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our commercial & industrial segment 's gross profit during the year ended september 30 , 2020 decreased by $ 8.8 million , or 29.6 % , as compared to the year ended september 30 , 2019. this was driven primarily by a decrease in volume as discussed above , and certain project inefficiencies . as a percentage of revenue , gross profit decreased from 9.8 % for the year ended september 29 30 , 2019 , to 8.2 % for the year ended september 30 , 2020 , as a result of certain project inefficiencies , as well as a less efficient absorption of branch level overheads in connection with lower volumes . selling , general and administrative expenses . our commercial & industrial segment 's selling , general and administrative expenses during the year ended september 30 , 2020 , increased $ 4.3 million , or 15.5 % , compared to the year ended september 30 , 2019. the increased expense for the year ended september 30 , 2020 includes a reserve for doubtful accounts related to a commercial dispute , as well as an increase in legal fees . additionally , we have invested in our procurement process and incurred costs in connection with changes to our organization structure , with the goal of improving gross margins in the future . selling , general and administrative expenses as a percentage of revenue increased to 12.6 % from 9.1 % , reflecting the impact of the decreased scale of our operations . goodwill impairment expense . throughout 2020 , our commercial & industrial segment continued to experience operating losses . although the business has maintained a focus on operational improvements and cost reductions , its performance continued to be affected by the ongoing covid-19 pandemic and other market factors . during the third and fourth fiscal quarter , we had expected to see operational and market improvements , as government restrictions and “ stay at home ” orders began to expire . however , the continuing impact of covid-19 and the resulting increase in economic uncertainty has continued to impact customer decisions on awarding of new work . in this increasingly competitive and uncertain environment , demand for new construction in market sectors such as retail , office , and hospitality has declined , and our backlog has decreased . as a result of these developments , and continuing operational difficulties we experienced in the fourth fiscal quarter , we concluded in performing our annual goodwill impairment assessment that the fair value of our commercial & industrial reporting unit was less than its carrying amount , which resulted in the recognition of a non-cash goodwill impairment charge of $ 7.0 million for the year ended september 30 , 2020 . 2019 compared to 2018 replace_table_token_12_th revenue . revenues in our commercial & industrial segment increased $ 31.3 million , or 11.4 % , during the year ended september 30 , 2019 , compared to the year ended september 30 , 2018. the increase in revenue over this period was driven by an increase in large agricultural and other projects in the midwest . gross profit . our commercial & industrial segment 's gross profit during the year ended september 30 , 2019 increased by $ 0.3 million , or 0.9 % , as compared to the year ended september 30 , 2018. we benefited from higher volumes ; however , these benefits were offset by certain project inefficiencies during the second half of the year . as a percentage of revenue , gross profit decreased from 10.8 % for the year ended september 30 , 2018 , to 9.8 % for the year ended september 30 , 2019 , as a result of these project inefficiencies . selling , general and administrative expenses . our commercial & industrial segment 's selling , general and administrative expenses during the year ended september 30 , 2019 , increased $ 0.8 million , or 2.9 % , compared to the year ended september 30 , 2018 , but decreased from 9.9 % as a percentage of revenue for the year ended september 30 , 2018 to 9.1 % for the year ended september 30 , 2019 , as we benefited from the increased scale of our operations and a focus on controlling costs . 30 interest and other expense , net replace_table_token_13_th during the year ended september 30 , 2020 , we incurred interest expense of $ 0.8 million primarily comprised of interest expense from our revolving credit facility with wells fargo bank , n.a . ( “ wells fargo ” ) and fees on an average letter of credit balance of $ 6.9 million under our revolving credit facility and an average unused line of credit balance of $ 89.6 million . this compares to interest expense of $ 1.9 million for the year ended september 30 , 2019 , primarily comprised of interest expense from our revolving credit facility with wells fargo and fees on an average letter of credit balance of $ 6.6 million under our revolving credit facility and an average unused line of credit balance of $ 73.7 million . for the year ended september 30 , 2018 , we incurred interest expense of $ 1.9 million on a debt balance primarily comprised of our revolving credit facility with wells fargo and fees on an average letter of credit balance of $ 6.6 million under our revolving credit facility , and an average unused line of credit balance of $ 63.2 million . provision for income taxes for the year ended september 30 , 2020 , we recorded income tax expense of $ 8.7 million . income tax expense was partly offset by a $ 3.2 