driven by losses at gtl in 2012 resulting from the low cobalt price and electrical problems in the drc that negatively impacted production . 2011 compared with 2010 the following table identifies , by segment , the components of change in net sales in 2011 compared with 2010 : replace_table_token_10_th net sales increased $ 317.9 million , or 26.6 % , primarily due to the vac acquisition . a full year of sales for battery technologies in the 2011 period compared to eleven months of sales in the 2010 period contributed $ 10.1 million to the increase in net sales . gross profit decreased to $ 255.9 million in 2011 , compared with $ 284.7 million in 2010 . the largest factors affecting the $ 28.8 million decrease in gross profit were : lower cobalt price and higher process-based material costs , partially offset by higher volume in advanced materials ; an unfavorable shift in mix of products sold in specialty chemicals ; and the negative gross profit of vac , including the acquisition-related inventory charges ; all partially offset by higher volumes , price/mix and income from sales of recycled material in battery technologies . selling , general and administrative expenses ( “ sg & a ” ) increased to $ 229.1 million in 2011 compared with $ 162.0 million in 2010 . the increase was primarily due to $ 43.6 million of magnetic technologies sg & a expenses and $ 15.4 million in fees associated with acquisitions recorded in corporate . the following table summarizes the components of other expense , net : replace_table_token_11_th the increase in interest expense is due to borrowings to finance the acquisition of vac . the foreign exchange gain in 2011 is primarily related to movements in euro/u.s . dollar exchange rates and the resulting impact on the revaluation of non-functional currency cash and debt balances . the foreign exchange loss in 2010 was primarily related to the revaluation of non-functional currency cash balances due to changes in exchange rates , primarily the euro , the malaysian ringgit and the taiwanese dollar . in 2012 we changed from the cost method to the equity method of accounting for an investment in china . the company recorded a retrospective adjustment to the investment balance , results of operations and retained earnings as if the equity method had been in effect during all previous periods since august 2011 in which the investment was acquired .
| financing activities net cash used in financing activities in 2012 included $ 213.5 million of debt repayments . net cash provided by financing activities in 2011 included borrowings of $ 698 million to fund the vac acquisition and repay the company 's former revolving credit line . net cash provided by financing activities in 2010 included net borrowings under the company 's revolver of $ 120 million to partially fund the eaglepicher acquisition . financial condition cash balances are held in numerous locations throughout the world . as of december 31 , 2012 , most of the company 's cash and cash equivalents were held outside the united states , primarily in germany and finland , and most of the company 's cash and cash equivalents were denominated in u.s. dollars . most of the amounts held outside the u.s. could be repatriated to the u.s. but , under current law , would be subject to u.s. income taxes , less applicable foreign tax credits . the company 's intent is to retain the majority of its cash balances outside of the u.s. and to meet u.s. liquidity needs through cash generated from operations in the u.s. , limited repatriation of foreign earnings , and external borrowings . we expect our available cash , 2013 operating cash flows and availability under our senior secured credit facility to be adequate to fund 2013 operating needs and capital expenditures . debt and other financing activities on august 2 , 2011 , in connection with the acquisition of vac , the company terminated its credit facilities and entered into the senior secured credit facility , primarily to finance the acquisition of vac and repay existing indebtedness of the company under its former revolving credit facility . the senior secured credit facility includes a $ 100 million term loan a facility , a $ 350 million term loan b facility , a 175 million term loan b facility , and a $ 200 million undrawn revolving credit facility . the term a facility and the revolving credit facility
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as a percentage of revenue , sg & a deleveraged by 30 basis points . the increase in technology expenses reflects higher spend as we migrate technology systems to the cloud . leadership changes drove the increase in corporate expenses . distribution costs , which exclude payroll related to online originated orders that were shipped from our stores , were $ 312 million for 2018 and increased $ 9 million due to higher transportation costs . marketing costs reflect higher digital and personalization spend . in our stores , increases in expenses driven by omnichannel support of ship-from-store and buy online , pick-up in store operations were offset by productivity improvements . expenses from our credit card operations decreased due to savings in payroll and operating costs . other expenses replace_table_token_5_th the changes in depreciation and amortization reflect the net impact of lower depreciation due to the maturing of our stores and the impact of the new lease accounting standard in 2019 , offset by higher amortization due to investments in technology , higher depreciation from our fifth e-commerce fulfillment center which opened in 2017 , and a $ 22 million write-off in 2017 of information technology projects that no longer fit into our strategic and cloud migration plans . 23 impairments , store closing , and other costs in 2019 include $ 52 million of asset impairment charges related to the closure of four kohl 's stores and four off-aisle clearance centers , $ 30 million in severance , which includes our corporate restructuring effort along with the execution of a voluntary role reduction program , $ 10 million related to brand exits , and a $ 21 million impairment related to technology projects that no longer align with our strategic plans . impairments , store closing , and other costs in 2018 included the following expenses related to closing four stores , consolidating call center locations which supported both kohl 's charge and online customers , a voluntary retirement program , and t he impairment of certain assets : replace_table_token_6_th interest expense , net decreased in 2019 due primarily to the benefits of debt reductions in 2018 and adoption of the new lease accounting standard in the first quarter of 2019. the decrease in interest expense in 2018 was driven by the benefits of debt reductions in 2018. higher interest income due to higher yields and investment balances and lower interest on finance leases as the portfolio matures also contributed to the decrease in 2018. gain on extinguishment of debt of $ 9 million in 2019 resulted from the purchase of leased equipment that was accounted for as a financing obligation . loss on the extinguishment of debt of $ 63 million in 2018 resulted from a $ 413 million make-whole call and a $ 500 million cash tender offer in 2018. income taxes replace_table_token_7_th our effective tax rates in 2019 and 2018 include the full year benefit of the decrease in the corporate rate . for 2017 , the reduction in the tax rate was prorated , resulting in a statutory federal tax rate of 33.7 % . in 2017 , we recorded a total tax benefit of $ 136 million related to the federal tax rate reduction and the re-measurement of our deferred tax assets and liabilities as well as a $ 20 million benefit from the settlement of a significant state tax dispute . these items reduced our 2017 effective tax rate by 10.9 percentage points . 24 adjusted net income and earnings p er diluted share replace_table_token_8_th we believe adjusted results are useful because they provide enhanced visibility into our results for the periods excluding the impact of certain items such as those included in the table above . however , these non-gaap financial measures are not intended to replace gaap measures . inflation we expect that our operations will continue to be influenced by general economic conditions , including food , fuel and energy prices , higher wages , and by costs to source our merchandise , including tariffs . there can be no assurances that such factors will not impact our business in the future . liquidity and capital resources the following table presents our primary uses and sources of cash : cash uses cash sources operational needs , including salaries , rent , taxes , and other costs of running our business capital expenditures inventory share repurchases dividend payments debt reduction cash flow from operations short-term trade credit , in the form of extended payment terms line of credit under our revolving credit facility our working capital and inventory levels typically build throughout the fall , peaking during the november and december holiday selling season . 25 the following table inc ludes cash balances and changes : replace_table_token_9_th ( a ) non-gaap financial measure operating activities operating activities generated cash of $ 1.7 billion in 2019 compared to cash of $ 2.1 billion in 2018. the decrease was primarily attributable to lower net income and changes in accrued and other operating liabilities . net cash provided by operating activities increased $ 416 million to $ 2.1 billion in 2018. the increase was primarily attributable to changes in accounts payable and other operating assets and liabilities . investing activities net cash used in investing activities increased $ 265 million to $ 837 million in 2019. the increase was primarily due to the investments in our sixth e-commerce fulfillment center , store strategies that include new stores and capital improvements to existing stores , and technology investments . net cash used in investing activities decreased $ 77 million to $ 572 million in 2018. the decrease was primarily due to the timing of technology spending . the following chart summarizes capital expenditures by major category : financing activities financing activities used cash of $ 1.0 billion in 2019 compared to $ 1.9 billion in 2018. the reduction was primarily due to debt reductions in 2018 not repeated in 2019. we paid cash for treasury stock purchases of $ 470 million in 2019 and $ 396 million in 2018. share repurchases are discretionary in nature . story_separator_special_tag the timing and amount of repurchases are based upon available cash balances , our stock price and other factors . 26 we paid ca sh dividends of $ 423 million ( $ 2.68 per share ) in 2019 , as detailed below , and $ 400 million ( $ 2.44 per share ) in 2018. replace_table_token_10_th we used cash to repurchase $ 6 million of debt on the open market in 2019. we used cash to repurchase $ 530 million of debt pursuant to a tender offer on the open market and on a $ 413 million make-whole provision in 2018. we may again seek to retire or purchase our outstanding debt through open market cash purchases , privately negotiated transactions or otherwise . such repurchases , if any , will depend on prevailing market conditions , our liquidity requirements , contractual restrictions and other factors . as of february 1 , 2020 , our credit ratings were as follows : moody 's standard & poor 's fitch long-term debt baa2 bbb bbb free cash flow we generated $ 700 million of free cash flow for 2019 compared to $ 1.4 billion in 2018. the decrease is primarily the result of a reduction in net income , changes in operating assets and liabilities , and increased capital expenditures due to investments in our sixth e-commerce fulfillment center , store strategies that include new stores and capital improvements to existing stores , and technology investments . free cash flow is a non-gaap financial measure which we define as net cash provided by operating activities and proceeds from financing obligations ( which generally represent landlord reimbursements of construction costs ) less capital expenditures and finance lease and financing obligation payments . free cash flow should be evaluated in addition to , and not considered a substitute for , other financial measures such as net income and net cash provided by operating activities . we believe that free cash flow represents our ability to generate additional cash flow from our business operations . the following table reconciles net cash provided by operating activities ( a gaap measure ) to free cash flow ( a non-gaap measure ) : replace_table_token_11_th key financial ratios key financial ratios that provide certain measures of our liquidity are as follows : replace_table_token_12_th the decreases in our working capital and current ratio are primarily due to lower cash balances as a result of capital expenditures , share repurchases and dividends . 27 return on investment ratios the following table provides additional measures of our return on investments : replace_table_token_13_th ( a ) non-gaap financial measures changes in earnings and the adoption of the new lease accounting standard drove changes in our return on investment ratios . the lease accounting standard impacted the roi positively by approximately 60 bps . we believe that roi is a useful financial measure in evaluating our operating performance . when analyzed in conjunction with our net earnings and total assets , it provides investors with a useful tool to evaluate our ongoing operations and our management of assets from period to period . roi is a non-gaap financial measure which we define as earnings before interest , taxes , depreciation , amortization and rent ( “ ebitdar ” ) divided by average gross investment . ebitdar is a useful non-gaap measure that excludes items that are non-operating in nature and focuses on items that are key to our operating performance . our roi calculation may not be comparable to similarly titled measures reported by other companies . roi should be evaluated in addition to , and not considered a substitute for , other gaap financial measures . return on investment ratios that are adjusted for certain items are useful financial measures because they illustrate the impact of these items on each metric . see the key financial ratio calculations below for our roi and adjusted roi calculations . capital structure ratio the following table provides an additional measure of our capital structure : 2019 2018 adjusted debt to adjusted ebitdar ( a ) 2.51 2.16 ( a ) non-gaap financial measure the increase in our adjusted debt to adjusted ebitdar ratio is primarily due to lower operating income . adjusted debt to adjusted ebitdar is a non-gaap financial measure which we define as our adjusted outstanding debt balance divided by adjusted ebitdar . we believe that our debt levels are best analyzed using this measure . our current goals are to maintain a ratio that demonstrates our commitment to an investment grade rating and allows us to operate with an efficient capital structure for our size , growth plans and industry . our adjusted debt to adjusted ebitdar calculation may not be comparable to similarly-titled measures reported by other companies . adjusted debt to adjusted ebitdar should be evaluated in addition to , and not considered a substitute for , other gaap financial measures . see the key financial ratio calculations section below for our adjusted debt to adjusted ebitdar calculation . our debt agreements contain various covenants including limitations on additional indebtedness and a maximum permitted debt ratio . as of february 1 , 2020 , we were in compliance with all debt covenants and expect to remain in compliance during 2020. see the key financial ratio calculations section below for our debt covenant calculation . 28 key financial ratio calculations the following table includes our roi calculation . all ratios are non-gaap financial measures : replace_table_token_14_th ( a ) represents average of five most recent quarter-end balances . for 2019 , fourth quarter 2018 balances were adjusted to reflect the impact of the new lease accounting standard . ( b ) represents excess cash not required for operations . ( c ) represents ten times store rent and five times equipment/other rent . this is not applicable in 2019 as operating leases are now recorded on the balance sheet due to the adoption of the new lease accounting standard . ( d ) ebitdar or adjusted ebitdar , as applicable , divided by gross investment .
| results of operations net sales net sales includes revenue from the sale of merchandise , net of expected returns and shipping revenue . comparable sales is a measure that highlights the performance of our stores and digital channel by measuring the change in sales for a period over the comparable , prior-year period of equivalent length . comparable sales includes all store and digital sales , except sales from stores open less than 12 months , stores that have been closed , and stores where square footage has changed by more than 10 % . we measure the change in digital sales by including all sales initiated online or through mobile applications , including omnichannel transactions which are fulfilled through our stores . we measure digital penetration as digital sales over net sales . these amounts do not take into consideration fulfillment node , digital returns processed in stores , and coupon behaviors . comparable sales is a meaningful metric in evaluating our performance of ongoing operations period over period . comparable sales and digital penetration measures vary across the retail industry . as a result , our comparable sales calculation and digital penetration are non-gaap measures that may not be consistent with the similarly titled measures reported by other companies . 19 the following graph summarizes net sales dollars and comparable sales ( dollars in millions ) : 2019 compared to 2018 net sales decreased $ 282 million , or 1.5 % to $ 18.9 billion for 2019. the decrease was primarily due to a 1.3 % decrease in comparable sales driven by a decrease in average transaction value . by line of business , children 's , men 's , accessories , and footwear outperformed the company average . home and women 's underperformed the company average . active continued to be a key strategic initiative that contributed to our sales growth in 2019. geographically , the midwest , mid-atlantic , and northeast outperformed the company . digital sales had a low double digits percentage increase in 2019. digital penetration represented 24 % of net
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onebeacon 's gaap combined ratio was 92 % for 2013 compared to 98 % for 2012. the combined ratio for 2013 reflects lower catastrophe losses , which were negligible in 2013 while contributing 5 points to onebeacon 's combined ratio in 2012 , and a lower expense ratio . sirius group 's gaap combined ratio was 82 % for 2013 compared to 90 % for 2012. the improvement in the combined ratio for 2013 was driven by lower catastrophe losses and higher favorable loss reserve development . sirius group 's combined ratio includes 10 points of catastrophe losses in 2013 compared to 13 points in 2012 and includes 6 points of favorable loss reserve development in 2013 compared to 4 points in 2012. white mountains 's total net written premiums decreased 7 % to $ 1,979 million in 2013 , primarily related to onebeacon 's exit from the collector car and boat and energy businesses and lower premiums in the accident and health and trade credit lines at sirius group , partially offset by growth in all of onebeacon 's ongoing specialty lines and an increase in property lines at sirius group . onebeacon 's net written premiums decreased 8 % to $ 1,089 million in 2013. excluding the $ 206 million of net premiums written in 2012 from the exited businesses , white mountains 's net written premiums decreased 3 % and onebeacon 's net written premiums increased 12 % in 2013. sirius group 's net written premiums decreased 8 % to $ 877 million in 2013. white mountains 's gaap pre-tax total return on invested assets was 4.1 % for 2013 , compared to 4.9 % for 2012. foreign currency translation did not meaningfully impact investment returns in 2013 , while 2012 included 0.5 % of foreign currency gains . in local currencies , the fixed income portfolio was up 0.5 % for 2013 , outperforming the longer duration barclays intermediate aggregate bond index of ( 1.0 ) % as interest rates rose . in local currencies , the fixed income portfolio was up 3.8 % for 2012. in local currencies , the equity portfolio was up 18.9 % for 2013 , a strong absolute result for the year but behind benchmarks . the shortfall against benchmarks was due primarily to underperformance in white mountains 's value oriented common equity security portfolio ( up 23.2 % versus the s & p 500 return of 32.4 % ) and the impact of convertible fixed maturity investments in the equity portfolio ( as opposed to common equity securities ) , which tend to lag benchmarks in strong up markets . wm life re reported losses of $ 17 million in 2013 compared to $ 19 million of losses in 2012 . 51 adjusted book value per share the following table presents white mountains 's adjusted book value per share , a non-gaap financial measure , for the years ended december 31 , 2014 , 2013 and 2012 and reconciles this non-gaap measure to the most comparable gaap measure . ( see “ non-gaap financial measures ” on page 86 . ) replace_table_token_23_th ( 1 ) excludes out-of-the-money stock options . the following table is a summary of goodwill and intangible assets that are included in white mountains 's adjusted book value as of december 31 , 2014 , 2013 and 2012 : replace_table_token_24_th ( 1 ) see note 6 - “ goodwill and other intangible assets ” for details of other intangible assets . 52 review of consolidated results a summary of white mountains 's consolidated financial results for the years ended december 31 , 2014 , 2013 and 2012 follows : replace_table_token_25_th ( 1 ) on december 31 , 2011 , tuckerman fund i was dissolved and all of the net assets of the fund , which consisted of the llc units of hamer and bri-mar , two small manufacturing companies , were distributed . as of october 1 , 2012 , hamer and bri-mar are no longer consolidated and are accounted for as investments in unconsolidated affiliates . ( 2 ) adjusted comprehensive income is a non-gaap measure . for a description of the most comparable gaap measure ( see non-gaap financial measures on page 86 ) . 53 consolidated results—year ended december 31 , 2014 versus year ended december 31 , 2013 white mountains 's total revenues increased 8 % to $ 2,510 million in 2014 , which was driven by an increase in net unrealized gains from the investment portfolio and other revenues from the newly-acquired insurance service businesses . earned insurance and reinsurance premiums increased 4 % , with onebeacon up 5 % and sirius group up 1 % over 2013. net investment income was down 5 % to $ 105 million , due to a lower fixed maturity asset base and lower investment yields . white mountains reported net realized and unrealized investment gains of $ 284 million in 2014 , which included $ 141 million of net realized and unrealized foreign currency gains , compared to $ 162 million of gains in 2013 , which included $ 1 million of net realized and unrealized foreign currency gains . net realized and unrealized foreign currency gains on investments are primarily related to gaap foreign currency translation and are more than offset in comprehensive net income and adjusted book value per share by foreign currency losses recognized in other comprehensive income in 2014 ( see “ foreign currency translation ” on page 73 ) . other revenue increased to $ 62 million in 2014 from $ 58 million in 2013. other revenue in 2014 included $ 57 million in foreign currency translation losses compared to $ 1 million in foreign currency translation losses in 2013. other revenue in 2014 included $ 65 million from quotelab and $ 43 million from tranzact . story_separator_special_tag other revenue in 2013 included transaction gains of $ 42 million , composed of a $ 23 million gain on onebeacon 's sale of essentia , a $ 7 million gain on sirius group 's acquisition of empire , a $ 7 million gain on sirius group 's acquisition of ashmere and a $ 4 million gain from the extension of the transition service agreement for services provided by onebeacon on business sold to tower in the personal lines transaction in 2010. in addition , 2013 included $ 11 million of mark-to-market gains on the symetra warrants , which were exercised in june 2013. other revenue included $ 4 million of wm life re 's losses in 2014 compared to $ 13 million of wm life re 's losses in 2013. see note 9 - “ derivatives ” for details regarding wm life re 's total impact on white mountains 's statement of operations . other revenues in 2014 also included third-party investment management fee income at wm advisors of $ 12 million , compared to $ 11 million in 2013. white mountains 's total expenses increased 12 % to $ 2,209 million in 2014. losses and lae , insurance and reinsurance acquisition expenses increased 12 % and 6 % in 2014 , while other underwriting expenses decreased 7 % in 2014. the increase in loss and lae includes the $ 109 million reserve charge recorded by onebeacon related to the actuarial analysis performed in the fourth quarter of 2014 , which was partially offset by a $ 28 million decrease in onebeacon 's incentive compensation expense accrual , contributing to the decrease in other underwriting expenses in 2014 ( see “ summary of operations by segment ” on page 56 ) . general and administrative expenses in 2014 included $ 61 million from quotelab and $ 37 million from tranzact . consolidated results—year ended december 31 , 2013 versus year ended december 31 , 2012 white mountains 's total revenues decreased 5 % to $ 2,317 million in 2013 , primarily due to lower earned insurance and reinsurance premiums , net investment income and other revenues , partially offset by higher net realized and unrealized investment gains . earned insurance and reinsurance premiums decreased 4 % to $ 1,987 million in 2013. net investment income was down 28 % to $ 111 million in 2013 , due to a lower fixed maturity asset base , resulting primarily from $ 749 million of share repurchases since january 2012 , and lower investment yields . white mountains reported net realized and unrealized investment gains of $ 162 million in 2013 , which included $ 1 million of net realized and unrealized foreign currency gains , compared to $ 118 million of gains in 2012 , which included $ 57 million of net realized and unrealized foreign currency losses . most of the net realized and unrealized foreign currency gains ( losses ) on investments are related to gaap foreign currency translation and are offset by amounts recognized in other comprehensive income ( see “ foreign currency translation ” on page 73 ) . other revenue decreased to $ 58 million in 2013 from $ 100 million in 2012. other revenue in 2013 included transaction gains of $ 42 million , compared to $ 28 million of net transaction gains in 2012. transaction gains in 2013 included a $ 23 million gain on onebeacon 's sale of essentia , a $ 7 million gain on sirius group 's acquisition of empire , a $ 7 million gain on sirius group 's acquisition of ashmere and a $ 4 million gain from the extension of the transition service agreement for services provided by onebeacon on business sold to tower in the personal lines transaction in 2010 , while 2012 included a $ 15 million gain on sirius group 's sale of img , $ 14 million of gains from sirius group 's acquisitions that closed in 2012 , a $ 5 million gain on onebeacon 's sale of a shell company and a $ 6 million loss from onebeacon 's repurchase of its senior notes . other revenue in 2013 also included $ 1 million in foreign currency translation losses , compared to $ 40 million in foreign currency translation gains in 2012. in addition , 2013 included $ 11 million of mark-to-market gains on the symetra warrants compared to $ 18 million of gains in 2012. other revenue included $ 13 million of wm life re 's losses in 2013 compared to $ 25 million of wm life re 's losses in 2012. see note 9 - “ derivatives ” for details regarding wm life re 's total impact on white mountains 's statement of operations . other revenues also included third-party investment management fee income at wm advisors of $ 11 million in both 2013 and 2012. in 2012 , white mountains reported other revenue of $ 24 million related to the consolidation of hamer and bri-mar . effective october 1 , 2012 , the results of hamer and bri-mar are no longer consolidated in white mountains 's financial statements . 54 white mountains 's total expenses decreased 9 % to $ 1,973 million in 2013. losses and lae decreased 13 % in 2013 , exceeding the 4 % decrease in earned insurance and reinsurance premiums primarily as a result of lower catastrophe losses and higher favorable loss reserve development in 2013. insurance and reinsurance acquisition expenses decreased 12 % in 2013 , exceeding the 9 % decrease in net written premiums primarily due to changes in business mix at onebeacon driven by the termination of the underwriting arrangement with hagerty insurance agency and higher profit commissions accrued at sirius group on ceded european property business , while other underwriting expenses increased 3 % , primarily due to higher incentive compensation expenses at sirius group . income taxes the company and its bermuda-domiciled subsidiaries are not subject to bermuda income tax under current bermuda law .
| foreign currency translation did not meaningfully impact equity returns in 2012. the prospector portfolio returned 23.2 % for 2013 and 7.7 % for 2012 , lagging the s & p 500 return of 32.4 % and 16.0 % , respectively , in both periods . prospector 's underperformance relative to the s & p 500 returns for both periods reflected an overweight position in gold mining , an underweight position in the consumer discretionary , technology and industrial sectors and the impact of convertible fixed maturity investments ( as opposed to common equity securities ) , which tend to lag benchmarks in strong up markets . the lateef separate account , which consists of a highly concentrated portfolio where relative performance is often influenced by one or two positions , returned 32.6 % for 2013 compared to the s & p 500 return of 32.4 % . lateef 's performance in 2013 reflects specific positions in the industrial , technology and consumer discretionary sectors . the lateef separate account , which was established on may 11 , 2012 , returned 7.0 % for 2012 , outperforming the s & p 500 return of 6.6 % . in local currencies , the silchester portfolio , which invests primarily in value-oriented non-u.s. equity securities , returned 32.6 % for 2013 , compared to the s & p 500 return of 32.4 % . in local currencies , the silchester portfolio returned 15.9 % for 2012 compared to the s & p 500 return of 16.0 % . white mountains 's other long-term investments returned 6.9 % for 2013 , which outperformed the hfrx equal weighted strategies index return of 6.3 % for 2013. white mountains 's other long-term investments returned 2.4 % for 2012 , which was essentially in line with the hfrx equal weighted strategies index return of 2.5 % . 71 investment in symetra common shares during 2014 , 2013 and 2012 , white mountains recorded $ 44 million , $ 35 million and $ 30 million in after-tax equity in earnings from its investment in symetra 's common shares . the table below illustrates ( 1 ) the per-symetra common share value used in the calculation of white mountains 's adjusted book value per share , ( 2 )
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while significantly mitigating the financial impact of competitive entry , we will continue to have exposure to significant risks associated with verizon 's entry as discussed in the item 1a , risk factors. the transaction has required numerous conditions to close , one of which was an amendment to our senior credit facility . on november 1 , 2012 , an amendment was entered into allowing for the sale to gci and transfer directly to awn of certain wireless assets . although we expect to reduce our outstanding debt , the awn cash distributions were structured to serve as a surrogate for the free cash flow ( as defined in non-gaap financial measures ) historically generated by our wireless assets . therefore , additional term modifications were required to provide the flexibility necessary to address the resulting lower adjusted ebitda , as defined in our senior credit facility , which will result following consummation of the awn transaction . a comparison of certain original terms of our senior credit facility with the corresponding amended terms is summarized as follows : 32 replace_table_token_5_th * term modification effective november 1 , 2012 regardless of consummation of the awn transaction . 2012 focus our results of operations , financial position and sources and uses of cash in the current and future periods reflect our focus on being the most successful broadband solutions company in alaska by delivering the best customer experience in the markets we choose to serve . to do this we have and will continue to : develop our workforce to build our sales and service capabilities . we believe an engaged workforce is critical to our success . provide a delightful customer experience every time . we believe the economics of retaining a customer always prevails over those of adding a customer . we invest in training , process and systems improvements to continuously improve the customer experience we create . simplify how we do business . we believe we must reduce waste in non-value-added activities . we are accelerating our investments in technology and process improvement and expect these efforts to meaningfully impact margins in the next two to three years . offer broadband solutions to our customers at home , at work and everywhere in between . we are building on strength in designing , building and operating quality networks and providing new products and solutions to our customers . we believe we can create value for our shareholders by carefully investing cash flows generated by the business in specific opportunities and transactions that support these imperatives , and by deleveraging our balance sheet . 33 revenue sources by customer group we manage our revenues based on the sale of services and products to the following major customer groups : business and wholesale : we provide communications and managed services including voice and broadband data network hosting , it management , cloud-based services , billing and collection , and local and long distance services to carriers , business and government customers . consumer : we provide broadband , internet access , local and long distance voice , and other communications products and services to residential customers . wireless : we provide wireless voice and broadband services , and other value-added wireless products and services , such as wireless devices and other equipment , statewide across alaska with roaming coverage available in the contiguous states , hawaii and canada . access and cetc : we provide voice and broadband termination services to interstate and intrastate carriers who provide services to our retail customers . we also receive interstate and intrastate high cost universal support funds and other revenue streams as structured by state and federal regulatory agencies that allow us to recover our costs of providing universal service in alaska . executive summary the following summary should be read in conjunction with non-gaap financial measures included in this managements ' discussion and analysis of financial condition and results of operations . operating revenues consolidated operating revenue of $ 367.8 million increased $ 18.5 million , or 5.3 % , in 2012. revenue growth in 2012 was driven by higher broadband revenues , particularly with business and wholesale customers , and higher foreign roaming revenues . these increases were partially offset by lower voice revenue in all customer groups and lower cetc revenue . adjusted ebitda adjusted ebitda , as defined in non-gaap financial measures ( adjusted ebitda ) of $ 121.8 million decreased $ 4.1 million from 2011 due largely to higher wireless equipment subsidies , increased costs associated with our wireless customers roaming in the lower 48 and higher labor costs . operating metrics business broadband connections of 19,202 and average monthly revenue per user ( arpu ) of $ 148.14 at december 31 , 2012 and in 2012 , respectively , were up from connections of 19,143 and arpu of $ 135.61 in 2011. we count connections on a unitary basis regardless of the size of the bandwidth . for example , a customer that has a 10mb connection is counted as one connection as does a customer with a 1mb connection . we believe that arpu , therefore , is an important metric to indicate the increasing amounts of bandwidth that we provide to our customers , and it is expected to grow at a faster rate than connections . wireless connections of 115,017 at december 31 , 2012 decreased 2.2 % from 117,559 at december 31 , 2011 primarily as a result of new certification rules for lifeline customers enacted by fcc which resulted in the disconnection of 3,115 customers . we also experienced a shift in mix toward prepaid wireless customers during this time period . postpaid wireless connections fell to 100,910 at december 31 , 2012 from 107,530 at december 31 , 2011 , while our prepaid wireless connections increased to 14,107 from 10,029 year over year . story_separator_special_tag the success of prepaid offerings was attributable to the launch of significant prepaid offerings in 2012. weakness in postpaid was attributable to three factors : ( i ) erosion of customers from the lifeline certification process ; ( ii ) erosion in our 3g mifi devices of approximately 500 as we tightened our usage policies and as customers enabled the wi-fi feature on their phones ; and ( iii ) delay in availability of the iphone 5 devices relative to our competition . absent the lifeline certification process , our wireless churn would have increased to 2.9 % in 2012 from 2.2 % over the same period , and was attributable to a declining number of mifi device connections and increased losses to competitors coincident with their iphone 5 launches . in the fourth quarter of 2012 , consumer broadband connections of 38,760 increased for the second consecutive quarter and were up slightly year over year . consumer broadband arpu also improved to $ 39.71 in 2012 compared with $ 35.27 in 2011 as the result of customers taking our higher bandwidth products . 34 our wireless equipment subsidy increased 20.5 % , to $ 14.4 million for the twelve months ended december 31 , 2012. we sold 71,562 and 71,995 devices in the twelve months ended december 31 , 2012 and 2011 , respectively . our subsidy per device increased to $ 185.00 in the fourth quarter of 2012 from $ 141.00 in the fourth quarter of 2011. the higher per device subsidy is primarily attributable to higher cost devices that our customers increasingly are buying . the table below provides connection levels , arpu , churn and wireless equipment subsidies as of , or for , the periods indicated : replace_table_token_6_th liquidity we generated $ 84.4 million of cash from operating activities in 2012 compared with $ 79.1 million in 2011. this cash flow was utilized for the repayment of debt of $ 19.5 million , total capital expenditures of $ 58.9 million and cash dividends of $ 9.1 million . as of december 31 , we had a $ 30.0 million undrawn revolving credit facility . outstanding letters of credit commit $ 2.1 million of the available revolving credit facility at december 31 , 2012 . 35 other initiatives a key focus in 2012 was entering into and seeking approvals to close the awn transaction , including obtaining the required regulatory approvals and meeting the other conditions detailed in the asset purchase and contribution agreement . two key conditions achieved in 2012 consisted of entering into an amendment extending our cba with the ibew on october 4 , 2012 , and , on november 1 , 2012 , reaching an agreement with our lenders to amend our senior credit facility . we believe that consummation of the awn transaction and the subsequent performance of awn will mitigate the risks of competitive entry and erosion of cetc and other wireline high cost revenue sources . we currently expect that the awn transaction will close during the second quarter of 2013. in october , we announced the launch of 4g lte service and related new product offerings to our customers in select cities in alaska . we also expanded 4g wireless service to other locations throughout alaska , and , in november , we began offering voip services to our small and medium business customers . story_separator_special_tag sales and customer service functions associated with improving performance to our customer promises . in addition , we incurred $ 6.1 million in transaction costs and other administrative expenses associated with the awn transaction , and $ 0.6 million in bad debt expense due in part to specific accounts for which funding from outside agencies is currently uncertain . these items were partially offset by a $ 0.5 million reduction in advertising , consulting , legal and other outside services expense . in addition , selling , general and administrative expenses in 2011 were favorably affected by a $ 1.4 million settlement of a contract dispute with a bankrupt vendor . depreciation and amortization depreciation and amortization expense of $ 51.5 million decreased $ 7.1 million , or 12.1 % , in 2012 from $ 58.6 million in 2011 due primarily to a number of pooled asset classes reaching their maximum depreciable lives . these decreases were partially offset by depreciation on additions to our it asset base during 2012. gain on disposal of assets , net the $ 2.7 million gain on the disposal assets recorded in 2012 was primarily associated with the sale of excess property . other income and expense interest expense of $ 39.6 million in 2012 increased $ 1.3 million compared with $ 38.3 million in 2011 due to a marginally higher weighted average interest rate . the higher interest rate reflects $ 1.9 million associated with forward floating-to-fixed interest rate swap agreements which became effective in the third quarter of 2012. the impact of the interest rate swaps was partially offset by the sale of our 6.25 % notes in the second quarter of 2011 and subsequent repurchase of a portion of our 5.75 % notes , which carry a higher effective rate . in the fourth quarter of 2012 , an interest rate swap in the notional amount of $ 192.5 million no longer met the criteria for prospective hedge accounting treatment . in the fourth quarter , the $ 0.2 million favorable change in the fair value of this swap was credited to interest expense and $ 0.3 million of unrealized losses previously recorded to accumulated other comprehensive loss was charged to interest expense . a $ 0.6 million loss on extinguishment of debt was recorded in 2012 in connection with the repurchase of $ 13.7 million aggregate principal amount of our 5.75 % notes . a $ 13.4 million loss on extinguishment of debt was recorded in the second quarter of 2011 in connection with the repurchase of a portion of the 5.75 % notes . income taxes income tax expense and the effective tax rate in 2012 were $ 5.8
| these increases were partially offset by a $ 1.8 million decrease in traditional voice revenue due to 2,203 fewer connections year over year and lower arpu of $ 24.25 from $ 25.16 in the prior year due to price compression . consumer consumer revenue of $ 38.9 million decreased $ 0.4 million , or 0.9 % , in 2012 from $ 39.3 million in 2011. voice revenue decreased $ 2.0 million primarily due to 6,684 fewer connections and marginally lower arpu of $ 26.64 from $ 26.85 in the prior year . this trend is expected to continue as more customers cut their fixed landline voice service and move to wireless alternatives . partially offsetting the decrease in voice , broadband revenue increased $ 1.4 million . broadband connections increased slightly year over year , however , customers are subscribing to higher levels of bandwidth speeds , which resulted in an increase in arpu to $ 39.71 from $ 35.27 in the prior year , an increase of 12.6 % . launch of our home internet product in 2012 contributed to modest growth in broadband connections . in spite of the level of competition in our local market , we expect our retail customers to continue to demand higher bandwidth speeds as new products and services in the marketplace require it . wireless wireless revenue of $ 139.2 million increased $ 15.9 million , or 12.9 % , in 2012 from $ 123.3 million in 2011. our wireless subscriber base of 115,017 connections decreased 2,542 year over year due to a decrease of 6,620 in postpaid connections resulting in part from the loss of 3,115 lifeline customers during that program 's recertification process . we recertified approximately 75 % of our lifeline customers . this decline was partially offset by an increase of 4,078 in prepaid connections . retail wireless arpu decreased to $ 52.16 compared to $ 52.83 while broadband arpu increased 20.0 % to $ 19.24 from $ 16.03 in the prior year due to customers consuming higher amounts of data . the percentage of postpaid customers using data centric devices
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the agreement was subsequently amended in december 2020 , in connection with the u.s. government 's exercise of an option for an additional 100 million doses , bringing the total to 200 million doses of our covid-19 vaccine for a total consideration of up to $ 3.19 billion . the total consideration includes approximately $ 300.0 million of incentive payments which we earned as a result of securing an emergency use authorization ( eua ) before january 31 , 2021. as a result of our satisfying the requirements for this incentive payment , the total price for the supply of the first 100 million doses , inclusive of the $ 300.0 million incentive , is $ 1.53 billion . we will receive such incentive payments as product is delivered to and accepted by the u.s. government . pursuant to the u.s. supply agreement , the u.s. government made a $ 601.4 million upfront payment to us which represents approximately 50 % of the fixed price per dose that we are entitled to receive for the committed first 100 million doses . we will receive the remainder of the fixed price per dose upon delivery and acceptance of contracted doses to the u.s. government . we are required to secure , manage and maintain storage for any contracted doses of mrna-1273 based on the specific requirements of the contract and deliver the product to designated government facilities . we will be reimbursed for such services at a negotiated price . subsequent to december 31 , 2020 , the u.s. government exercised a second option to purchase 100 million doses on february 11 , 2021 , bringing its total order to 300 million doses , with a remaining option for 200 million doses . the price for each option is fixed at a price of $ 1.65 billion per 100 million doses . the u.s. supply agreement contains terms and conditions that are customary for u.s. government agreements of this nature , including provisions giving the u.s. government the right to terminate the agreement if the applicable contracting officer determines that a termination is in the u.s. government 's interest . following any such termination , we and the u.s. government may agree upon the amount to be paid or remaining to be paid to us because of the termination . in addition , we have entered into supply agreements with several other governmental agencies outside the united states for the supply of our covid-19 vaccine . the agreements are generally subject to receipt of authorization or approval for the use and distribution of the vaccine from the relevant regulatory authority in each jurisdiction . under these agreements , we are entitled to upfront deposits for our covid-19 vaccine supply , initially recorded as deferred revenue . as of december 31 , 2020 , we had approximately $ 3.80 billion in deferred revenue in connection with the supply agreements with the u.s. government and other governmental agencies , which will be recognized as revenue when revenue recognition criteria have been met . between the granting of the eua by the fda on december 18 , 2020 and the end of 2020 , we delivered 12.8 million doses of our covid-19 vaccine and recognized product sales of $ 199.9 million . in addition , we delivered 4.0 million doses of our covid-19 vaccine to the u.s. government under the barda agreement through december 31 , 2020 , for a total of nearly 17 million doses delivered to the u.s. government and canada between receipt of our eua authorization and the end of the year and satisfying the criteria for revenue recognition . for more information on our strategic priorities for 2021 , please see “ business—the mrna opportunity—our strategic priorities , ” above . the early investment we made in our manufacturing and digital capabilities prepared us to rapidly scale our production to accommodate between 700 million doses and 1 billion doses of our covid-19 vaccine in 2021. we are continuing to invest and add staff to build up to potentially 1 billion doses for 2021. we have a diverse development pipeline , and the broad potential applications of mrna medicines have led us to raise significant capital and adopt a long-term approach to capital allocation that balances near-term risks and long-term value creation . as of december 31 , 2020 , we had cash , cash equivalents and investments of approximately $ 5.25 billion , of which $ 82.1 million was related to product sales and $ 2.84 billion was related to customer deposits for the future supply of our covid-19 vaccine . we use this capital to fund operations and investing activities for technology creation , drug discovery and clinical development programs , infrastructure and capabilities to enable our research engine and early development engine ( which includes our moderna technology center ) , our digital infrastructure , creation of our portfolio of intellectual property , acquisition of key raw materials and supplies to support our commercial production quantities , development of a commercial team , expansion into global markets and administrative support . since our inception , we have incurred significant operating losses . our net losses were $ 747.1 million , $ 514.0 million and $ 384.7 million for the years ended december 31 , 2020 , 2019 and 2018 , respectively . as of december 31 , 2020 , our accumulated deficit was $ 2.24 billion . 165 for the foreseeable future , we may continue to incur significant expenses in connection with our ongoing activities , including as we : continue our platform research and drug discovery and development efforts ; conduct clinical trials for our investigational medicines ; manufacture our covid-19 vaccine ; manufacture clinical trial materials and develop large-scale manufacturing capabilities ; seek regulatory approval for our investigational medicines ; maintain , expand , and protect our intellectual property ; hire additional personnel to support our program development effort to obtain regulatory approval and secure additional facilities for operations ; build up our commercial operations and organization ; and continue to operate as a public company . story_separator_special_tag if we seek to obtain regulatory approval for and commercialize further of our investigational medicines , we expect to incur significant commercialization expenses , which include establishing a sales , marketing , manufacturing , and distribution infrastructure globally . as a result , we may need substantial additional funding to support our continued operations and pursue our growth strategy in addition to our product sales . if we fail to become profitable or are unable to sustain profitability on a continuing basis , we may be required to finance our operations through a combination of public or private equity offerings , structured financings and debt financings , government funding arrangements , strategic alliances and marketing , manufacturing , distribution , and licensing arrangements . we may not be able to raise additional funds or enter into such other agreements on favorable terms , or at all . if we fail to raise capital or enter into such agreements as , and when , needed , we may have to significantly delay , scale back , or discontinue the development and commercialization of one or more of our programs . because of the numerous risks and uncertainties associated with pharmaceutical development , we are unable to predict the timing or amount of expenses or when or if we will be able to achieve or maintain profitability . if we fail to become profitable or are unable to sustain profitability on a continuing basis , then we may be unable to continue our operations at planned levels and be forced to reduce our operations . the covid-19 pandemic impacted certain of our business operations . for instance , we are experiencing disruptions in the conduct of certain of our clinical trials , including our ability to initiate and complete our clinical trials within the originally anticipated timelines . site initiation , participant recruitment and enrollment , participant dosing , distribution of clinical trial materials , study monitoring and data analysis may or continue to be paused or delayed . while to date we have not experienced significant disruptions in our supply chain and distribution , an extended duration of this pandemic could result in such disruptions in the future . financial operations overview revenue the following table summarizes revenue for each period presented ( in thousands ) : replace_table_token_1_th we began to record product sales for our covid-19 vaccine subsequent to its authorization for emergency use by the fda and health canada in december 2020. for the year ended december 31 , 2020 , we recognized $ 199.9 million of product sales from sales of our covid-19 vaccine . other than product sales , our revenue has been primarily derived from government-sponsored and private organizations including barda , darpa and the gates foundation and from strategic alliances with astrazeneca , merck and vertex to discover , develop , and commercialize potential mrna medicines . 166 the following table summarizes collaboration revenue for the periods presented ( in thousands ) : replace_table_token_2_th grant revenue from barda increased significantly in 2020 , as a result of an award to accelerate development of our covid-19 vaccine . the following table summarizes collaboration revenue for the periods presented ( in thousands ) : replace_table_token_3_th we expect our product sales to significantly increase in 2021. as of december 31 , 2020 , we had signed supply agreements of approximately $ 11.65 billion for the future supply of our covid-19 vaccine and had deferred revenue of $ 3.80 billion associated with customer deposits received or billable under these agreements . additional supply agreements have been agreed upon since december 31 , 2020 , and others are under discussion for 2021 and 2022 deliveries . in addition , we expect to continue to receive funding from our contract with barda . as of december 31 , 2020 , the remaining available funding net of revenue earned was $ 444.3 million . to the extent that existing or potential future products generate revenue , our revenue may vary due to many uncertainties in the independent development of our mrna medicines and pursuant to our strategic alliances and other factors . we expect to continue to incur significant expenses as we continue our research and development and commercialization efforts . we expect our programs to mature and advance to later stage clinical development , and we expect expenses to increase as we seek regulatory approvals for our investigational medicines and commercialize any approved mrna medicines . if we fail to become profitable or are unable to sustain profitability on a continuing basis , we may incur losses in the future . cost of sales cost of sales includes raw materials , personnel and facility and other costs associated with manufacturing our commercial product . these costs include production materials , production costs at our manufacturing facilities , third-party manufacturing costs , and final formulation and packaging costs . cost of sales also includes shipping costs and royalties payable to third parties based on sales of our products . research and development expenses the nature of our business and primary focus of our activities generate a significant amount of research and development costs . research and development expenses represent costs incurred by us for the following : cost to develop our platform ; discovery efforts leading to development candidates ; preclinical , nonclinical , and clinical development costs for our programs ; costs related to pre-launch inventory ; cost to develop our manufacturing technology and infrastructure ; and digital infrastructure costs .