million benefit related to the recognition of previously unrecognized tax benefits as well as a $ 3.3 million benefit related to the release of valuation allowance on certain state net operating loss carryforwards . for the year ended september 30 , story_separator_special_tag our commercial & industrial segment 's gross profit during the year ended september 30 , 2020 decreased by $ 8.8 million , or 29.6 % , as compared to the year ended september 30 , 2019. this was driven primarily by a decrease in volume as discussed above , and certain project inefficiencies . as a percentage of revenue , gross profit decreased from 9.8 % for the year ended september 29 30 , 2019 , to 8.2 % for the year ended september 30 , 2020 , as a result of certain project inefficiencies , as well as a less efficient absorption of branch level overheads in connection with lower volumes . selling , general and administrative expenses . our commercial & industrial segment 's selling , general and administrative expenses during the year ended september 30 , 2020 , increased $ 4.3 million , or 15.5 % , compared to the year ended september 30 , 2019. the increased expense for the year ended september 30 , 2020 includes a reserve for doubtful accounts related to a commercial dispute , as well as an increase in legal fees . additionally , we have invested in our procurement process and incurred costs in connection with changes to our organization structure , with the goal of improving gross margins in the future . selling , general and administrative expenses as a percentage of revenue increased to 12.6 % from 9.1 % , reflecting the impact of the decreased scale of our operations . goodwill impairment expense . throughout 2020 , our commercial & industrial segment continued to experience operating losses . although the business has maintained a focus on operational improvements and cost reductions , its performance continued to be affected by the ongoing covid-19 pandemic and other market factors . during the third and fourth fiscal quarter , we had expected to see operational and market improvements , as government restrictions and “ stay at home ” orders began to expire . however , the continuing impact of covid-19 and the resulting increase in economic uncertainty has continued to impact customer decisions on awarding of new work . in this increasingly competitive and uncertain environment , demand for new construction in market sectors such as retail , office , and hospitality has declined , and our backlog has decreased . as a result of these developments , and continuing operational difficulties we experienced in the fourth fiscal quarter , we concluded in performing our annual goodwill impairment assessment that the fair value of our commercial & industrial reporting unit was less than its carrying amount , which resulted in the recognition of a non-cash goodwill impairment charge of $ 7.0 million for the year ended september 30 , 2020 . 2019 compared to 2018 replace_table_token_12_th revenue . revenues in our commercial & industrial segment increased $ 31.3 million , or 11.4 % , during the year ended september 30 , 2019 , compared to the year ended september 30 , 2018. the increase in revenue over this period was driven by an increase in large agricultural and other projects in the midwest . gross profit . our commercial & industrial segment 's gross profit during the year ended september 30 , 2019 increased by $ 0.3 million , or 0.9 % , as compared to the year ended september 30 , 2018. we benefited from higher volumes ; however , these benefits were offset by certain project inefficiencies during the second half of the year . as a percentage of revenue , gross profit decreased from 10.8 % for the year ended september 30 , 2018 , to 9.8 % for the year ended september 30 , 2019 , as a result of these project inefficiencies . selling , general and administrative expenses . our commercial & industrial segment 's selling , general and administrative expenses during the year ended september 30 , 2019 , increased $ 0.8 million , or 2.9 % , compared to the year ended september 30 , 2018 , but decreased from 9.9 % as a percentage of revenue for the year ended september 30 , 2018 to 9.1 % for the year ended september 30 , 2019 , as we benefited from the increased scale of our operations and a focus on controlling costs . 30 interest and other expense , net replace_table_token_13_th during the year ended september 30 , 2020 , we incurred interest expense of $ 0.8 million primarily comprised of interest expense from our revolving credit facility with wells fargo bank , n.a . ( “ wells fargo ” ) and fees on an average letter of credit balance of $ 6.9 million under our revolving credit facility and an average unused line of credit balance of $ 89.6 million . this compares to interest expense of $ 1.9 million for the year ended september 30 , 2019 , primarily comprised of interest expense from our revolving credit facility with wells fargo and fees on an average letter of credit balance of $ 6.6 million under our revolving credit facility and an average unused line of credit balance of $ 73.7 million . for the year ended september 30 , 2018 , we incurred interest expense of $ 1.9 million on a debt balance primarily comprised of our revolving credit facility with wells fargo and fees on an average letter of credit balance of $ 6.6 million under our revolving credit facility , and an average unused line of credit balance of $ 63.2 million . provision for income taxes for the year ended september 30 , 2020 , we recorded income tax expense of $ 8.7 million . income tax expense was partly offset by a $ 3.2 million benefit related to the recognition of previously unrecognized tax benefits as well as a $ 3.3 million benefit related to the release of valuation allowance on certain state net operating loss carryforwards . for the year ended september 30 ,