| operating expenses cost of sales we began capitalizing our covid-19 vaccine inventory costs in december 2020 , in connection with an emergency use authorization from the fda and an interim order from health canada for use of our covid-19 vaccine , and based upon our expectation that these costs would be recoverable through commercialization of mrna-1273 . prior to the capitalization of our covid-19 vaccine inventory costs , such costs were recorded as research and development expenses in the period incurred . we expensed $ 242.0 million of pre-launch inventory costs in 2020. our cost of sales were $ 7.9 million , or 4.0 % of our product sales , in 2020 , comprised of third-party royalties of $ 6.9 million and shipping and handling costs of $ 1.0 million as the associated inventory costs were expensed previously . if inventory sold during 2020 was valued at cost , our cost of sales for 2020 would have been $ 62.4 million , or 31.2 % of our product sales . at december 31 , 2020 , we had $ 187.5 million of zero-cost covid-19 vaccine inventory that we expect to sell prior to march 31 , 2021. we expect our cost of sales as a percentage of our product sales will increase , reflecting the full cost of manufacturing , subsequent to the utilization of our zero-cost mrna-1273 inventory . research and development expenses research and development expenses increased by $ 874.0 million , or 176 % in 2020. the increase was primarily attributable to an increase in clinical trial expenses of $ 321.2 million , an increase in manufacturing expenses of $ 301.7 million , an increase in personnel related costs of $ 105.2 million , an increase in technology and facility related expenses of $ 74.2 million , and an increase in consulting and outside services of $ 60.7 million . the increase in 2020 was largely attributable to mrna-1273 clinical development and pre-launch inventory buildup prior to the authorization from the fda . the increase in personnel related costs was primarily driven by an increase in the number of employees supporting our mrna-1273 development activities
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we intend for this md & a to provide the reader with information that will assist in understanding our results of operations , including metrics that management uses to assess the company 's performance . throughout this md & a , we discuss the following performance metrics : the company provides certain percentage changes excluding the impact of foreign currency translation ( “ f/x ” ) . these amounts are derived by translating current year results at prior year average exchange rates . we believe the elimination of the f/x impact provides better year-to-year comparability without the distortion of foreign currency fluctuations . system sales growth reflects the results of all restaurants regardless of ownership , including company-owned , franchise and unconsolidated affiliate restaurants that operate our concepts , except for non-company-owned restaurants for which we do not receive a sales-based royalty . sales of franchise and unconsolidated affiliate restaurants typically generate ongoing franchise fees for the company at a rate of approximately 6 % of system sales . franchise and unconsolidated affiliate restaurant sales are not included in company sales on the consolidated and combined statements of income ; however , the franchise fees are included in the company 's revenues . we believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers , company and franchise same-store sales as well as net unit growth . same-store sales growth is the estimated percentage change in sales of all restaurants that have been open and in the company system one year or more . company restaurant profit ( “ restaurant profit ” ) is defined as company sales less expenses incurred directly by our company-owned restaurants in generating company sales . company restaurant margin as a percentage of sales is defined as restaurant profit divided by company sales . within the company sales and restaurant profit analysis , store portfolio actions represent the net impact of new-unit openings , acquisitions , refranchising and store closures , and other primarily represents the impact of same-store sales as well as the impact of changes in costs such as inflation/deflation . 63 2017 form 10-k in addition to the results provided in accordance with gaap throughout this md & a , the company provides measures adjusted for special items , which include adjusted operating profit , adjusted net income , adjusted diluted earnings per common share , adjusted e ffective t ax r ate and adjusted ebitda , which we define as net income including noncontrolling interests adjusted for income tax , interest income , depreciation , amortization and other items , including store impairment charges . special items consist of r eversal of ( provision for ) losses associated with sales of aircraft , incremental restaurant-level impairment upon separation , income from the reversal of contingent consideration previously recorded for a business combination , c hange s in fair value of financial instruments , the estimated one-time income tax charge as a result of the tax act , and the impact of the redemption of the little sheep noncontrolling interest . the company excludes impact from special items for the purpose of evaluating performance internally . special items are not included in any of our segment results . these a djusted measures are not intended to replace the presentation of our financial results in accordance with gaap . rather , the company believes that the presentation of these a djusted measures provides additional information to investors to facilitate the comparison of past and present results , excluding those items that the company does not believe are indicative of our ongoing operations due to their nature . story_separator_special_tag roman ; font-size:10pt ; font-weight : normal ; font-style : normal ; text-transform : none ; font-variant : normal ; '' > ( e ) the tax benefit was determined based upon the impact of the nature of each special item tax effected at the 25 % china tax rate or the historical 35 % u.s. tax rate , except for the $ 21 million changes in fair value of financial instruments associated with the strategic investment which resulted in no income tax expense . additionally , during the year ended december 31 , 2016 , we recognized a tax benefit of $ 26 million related to the legal entity restructuring of our little sheep business . of this benefit , $ 12 million was attributed to previous little sheep impairment losses recognized within special items in 2013 and 2014 and as such was classified as a special item consistent with the classification of those historical impairments . ( f ) the company incurred an estimated one-time income tax charge of $ 164 million in the fourth quarter of 2017 , as a result of the tax act , due to the transition tax on deemed repatriation of accumulated undistributed earnings of foreign subsidiaries , and additional tax related to the revaluation of certain deferred tax assets . ( g ) during the year ended december 31 , 2016 , the little sheep founding shareholders sold their remaining 7 % little sheep ownership interest to the company pursuant to their redemption rights . the difference between the purchase price of less than $ 1 million , which was determined using a non-fair value based formula pursuant to the agreement governing the redemption rights , and the carrying value of their redeemable noncontrolling interests was recorded as an $ 8 million loss attributable to noncontrolling interests . ( see note 8 ) 68 2017 form 10-k adjusted ebitda reported net income , along with the reconciliation to adjusted ebitda , is presented below . replace_table_token_11_th segment results kfc kfc delivered strong sales performance in 2017 , marking the second year of positive same-store sales growth , led by the company 's continued focus on innovative products , creating abundant value to our customers as well as upgrading ingredients to meet chinese consumers ' needs . kfc also continued with its digital and delivery initiatives to enhance customer experience . story_separator_special_tag kfc loyalty program members exceeded 110 million at year-end 2017 and represented 38 % of company sales at kfc in the fourth quarter of 2017. delivery sales accounted for 11 % of company sales at kfc in 2017 with over 3,200 stores across 900 cities offering delivery services at the end of 2017. replace_table_token_12_th replace_table_token_13_th 69 2017 form 10-k replace_table_token_14_th replace_table_token_15_th replace_table_token_16_th company sales and restaurant profit the changes in company sales and restaurant profit were as follows : replace_table_token_17_th replace_table_token_18_th in 2017 , the increase in company sales and restaurant profit associated with store portfolio actions was driven by net unit growth . significant other factors impacting company sales and restaurant profit were same-store sales growth and the favorable impact from retail tax structure reform ( primarily in cost of sales ) , partially offset by higher labor costs mainly due to wage inflation of 7 % , promotion costs and commodity inflation of 1 % . 70 2017 form 10-k in 2016 , the increase in company sales and restaurant profit associated with store portfolio actions was driven by net unit growth , partially offset by the impact of more refranchising . significant other factors impacting company sales and or restaurant profit were the favorable impact of cost favorability from retail tax structure reform ( primarily in cost of sales ) , company same-store sales growth of 3 % and lower utility cost , partially offset by higher labor costs including wage inflation of 8 % , and commodity inflation of 1 % . franchise fees and income in 2017 , the increase in franchise fees and income , excluding the impact of f/x , was driven by t he impact of net unit growth , refranchising and same-store sales growth for the unconsolidated affiliates and franchisees . in 2016 , the increase in franchise fees and income , excluding the impact of f/x , was driven by t he impact of refranchising . g & a expenses in both 2017 and 2016 , the increase in g & a expenses , excluding the impact of f/x , was driven by higher compensation due to wage inflation and higher incentive compensation associated with better operating results of kfc . operating profit in 2017 , the increase in operating profit , excluding the impact of f/x , was driven by the impact of same-store sales growth , the favorable impact of retail tax structure reform and net unit growth and lower closure and impairment expenses , partially offset by higher restaurant operating costs due to wage inflation and promotion costs , and higher g & a expenses . in 2016 , the increase in operating profit , excluding the impact of f/x , was driven by the impact of same-store sales growth , lower restaurant operating costs , including the favorable impact of the retail tax structure reform , and net new unit growth , partially offset by higher g & a expenses . in addition , the leap year in 2016 added an extra day in february resulting in incremental operating profit of $ 5 million . 71 2017 form 10-k pizza hut pizza hut showed improvement in sales performance in 2017 ending the year with 1 % same-store sales growth which marks the first year of positive growth since 2013. the revitalization strategy of pizza hut focuses on fixing the fundamentals , including investments in product upgrades , enhancing digital capabilities through expanding the user base , integrating delivery system of pizza hut casual dining and pizza hut home service while working closely with aggregators and experimenting with new store formats to drive further growth . replace_table_token_19_th replace_table_token_20_th replace_table_token_21_th replace_table_token_22_th replace_table_token_23_th 72 2017 form 10-k company sales and restaurant profit the changes in company sales and restaurant profit were as follows : replace_table_token_24_th replace_table_token_25_th in 2017 , the increase in company sales and restaurant profit associated with store portfolio actions was driven by net unit growth . significant other factors impacting company sales and restaurant profit were the favorable impact from retail tax structure reform ( primarily in cost of sales ) , company same-store sales growth of 1 % and labor efficiency , partially offset by higher labor costs including wage inflation of 6 % , promotion and product upgrade costs . in 2016 , the increase in company sales and restaurant profit associated with store portfolio actions was driven by net unit growth . significant other factors impacting company sales and or restaurant profit were the favorable impact from retail tax structure reform ( primarily in cost of sales ) and commodity deflation of 3 % , partially offset by company same-store sales declines of 7 % and higher labor costs including wage inflation of 9 % . g & a expenses in both 2017 and 2016 , the increase in g & a expenses , excluding the impact of f/x , was driven by higher compensation costs due to wage inflation and increased headcount . operating profit in 2017 , the increase in operating profit , excluding the impact of f/x , was primarily driven by the favorable impact of retail tax structure reform , net unit growth and same-store sales growth , partially offset by higher operating costs due to wage inflation and promotion and products upgrades costs , higher g & a expenses , and higher closure and impairment expenses , some of which was associated with the impact from the pizza hut businesses integration . in 2016 , the increase in operating profit , excluding the impact of f/x , was primarily driven by lower restaurant operating costs , including the favorable impact of the retail tax structure reform , and net unit growth , partially offset by same-store sales declines of 7 % and higher g & a expenses . 73 2017 form 10-k all other segments all other segments includes east dawning , little sheep , taco bell and daojia . replace_table_token_26_th in both 2017 and 2016 , the decrease in company sales , excluding the impact of f/x , was primarily driven by unit closures and refranchising .
| the growth in company 's profit was primarily aided by the impact of the retail tax structure reform implemented on may 1 , 2016. the benefit from the retail tax structure reform was most visible and impactful on food and paper costs while other items such as utility cost and rental expense also benefited from it . in 2017 , the company 's total revenues increased 8 % , excluding f/x , attributable to solid sales performance at kfc with same-store sales growth of 5 % and 1 % same-store sales growth at pizza hut . the increase was also attributable to new unit openings of 691 or 6 % net unit growth , bringing total store count to 7,983 across more than 1,200 cities . increase in operating profit was driven by strong sales and margin expansion , which was also aided by the impact of retail tax structure reform . net income for 2017 decreased 20 % and , excluding the estimated one-time income tax charge of $ 164 million recorded in the fourth quarter 2017 related to the tax act , increased 24 % , excluding f/x . 64 2017 form 10-k for further information about the potential impact political , regulatory , economic and social conditions in china may have on our business , see “ item 1a . risks related to doing business in china—changes in chinese political policies and economic and social policies or conditions may materially and adversely affect our business , results of operations and financial condition and may result in our inability to sustain our growth and expansion strategies. ” 2017 financial highlights are below : replace_table_token_6_th ( a ) system sales , operating profit and same-store sales percentages as shown in 2017 financial highlights exclude the impact of f/x . the consolidated and combined results of operations for the years ended december 31 , 2017 , 2016 and 2015 are presented below : replace_table_token_7_th ( a ) represents year-over-year change in percentage . nm refers to changes over 100 % , from negative to positive amounts or from zero to an amount . 65 2017 form 10-k performance metrics replace_table_token_8_th replace_table_token_9_th 66 2017 form 10-k special items special items , along with the
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on june 30 , 2020 , the company and its subsidiaries entered into ninth amendment , dated as of june 30 , 2020 ( the “ ninth amendment ” ) , to the revolving credit , term loan and security agreement , dated as of march 31 , 2017 ( as amended , amended and restated , restated , supplemented or otherwise modified from time to time , the “ credit agreement ” ) . under the ninth amendment , the company 's senior lender agreed to modify the earlier conversion condition of the seventh amendment and allow the company to settle a significant portion of the subordinated debt and preferred stock with up to $ 5,083 million in cash , instead of by converting all of it into the company 's common stock . as a result , the company was able to negotiate and settle $ 46,900 in subordinated debt and preferred stock for $ 5,083 in cash and 1,811 shares of the company 's common stock . these transactions resulted in recognition of a net gain on the extinguishment of debt of $ 12,316 , and a net gain on redemption of preferred stock of $ 24,475 , and smaller net loss and net income attributable to common shareholders of $ ( 14,347 ) and $ 10,128 , respectively , in fiscal 2020. story_separator_special_tag style= '' font-size:10pt ; font-family : times new roman ; margin:0px '' > ( 1 ) includes gross profit from direct hire placements , for which all associated costs are recorded as selling , general and administrative expenses . 17 the company 's combined gross profit margin , including direct hire placement services ( recorded at 100 % gross margin ) for fiscal 2020 was approximately 34.4 % versus approximately 34.3 % for the fiscal 2019. in the professional contract staffing services segment , the gross margin excluding direct placement services was approximately 26.4 % for fiscal 2020 compared to approximately 26.0 % for fiscal 2019. the increase is primarily the result of increases in the amounts and mix of higher margin contract services business in it end markets , including growth in several of the company 's higher end it brands during fiscal 2020 , as compared with the prior fiscal year . this trend also is consistent with covid-19 related declines in business , which weighed more heavily on the company 's lower margin finance , accounting , and office ( primarily , office ) and light industrial end markets , resulting in a higher mix of higher margin business . the company 's industrial staffing services gross margin for fiscal 2020 was approximately 21.7 % as compared with approximately 20.8 % for fiscal 2019. the increase in industrial staffing services gross margin is due to a higher proportion of estimated amounts of return premiums , the company 's light industrial business is eligible to receive under the ohio bureau of workers ' compensation retrospectively-rated insurance program . selling , general and administrative expenses selling , general and administrative expenses include the following categories : compensation and benefits in the operating divisions , which includes salaries , wages and commissions earned by the company 's employment consultants , recruiters and branch managers on permanent and temporary placements ; administrative compensation , which includes salaries , wages , payroll taxes and employee benefits associated with general management and the operation of the finance , legal , human resources and information technology functions ; occupancy costs , which includes office rent , depreciation and amortization , and other office operating expenses ; recruitment advertising , which includes the cost of identifying job applicants ; and other selling , general and administrative expenses , which includes travel , bad debt expense , fees for outside professional services and other corporate-level expenses such as business insurance and taxes . the company 's sg & a for fiscal 2020 , decreased by $ 2,338 as compared to fiscal 2019. sg & a for fiscal 2020 , as a percentage of revenue was approximately 34.2 % versus 30.8 % for fiscal 2019. the increase in sg & a expenses as a percentage of revenue is primarily attributable to the corresponding significant reduction in revenues , which resulted in less coverage of our sg & a fixed or semi-variable expenses . sg & a expenses for fiscal 2020 decreased as the result of a decrease in employee related costs of $ 2,984 and a decrease in a stock compensation expense of $ 627. sg & a in fiscal 2020 also included increases in bad debt expense of $ 1,765 compared to fiscal 2019 , including $ 1,653 associated with a single large customer of our light industrial segment that has declared bankruptcy . sg & a also includes certain costs and expenses incurred related to acquisition , integration and restructuring and other non-recurring activities , such as certain corporate legal and general expenses associated with capital markets activities that either are not directly associated with core business operations or may be expected not to recur in whole or in part on a going forward basis . these costs were $ 4,277 and $ 4,281 for fiscal 2020 and fiscal 2019 , respectively , and include mainly expenses associated with former closed and consolidated locations , personnel costs associated with eliminated positions , costs incurred related to acquisitions and associated legal and professional costs . depreciation expense depreciation expense was $ 248 for fiscal 2020 and $ 349 for fiscal 2019. the net decrease in depreciation expense is primarily the result of company fixed assets becoming fully depreciated exceeding new capital expenditures . 18 amortization expense amortization expense was $ 5,038 , and 5,586 for fiscal 2020 and 2019. the decrease is due to amortization completion of sni intangible asset related to non-compete agreements . goodwill impairment the company performed annual goodwill impairment testing effective as of september 30 , 2020 , and allocates its goodwill among two reporting units , its professional segment and its commercial segment , for purposes of evaluation for impairments . story_separator_special_tag as a result of the evaluation performed , the carrying value of the net assets exceeded the estimated fair value of the company 's professional segment as of september 30 , 2020 , while the estimated fair value of the commercial segment exceeded its net carrying value . the outcome of this goodwill impairment test resulted in a non-cash charge for the impairment of goodwill applicable to the professional segment of $ 8,850 , which was recorded in the consolidated financial statements for fiscal 2020. for purposes of performing this goodwill impairment assessment , management applied valuation techniques and assumptions to its professional and commercial segments as reporting units and also considered recent trends in the company 's stock price , implied control or acquisition premiums , earnings and other possible factors and their effects on estimated fair value of the company 's reporting units . management also considered the company 's market capitalization , as recently reported on the nyse american exchange , in conducting its assessment , which has been lower than its consolidated net book value ( consolidated stockholders ' equity ) . management believes that the continuing declines in global economic and labor market conditions and other disruptions caused by the covid-19 pandemic that have negatively impacted the company 's business and operating results also are a contributing factor to the company 's recent stock prices , market capitalization , and potentially , the value of its goodwill resulting , in part , in the non-cash impairment charge recognized during fiscal 2020. management believes and expects that these conditions , including those impacting the company , are improving and will continue to improve . however , there can be no assurance that the company 's goodwill or other long-lived assets will not become impaired in the future . due to a previous sustained decline in the market capitalization of our common stock during the third quarter of 2019 , we also performed a goodwill impairment test in accordance with the provisions of asu 2017-04 , and recognized a non-cash charge for the impairment of goodwill of $ 4,300 in fiscal 2019. loss from operations as the net result of the matters discussed regarding revenues and operating expenses above , loss from operations increased by $ 8,880 , to a loss of $ 13,833 for fiscal 2020 from a loss of $ 4,953 for fiscal 2019. the increase in our loss from operations is directly attributable to the matters discussed regarding revenues and operating expenses above ; including , notably , the negative impacts of the covid-19 pandemic , increases in our bad debt expense of approximately $ 1,765 , and an increase of approximately $ 4,550 in the amount of a non-cash goodwill impairment charge recognized in fiscal 2020 , as compared with a similar non-cash goodwill impairment charge recognized during fiscal 2019. interest expense interest expense for fiscal 2020 , decreased by $ 207 compared to fiscal 2019. the decrease in interest expense is mostly attributable to a decrease in interest on revolving credit facility and term loan of $ 1,107 during fiscal 2020 compared to fiscal 2019. this was mainly offset by increases in an amortization of the debt issue costs related to exit and restructuring fees originated under seventh amendment of $ 422 and interest expense for beneficial conversion feature associated with the former 8 % notes of $ 487 in fiscal 2020 compared to fiscal 2019. provision for income taxes the company recognized provisions for income tax expense of $ 597 and $ 370 in fiscal 2020 and 2019 , respectively . the composition of the company 's income tax provisions is relatively complex ; however , the net increase in the provision for fiscal 2020 as compared with fiscal 2019 can be attributed to higher state and local taxes in certain jurisdictions . 19 net loss the company 's net loss was $ 14,347 and $ 17,763 for fiscal 2020 and 2019 , respectively . the decrease in the net loss was principally the result of the gain recognized of $ 12,316 on an extinguishment of subordinated debt in fiscal 2020 that was offset by goodwill impairment of $ 8,850. as explained under the overview section and results of operations sections above , the negative effects of the coronavirus pandemic during the later portion of fiscal 2020 also significantly impacted our business and contributed to our fiscal 2020 net loss . net income ( loss ) attributable to common stockholders net income ( loss ) attributable to common stockholders for fiscal 2020 increased by $ 27,891. the significant items contributing to this improvement were the gains resulting from extinguishments of the company 's subordinated debt and outstanding preferred stock of $ 12,316 and $ 24,475 , respectfully . these were offset , in part , by a non-cash goodwill impairment charge during fiscal 2020 , which exceeded a similar non-cash charge in fiscal 2019 by approximately $ 4,550 , increases in our bad debt expense of approximately $ 1,765 , including $ 1,653 associated with a single large customer of our light industrial segment that has declared bankruptcy , and the negative effects of the covid-19 pandemic and other matters discussed above . the company continues to closely manage costs and to pursue opportunities to selectively increase revenue producing headcount in key markets and industry verticals . the company also seeks to organically grow its professional contract services revenue and direct hire placement revenue , including business from staff augmentation , permanent placement , statement of work ( sow ) and other human resource solutions in the information technology , engineering , healthcare and finance and accounting higher margin staffing specialties . the company 's strategic plans to achieve this goal involve setting aggressive new business growth targets , including initiatives to increase services to existing customers , increasing its numbers of revenue producing core professionals , including primarily , business development managers and recruiters , changes to compensation , commission and bonus plans to better incentivize producers , and frequent interaction with the field to monitor and motivate growth .
| with the onset of covid-19 , the company 's business and revenues began to decrease significantly in approximately mid-march 2020. consolidated net revenues for the fiscal quarter ended march 31 , 2020 of $ 34,681 decreased by approximately $ 1,496 , or 4 % , as compared with consolidated net revenues for the fiscal quarter ended march 31 , 2019 of $ 36,177 , and decreased by approximately $ 2,876 , or 8 % , as compared with consolidated net revenues for the sequential fiscal quarter ended december 31 , 2019 of $ 37,557. consolidated net revenues decreased further by approximately $ 8,087 , or 23 % , to $ 26,594 during the fiscal quarter ended june 30 , 2020 ; however , have rebounded since resulting in an increase of approximately $ 4,410 , or 17 % , to $ 31,004 during this year 's final fiscal quarter ended september 30 , 2020. consolidated revenues on monthly basis bottomed during the month of may 2020 to a low of approximately $ 8,248 and steadily rose each month to a high of $ 12,216 during the month of october 2020. november 2020 's revenues were lower at $ 10,560 largely due to significant lower billing days than october , including the thanksgiving holidays . management believes that the trend towards recovery since may 2020 is the result of actions taken to adapt to covid-19 and position the company for recovery and , otherwise , is generally consistent with the recovery experienced in the overall u.s. economy so far . the company continues to observe , analyze , and make modifications and changes to its business operating model and practices on a daily basis in response to the on-going coronavirus pandemic and related health and safety concerns . with regard to revenue generation , the company has expanded focus and priority towards sales and marketing of our placement and staffing services to clients that provide products or services considered essential during covid-19 , including principally , it , financial services , and healthcare staffing in the professional segment , and in our light industrial segment , staffing for clients that manufacture and distribute ppe . in addition , we have implemented policies and procedures in observance of federal , state and or local guidelines regarding the coronavirus , including but not limited to , working from home , use of personal protective equipment ( principally ,
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in addition , we use historical and current information to estimate future credit losses.to determine if the allowance is adequate . because we can not predict future changes in the financial stability of our customers , actual future losses from uncollectible accounts may differ from estimates . if the financial condition of customers were to deteriorate , resulting in their inability to make payments , a larger reserve might be required . in the event we determine a smaller or larger reserve is appropriate , we would record a benefit or charge to selling and administrative expenses in the period in which such a determination was made . the adequacy of this allowance is reviewed each reporting period and adjusted as necessary . our allowance for doubtful accounts was approximately $ 326,000 and $ 162,000 at december 31 , 2020 and 2019 , respectively , which was approximately 3.8 % and 2.2 % of gross accounts receivable at december 31 , 2020 and 2019 , respectively . if the financial condition of our customers were to deteriorate , resulting in increased uncertainty as to their ability to make payments , or if unexpected events or significant future changes in trends were to occur , we may be required to increase the allowance or incur a bad debt expense . in this regard , we incurred bad debt expense of approximately $ 197,000 and $ 6,000 in 2020 and 2019 , respectively . inventories our inventories primarily are composed of raw materials and finished goods and are stated at the lower of cost or net realizable value , using the first-in , first-out method . net realizable value is the estimated selling prices in the ordinary course of business , less reasonably predictable costs of completion , disposal and transportation . we maintain a reserve for slow moving and obsolete inventory to reflect the diminution in value resulting from product obsolescence , damage or other issues affecting marketability in an amount equal to the difference between the cost of the inventory and its estimated net realizable value . the adequacy of this reserve is reviewed each reporting period and adjusted as necessary . we regularly compare inventory quantities on hand against historical usage or forecasts related to specific items in order to evaluate obsolescence and excessive quantities . in assessing historical usage , we also qualitatively assess business trends to evaluate the reasonableness of using historical information as an estimate of future usage . our slow moving and obsolete inventory reserve was approximately $ 290,000 and $ 244,000 at december 31 , 2020 and 2019 , respectively . income taxes we account for income taxes under the asset and liability method . under this method , deferred tax assets and liabilities are recognized to reflect the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases . deferred tax assets and liabilities are measured and recorded using currently enacted tax rates , which we expect will apply to taxable income in the years in which the differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases are recovered or settled . the differences are attributable to differing methods of financial statement and income tax treatment with respect to depreciation and reserves for trade accounts receivable and inventories . the likelihood of a material change in our expected realization of deferred tax assets is dependent on , among other factors , changes in tax law , future taxable income and settlements with tax authorities . in assessing the realizability of our deferred tax assets , we evaluate positive and negative evidence and use judgments regarding past and future events , including operating results and available tax planning strategies that could be implemented to realize the deferred tax assets . we record a valuation allowance when necessary to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized . we consider available evidence , both positive and negative , and use judgments regarding past and future events , including operating results and available tax planning strategies , in assessing the need for a valuation allowance . significant judgment is required in determining income tax provisions and in evaluating tax positions . we establish additional provisions for income taxes when , despite the belief that tax positions are fully supportable , there remain certain positions that do not meet the minimum probability threshold , which is a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority . in the normal course of business , we and our subsidiaries are examined by various federal and state tax authorities . we regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes . we adjust the income tax provision , the current tax liability and deferred taxes in any period in which we become aware of facts that necessitate such an adjustment . the ultimate outcomes of the examinations of our income tax returns could result in increases or decreases to our recorded tax liabilities , which would affect our financial results . 7 intangible assets intangible assets are acquired assets that lack physical substance and that meet specified criteria for recognition apart from goodwill . we own several trademarks and trade names , including star brite ® and performacide ® . we have determined that these intangible assets have indefinite lives and , therefore , are not amortized . story_separator_special_tag in addition , we own other intangible assets including patents , royalty rights , other trademarks and trade names , customer lists , and product formulas that have finite lives . as these intangible assets have finite lives , their carrying value is amortized over their remaining useful lives . see note 5 to the consolidated financial statements included in this report for additional information regarding our intangible assets . we evaluate our indefinite-lived intangible assets for impairment annually and at other times if events or changes in circumstances indicate that an impairment may have occurred . in evaluating our indefinite-lived intangible assets for impairment , we assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value . if , after completing the qualitative assessment , we determine it is more likely than not that the fair value of the indefinite-lived intangible asset is greater than its carrying amount , the asset is not impaired . if we conclude it is more likely than not that the fair value of the indefinite-lived intangible assets is less than the carrying value , we would then proceed to a quantitative impairment test , which consists of a comparison of the fair value of the intangible assets to their carrying amounts . in 2020 , we performed a qualitative assessment on all of our indefinite lived assets and determined , based on the assessment , that their fair values were more likely than not higher than their carrying values . we assess the remaining useful life and recoverability of intangible assets having finite lives whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable . such events or circumstances may include , for example , the occurrence of an adverse change with respect to a product line that utilizes the intangible assets . significant judgments in this area involve determining whether such an event or circumstance has occurred . any impairment loss , if indicated , equals the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset . story_separator_special_tag 2020 increased by approximately $ 557,000 , or 70.2 % , as compared to 2019. the increase in cash used in investing activities was a result of an increase of approximately $ 1,118,000 in cash used for purchases of property , plant and equipment , partially offset by approximately $ 487,000 of insurance proceeds ( see results of operations ) received during 2020 and a decrease of $ 75,000 for purchases of intangible assets . the cash used for purchases of plant , property and equipment primarily relates to machinery and equipment at our manufacturing subsidiary kinpak . in 2019 , the company used $ 75,000 to acquire intangible assets , while there were no purchases of intangible assets in 2020. net cash used in financing activities during 2020 increased by approximately $ 343,000 or 37.1 % , as compared to 2019. the increase in cash used in financing activities was principally a result of an increase of approximately $ 289,000 in dividends paid to common shareholders . additionally , payments on long term debt increased by approximately $ 62,000 in 2020 , as compared to 2019. see notes 6 and 8 to the consolidated financial statements included in this report for information concerning our principal credit facilities , consisting of kinpak 's obligations relating to an industrial development bond financing with respect to the expansion project , the payment of which we have guaranteed and a revolving line of credit . at december 31 , 2020 and 2019 , we had outstanding balances of approximately $ 3,719,000 and $ 3,974,000 , respectively , under kinpak 's obligations relating to the industrial development bond financing respectively , and no borrowings under our revolving credit facility . the loan agreement pertaining to our revolving credit facility , as amended , has a stated term that expires on august 31 , 2021 , although as was the case with earlier revolving lines of credit provided to us in recent years , amounts outstanding are payable on demand . nevertheless , the loan agreement pertaining to our revolving line of credit , as amended , contains various covenants , including financial covenants that are described in note 6 to the consolidated financial statements included in this report . at december 31 , 2020 , we were in compliance with these financial covenants . the revolving credit facility is subject to several events of default , including a decline of the majority shareholder 's ownership below 50 % of our outstanding shares . 9 our guarantee of kinpak 's obligations related to the industrial development bond financing are subject to various covenants , including financial covenants that are described in note 8 to the consolidated financial statements included in this report . as of december 31 , 2020 , we were in compliance with these financial covenants . in connection with our 2018 acquisition of assets of snappy marine , we issued a promissory note in the amount of $ 1,000,000 , including interest ( of the $ 1,000,000 amount of the promissory note , $ 930,528 was recorded as principal , and the remaining $ 69,472 , representing an imputed interest rate of 2.87 % per annum , is being recorded as interest expense over the term of the note ) . at december 31 , 2020 , we had an outstanding balance of $ 516,666 under the promissory note ( including $ 497,405 recorded as principal and $ 19,261 to be recorded as interest expense over the remaining term of the note ) . we also obtained financing through leases for office equipment , totaling approximately $ 100,000 and $ 26,000 at december 31 , 2020 and 2019 , respectively . some of our assets and liabilities are denominated in canadian dollars and are
| as a percentage of net sales , gross profit increased to 42.3 % in 2020 from 36.9 % in 2019 , primarily because of a more profitable sales mix and improved operating efficiencies at our manufacturing subsidiary , kinpak . advertising and promotion expenses decreased by approximately $ 167,000 , or 5.3 % , during 2020 as compared to 2019. as a percentage of net sales , advertising and promotion expense decreased to 5.4 % in 2020 from 7.4 % in 2019. the decrease in advertising and promotion expenses was principally a result of decreased trade show expenses as a result of the travel and social distancing restrictions implemented due to the covid-19 pandemic social distancing policies , decreased magazine advertising , decreased customer cooperative advertising , and a decrease in product samples used to promote sales , partially offset by increases in internet and television advertising . selling and administrative expenses increased by approximately $ 518,000 , or 6.6 % , during 2020 as compared to 2019. the increase in selling and administrative expenses was primarily a result of increased sales commissions , a higher noncash adjustment to our trade accounts receivable allowance account , and increased employee salaries , partially offset by a decrease in expenses related to salesmen travel , meals , and entertainment as a result of the covid-19 pandemic . as a percentage of net sales , selling and administrative expenses decreased to 15.0 % in 2020 from 18.6 % in 2019 . 8 interest ( expense ) , net during 2020 increased by approximately $ 14,000 , or 11.7 % , as compared to 2019. gain on insurance settlement was approximately $ 201,000 during the year ended december 31 , 2020. we had no such gain in 2019. the company received approximately $ 487,000 from our insurance company to cover losses from a chemical incident at our kinpak facility that took place in december 2019. for more information please refer to recent developments and note 16 included in the company 's annual report on form 10-k for the year ended december 31 , 2019. provision for income taxes increased by approximately $ 1,620,000 or 4.7 % in 2020 , as compared
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payroll employment growth in 2019 totaled 2.1 million jobs , compared with a gain of 2.3 million jobs in 2018. gross domestic product increased 2.3 % in 2019 , compared with 2.9 % in 2018 according to the bureau of economic analysis initial estimate . as reported by u.s. census bureau and the u.s. department of housing and urban development , new home sales were up 23 % on a year-over-year basis . the median sale price of new homes sold in the u.s. in december 2019 was $ 331,400 , an improvement over 2018 's lower median sales prices , which hit a low of $ 302,400 in november 2018. see item 8 , financial statements and supplementary data , note 6 , expected loss to be paid , for a discussion of the assumptions used in determining expected losses for u.s. rmbs . the federal funds rate ended 2019 with a target range of 1.5 % and 1.75 % , having started the year at 2.25 % and 2.50 % . at the january 28-29 , 2020 federal open market committee ( fomc ) meeting , the fomc maintained the target range for the federal funds rate at between 1.5 % and 1.75 % . after that meeting , the fomc released the following statement in regards to its decision to maintain the fed funds rate at its current level : “ the committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity , strong labor market conditions , and inflation returning to the committee 's symmetric 2 % objective . the committee will continue to monitor the implications of incoming information for the economic outlook , including global developments and muted inflation pressures , as it assesses the appropriate path of the target range for the federal funds rate. ” in 2019 , municipal interest rates reached new lows and credit spreads tightened further . the 30-year aaa municipal market data ( mmd ) rate started the year off at 3.02 % and ended the year at 2.09 % . credit spreads tightened during the year as the spread between `` a '' and `` aaa '' 30-year general obligation fell from 51 basis points ( bps ) to start the year to as low as 35 bps on july 24th . it remained near that relatively narrow level through the end of the year . this is compared to an average of 53 bps in 2018 and 2017. the “ aaa ” 30-year mmd benchmark yields reached 1.83 % on august 28th , the lowest yield since the benchmark was first published in june 1981. following the reporting period , the benchmark yield hit a subsequent new low . when interest rates are low , or when the market is relatively less risk averse , the credit spread between high-quality or insured obligations versus lower-rated or uninsured obligations typically narrows . as a result , financial guaranty insurance typically provides lower interest cost savings to issuers than it would during periods of relatively wider credit spreads . issuers are less likely to use financial guaranties on their new issues when credit spreads are narrow , which results in decreased demand or premiums obtainable for financial guaranty insurance , and a resulting reduction in the company 's results of operations . see “ key business strategies ” below for market volume and penetration . us equity markets were largely negative for 2018 due to equities dropping sharply in the fourth quarter of 2018 , but experienced a very strong 2019. the dow jones industrial average , nasdaq composite index and the s & p 500 index all finished markedly higher for the full year . during 2019 , the u.s. dollar remained stable against other currencies on a trade-weighted basis according to data from the federal reserve bank of st. louis . the company believes this was the result of the federal reserve shifting its monetary policy path to a more accommodating one , bringing it more in line with other key central banks ( e.g. , bank of japan , the bank of england and the european central bank ) . see item 8 , financial statements and supplementary data , note 7 , contracts accounted for as insurance and note 10 , investments and cash , for gains/losses on foreign exchange rate changes on the consolidated statements of operations . 77 financial performance of assured guaranty financial results include the results of bluemountain after the date of acquisition on october 1 , 2019. financial results replace_table_token_5_th replace_table_token_6_th ( 1 ) see “ -- non-gaap financial measures ” for a definition of the financial measures that were not determined in accordance with accounting principles generally accepted in the united states of america ( gaap ) and a reconciliation of the non-gaap financial measure to the most directly comparable gaap measure , if available . see “ -- non-gaap financial measures ” for additional details . ( 2 ) `` adjusted operating income '' was formerly known as `` non-gaap operating income . '' ( 3 ) `` adjusted operating shareholders ' equity '' was formerly known as `` non-gaap operating shareholders ' equity . '' ( 4 ) `` adjusted book value '' was formerly known as `` non-gaap adjusted book value . '' ( 5 ) see “ key business strategies -- capital management ” below for information on common share repurchases . 78 several primary drivers of volatility in net income or loss are not necessarily indicative of credit impairment or improvement , or ultimate economic gains or losses such as : changes in credit spreads of insured credit derivative obligations , changes in fair value of assets and liabilities of vies and ccs , changes in fair value of credit derivatives related to the company 's own credit spreads , and changes in risk-free rates used to discount expected losses . story_separator_special_tag other factors that drive volatility in net income in the insurance segment include : changes in expected claims and recoveries , the amount and timing of the refunding and or termination of insured obligations , realized gains and losses on the investment portfolio ( including other-than-temporary impairments ( otti ) ) , changes in foreign exchange rates , the effects of large settlements , commutations , acquisitions , the effects of the company 's various loss mitigation strategies , and changes in the fair value of investments in assured investment management funds . in the asset management segment , changes in the fair value of assured investment management funds affect the amount of management and performance fees earned . changes in laws and regulations , among other factors , may also have a significant effect on reported net income or loss in a given reporting period . consolidated results of operations consolidated results of operations replace_table_token_7_th 79 year ended december 31 , 2019 compared with year ended december 31 , 2018 net income attributable to agl for 2019 was lower compared 2018 primarily due to : fair value losses on credit derivatives and ccs in 2019 compared with gains in 2018 , lower earned premiums consistent with the scheduled decline net par outstanding , as well as lower accelerations for refundings and terminations , higher compensation and other operating expenses attributable to the bluemountain acquisition and its related fourth quarter 2019 expenses , and higher loss and loss adjustment expenses in 2019. these decreases were offset in part by foreign exchange gains in 2019 compared with losses in 2018 , realized gains on investment portfolio in 2019 compared with losses in 2018 , higher gains on fg vies in 2019 , and asset management fees from bluemountain for fourth quarter 2019. the company 's effective tax rate reflects the proportion of income recognized by each of the company 's operating subsidiaries , with u.s. subsidiaries generally taxed at the u.s. marginal corporate income tax rate of 21 % in 2019 and 2018 , u.k. subsidiaries taxed at the u.k. marginal corporate tax rate of 19 % , and no taxes for the company 's bermuda subsidiaries , unless subject to u.s. tax by election or as a u.s. controlled foreign corporation . the effective tax rate was lower in 2019 due to the impact of final beat regulations issued in fourth quarter 2019 that allow alternative minimum tax credits to be used in the calculation . shareholders ' equity attributable to agl increased since december 31 , 2018 primarily due to net income and unrealized gains on available for sale investment securities , offset in part by share repurchases and dividends . adjusted operating shareholders ' equity decreased in 2019 primarily due to share repurchases and dividends , partially offset by positive adjusted operating income . adjusted book value increased slightly in 2019 primarily due to new business development , partially offset by share repurchases and dividends . shareholders ' equity attributable to agl per share , adjusted operating shareholders ' equity per share and adjusted book value per share all increased in 2019 to $ 71.18 , $ 66.96 and $ 96.86 , respectively , which benefited from the repurchase of an additional 11.2 million shares in 2019 . see “ accretive effect of cumulative repurchases ” table below . year ended december 31 , 2018 compared with year ended december 31 , 2017 the company 's comparison of 2018 results to 2017 results is included in the company 's annual report on form 10-k for the fiscal year ended december 31 , 2018 , under part ii , item 7 , management 's discussion and analysis of financial condition and results of operations , executive summary and results of operations . key business strategies the company continually evaluates its business strategies . for example , with the bluemountain acquisition the company has increased its focus on asset management and alternative investments . currently , the company is pursuing the following key business strategies in three areas : insurance asset management and alternative investments capital management insurance the company seeks to grow the insurance business through new business production , acquisitions of legacy monolines and reinsurance transactions , and to continue to mitigate losses in its current insured portfolio . 80 growth of the insured portfolio the company seeks to grow its insurance portfolio through new business production in each of its three markets : u.s. public finance , international infrastructure and global structured finance . the company believes high-profile defaults by municipal obligors , such as puerto rico , detroit , michigan and stockton , california have led to increased awareness of the value of bond insurance and stimulated demand for the product . the company believes there will be continued demand for its insurance in this market because , for those exposures that the company guarantees , it undertakes the tasks of credit selection , analysis , negotiation of terms , surveillance and , if necessary , loss mitigation . the company believes that its insurance : encourages retail investors , who typically have fewer resources than the company for analyzing municipal bonds , to purchase such bonds ; enables institutional investors to operate more efficiently ; and allows smaller , less well-known issuers to gain market access on a more cost-effective basis . on the other hand , the persistently low interest rate environment and relatively tight u.s. municipal credit spreads have dampened demand for bond insurance , and provisions in legislation known as the tax act , such as the termination of the tax-exempt status of advance refunding bonds and the reduction in corporate tax rates , have resulted in a reduction of supply and made municipal obligations less attractive to certain institutional investors . in certain segments of the global infrastructure and structured finance markets the company believes its financial guaranty product is competitive with other financing options . for example , certain investors may receive advantageous capital requirement treatment with the addition of the company 's guaranty .