| during the year ended september 30 , 2020 , our selling , general and administrative expenses were $ 170.9 million , an increase of $ 30.3 million , or 21.6 % over the year ended september 30 , 2019 , driven by increased personnel costs at our operating segments in connection with their growth , as well as an increase in certain selling , general and administrative expenses at our commercial & industrial segment as described below . this increase also includes a $ 1.8 million increase in expenses at the corporate level , primarily related to a severance payment to our former ceo , who stepped down in july 2020. as a percentage of revenue , selling , general and administrative expenses increased to 14.4 % for the year ended september 30 , 2020 from 13.1 % for the year ended september 30 , 2019. as described below , for the year ended september 30 , 2020 , we recognized a non-cash goodwill impairment charge of $ 7.0 million relating to our commercial & industrial segment . 2019 compared to 2018 consolidated revenues for the year ended september 30 , 2019 , were $ 200.2 million higher than for the year ended september 30 , 2018 , an increase of 22.8 % , with increases at all of our operating segments , driven by strong demand . our overall gross profit percentage decreased slightly to 16.9 % during the year ended september 30 , 2019 , as compared to 17.1 % during the year ended september 30 , 2018. gross profit as a percentage of revenue increased at our infrastructure solutions and residential segments , but decreased at our commercial & industrial and communications segments , as discussed in further detail with respect to each segment below . during the year ended september 30 , 2019 , our selling , general and administrative expenses were $ 140.6 million , an increase of $ 16.7 million , or 13.4 % , over the year ended september 30 , 2018 , driven by increased personnel costs at our operating segments in connection with their growth . this increase also includes a $ 4.2 million increase in expenses at the corporate level , primarily related to an increase in stock-based compensation expense , as well as
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presentation of foreign currency amounts the average exchange rates to the u.s. dollar used to translate balances during each reported period are as follows : replace_table_token_2_th - 28 - story_separator_special_tag align= '' justify '' style= '' text-indent : 0pt ; display : block ; margin-left : 0pt ; margin-right : 0pt '' > hotel , food , beverage and other revenue increased by $ 0.6 million , or 8.6 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increases in hotel , food , beverage and other revenue are due to increased food and beverage revenue from the yuk yuk 's comedy club , which we began operating without a third party provider in september 2010 , and increased showroom events attendance . the increase in hotel , food , beverage and other revenue is also the result of the 4.0 % exchange rate increase . in canadian dollars , hotel , food , beverage and other revenue increased by 4.5 % . promotional allowances increased by $ 0.2 million , or 33.2 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase is partially due to increased participation in our players ' club loyalty program and increased use of complimentary services provided to customers . the increase is also due to the 4.0 % exchange rate increase . total operating costs and expenses increased by $ 1.0 million , or 6.4 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase is primarily due to the 4.0 % exchange rate increase . in canadian dollars , total operating costs and expenses increased by $ 0.4 million , or 2.2 % . the increase is also due to increased marketing costs related to showroom entertainment costs and increased marketing expenses . - 31 - earnings from operations increased by $ 1.0 million , or 18.7 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase in earnings is due to an overall increase in revenue , an effort to control costs and the 4.0 % exchange rate increase . in canadian dollars , earnings from operations increased by $ 0.8 million , or 13.7 % . calgary replace_table_token_5_th * we acquired century casino calgary on january 13 , 2010. gaming revenue at our property in calgary increased by $ 1.1 million , or 20.5 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase is due to new and converted slot machines added to the floor , improved slot machine floor layout and increased customer volumes in 2011. the increase in gaming revenue is also due to the 4.0 % exchange rate increase . in canadian dollars , net operating revenue increased by 15.9 % for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. bowling , food , beverage and other revenue increased by $ 1.1 million , or 36.5 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase in food , beverage and other revenue is due to the differing types of events and