| 126 from january 1 , 2020 through february 27 , 2020 , the company repurchased an additional 0.8 million common shares . on february 26 , 2020 , the board authorized share repurchases for an additional $ 250 million . as of february 27 , 2020 , after combining the remaining authorization and the new authorization , the company was authorized to purchase $ 408 million of its common shares . for more information about the company 's share repurchases and authorizations , see item 8 , financial statements and supplementary data , note 21 , shareholders ' equity . commitments and contingencies leases the company leases and occupies approximately 103,500 square feet in new york city through 2032. subject to certain conditions , the company has an option to renew the lease for five years at a fair market rent . the company also leases 78,400 square feet of office space at another location in new york city , which expires in 2024. in addition , agl and its subsidiaries lease additional office space in various locations under non-cancelable operating leases which expire at various dates through 2029. see “ contractual obligations ” below or item 8 , financial statements and supplementary data , note 20 , commitments and contingencies , for lease payments due by period . rent expense was $ 12 million in 2019 , $ 9 million in 2018 and $ 9 million in 2017 . 127 contractual obligations the following table summarizes the company 's obligations under its contracts , including debt and lease obligations , and also includes estimated claim payments , based on its loss estimation process , under financial guaranty policies it has issued . replace_table_token_49_th ( 1 ) includes interest and principal payments . see item 8 , financial statements and supplementary data , note 15 , long-term debt and credit facilities , for expected maturities of debt . ( 2 ) operating lease obligations exclude escalations in building operating costs and real estate taxes . ( 3 ) amount excludes approximately $ 85 million of liabilities under various supplemental retirement
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in connection with the execution of the sublease , the company also agreed to pay a security deposit of approximately $ 22,000. the company is entitled to an allowance of approximately $ 88,000 for certain tenant improvements relating to the engineering , design and construction of the sublease premises . march 2017 offering on march 22 , 2017 , in connection with the closing of a public offering ( the “ march 2017 offering ” ) , the company issued an aggregate of 8,625,000 shares of common stock , including the shares issued in connection with the exercise of the underwriters ' overallotment option , at a public offering price of $ 4.00 per share for gross proceeds of approximately $ 34,500,000. the net proceeds to the company , after the deduction of underwriting discounts , commissions and other offering expenses , were approximately $ 31,440,000. loan agreement on may 22 , 2017 , the company entered into a term loan agreement ( the “ 2017 loan agreement ” ) with affiliates of crg lp ( “ crg ” ) . the credit facility consists of $ 20,000,000 drawn at closing and access to additional funding of up to an aggregate of $ 10,000,000 for a total of $ 30,000,000 available under the credit facility . on december 29 , 2017 , the company accessed the remaining $ 10,000,000 available under the crg credit facility . a portion of the initial loan proceeds were used to repay all of the amounts owed by the company under its existing loan and security agreement , as amended january 13 , 2017 ( the “ 2016 loan agreement ” ) with western alliance bank . the remainder of the loan proceeds ( after deducting loan origination costs and other fees and expenses incurred in connection with the 2017 loan agreement ) will be used for general corporate purposes and working capital . the 2017 loan agreement has a six-year term with four years of interest-only payments after which quarterly principal and interest paymen ts will be due through the maturity date . amounts borrowed under the 2017 loan agreement accrue interest at an annual fixed rate of 12.50 % , 4.0 % of which may , at the election of the company , be paid in-kind during the interest-only period by adding such accrued amount to the principal loan amount each quarter . during the year ended december 31 , 2017 , the company paid interest in-kind of $ 495,000 which was added to the total outstanding principal loan amount as of december 31 , 2017. the company is also required to pay crg a final payment fee upon repayment of the loans in full . 46 the company may prepay all or a portion of the outstanding principal and accrued unpaid interest under the 2017 loan agreement at any time upon prior notice to crg , subject to a prep ayment fee during the first five years of the term ( which reduces each year ) and no prepayment fee thereafter . as security for its obligations under the 2017 loan agreement , the company entered into security agreements with crg whereby the company granted crg a lien on substantially all of the company 's assets , including intellectual property . the terms of the 2017 loan agreement also require the company to meet certain financial and other covenants . these covenants require the company to maintain cash a nd cash equivalents of $ 2.0 million and , each year through the end of 2022 , to meet a minimum total annual revenue threshold . in the event that the company does not meet the minimum total annual revenue threshold for a particular year , the company can retroactively cure the shortfall by either issuing additional equity in exchange for cash or incurring certain additional permitted indebtedness , in each case , in an amount equal to 2.0 times the shortfall . any such amounts shall be applied to prepay the loans . the 2017 loan agreement also contains customary affirmative and negative covenants for a credit facility of this size and type , including covenants that limit or restrict the company 's ability to , among other things , incur indebtedness , grant liens , merge or consolidate , dispose of assets , make investments , make acquisitions , enter into transactions with affiliates , pay dividends or make distributions , license intellectual property rights on an exclusive basis or repurchase stock , in each case subject to customary exceptions . as of december 31 , 2017 , the company was in compliance with all covenants . in connection with the 2017 loan agreement , the company issued two 10-year warrants to crg to purchase a total of 222,049 shares of the company 's common stock at an exercise price of $ 9.50 per share . 2017 employee stock purchase plan at the company 's annual meeting of the stockholders held on august 15 , 2017 , the stockholders approved the company 's 2017 employee stock purchase plan ( the “ 2017 espp ” ) . it is the company 's intention that the 2017 espp qualify as an “ employee stock purchase plan ” under section 423 of the internal revenue code . shares subject to the plan . an aggregate of 400,000 shares has been reserved and available for issuance under the 2017 espp . plan administration . the 2017 espp is administered by the compensation committee of the board of directors . eligibility . employees of the company and its u.s. subsidiary are eligible to participate in the 2017 espp so long as the employee is employed for more than 20 hours a week and has completed at least six months of employment on the first day of the applicable offering period . story_separator_special_tag no person who owns or holds , or as a result of participation in the 2017 espp would own or hold , common stock or options to purchase common stock , that together equal to 5 % or more of total outstanding common stock is entitled to participate in the 2017 espp . no employee may exercise an option granted under the 2017 espp that permits the employee to purchase common stock of the company having a value of more than $ 25,000 ( determined using the fair market value of the stock at the time such option is granted ) in any calendar year . participation and payroll deductions . participation in the 2017 espp is limited to eligible employees . eligible employees may authorize payroll deductions , with a minimum of 1 % of base pay and a maximum of 15 % of base pay . there are currently approximately 40 employees who will be eligible to participate in the 2017 espp . once an employee becomes a participant in the 2017 espp , that employee will automatically participate in successive offering periods until such time as that employee withdraws from the 2017 espp , becomes ineligible to participate in the 2017 espp , or his or her employment ceases . 47 offering periods . each offering of common stock under the 2017 espp is for a period of three months , which is referred to as the “ offering period. ” the first offering period under the 2017 espp began on october 1 , 2017 and will end on december 31 , 2017. subsequent offerings under the 2017 espp will generally begin on the first business day occurring on or after each january 1st , april 1st , july 1st and october 1st and will end on the last business day occurring on or before the following march 31st , june 30th , september 30th and december 31st , respectively . shares are purchased on the last business day of each offering period , with that day being referred to as an “ exercise date. ” exercise price . on the first day of an offering period , employees participating in that offering period will receive an option to purchase shares of our common stock . on the exercise date of each offering period , the employee is deemed to have exercised the option , at the exercise price , to the extent of accumulated payroll deductions . the option exercise price is equal to the lesser of ( i ) 85 % the fair market value per share of our common stock on the first day of the offering period or ( ii ) 85 % of the fair market value per share of our common stock on the exercise date . the maximum number of shares of common stock that may be issued to any employee under the 2017 espp in any offering period is 2,000. if an employee is no longer a participant on an exercise date , the employee 's option will be automatically terminated , and the amount of the employee 's accumulated payroll deductions will be refunded . terms of participation . a participant may not increase or decrease the amount of his or her payroll deductions during any offering period but may increase or decrease his or her payroll deduction with respect to the next offering period by completing a new enrollment form within the period beginning on the first day of the month before the first day of such offering period and ending on the 14th day of the month before the first day of such offering period . a participant may withdraw from an offering period at any time without affecting his or her eligibility to participate in future offering periods . if a participant withdraws from an offering period , that participant may not again participate in the same offering period , but may enroll in subsequent offering periods . an employee 's withdrawal will be effective as of the business day following the employee 's delivery of written notice of withdrawal under the 2017 espp . term ; amendments and termination . the 2017 espp will continue until terminated by the board of directors . upon termination of the 2017 espp , all amounts in the accounts of participating employees will be refunded . on august 8 , 2017 , the company entered into an exclusive distributorship agreeme nt ( the “ distributorship agreement ” ) with incontrol medical , llc ( “ icm ” ) , a wisconsin limited liability company focused on women 's health , pursuant to which the company will directly market , promote , distribute and sell icm 's products to licensed medical professional offices and hospitals . the products to be distributed by the company include icm 's intone , intonemv , apexm , and intensity products . under the terms of the distributorship agreement , icm agreed to not directly or indirectly appoint or autho rize any third party to market , promote , distribute or sell any of the licensed products to any licensed medical professional offices and hospitals in the united states . in exchange , the company agreed to not market , promote , distribute or sell ( or contract to do so ) any product which substantially replicates all or almost all of the key features of the licensed products . the company has a minimum purchase requirement to purchase a certain quantity of icm products per month during the term of this distributorship agreement . in addition , the parties agreed to certain mutual marketing obligations to promote sales of the licensed products . investment in limited liability company in connection with the distributorship agreement , the company also entered into a membership unit subscription agreement with icm and the associated limited liability company operating agreement of icm , pursuant to which the company invested $ 2,500,000 in , and acquired membership units of , icm . as of december 31 , 2017 , the company owns approximately 11 % ownership interest in icm .
| sales in 2016 included 175 viveve systems and smaller quantities of disposable treatment tips and other ancillary consumables sold primarily outside the u.s. to our distribution partners . 50 the increase in gross margin was primarily due to an increase in revenue from direct sales with higher margin products . we expect our gross margin to fluctuate in future periods based on the mix of our product and direct sales versus distributor sales . research and development expenses year ended december 31 , change 2017 2016 $ % ( in thousands , except percentages ) research and development $ 12,343 $ 8,365 $ < td id= '' .amt.4 '' style='width : 10 % ; text-align : right ; font-family :
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results of operations the following table sets forth income statement data for the periods indicated as a percentage of revenue : replace_table_token_5_th fiscal year 2014 compared with fiscal year 2013 sales sales for fiscal year 2014 increased $ 69.9 million , or 15.8 % to $ 514.0 million from $ 444.0 million for fiscal year 2014. the increase in sales for the fiscal year ended 2014 when compared to the same period of 2013 reflects an increase in semiconductor sales of $ 33.2 million and an increase in non-semiconductor sales of $ 36.8 million . the increase in overall sales for fiscal year 2014 compared to the same period in fiscal year 2013 is due primarily to an increase in the volume of products shipped , which is attributable to some recovery in customer demand from 2013 levels and , to a lesser degree , to the addition of a relatively new non-semiconductor customer , gtat , who declared bankruptcy in october of 2014. on a geographic basis , sales in the u.s. increased by $ 44.1 million to $ 361.7 million , or 70.4 % of sales , for the year ended december 26 , 2014 as compared to $ 317.6 million , or 71.5 % of sales for the same period of 2013. foreign sales increased by $ 25.9 million to $ 152.3 million , or 29.6 % of sales , for the year ended december 26 , 2014 as compared to $ 126.4 million , or 28.5 % of sales , for the same period of 2013. the increase in foreign sales is due in part to the recovery in customer demand as well as to the addition of the new customer discussed above in asia ( that subsequently declared bankruptcy in october 2014 ) . we expect sales to increase modestly in the first quarter of 2015 as compared to the fourth quarter of 2014 as we consolidate results for our newly-acquired company , marchi . gross profit cost of goods sold consists primarily of purchased materials , inventory reserves and labor and overhead , including depreciation , associated with the design and manufacture of products sold . gross profit for fiscal year 2014 increased to $ 73.1 million or 14.2 % of sales , from $ 67.3 million , or 15.2 % of sales , for fiscal year 2013. our gross margin percentage decreased in fiscal 2014 from the comparable period in 2013 due primarily to the 32 declaration of bankruptcy of gtat whereby the cost of sales associated with the goods shipped to gtat during the third quarter of fiscal 2014 did not have corresponding revenues and the on-hand and non-cancelable inventory commitments related to this customer of $ 4.6 million was charged to cost of goods sold . the increase in absolute dollars of gross profit when comparing fiscal year 2014 with 2013 is primarily due to higher sales volume , a sales mix which included higher margin products and certain improvements in operational efficiencies at our manufacturing locations in the u.s. , which typically deliver lower margins due to higher labor and overhead costs , offset to a degree by the charges in the third quarter as described above related to the declaration of bankruptcy of gtat . we expect gross profit to be slightly higher in the first quarter of 2015 , as compared to the fourth quarter of fiscal 2014 , primarily as a result of modestly higher expected sales in the first quarter of 2015. research and development expense research and development expense consists primarily of activities related to new component testing and evaluation , test equipment and fixture development , product design , and other product development activities . research and development expense for fiscal year 2014 was $ 7.1 million or 1.4 % of sales , compared to $ 5.5 million , or 1.2 % of sales , for fiscal year 2013. the increase in research and development expense in absolute dollars was due primarily to the timing of reassignment of existing resources to research and development activities and , to a lesser degree , to an increase in headcount . sales and marketing expense sales and marketing expense consists primarily of salaries and commissions paid to our sales and service employees , salaries paid to our engineers who work with the sales and service employees to help determine the components and configuration requirements for new products and other costs related to the sales of our products . sales and marketing expense increased $ 0.6 million , or 6.1 % , to $ 10.4 million , or 2.0 % of sales , compared to $ 9.8 million , or 2.2 % of sales , in the comparable period of 2013. the increase in the sales and marketing expense was primarily due to higher salaries and commissions resulting from higher headcount and revenues . general and administrative expense general and administrative expense consists primarily of salaries and overhead associated with our administrative staff and professional fees . general and administrative expense increased $ 1.4 million , or 3.9 % , to $ 37.5 million , or 7.3 % of sales , for fiscal year 2014 compared to $ 36.0 million , or 8.1 % of sales , for fiscal year 2013. the increase is primarily due to headcount related costs , including salaries , bonuses and stock compensation , and by the write-off of $ 1.6 million of accounts receivable as a result of the bankruptcy of gtat in october 2014 , offset by a decrease in the amortization of finite-lived intangibles associated with the ait acquisition . story_separator_special_tag interest and other income ( expense ) , net interest and other income ( expense ) , net for fiscal year 2014 was $ ( 1.9 ) million compared to $ ( 3.3 ) million for fiscal year 2013. the decrease in net expense was primarily due to the decrease in outstanding debt in fiscal year 2014. income tax provision our effective tax rate for fiscal year 2014 was 30.5 % compared to 17.3 % for fiscal year 2013. the change in respective rates reflects , primarily , a charge in the third quarter of fiscal 2014 related to recording a valuation allowance on our california and oregon deferred tax assets , and to a lesser degree , a change in the geographic mix of worldwide earnings and financial results for fiscal year 2014 compared to fiscal year 2013. our effective tax rate was lower than the statutory rates for fiscal year 2014 primarily due to the geographic distribution of our 33 world-wide earnings in foreign jurisdictions with lower tax rates or tax holidays , such as the tax holiday we are currently enjoying in singapore , offset by a valuation allowance against our california and oregon deferred tax assets . our effective tax rate was lower than the statutory rates for fiscal year 2013 primarily due to the geographic distribution of our world-wide earnings in foreign jurisdictions with lower tax rates or tax holidays . our ability to realize deferred tax assets depends on our ability to generate sufficient taxable income within the carryback or carry forward periods . in assessing our future taxable income , we have considered all sources of future taxable income available to realize our deferred tax assets , including the taxable income from future reversal of existing temporary differences , carry forwards , taxable income in carryback years and tax-planning strategies . in the third quarter of 2014 , we weighed both positive and negative evidence and concluded that a full valuation allowance on our california and oregon deferred tax assets was appropriate . among the negative evidence was the declaration of bankruptcy of gtat during the third quarter of 2014 and its impact on our ability to generate enough future taxable income in california and oregon to fully utilize net operating loss carryforwards in those states before they expire . as such , management concluded that it was not more likely than not that the california and oregon deferred tax assets will be realized and recorded a tax charge of $ 2.8 million in fiscal year 2014. as of december 26 , 2014 , we continue to maintain a full valuation allowance on the deferred assets of one of our china subsidiaries in the amount of $ 1.4 million as we believe it is more likely than not that the deferred tax asset will not be realized . in order to reverse a valuation allowance , accounting principles generally accepted in the united states of america suggests that we review both positive and negative evidence , including our recent cumulative income/loss to determine if we are more likely than not to generate sufficient future taxable income to realize our net deferred tax assets . we performed a twelve quarter analysis of our u.s. cumulative pretax profit position as of december 26 , 2014 and , weighing both positive and negative evidence , determined that it is more likely than not that we will have the ability to generate sufficient taxable income over the foreseeable future to realize our u.s. federal deferred tax assets . therefore , we concluded that a valuation allowance on our u.s. federal tax assets was not required . if changes occur in the assumptions underlying our tax planning strategies or in the scheduling of the reversal of our deferred tax liabilities , the valuation allowance may need to be adjusted in the future . beginning 2013 , we determined that a portion of the current year annual earnings of one of our china subsidiaries may be remitted in the future to one of our foreign subsidiaries outside of mainland china and , accordingly , we provided for the related withholding taxes in our consolidated financial statements . accordingly , no provisions for u.s. taxes have been provided thereon . in addition , if we change our intent to reinvest our undistributed foreign earnings indefinitely or if a greater amount of undistributed earnings are needed than the previously anticipated remaining unremitted foreign earnings , we could be required to accrue or pay u.s. taxes on some or all of these undistributed earnings . fiscal year 2013 compared with fiscal year 2012 sales sales for fiscal year 2013 increased $ 40.6 million , or 10.1 % to $ 444.0 million from $ 403.4 million for fiscal year 2012. the increase in sales during the fiscal year 2013 was due primarily to our acquisition of ait in july 2012 which resulted in the inclusion of sales of $ 122.4 million from ait , compared to $ 63.8 million of sales from ait for fiscal year 2012. sales for uct when excluding sales from ait were lower during the twelve months ended december 27 , 2013 when compared to fiscal year 2012 due to factors including the termination of our arrangement with fei at the end of the first quarter of 2012 , the determination by one of our larger semiconductor equipment customers to in-source a portion of their gas panel business , as well as an overall 34 downturn in the semiconductor industry beginning in the third quarter of 2012 which did not impact ait until the beginning of the fourth quarter of 2012. gross profit gross profit for fiscal year 2013 increased to $ 67.3 million or 15.2 % of sales , from $ 55.8 million , or 13.8 % of sales , for fiscal year 2012. our gross margin increased in fiscal 2013 from the comparable period in 2012 due primarily to sales mix which included higher margin products , certain improvements in operational efficiencies at our manufacturing locations , favorable work order variances and a reduction in floor stock
| debt issuance costs of a total $ 8.4 million and stock-based compensation of $ 4.4 million ; and decreases in accounts receivable , inventory and deferred income of $ 5.6 million and $ 7.1 million and $ 2.2 million , respectively . the decrease in inventory reflects , in part , improvement in inventory management over the previous year and , in part , the write-off related to the gtat bankruptcy . these were offset by a net decrease in accounts payable , accrued compensation and related benefits and other current liabilities of $ 6.2 million , and an increase in prepaid expenses and other assets of $ 2.5 million . operating cash flows generated in the twelve months ended december 27 , 2013 , were from $ 10.4 million of net income ; net non-cash activity , including depreciation of equipment and leasehold improvements and amortization of intangibles and debt issuance costs of a total $ 9.6 million and stock-based compensation of $ 4.7 million ; and decreases in accounts receivable and inventory of $ 17.4 million and $ 9.1 million , respectively . the decrease in inventory reflects the substantial improvement in inventory management over the previous year . these were offset by a net increase in accounts payable and other current liabilities of $ 31.0 million , and an 39 increase in accrued compensation and related benefits of $ 1.1 million . our cash flows from operations in any given period are largely driven by the timing of sales , the collection of accounts receivable and the payment of accounts payable . net cash used in investing activities for the twelve months ended december 26 , 2014 , was $ 5.1 million , consisting mainly of $ 5.3 million capital equipment expenditures in asia similar to the capital expenditures in 2013 which reflects our continued investment in our asian subsidiaries . net cash used in investing activities for fiscal 2013 was $ 2.9 million . the
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in march 2019 , we experienced a ransomware attack that infiltrated and encrypted certain of our information technology systems , including systems containing critical business data . immediately following the attack , actions were taken to recover the compromised systems and we believe we were able to restore their operation without significant loss of business data . based on the nature of the attack and its impact on our systems , we do not believe confidential data was lost or disclosed . we were able to recover the majority of the costs associated with the intrusion under an applicable insurance policy . although we believe we have contained the disruption from the march 2019 attack , we anticipate additional work and expense in the future as we continue to enhance our security processes and initiatives in response to ever-evolving information security threats . critical accounting policies , significant judgments and estimates our consolidated financial statements and the related notes included elsewhere in this form 10-k are prepared in accordance with accounting principles generally accepted in the united states . the preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenue , costs , and expenses and related disclosures . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . changes in accounting estimates may occur from period to period . accordingly , actual results could differ significantly from the estimates made by our management . we evaluate our estimates and assumptions on an ongoing basis . to the extent that there are material differences between these estimates and actual results , our future financial statement presentation , financial condition , results of operations , and cash flows will be affected . we believe that the following critical accounting policies involve a greater degree of judgment and complexity than our other accounting policies . accordingly , these are the policies we believe are the most critical to understanding and evaluating of our audited 2019 consolidated financial statements . revenue recognition we adopted asc 606 revenue from contracts with customers on january 1 , 2018 and all the related amendments using the modified retrospective method . the company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit as of january 1 , 2018. the comparative information for 2017 has not been recast and continues to be reported under the accounting standards in effect for that period . we generate revenue primarily from sales of our products and services . our product revenue consists of sales of our mass cytometry , high-throughput genomics and single-cell genomics instruments and consumables , including ifcs , assays , and other reagents . our service revenue consists of post-warranty service contracts , preventive maintenance plans , repairs , installation , training and other specialized product support services . we also receive grants from various entities to perform research and development activities over contractually defined periods . revenue is reported net of any sales , use and value-added taxes , which we collect from customers as required by government authorities . we recognize revenue based on the amount of consideration we expect to receive in exchange for the goods and services we transfer to the customer . our commercial arrangements typically include multiple distinct products and services , and we allocate revenue to these performance obligations based on their relative standalone selling prices . standalone selling prices ( ssps ) are generally determined using observable data from recent transactions . in cases where sufficient data is not available , we estimate a product 's ssp using a cost plus a margin approach or by applying a discount to the product 's list price . product revenue we recognize product revenue at the point in time when control of the goods passes to the customer and we have an enforceable right to payment . this generally occurs either when the product is shipped from one of our facilities or when it arrives at the customer 's facility , based on the contractual terms . customers generally do not have a unilateral right to return products after delivery . invoices are generally issued at shipment and become due in 30 to 60 days . 40 service revenue we recognize revenue from repairs , maintenance , installation , training and other specialized product support services at the point in time the work is completed . installation and training services are generally billed in advance of service . repairs and other services are generally billed at the point the work is completed . revenue associated with instrument service contracts is recognized on a straight-line basis over the life of the agreement , which is generally one to three years . we believe this approach is appropriate for service contracts because we provide services on demand throughout the term of the agreement . invoices are generally issued in advance of service on a monthly , quarterly , annual or multi-year basis . payments made in advance of service are reported on our consolidated balance sheet as deferred revenue . contract costs incremental sales commission costs incurred to obtain instrument service contracts are capitalized and amortized to selling , general and administrative expense over the life of the contract , which is generally one to three years . as a practical expedient , we expense sales commissions associated with product support services that are delivered in less than one year as they are incurred . sales commissions associated with the sale of products are expensed as they are incurred . to date , capitalized contract costs have been immaterial . product warranties we generally provide a one-year warranty on our instruments . we accrue for estimated warranty obligations at the time of product shipment . we periodically review our warranty liability and record adjustments based on the terms of warranties provided to customers , and historical and anticipated warranty claim experience . story_separator_special_tag this expense is recorded as a component of cost of product revenue in the consolidated statements of operations . significant judgments applying the revenue recognition practices discussed above often requires significant judgment . judgment is required when identifying performance obligations , estimating ssp and allocating purchase consideration in multi-element arrangements and estimating the future amount of our warranty obligations . significant judgment is also required when interpreting commercial terms and determining when control of goods and services passes to the customer . any material changes created by errors in judgment could have a material effect on our operating results and overall financial condition . goodwill , intangible assets and other long-lived assets goodwill , which has an indefinite useful life , represents the excess of cost over fair value of net assets acquired . our intangible assets include developed technology , patents and licenses . the cost of identifiable intangible assets with finite lives is generally amortized on a straight-line basis over the assets ' respective estimated useful lives . goodwill and intangible assets with indefinite lives are not subject to amortization but are tested for impairment on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate the carrying amount of these assets may not be recoverable . events or changes in circumstances that could affect the likelihood that we will be required to recognize an impairment charge include , but are not limited to , declines in our stock price or market capitalization , declines in our market share or revenues , and an increase in our losses , rapid changes in technology , failure to achieve the benefits of capacity increases and utilization , significant litigation arising out of an acquisition , or other matters . any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge . in evaluating our goodwill and intangible assets with indefinite lives for indications of impairment , we first conduct an assessment of qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount . if we determine that it is more likely than not that the fair value of our reporting unit is less than its carrying amount , we then conduct a two-step test for impairment of goodwill . in the first step , we compare the fair value of our reporting unit to its carrying value . if the fair value of our reporting unit exceeds its carrying value , goodwill is not considered impaired and no further analysis is required . if the carrying value of the reporting unit exceeds its fair value , then the second step of the impairment test must be performed in order to determine the implied fair value of the goodwill . if the carrying value of the goodwill exceeds its implied fair value , then an impairment loss equal to the difference would be recorded . we did not recognize any impairment of goodwill for any of the periods presented herein . 41 we evaluate our long-lived assets , including finite-lived intangibles , for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable . if any indicators of impairment exist , we assess the recoverability of the affected long-lived assets by determining whether the carrying value of the asset can be recovered through undiscounted future operating cash flows . if impairment is indicated , we estimate the asset 's fair value using future discounted cash flows associated with the use of the asset and adjust the carrying value of the asset accordingly . in the fourth quarter of 2019 , we recognized an impairment charge of $ 0.4 million on patents and licenses that are not used in any current products and are not expected to be used in future product offerings . convertible notes in february 2014 , we closed an underwritten public offering of $ 201.3 million aggregate principal amount of our 2014 notes . in march 2018 , we entered into separate privately negotiated transactions with certain holders of our 2014 notes to exchange $ 150.0 million in aggregate principal amount of the 2014 notes for 2.75 % exchange convertible senior notes due 2034 ( 2018 notes ) . following the exchange , approximately $ 51.3 million in aggregate principal amount of the 2014 notes remained outstanding , together with $ 150.0 million in aggregate principal amount of the 2018 notes . as the 2018 notes were convertible , at our election , into cash , shares of our common stock , or a combination of cash and shares of our common stock , we accounted for the 2018 notes under the cash conversion guidance in asc 470 , whereby the embedded conversion option in the 2018 notes was separated and accounted for in equity . the embedded conversion option value was calculated as the difference between ( i ) the total fair value of the 2018 notes and ( ii ) the fair value of a similar debt instrument excluding the embedded conversion option . we determined an embedded conversion option value of $ 29.3 million , which was recorded in additional paid-in-capital and reduced the carrying value of the 2018 notes . the resulting discount on the 2018 notes was amortized over the expected term of the 2018 notes , using the effective interest method through the first note holder put date , of february 6 , 2023. in the first quarter of 2019 , the 2018 notes were converted into approximately 19.5 million shares of common stock and the 2018 notes were retired . we recorded a loss of $ 9.0 million on the retirement of the 2018 notes . this amount represents the difference between the fair value of the bonds converted and the carrying value of the bonds at the time of conversion , including unamortized premiums , discounts and debt issuance costs .
| 45 the following table presents our revenue by source for the years ended december 31 , 2019 , 2018 , and 2017 , and as a percentage of total revenue for the respective years ( in thousands ) : replace_table_token_3_th the following table presents our total revenue by geographic area of our customers and as a percentage of total revenue for each year presented ( in thousands ) : replace_table_token_4_th the americas revenue includes revenue generated in the united states of $ 43.4 million , $ 48.1 million , and $ 45.8 million for 2019 , 2018 and 2017 , respectively . asia-pacific revenue includes sales to customers in china of $ 15.4 million , $ 14.0 million and $ 11.1 million for 2019 , 2018 and 2017 , respectively . except for china , no other foreign country or jurisdiction had sales in excess of 10 % of our total revenue during the years 2019 , 2018 and 2017. the following section includes management discussion and analysis for the fiscal year ended december 31 , 2019. refer to part i item 7 of the annual report on form 10-k for the fiscal year ended december 31 , 2018 , filed with the sec on march 18 , 2019 , for a discussion of the comparative results for 2018 and 2017 , which discussion of comparative results is incorporated by reference into this form 10-k. total revenue total revenue increased by $ 4.3 million or 4 % , to $ 117.2 million for 2019 compared to $ 113.0 million for 2018 , primarily attributable to increases in mass cytometry instruments , consumables and service revenue , partially offset by lower microfluidics revenue . americas revenues declined by 8 % , due to lower instrument and consumables product revenues , partially offset by higher service and grant revenues . emea revenues grew 9 % , driven primarily by higher instrument sales . unfavorable foreign exchange rates had a negative 3 % point impact on emea revenue growth . the 20 % increase in asia-pacific revenues is due to increases in instrument sales and service revenue , partially offset by lower consumables revenue . on a company-wide basis , weaker foreign exchange rates negatively impacted revenues by less than 1 % for 2019 compared to 2018. product revenue product revenue increased by $ 1.8 million , or 2 % , to $ 95.4 million for 2019 from $ 93.7 million in 2018 due to higher sales volumes of mass cytometry instruments and consumables , partially offset by lower average selling prices of mass cytometry
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in addition to network programs , we broadcast locally and nationally internally produced programs , syndicated programs , sporting events and other programs of interest in each station 's market . news is the primary focus of our locally-produced programming . the operating performance of our television group is most affected by local and national economic conditions , particularly conditions within the automotive , services and retail categories , and by the volume of advertising time purchased by campaigns for elective office and political issues . the demand for political advertising is significantly higher in the third and fourth quarters of even-numbered years . operating results for our television segment were as follows : replace_table_token_12_th 2016 compared with 2015 the company completed its acquisition of the journal television stations on april 1 , 2015. the inclusion of operating results from this transaction for the periods subsequent to the acquisition impacts the comparability of the television division operating results . revenues total television revenues increased 31.6 % in 2016. the comparability of year-over-year revenues was impacted by $ 48.7 million of revenues from the acquired television stations . increased retransmission revenues and higher political revenues in a presidential-election year drove most of the remaining year-over-year increase . retransmission revenues , excluding the impact of the acquired television stations , increased almost $ 70 million due to the renewal of retransmission agreements with higher rates and contractual rate increases . rate increases from the renewal of contracts covering 3 million households were effective from the beginning of 2016 and contracts covering an additional 3 million households were effective in the fourth quarter of 2016. f-9 costs and expenses employee compensation and benefits increased 5.9 % in 2016. the increase was primarily from $ 15.9 million of incremental compensation and benefits from the acquired television stations for the first quarter of 2016. programs and program licenses expense increased 47.1 % in 2016 , primarily due to the acquired television stations and higher network fees . programming costs of the acquired television stations accounted for $ 9.1 million of the year-over-year increase . the remainder of the increase was from higher network affiliation license fees of $ 47 million , partially offset by lower syndicated programming expense . network affiliation fees have been increasing industry wide due to higher rates on renewals as well as contractual rate increases , and we expect that they may continue to increase over the next several years . other expenses increased 14.3 % in 2016 primarily due to higher general operating expenses and the impact of the acquired television stations . 2015 compared with 2014 the company completed its acquisition of the journal television stations on april 1 , 2015 and the acquisition of two granite television stations on june 16 , 2014 , collectively referred to as the `` acquired stations . '' the inclusion of operating results from these businesses for the periods subsequent to the acquisitions impacts the comparability of our television division operating results . revenues total television revenues increased 31 % in 2015. the acquired stations accounted for slightly more than $ 147 million of the year-over-year increase . for stations owned for the entire year , a $ 52 million decline in political advertising revenue was offset by a $ 49 million increase in retransmission revenue . in 2014 , we completed negotiations with satellite and cable television systems covering approximately 5.6 million subscribers in certain of our markets and our 2015 results reflect the renewal of those agreements . costs and expenses employee compensation and benefits increased 28 % in 2015 primarily due to the acquired stations . programs and program licenses expense nearly doubled during the year compared to 2014 , primarily due to the acquisitions and higher network affiliate fees . the acquired stations accounted for $ 28 million of the increase for the year while higher network license fees , offset by lower syndicated programming expense , accounted for the rest . we completed new agreements for 10 of our abc stations at the beginning of 2015 and one of our cbs stations in july 2015. other expenses increased 36 % in 2015 primarily due to the impact of the acquired stations . f-10 radio — our radio segment consists of 34 radio stations in eight markets . we operate 28 fm stations and six am stations . radio stations earn revenue primarily from the sale of advertising to local advertisers . our radio stations focus on providing targeted and relevant local programming that is responsive to the interest of the communities in which we serve , strengthening our brand identity and allowing us to provide effective marketing solutions for advertisers by reaching their targeted audiences . operating results for our radio segment were as follows : replace_table_token_13_th the company completed its acquisition of the journal radio stations on april 1 , 2015. the inclusion of operating results from this transaction for the periods subsequent to the acquisition impacts the comparability of the radio division operating results . revenues total radio revenues increased 20.3 % in 2016. in 2016 , there was a full year of operations for our radio stations compared to only nine months in 2015 , which accounted for an additional $ 14.5 million of revenue . this increase was partially offset by weakness in our largest markets during 2016 , including the impact of lower advertising for sports programming in our milwaukee market . costs and expenses total costs and expenses increased 26.1 % in 2016 primarily due to costs associated with flood cleanup at our wichita operations and the $ 12.5 million of expenses from the acquired radio stations for the first quarter of 2016. employee compensation and benefits were lower year-over-year after adjusting for the impact of the acquired stations . f-11 digital — our digital segment includes the digital operations of our local television and radio businesses . story_separator_special_tag it also includes the operations of our national digital businesses including newsy , an over-the-top video news service , cracked , the multi-platform humor and satire brand and midroll , a podcast industry leader . our digital operations earn revenue primarily through the sale of advertising and marketing services . operating results for our digital segment were as follows : replace_table_token_14_th 2016 compared with 2015 our digital businesses , midroll and cracked , were acquired on july 22 , 2015 and april 12 , 2016 , respectively , and the journal acquisition was completed on april 1 , 2015. the inclusion of operating results from these businesses for the periods subsequent to the acquisitions impacts the comparability of our digital segment operating results . revenues digital revenues increased 59.5 % or $ 23.1 million in 2016. excluding the results of cracked and midroll , revenues increased 28 % for the year , primarily driven by increases in advertising on our television and radio local market digital sites and increased revenues from newsy . in 2016 , our national digital brands were approximately 37 % of our total revenues , up from 21 % in 2015. cost and expenses digital costs and expenses increased 40.0 % in 2016 , primarily due to the impact of cracked and midroll . excluding the results of cracked and midroll , expenses increased 10.5 % for the year , primarily due to costs from expanding newsy 's editorial staff and marketing efforts . 2015 compared with 2014 revenues digital revenues increased 70.1 % in 2015 compared to 2014. the increase for the year includes $ 5.9 million and $ 4.6 million , respectively , from the acquired journal stations and the midroll acquisition . the remainder of the increase was driven by our focus on increasing digital advertising revenues with an expanded sales force in our television markets and increased revenue from programmatic advertising . costs and expenses digital costs and expenses increased 22.6 % in 2015 compared to 2014 primarily due to the impact of the acquired journal stations and our acquisition of midroll . f-12 shared services and corporate we centrally provide certain services to our business segments . such services include accounting , tax , cash management , procurement , human resources , employee benefits and information technology . the business segments are allocated costs for such services at amounts agreed upon by management . such allocated costs may differ from amounts that might be negotiated at arms-length . costs for such services that are not allocated to the business segments are included in shared services and corporate costs . shared services and corporate also includes unallocated corporate costs , such as costs associated with being a public company . 2016 to 2015 shared services and corporate expenses were comparable year-over-year at $ 44.2 million in 2016 and $ 43.6 million in 2015 . 2015 to 2014 shared services and corporate expenses were $ 43.6 million in 2015 and $ 41.8 in 2014 , increasing by $ 1.8 million , primarily due to higher incentive compensation . f-13 liquidity and capital resources our primary source of liquidity is our available cash and borrowing capacity under our revolving credit facility . operating activities cash provided by operating activities for the years ended december 31 is as follows : replace_table_token_15_th 2016 to 2015 the $ 138 million increase in cash provided by continuing operating activities was primarily attributable to an $ 110 million year-over-year increase in segment profit , $ 38 million of acquisition and related costs incurred in 2015 that were not repeated in 2016 and changes in working capital in 2016 compared to 2015. these items were partially offset by $ 10 million of contributions made to our pension plans in 2016. the primary factors affecting changes in working capital are described below . in 2015 , we made $ 15 million in estimated tax payments while no significant tax payments were made in 2016. additionally , in 2016 we received a tax refund of $ 4.4 million . the accrual of payroll and annual incentive compensation , net of the payment amounts earned in the prior year , decreased working capital by $ 1.0 million in 2016 and increased working capital by $ 6.0 million in 2015. the timing of the payment of more than $ 8 million of our network affiliation fees at the end of 2016 reduced working capital in 2016. f-14 2015 to 2014 the $ 69 million decrease in cash provided by continuing operating activities was primarily attributable to changes in working capital in 2015 compared to 2014 , partially offset by a $ 21 million increase in segment profit . in addition , we incurred transaction costs of $ 38 million in 2015 and $ 9.7 million in 2014 in connection with the journal transactions . also , the 2015 tax benefit of $ 33 million will not provide cash until future years when the net operating loss carryforward will reduce taxes payable . the other primary factors affecting changes in operating activities are described below . collections of accounts receivable decreased $ 20 million in 2015 compared to 2014. collections in an odd year are generally lower due to the impact of political advertising in the preceding period , which is paid in advance , increasing overall collections of accounts receivable in that year . in 2015 , we made estimated income tax payments of $ 15 million . we did not make any significant tax payments in 2014. the timing of payments for accounts payable and accrued expenses decreased working capital by $ 26 million in 2015. investing activities cash used in investing activities for the years ended december 31 is as follows : replace_table_token_16_th in 2016 , 2015 and 2014 we used $ 73 million , $ 60 million and $ 160 million , respectively , in cash for investing activities for continuing operations . the primary factors affecting our cash flows from investing activities for the years presented are described below .