increased attendance at events offered in the property 's showrooms , increased food quality at each restaurant and bar , additional customer volumes in the casino and improved customer service . the increase in bowling revenue is due to the new bowling lanes and bowling leagues that utilize our facility . the increases in bowling , food , beverage and other revenue is also the result of the 4.0 % exchange rate increase . in canadian dollars , bowling , food , beverage and other revenue increased by $ 1.0 million , or 31.4 % . promotional allowances increased by $ 0.1 million , or 28.5 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase is due to the addition of a players ' club point redemption program during the year . the increase is also due to the 4.0 % exchange rate increase . in canadian dollars , promotional allowances increased by $ 0.1 million , or 23.3 % . - 32 - total operating costs and expenses increased by $ 1.8 million , or 21.2 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. this increase is due to increased radio advertising , promotional prizes and events , increased loyalty membership direct mailing costs and additional staffing costs in order to provide improved customer service . the increase is also due to the 4.0 % exchange rate increase . in canadian dollars , total operating costs increased by $ 1.5 million , or 16.6 % . losses from operations decreased by $ 0.3 million , or 65.8 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. in canadian dollars , losses from operations decreased by $ 0.3 million , or 67.7 % . during december 31 , 2011 , management of the casino continued to look at new ways to market the casino and utilize the showrooms and bowling alley to attract customers while maintaining costs . story_separator_special_tag central city replace_table_token_6_th gaming revenue at our property in central city increased by $ 0.8 million , or 4.3 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase is due to increased table games revenue generated from craps and player banked poker , increased customer volumes that we believe resulted from the disruption at the fortune valley casino in central city during the transition of its ownership during the first and second quarters of 2011 and increased revenue from slot machines that were moved from the lower level to the main level of the casino . also , the central city market increased by 3 % during the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increased market led to higher business volumes compared to 2010. hotel , food and beverage revenue increased by $ 0.2 million , or 8.6 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase is due to increased prime rib sales and beverage portion control . in addition , the deli was closed for remodeling during the fourth quarter of 2010 . - 33 - promotional allowances increased by $ 0.4 million , or 10.5 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase in promotional allowance expense is primarily due to a more aggressive player point redemption program offered during the third and fourth quarters of 2011. total operating costs and expenses increased by $ 0.4 million , or 2.2 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase is due to increased marketing costs for promotional prizes and giveaways , player participation in bus ridership rewards in which the casino reimburses a portion of players ' bus fare to the casino , increased gaming taxes as a result of higher gaming revenue , increased game royalty fees and increased staffing costs in order to provide better customer service . earnings from operations increased by $ 0.3 million , or 19.5 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. during 2011 , the property continued its emphasis on restructuring and efficiencies of operations to reduce costs and improve revenue . in addition , the property is maximizing marketing strategies to compete in a very competitive central city/black hawk market . our competitors continue to develop vip programs in direct competition to ours . in response , we are seeking to develop programs that offer better rewards . cripple creek replace_table_token_7_th gaming revenue at our property in cripple creek increased by $ 1.9 million , or 16.7 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase is due to higher slot revenue from new slot machines , additional table games revenue generated after moving the table games pit from the back of the casino to the front , improved customer service and targeted and higher frequency marketing strategies improving the customer volumes and differentiating our casino from competitors . finally , we believe slot gaming revenue also improved partly due to a disruption in operations at the j.p. mcgills casino in cripple creek during a remodeling project that took place during the first quarter of 2011. total operating costs and expenses increases by $ 1.0 million , or 10.4 % . the increase in total operating costs and expenses is due to increased marketing costs for more aggressive marketing campaigns including promotional prizes and increased direct mail costs , increased slot machine royalty fees in order to provide the latest slot machine products , increased gaming taxes as a result of higher gaming revenue , increased staffing costs in order to provide greater customer service and increased utility costs from colder temperatures during the first quarter