| programs and program licenses expense increased 43.7 % in 2016 , primarily due to the acquired stations and higher network affiliation fees . programming costs of the acquired stations was $ 10 million of the increase year-over-year . the f-4 remainder of the increase for the year was from higher network affiliation license fees of $ 47 million , which was partially offset by lower syndicated programming expense . other expenses are comprised of the following : replace_table_token_9_th other expenses increased in 2016 compared to prior year , most of which was driven by the acquired stations and the acquired digital operations . acquisition and related integration costs of $ 0.6 million in 2016 and $ 38.0 million in 2015 include costs for spinning off our newspaper operations and costs associated with acquisitions , such as investment banking , legal and accounting fees , as well as costs to integrate the acquired businesses . depreciation and amortization expense increased from $ 52 million in 2015 to $ 59 million in 2016 due to a full year of expense from the acquired stations and as well as the impact of the acquired digital operations . in 2015 , we recorded a $ 25 million non-cash charge to reduce the carrying value of goodwill and certain intangible assets associated with newsy and a smaller business . defined benefit plan expense decreased by $ 44.3 million year-over-year . the prior year included a $ 45.7 million non-cash settlement charge for the lump-sum pension benefit payments made to certain pension participants and a $ 1.1 million curtailment charge resulting from the spin-off of our newspaper business . the current year included a full year of expense from the pension plans acquired in the journal transactions . interest expense increased year-over-year due to the increased debt related to the journal acquisition . the effective income tax rate was 36.5 % and 33.0 % for 2016 and 2015 , respectively . state taxes and
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recent developments following are the more significant issues impacting us since the filing of our annual report on form 10-k for the year ended december 31 , 2012 : impairment of long-lived assets and goodwill due to the existence of a number of potential impairment indicators at june 30 , 2013 , we performed a company-wide impairment review of our long-lived assets and goodwill , which we completed during the three months ended september 30 , 2013. indicators of impairment , which triggered the need for such review , included adverse changes in the business climate in certain shale basins including persistently low natural gas prices and shifts in customer end markets and resulting higher logistics costs in our industrial solutions operating segment , combined with lower-than-expected financial results . additionally , the market value of our equity traded for a period of time at a value that was less than the book value of our equity . in its shale solutions operating segment , long-lived assets were grouped at the shale basin level for purposes of assessing their recoverability . except for aws and the company 's pipelines , we concluded the basin level is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities . for those asset groups with carrying values that exceed their undiscounted future cash flows , we recognized an impairment charge for the amount by which the carrying values of the asset group exceeded their respective fair values . long-lived asset impairment was $ 111.9 million for the year ended december 31 , 2013. the impairment charge recognized during 2013 consists of write-downs to the carrying values of our freshwater pipeline in the haynesville shale basin of $ 27.0 million and certain other long-lived assets including customer relationship and disposal permit intangibles totaling $ 4.5 million and disposal wells and equipment of $ 80.4 million in the haynesville , eagle ford , tuscaloosa marine and barnett shale areas . the goodwill impairment test has two steps . the first step of the goodwill impairment test , used to identify potential impairment , compares the fair value of a reporting unit with its carrying amount including goodwill . during the three months ended september 30 , 2013 , we performed step one of the goodwill impairment test for each of our four reporting units : the shale solutions reporting unit , the industrial solutions reporting unit , the pipeline reporting unit and the aws reporting unit . to measure the fair value of each reporting unit , we used a combination of the discounted cash flow method and the guideline public company method . based on the results of the step-one goodwill impairment review we concluded the fair values of the shale solutions , pipeline and aws reporting units exceeded their respective carrying amounts and accordingly , the second step of the 39 impairment test was not necessary for these reporting units . conversely , we concluded the fair value of the industrial solutions reporting unit was less than its carrying value thereby requiring us to proceed to the second step of the two-step goodwill impairment test . the second step of the goodwill impairment test , used to measure the amount of the impairment loss , compares the implied fair value of reporting unit goodwill with its carrying amount . the implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination . after allocating the fair value of industrial solutions to the assets and liabilities of the reporting unit , we concluded the carrying value of reporting unit goodwill exceeded its implied fair value . accordingly , we recognized a goodwill impairment charge of $ 98.5 million in 2013 which is recorded within loss from discontinued operations in the accompanying consolidated statements of operations . we have $ 408.7 million in goodwill as of december 31 , 2013 related to our shale solutions reportable segment , which has been allocated to our shale solutions , pipeline and aws reporting units . as described in the preceding paragraphs , the results of our impairment test during the third quarter of 2013 , which we updated through september 30 , 2013 ( our annual testing date ) , indicated that the goodwill relating to each of these reporting units was not impaired at june 30 , 2013 and september 30 , 2013 , since the estimated fair values of all reporting units exceeded their carrying values . with respect to the pipeline and aws reporting units , the estimated fair values of the reporting units exceeded their carrying values by a substantial amount . however , while no impairment was indicated as a result of our analysis and testing at june 30 , 2013 , september 30 , 2013 , or from our subsequent review at december 31 , 2013 , we determined that our shale solutions reporting unit , with goodwill of $ 390.7 million , had an estimated fair value that exceeded its carrying value by less than 3.5 percent . the fair values of each of the reporting units as well as the related assets and liabilities utilized to assess the 2013 impairment were measured using level 2 and level 3 inputs as described in note 11 of the notes to consolidated financial statements . we believe the assumptions used in our discounted cash flow analysis are appropriate and result in reasonable estimates of the implied fair value of each reporting unit . however , these assumptions are subject to uncertainty and relatively small declines in the future performance or cash flows of the shale solutions reporting unit or small changes in other key assumptions may result in the recognition of impairment charges , which could be significant . we believe the most significant assumption used in our analysis is the expected improvement in the margins and overall profitability of our reporting units . story_separator_special_tag in order to evaluate the sensitivity of the fair value calculations on the goodwill impairment test , a hypothetical decline of greater than 65 basis points in the operating margin in our shale solutions reporting unit would result in an estimated carrying value in excess of its fair value , requiring us to proceed to the second step of the goodwill impairment test . additionally , we may not meet our revenue growth targets , our working capital needs and capital expenditures may be higher than forecast , changes in credit or equity markets may result in changes to our cost of capital and discount rate and general business conditions may result in changes to the terminal value assumptions for our reporting units . one or more of these factors , among others , could result in additional impairment charges . in evaluating the reasonableness of our fair value estimates , we consider ( among other factors ) the relationship between our book value , the market price of our common stock and the fair value of our reporting units . at december 31 , 2013 , the closing market price of our common stock was $ 16.79 per share compared to our book value per share of $ 24.79 as of such date . our assessment assumes this relationship is temporary ; however , if our book value per share continues to exceed our market price per share for an extended period of time , this would likely indicate the occurrence of events or changes that could cause us to revise our fair value estimates and perform a step-two goodwill impairment analysis . while we believe that our estimates of fair value are reasonable , we will continue to monitor and evaluate this relationship in 2014. in the fourth quarter of 2013 , we announced a plan to realign our shale solutions business into three operating divisions : ( 1 ) the northeast division comprising the marcellus and utica shale areas , ( 2 ) the southern division comprising the haynesville , barnett , eagle ford , mississippian shale areas and permian basin and ( 3 ) the rocky mountain division comprising the bakken shale area . the implementation of this organizational 40 realignment is ongoing and is expected to be completed in 2014. in connection with these planned organizational changes , we are evaluating whether the new operating divisions constitute separate operating segments and if so , whether two or more of them can be aggregated into one or more reportable segments . as the organizational realignment progresses , we will continue to evaluate its potential impact on our reporting units , which is a level of reporting at which goodwill is tested for impairment . to the extent we conclude the composition of our reporting units has changed , we will be required to allocate goodwill on a relative fair value basis to the new reporting units and test the newly-allocated goodwill for impairment should triggering events occur . we may be required to record impairment of our goodwill and other intangible assets as a result of this reallocation . impairment charges recorded for the year ended december 31 , 2013 , by reportable segment , are summarized as follows ( in thousands ) : shale solutions industrial solutions impairment of property , plant and equipment $ 107,413 $ impairment of intangible assets 4,487 impairment of goodwill ( 1 ) 98,500 total impairment $ 111,900 $ 98,500 ( 1 ) goodwill impairment applicable to the industrial solutions segment is included as a part of loss from discontinued operations in our consolidated statements of operations . assets held for sale and discontinued operations as discussed in the preceding paragraphs , our board of directors has approved and committed to a plan to divest tfi and , based on the status of the sales process currently underway , we expect the sale will be completed in the second quarter of 2014. the results of operations and cash flows of tfi are presented as discontinued operations in our consolidated statements of operations and consolidated statements of cash flows for the years ended december 31 , 2013 and 2012 ( since its acquisition on april 10 , 2012 ) . additionally , the assets and liabilities of tfi are presented separately as assets held for sale , and liabilities of discontinued operations , in our consolidated balance sheets as of december 31 , 2013 and 2012. at december 31 , 2013 , the carrying value of the net assets of tfi was approximately $ 147.1 million , which we believe does not exceed the amount expected to be realized from the sale . see note 20 of notes to consolidated financial statements for additional information . financing activities as more fully described in note 10 of the notes to consolidated financial statements and in item 7. management 's discussion and analysisliquidity and capital resourcesrevolving credit agreement in february 2014 , we entered into a new asset-based revolving credit facility ( abl facility ) with wells fargo bank as administrative agent and other lenders which amended and replaced our amended revolving credit facility . initially , the abl facility provides a maximum credit amount of $ 200.0 million , which can be increased to $ 225.0 million through a $ 25.0 million accordion feature . initial borrowings under the abl facility were used to refinance amounts outstanding under the amended revolving credit facility and fund certain related fees and expenses . the abl facility will be used to support ongoing working capital needs and other general corporate purposes , including growth initiatives and the potential repurchase of a portion of the company 's currently outstanding 2018 notes . the abl facility , which matures at the earlier of five years from the closing date or 90 days prior to the maturity of other material indebtedness including the 2018 notes , is secured by substantially all of our assets .
| 45 amortization of intangibles : amortization of intangible assets represents the allocation of costs for identifiable intangible assets originating from business acquisitions to future periods based on the assets ' useful lives and or their projected future cash flows . intangible assets include customer relationships , customer contracts , disposal permits , vendor relationships and other . impairment of long-lived assets : as discussed in note 7 of the notes to the consolidated financial statements , we recognized a charge of $ 111.9 million in the year ended december 31 , 2013 for the write-down of the carrying values of certain intangible assets , disposal wells , vehicles and equipment and our freshwater pipeline . interest expense , net : interest expense includes interest incurred on the outstanding balance of our amended revolving credit facility including fees on the unutilized portion thereof , interest incurred on our 2018 notes as well as other indebtedness . additionally , interest expense includes accretion of contingent consideration obligations , the obligation to acquire non-controlling interest , asset retirement obligations , as well as amortization of deferred financing costs . such amounts are offset by interest earned on short-term investments . other income ( expense ) : other income ( expense ) includes gains and losses from changes to contingent consideration estimates incurred in connection with business combinations , losses attributable to declines in the value of escrowed assets associated with the indemnification arrangements pursuant to acquisitions , the impairment of cost-method investments and income from equity method investments . income tax benefit : we have significant deferred tax assets , consisting primarily of net operating losses ( nols ) , which have a limited life . although we have incurred losses in recent years , we have determined that the reversal of our deferred tax liabilities will generate sufficient taxable income in future years to utilize our deferred tax assets prior to the expiration of our nols . however , if we were to generate additional deferred tax assets in the near future , our deferred tax liabilities may not be sufficient to fully realize all of our deferred tax assets , and a valuation allowance
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the company considers itself the principal in the arrangement because the company controls the specified good before it is transferred to the customer . revenue contracts contain one performance obligation , which is delivery of the product ; customer care and support is deemed not to be a material right to the contract . the transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns , which are estimated based on historical patterns ; however this is not considered a key judgment . there are no amounts excluded from variable consideration . revenue is recognized when control transfers to the customer at the point in time in which shipment of the product occurs . this key judgment is determined as the shipping point represents the point in time in which the company has a present right to payment , title has transferred to the customer , and the customer has assumed the risks and rewards of ownership . outbound shipping and handling fees are an accounting policy election , and are included in sales as the company considers itself the principal in the arrangement given responsibility for supplier selection and discretion over pricing . shipping costs associated with outbound freight after control over a product has transferred to a customer are an accounting policy election and are accounted for as fulfillment costs and 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 $ 39,000 at march 31 , 2019 compared to $ 35,000 at march 31 , 2018 . 16 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 $ 54,000 and $ 58,000 at march 31 , 2019 and 2018 , respectively . advertising the company 's advertising expense consists primarily of internet marketing , direct mail/print , and television advertising . internet costs are expensed in the month incurred and direct mail/print advertising costs are expensed when the related brochures and postcards are produced , distributed , or superseded . television advertising costs are expensed as the advertisements are televised . 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 for the fiscal year ended march 31 , 2018. advertising cost of acquiring a new customer can be impacted by the advertising environment , the effectiveness of our advertising creative , increased advertising spending , and price competition . historically , the advertising environment fluctuates due to supply and demand . a more favorable advertising environment may positively impact future new order sales , whereas a less favorable advertising environment may negatively impact future new order sales . as a percentage of sales , advertising expense was 7.8 % and 7.0 % for the fiscal years ended march 31 , 2019 and 2018 , respectively . the increase in advertising expense as a percentage of total sales for the fiscal year ended march 31 , 2018 can be mainly attributed to increased online and television advertising to stimulate sales and promote brand awareness . the company currently anticipates advertising as a percentage of sales to be approximately 10 % for fiscal 2020. however , the advertising percentage may fluctuate quarter to quarter due to seasonality and advertising availability . depreciation depreciation expense for the fiscal year ended march 31 , 2019 increased by approximately $ 99,000 , to approximately $ 2.2 million from approximately $ 2.1 million for the fiscal year ended march 31 , 2018. this increase to depreciation expense for the fiscal year ended march 31 , 2019 can be attributed to an increase in new property and equipment additions in fiscal 2019. other income other income increased by approximately $ 1.2 million , to approximately $ 2.9 million for the fiscal year ended march 31 , 2019 from approximately $ 1.7 million for the fiscal year ended march 31 , 2018. the increases to other income for the fiscal year ended march 31 , 2018 are primarily related to increased interest income due to increased interest rates . interest income may decrease in the future as the company utilizes its cash balances on its share repurchase plan , with approximately $ 40.2 million remaining at march 31 , 2019 , on any quarterly dividend payment , or on its operating activities . story_separator_special_tag provision for income taxes for the fiscal years ended march 31 , 2019 and 2018 , the company recorded an income tax provision for approximately $ 11.4 million and $ 16.5 million , respectively . the decrease to the income tax provision for fiscal 2019 is related to a decrease in operating income offset by the income tax rate reduction pursuant to the tax cuts and jobs act of 2017 ( “ 2017 act ” ) . the effective tax rate for the fiscal years ended march 31 , 2019 and 2018 were 23.2 % and 30.7 % , respectively . the decrease to the effective rate for the fiscal year ended march 31 , 2019 is due to a reduction in the company 's corporate tax rate pursuant to the 2017 act . the company estimates its effective tax rate will be approximately 24.0 % for fiscal 2020. net income net income increased by approximately $ 457,000 , or 1.2 % , to approximately $ 37.7 million for the fiscal year ended march 31 , 2019 from approximately $ 37.3 million for the fiscal year ended march 31 , 2018. the increase was primarily due to a decrease in the tax provision due to a reduction in the effective tax rate , which was offset by a decrease to gross profit due to increases in discounts given to customers to stimulate sales in response to increased online competition and increased advertising . 19 fiscal 2018 compared to fiscal 2017 sales sales increased by approximately $ 24.6 million , or 9.9 % , to approximately $ 273.8 million for the fiscal year ended march 31 , 2018 , from approximately $ 249.2 million for the fiscal year ended march 31 , 2017. the increase in sales for the fiscal year ended march 31 , 2018 was primarily due to increased new order and reorder sales . the company acquired approximately 521,000 new customers for the fiscal year ended march 31 , 2018 , compared to approximately 514,000 new customers for the same period the prior year . 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 continue to grow in the future . the majority of our product sales are affected by the seasons , due to the seasonality of mainly flea , tick , and heartworm medications . for the quarters ended june 30 , september 30 , december 31 , and march 31 of fiscal 2018 , the company 's sales were approximately 29 % , 24 % , 22 % , and 25 % , respectively . for the quarters ended june 30 , september 30 , december 31 , and march 31 of fiscal 2017 , the company 's sales were approximately 29 % , 25 % , 21 % , and 25 % , respectively . cost of sales cost of sales increased by $ 6.1 million , or 3.6 % to $ 176.0 million for the fiscal year ended march 31 , 2018 , from $ 169.9 million for the fiscal year ended march 31 , 2017. the increase in cost of sales in fiscal 2018 is directly related to the increase in sales during the fiscal year . as a percentage of sales , cost of sales was 64.3 % in fiscal 2018 , as compared to 68.2 % in fiscal 2017. the cost of sales percentage decrease can be mainly attributed to a product mix shift to higher margin items , offset by additional discounts given to customers to increase sales during the fiscal year . gross profit gross profit increased by $ 18.5 million , or 23 % , to $ 97.8 million for the fiscal year ended march 31 , 2018 , from $ 79.3 million for the fiscal year ended march 31 , 2017. the increase in gross profit in fiscal 2018 is directly related to the increase in sales during the fiscal year . gross profit as a percentage of sales for fiscal 2018 was 35.7 % compared to 31.8 % for fiscal 2017. the gross profit percentage increase in fiscal 2018 can be mainly attributed to a product mix shift to higher margin items , offset by 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 6.5 % , to $ 24.3 million for the fiscal year ended march 31 , 2018 from $ 22.8 million for the fiscal year ended march 31 , 2017. the increase in general and administrative expenses for the fiscal year ended march 31 , 2018 was primarily due to the following : a $ 1.8 million increase in payroll expenses related to increased stock compensation expense ; a $ 554,000 increase in bank service fees due to increased sales ; and a $ 179,000 increase in professional fees . offsetting the increase was a $ 620,000 decrease to property expense ; a $ 310,000 decrease to bad debt expenses relating to decreased credit card chargebacks ; and a $ 66,000 net decrease to other expenses which include telephone , insurance , licenses , and office expenses . general and administrative expenses as a percentage of sales were 8.9 % for the fiscal year ended march 31 , 2018 , compared to 9.2 % for the fiscal year ended march 31 , 2017 .
| cost of sales cost of sales increased by $ 12.1 million , or 6.9 % to $ 188.1 million for the fiscal year ended march 31 , 2019 , from $ 176.0 million for the fiscal year ended march 31 , 2018. as a percentage of sales , cost of sales was 66.4 % in fiscal 2019 , as compared to 64.3 % in fiscal 2018. the cost of sales increase is due to increased sales and the percentage increase can be attributed to increases in discounts given to customers to stimulate sales in response to increased online competition , and an increase in product costs during the fiscal year . gross profit gross profit decreased by $ 2.5 million , or 2.6 % , to $ 95.3 million for the fiscal year ended march 31 , 2019 , from $ 97.8 million for the fiscal year ended march 31 , 2018. the decrease in gross profit in fiscal 2019 is directly related to increased discounts given to customers to stimulate sales . gross profit as a percentage of sales for fiscal 2019 was 33.6 % compared to 35.7 % for fiscal 2018. the gross profit percentage decrease in fiscal 2019 can be mainly attributed to increases in discounts given to customers to stimulate sales in response to increased online competition , and an increase in product costs during the fiscal year . going forward gross profit may be adversely affected due to increased competition and consumers giving more consideration to price . general and administrative expenses general and administrative expenses increased by $ 477,000 , or 2.0 % , to $ 24.8 million for the fiscal year ended march 31 , 2019 from $ 24.3 million for the fiscal year ended march 31 , 2018. the increase in general and administrative expenses for the fiscal year ended march 31 , 2019 was primarily due to the following : a $ 291,000 increase in property expenses related to increased property taxes in fiscal 2019 ; a $ 257,000 increase in bank service fees due to increased sales ; a $ 142,000 increase in professional fees which is related to increased legal and it related expenses ; and a $ 110,000 increase in travel and
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our live events also generate substantial net revenue through the sale of sponsorships , food and other concessions , merchandise and other ancillary products and services . live event ticket pricing is based on consumer demand for each event and the geographic location and target audience demographic of each event . unforeseen events such as inclement weather conditions can have an adverse impact on our net revenue . in certain cases , we mitigate this risk with insurance policies , which cover a portion of lost revenue as a result of unforeseen events including inclement weather . we strive to maximize our net revenue by managing our advertising inventory and adjusting prices based on supply and demand and by broadening our base of advertisers and subscribers . our selling and pricing activity is based on demand for our advertising inventory and , in general , we respond to this demand by varying prices rather than by varying our target inventory levels . the optimal number of advertisements available for sale depends on the platform and in the case of our radio stations , their online streams and mobile applications , the programming format of a particular radio station . each of our advertising products has a general target level of available inventory . we seek to broaden our base of advertisers in each of our markets by providing a wide array of audience demographic segments across our platforms , thereby providing each of our potential advertisers with an effective means of reaching a targeted demographic group . our advertising contracts are generally short-term . in the media industry , companies , including ours , sometimes utilize barter agreements that exchange advertising time for goods or services such as travel or lodging , instead of cash . our most significant expenses are sales , programming , digital , marketing and promotional , engineering , and general and administrative expenses . we strive to control these expenses by closely monitoring and managing each of our local markets and through efficiencies gained from the centralization of finance , accounting , legal and human resources functions and management information systems . we also use our scale and diversified geographic portfolio to negotiate favorable rates with vendors where feasible . a portion of our expenses are variable . these variable expenses primarily relate to sales costs , such as commissions , as well as certain programming costs , such as music license fees , and certain costs related to production . marketing and promotions expenses are discretionary and are primarily incurred in an effort to maintain and or increase our audience share . other programming , digital , engineering and general and administrative expenses are primarily fixed costs . the company has identified three operating segments , which are advertising , including broadcast and digital advertising products and solutions , townsquare interactive , our digital marketing solutions business and live events , including concerts , expositions and other experiential events . 47 overview of our performance changes in our business during the first quarter of 2019 , management concluded that the company should exit its music festival business , which consisted of four multi-day music festivals ( the “ music festivals ” ) . on may 24 , 2019 , the company closed on the sale of the music festivals for $ 10.0 million . upon the sale , the company and the purchaser of the music festivals entered into a production services agreement which required the company to operate the 2019 festivals on the purchaser 's behalf . the company acted as an independent contractor while performing the services and earned a fixed percentage of profits from the festivals . accordingly , the assets , liabilities and results of operations of this business have been presented as discontinued operations on the consolidated balance sheets as of december 31 , 2019 and 2018 , and in the consolidated statements of operations for the years ended december 31 , 2019 , 2018 , and 2017. refer to note 6 , divestitures and discontinued operations , in the accompanying notes to consolidated financial statements for additional information . on july 2 , 2018 , the company acquired certain assets and liabilities related to three radio stations in princeton , nj ( “ the princeton acquisition ” ) from connoisseur media , llc . we use the term “ pro forma ” in this section to refer to results that include the princeton acquisition as if it had been completed on january 1 , 2017 . this presentation provides the users of this financial information a comparable format for analysis . refer to note 5 , acquisitions , in the accompanying notes to consolidated financial statements for additional information . on june 29 , 2018 , the company entered into an agreement of purchase and sale to transfer its 70 % controlling interest in mountain jam , llc ( `` mountain jam '' ) to chet-5 festivals ( `` chet-5 '' ) , llc and to acquire the 30 % minority interest in taste of country productions llc from chet-5 . the assets and liabilities associated with mountain jam qualified as an asset held for sale and the associated results of operations qualified for presentation as a discontinued operation . accordingly , assets , liabilities and results of operations of these businesses have been presented as discontinued operations on the consolidated balance sheet as of december 31 , 2018 , and in the consolidated statements of operations for the years ended december 31 , 2018 and 2017. refer to note 6 , divestitures and discontinued operations , in the accompanying notes to consolidated financial statements for additional information . during the fourth quarter of 2017 , we undertook a corporate strategic review of the company 's operations and concluded the company should exit certain entertainment businesses and that two live event verticals , premium music and holiday , would be discontinued . story_separator_special_tag the assets and liabilities associated with the heartland group , llc and its wholly owned subsidiary north american midway entertainment ( `` name '' ) qualified as an asset held for sale and the associated results of operations qualified for presentation as a discontinued operation . on may 24 , 2018 , the company , through a subsidiary of townsquare live events , llc , sold all of the issued and outstanding membership interests of heartland group , llc and its wholly owned subsidiary name to north american fairs , llc for $ 23.5 million . accordingly , the assets , liabilities and results of operations of this business have been presented as discontinued operations on the consolidated balance sheet as of december 31 , 2018 , and in the consolidated statements of operations for the years ended december 31 , 2018 and 2017. refer to note 6 , divestitures and discontinued operations , in the accompanying notes to consolidated financial statements for additional information . changes in our segments on january 2 , 2019 , the company announced that its co-ceo bill wilson would become the company 's sole ceo . as a result of this organization change , mr. wilson also became the company 's chief operating decision maker ( “ codm ” ) . based on the information reviewed by mr. wilson in his capacity as codm , the company identified three reportable operating segments , which are advertising , which includes broadcast and digital advertising products and solutions , townsquare interactive , which is our digital marketing solutions business and live events , which is comprised of the company 's live events , including concerts , expositions and other experiential events . the company has concluded that each of these operating segments shall be presented separately . prior year segment presentation has been conformed with the current year presentation . restatement of previously issued consolidated financial statements in connection with the performance of our 2019 annual testing for impairment to our fcc licenses , management determined that the projected cash flows utilized under the income valuation method to perform our annual testing for impairment to our fcc licenses included cash flows which have been determined to be indirectly related to the cash flows 48 generated from the use of our fcc licenses . as a result , our non-cash impairment charge for the years ended december 31 , 2018 and 2017 were understated by approximately $ 28.3 million and $ 3.8 million , respectively and therefore the provision for income taxes , net income , earnings per share and retained earnings were all overstated in our previously reported consolidated financial statements for the years ended december 31 , 2018 and 2017. the impact on our consolidated balance sheets was primarily an overstatement of intangible assets , net and an overstatement to retained earnings as of december 31 , 2018 and 2017. additionally , a non-cash impairment charge has been reflected in our restated consolidated statements of stockholders ' equity as of january 1 , 2017 for the impact of this adjustment on prior period results . additionally , the tax basis in certain fcc licenses recognized during the year ended december 31 , 2014 were retrospectively adjusted in connection with the completion of our 2019 annual testing for impairment . the impact of the adjustment represents a decrease to retained earnings in the amount of $ 3.5 million . this adjustment has been reflected in our restated consolidated statements of stockholders ' equity as of january 1 , 2017. in connection with the non-cash impairment charges discussed above , the company further assessed the need for a valuation allowance to reduce deferred tax assets related to its federal net operating loss carryforwards , including an evaluation of the available pertinent positive and negative evidence , such as our history of earnings , the scheduled reversal of deferred tax assets and liabilities and projected earnings . based on such evaluation , the company determined that it was more likely than not that a portion of the deferred tax assets related to its federal net operating and capital loss carryforwards may not be realized and that evidence supporting such determination became evident as of december 31 , 2018. as such , an adjustment of $ 42.9 million , $ 28.4 million of which is reflected as an adjustment to the provision for income taxes in our restated consolidated financial statements for the year ended december 31 , 2018 , related to the establishment of a valuation allowance to reduce the deferred tax assets to the amount that the company expects will be realized . as a result , net income , earnings per share and retained earnings were all overstated , while the provision for income taxes was understated in our previously reported consolidated financial statements for the year ended december 31 , 2018. the impact on our consolidated balance sheets was primarily an overstatement of deferred tax assets and an overstatement to retained earnings as of december 31 , 2018. on may 24 , 2018 , the company , through a subsidiary of townsquare live events , llc , sold all of the issued and outstanding membership interests of heartland group , llc and its wholly-owned subsidiary north american midway entertainment ( `` name '' ) to north american fairs , llc for $ 23.5 million . we recognized a loss on the sale of name of approximately $ 1.8 million within net loss from discontinued operations . the loss on the sale of name was recognized as an ordinary loss for tax purposes during the second quarter of the year ended december 31 , 2018. however , due to the uncertainty of the characterization of the loss , the company has recorded the sale of name as a capital loss and have also identified additional basis that increased this loss .
| our advertising segment reported an operating loss of $ 11.3 million which represents a decrease of $ 49.3 million from the year ended december 31 , 2018 , due primarily to a goodwill impairment charge of $ 69.0 million in 2019 , partially offset by the increase in net revenue and lower impairment charges on our fcc licenses . townsquare interactive 's operating income for the year ended december 31 , 2019 was $ 18.6 million , an increase of $ 4.7 million from the same period in 2018 , primarily due to the increase in net revenue offset by the additional costs associated with an increase in headcount . our live events segment reported operating income of $ 2.8 million , a decrease of $ 0.1 million from the year ended december 31 , 2018 reflecting the reduction of a number of live events in 2019. operating loss was also impacted by corporate costs and other reconciling items of $ 47.2 million for the year ended december 31 , 2019 , an increase of $ 10.2 million from the same period in 2018 , primarily due to an increase in depreciation and amortization offset by lower impairment and business realignment charges in 2019. cash and cash equivalents increased to $ 84.7 million from $ 60.5 million as of december 31 2019 , and 2018 , respectively . the adoption of the provisions of asu 2016-02 , leases and asu 2018-11 , leases ( topic 842 ) : targeted improvements on january 1 , 2019 altered the presentation of our consolidated balance sheet . in accordance with the asu 's we recognized ( a ) a lease liability of approximately $ 49.1 million , which represents the present value of the remaining lease payments , discounted at a weighted average discount rate of 7.04 % , and ( b ) a right-of-use 51 asset of approximately $ 46.2 million which represents the lease liability of $ 49.1 million adjusted for accrued rent of approximately $ 2.9 million . the adoption did not require us to restate the prior year 's consolidated balance sheet . therefore , certain metrics derived from the consolidated balance
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the company applies the accounting guidance in asc 740 related to accounting for uncertainty in income taxes . the company 's reserves related to taxes are based on a determination of whether , and how much of , a tax benefit taken by the company in its tax filings or story_separator_special_tag results of operations you should read the following management 's discussion and analysis of our financial condition and results together with the section entitled “ selected financial data ” and our financial statements and related notes included elsewhere in this annual report on form 10-k. this discussion and other parts of this annual report contain forward-looking statements that involve risk and uncertainties , such as statements of our plans , objectives , expectations and intentions . our actual results could differ materially from those discussed in these forward-looking statements . factors that could cause or contribute to such differences include , but are not limited to , those discussed in the `` risk factors '' section in part i item ia . overview we are a biopharmaceutical company that has historically focused on microrna-based oncology therapeutics , which are short ribonucleic acid , or rna , molecules , or oligonucleotides . our first product candidate , mrx34 , was studied as a single agent in a phase 1 clinical trial . in september 2016 , we voluntarily halted the phase 1 trial following multiple immune-related serious adverse events , or saes , observed in patients dosed with mrx34 in the trial . subsequently , we received notification from the u.s. food and drug administration , or the fda , that the investigational new drug application , or ind , for mrx34 was on full clinical hold . following our suspension of the phase 1 trial for mrx34 and the fda 's clinical hold on the ind for mrx34 , we discontinued development of mrx34 and our microrna product pipeline . in november 2016 , we discontinued research and development activities to reduce operating expenses while we evaluate our strategic alternatives with a goal to enhance stockholder value , including the possibility of a merger or sale of the company . we also initiated a plan in november 2016 to reduce personnel and expenses to preserve capital and further streamline our operations consistent with our decision to discontinue development of mrx34 and our microrna product pipeline . we expect to devote significant time and resources to identifying and evaluating strategic alternatives , however , there can be no assurance that such activities will result in any agreements or transactions that will enhance shareholder value . further , any strategic transaction that is completed ultimately may not deliver the anticipated benefits or enhance shareholder value . we were incorporated in 2007 under the laws of delaware and were maintained as a wholly‑owned subsidiary of our former parent company , asuragen , inc. , or asuragen , until the end of 2009 , when we became an independent entity . our operations have historically focused on developing our understanding of and capabilities in microrna biology , identifying potential product candidates , undertaking preclinical studies , initiating and conducting a clinical trial , protecting and enhancing our intellectual property estate and providing general and administrative support for these activities . we have not generated any revenue from product sales and , to date , have funded our operations primarily through the private placement of convertible preferred stock , federal and state government grants , offerings of our common stock , and support from our former parent company , asuragen . from our inception through december 31 , 2016 , we have raised an aggregate of approximately $ 167.3 million to fund our operations , of which approximately $ 89.9 million was from the issuance of preferred stock for cash and assets , $ 48.7 million from a public offering of our common stock , $ 16.8 million from a private placement of our common stock and $ 11.9 million was from federal and state grants . since our inception , we have incurred significant operating losses . our net loss was $ 26.3 million for the year ended december 31 , 2016 . at december 31 , 2016 , we had an accumulated deficit of $ 102.8 million . we expect to continue to incur significant expenses and operating losses . our net losses may fluctuate significantly from quarter to quarter and from year to year . we anticipate that our expenses will decrease as we proceed with our reduction in force ; discontinue our research and development activities ; and focus on evaluating our strategic alternatives with a goal to enhance stockholder value , including the possibility of a merger or sale of the company . financial operations overview revenue we have not generated any revenue from product sales or from collaborations . in the future , we may generate revenue following a potential strategic transaction , which may result in a clinical asset . revenue may fluctuate from period to period , and the timing and extent of any future revenue will depend on our ability to consummate a strategic transaction . 28 research and development expenses research and development expenses have consisted primarily of costs incurred for our research activities , including our historical drug discovery efforts , and the development of our product candidates , which included the following : employee‑related expenses , including salaries , benefits , travel and stock‑based compensation ; external research and development expenses incurred under arrangements with third parties , such as contract research organizations , or cros , consultants and our scientific advisory board ; lab supplies , and acquiring , developing and manufacturing preclinical study materials in accordance story_separator_special_tag with good laboratory practices ; costs of clinical trials , including costs for management , investigator fees and related vendors that provide services for the clinical trials ; costs to manufacture the drug used in the clinical trials in accordance with good manufacturing practices ; license and milestone fees ; development and prosecution of intellectual property ; and costs of facilities , depreciation and other expenses . in september 2016 , mirna announced its decision to close the phase 1 study of mrx34 and voluntarily halted the enrollment and dosing of patients in the study . further , in november 2016 , the company discontinued research and development activities to reduce operating expenses . research and development costs have been expensed as incurred . in certain circumstances , we have made nonrefundable advance payments to purchase goods and services for future use pursuant to contractual arrangements . in those instances , we deferred and recognized an expense in the period that we receive or consume the goods or services . our research and development expenses have been offset by proceeds derived from federal and state grants . these government grants , which have supplemented our research efforts on specific projects , generally provided for reimbursement of approved costs , as defined in the terms of the grant awards . the proceeds from these reimbursement grants are treated as a reduction to the associated expenses as the allowable expenses are incurred . prior to discontinuing our research and development activities , at any point in time , we typically had various early stage research and drug discovery projects ongoing . our internal resources , employees and infrastructure were not directly tied to any one research or drug discovery project and were typically deployed across multiple projects . as such , we did not maintain information regarding the costs incurred for these early stage research and drug discovery programs on a basis . however , we historically spent the vast majority of our research and development resources on our first product candidate , mrx34 , which has been placed on full clinical hold by the fda . we anticipate that our research and development expenses will decrease as we initiate our reduction in force ; discontinue our research and development activities ; focus on evaluating our strategic alternatives with a goal to enhance stockholder value , including the possibility of a merger or sale of the company ; and the complete closure of the phase 1 clinical trial for mrx34 . general and administrative expenses general and administrative expenses consist primarily of salaries and related benefits , including stock‑based compensation , related to our executive , finance and support functions . other general and administrative expenses include allocated facility‑related costs not otherwise included in research and development expenses , travel expenses and professional fees for auditing , tax and legal services . we expect that general and administrative expenses related to our operations will decrease as a result of the workforce reduction and discontinuance of our research and development activities . these decreases may be offset in whole or in part following the change in our corporate strategy to focus on pursuing potential strategic initiatives to enhance stockholder value . recent accounting pronouncements 29 for recent accounting pronouncements see note 2. summary of significant accounting policies of notes to the financial statements in part ii , item 8 of this report . critical accounting policies and estimates this management 's discussion and analysis of financial condition and results of operations is based on our 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 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 revenue and expenses incurred during the reported periods . on an ongoing basis , we evaluate our estimates and judgments , including those related to stock‑based compensation , clinical trial and pre-clinical study accruals , and restructuring expenses . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources . changes in estimates are reflected in reported results for the period in which they become known . actual results may differ from these estimates under different assumptions or conditions . while our significant accounting policies are described in the notes to our financial statements appearing elsewhere in this annual report on form 10-k , we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results . stock‑based compensation we account for our stock‑based compensation awards in accordance with asc topic 718 , compensation—stock compensation , or “ asc 718 ” . asc 718 requires all stock‑based payments to employees , including grants of employee stock options , to be recognized in the statements of operations based on their grant date fair values . for stock options granted to employees and to members of our board of directors for their services on the board of directors , we estimate the grant date fair value of each option award using the black‑scholes option‑pricing model .
| the increase for the year ended december 31 , 2015 was primarily due to the following : approximately $ 1.0 million for additional costs associated with operating as a publicly-traded company , including higher legal , audit , insurance , professional fees and administrative costs . approximately $ 1.0 million of increased employee compensation , benefits and stock compensation expense due to increased headcount and changes in compensation , of which $ 455,000 related to increased payroll and benefits expenses and $ 545,000 related to stock-based compensation expense 31 restructuring charges restructuring charges were approximately $ 4.4 million for the year ended december 31 , 2016 . we did not have restructuring charges during the year ended december 31 , 2015 . on september 20 , 2016 , we announced our decision to close the phase 1 clinical trial of mrx34 , voluntarily halted the enrollment and dosing of patients in the study and subsequently discontinued our research and development activities . following the announcement , we received notice from the fda that our investigational new drug mrx 34 had been placed on full clinical hold . following our announcement and notification from the fda , our board of directors approved a reduction of the total number of our full-time employees from 36 to 12 . we also committed to retention payments to certain key employees if such employees remained with us until june 30 , 2017 or were terminated by us without cause prior to such date . the restructuring expenses recognized during the year ended december 31 , 2016 included approximately $ 1.5 million for employee severance and benefits , $ 1.5 million for lease facility termination costs , and $ 1.4 million for non-cash impairment charges of property and equipment . the majority of employee severance and related benefits are expected to be settled in the first quarter of 2017. we expect to incur additional restructuring charges of approximately $ 0.3 million through the six months ended june 30 , 2017. comparison of year ended december 31 , 2015 and 2014 : replace_table_token_5_th research and development expenses
| 12,679 |
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