of 2011 . - 34 - earnings from operations increased by $ 0.9 million , or 206.0 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. during 2011 , the property continued its emphasis on controlling expenses while still maintaining aggressive marketing campaigns , providing the latest slot machine products and gaining market share . the property increased market share by 2 % during the year ended december 31 , 2011 compared to the year ended december 31 , 2010 , while the market as a whole decreased by 2 % during the same time period . cruise ships & other replace_table_token_8_th net operating revenue from our ship-based casinos & other increased by $ 3.5 million , or 118.8 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase is due to the two cruise ships added during 2011 from the oceania and tui cruise lines , which contributed a total of $ 1.4 million in gaming revenue for the year ended december 31 , 2011. in addition , during the third quarter of 2010 , three new ship-based casinos were added with the regent seven seas cruise line . these three ships added $ 1.8 million in additional net operating revenue for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. gaming expenses increased by $ 2.5 million , or 104.2 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. concession fees paid to the cruise operators increased by $ 1.9 million for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. these expenses and fees increased due to the addition of the ships to our portfolio .
| · total operating costs and expenses for our ship-based casinos and other increased by $ 3.1 million , or 104.5 % . · total operating costs and expenses for corporate other decreased by $ 0.3 million , or 4.4 % . earnings ( losses ) from operations improved at all properties and in total by $ 3.2 million , or 299.7 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. following is a breakout of earnings from operations by property for the year ended december 31 , 2011 compared to the year ended december 31 , 2010 : · earnings from operations at our property in edmonton increased by $ 1.0 million , or 18.7 % . · losses from operations at our property in calgary decreased by $ 0.3 million , or 65.8 % . · earnings from operations at our property in central city increased by $ 0.3 million , or 19.5 % . · earnings from operations at our property in cripple creek increased by $ 0.9 million , or 206.0 % . · earnings from operations at our ship-based casinos and other increased by $ 0.5 million , or 885.5 % . the increase in earnings from operations is due to increased efforts to attract customers and increase revenue while controlling costs at all properties . the increase at the canadian properties is also due to a 4.0 % increase in the average exchange rate between the us and canadian dollar for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. net earnings increased by $ 2.0 million for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. items deducted from or added to earnings from operations to arrive at net earnings included gain on bargain purchase , interest income , interest expense and gains on foreign currency transactions . for a complete discussion of these items see “ non-operating
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the company 's revenues from the services performed for bax/schenker , derived primarily by providing boeing 727 and dc-8 airlift , were $ 187.0 million , $ 194.3 million and $ 160.2 million for the years ended december 31 , 2011 , 2010 and 2009 , respectively . the company 's revenues from bax/schenker comprised approximately 26 % , 29 % and 19 % of the company 's total revenues during the years ended december 31 , 2011 , 2010 and 2009 , respectively ( 15 % , 18 % and 14 % of total revenues excluding directly reimbursable revenues , respectively ) . results of operations summary the consolidated net earnings from continuing operations were $ 23.9 million and $ 39.9 million for 2011 and 2010 , respectively . the pre-tax earnings from continuing operations for 2011 were $ 40.9 million , inclusive of asset impairment charges and interest rate derivative losses during 2011 , compared to pre-tax earnings of $ 63.3 million in 2010 , in which no impairment charges or derivative losses were recorded . the decline in earnings from continuing operations in 2011 as compared to 2010 resulted primarily from the recognition of asset impairment charges of $ 27.1 million , interest rate derivative losses of $ 4.9 million and the write-off of $ 2.9 million of unamortized debt issuance costs related to the refinancing of the company 's debt in 2011. adjusted pre-tax earnings from continuing operations , a non-gaap measure ( see reconciliation table below ) , after removing impairment charges , net derivative losses and charges related to debt refinancing was $ 75.8 million for 2011 compared to $ 59.8 million for 2010 after removing pre-tax earnings related to dhl 's restructuring . this improved earnings , as adjusted , over 2010 , was driven primarily by cam , which placed five additional aircraft under external customer leases since december 31 , 2010. the company 's impairment charges stemming from bax/schenker 's transition to a new u.s. business model are described below : - $ 22.1 million ( $ 13.7 million after income tax benefit ) to write-down boeing 727 and dc-8 freighters , engines and related parts to their appraised fair values . in light of bax/schenker 's decision to phase-out its dedicated air network in the u.s. and after evaluating business prospects for these aircraft , management has decided to discontinue the service of boeing 727 and dc-8 freighters sooner than previously expected . - $ 2.3 million ( $ 1.4 million after income tax benefit ) to write-down customer relationship intangible assets , reflecting the closure of bax/schenker 's dedicated air network . - $ 2.8 million ( $ 2.8 million after income tax benefit ) to write-down goodwill acquired when the company purchased ati , which operated the dc-8 aircraft for bax/schenker . the write-down reflects the lower forecasted cash flows in the near term as ati re-fleets by replacing the dc-8 aircraft operated for bax/schenker with more efficient boeing 767 and 757 aircraft to be operated for other customers . during 2011 , the company executed a new credit facility with a consortium of banks ( `` credit facility '' ) . the new credit facility refinanced the company 's previous term loan and provides liquidity to expand the company 's aircraft fleet through april 2016. the new credit facility includes a term loan of $ 150 million and a $ 175 million revolving credit facility , of which the company has drawn $ 106 million , net of repayments . in conjunction with the execution of the new credit facility , the company terminated its previous credit agreement , which resulted in the write-off of $ 2.9 million of unamortized debt issuance costs associated with that credit agreement and the recognition of $ 3.9 million of losses for certain interest rate swaps previously designated as cash flow hedges of interest payments stemming from the former term loan . these charges , which totaled $ 6.8 million before income tax effects , were recorded in march 2011 . 24 customer revenues from continuing operations increased by $ 62.8 million to $ 730.1 million during 2011 compared to 2010. excluding directly reimbursed revenues , customer revenues increased by $ 45.4 million during 2011 compared to 2010. revenue growth during 2011 compared to 2010 reflects additional external aircraft leases by cam , up $ 24.5 million , additional boeing 767 aircraft operations being performed under the acmi services segment , up $ 12.7 million , and increased aircraft maintenance services , up $ 9.9 million , which is reflected under other activities . revenue growth comparisons to 2010 are affected by the termination of the dhl acmi agreement and the termination of the severance and retention agreement ( `` s & r agreement '' ) with dhl in march 2010. under the s & r agreement , dhl compensated and reimbursed abx for its management and costs associated with dhl 's network restructuring starting in may 2008 and continuing through march 2010. revenues from the s & r agreement were $ 4.0 million in the first quarter of 2010. a summary of our revenues and pre-tax earnings from continuing operations is shown below ( in thousands ) : replace_table_token_4_th other reimbursable revenues include certain operating costs that are reimbursed to the airlines by their customers . such costs include fuel used , landing fees and certain aircraft maintenance expenses . the types of costs that are reimbursed varies by customer operating agreement . adjusted pre-tax earnings , a non-gaap measure , is pre-tax earnings excluding asset impairment charges , net derivatives losses , the write-off of debt issuance costs and earnings from the s & r agreement , which ended in march 2010. management uses adjusted pre-tax earnings , to compare the performance of core operating results between periods . adjusted pre-tax earnings , should not be considered in isolation or as a substitute for analysis of the company 's results as reported under gaap . 25 cam the company offers aircraft leasing through its cam subsidiary . story_separator_special_tag aircraft leases normally cover a term of five to seven years . in a typical leasing agreement , customers pay rent and a maintenance deposit on a monthly basis . cam 's revenues for 2011 grew to $ 140.5 million compared to $ 101.4 million during 2010. revenues from external customers accounted for $ 24.5 million of the increased revenue for 2011. since december 31 , 2010 , cam has leased five more boeing 767-200 aircraft to external customers . cam 's revenues from the company 's airlines totaled $ 72.7 million during 2011 , compared to $ 58.1 million for 2010. as of december 31 , 2011 , cam had 52 aircraft that were under lease , 31 of them internally to atsg airlines . cam 's pre-tax earnings , inclusive of an interest expense allocation and $ 6.8 million for aircraft impairment charges , were $ 53.2 million and $ 41.6 million , during 2011 and 2010 , respectively . cam 's pre-tax earnings , excluding the aircraft impairment charges , increased by $ 18.4 million for 2011 compared to 2010. improved earnings reflected five more boeing 767 freighter aircraft under lease since december 31 , 2010. during 2011 , cam completed the freighter modification of two boeing 767-200 aircraft and leased them to a brazilian airline under long term leases . also during 2011 , cam leased two additional boeing 767-200 aircraft to dhl , fulfilling its commitment from march of 2010 to lease 13 aircraft to dhl under long term leases . cam also leased one additional boeing 767-200 freighter aircraft to a miami , florida , based operator in 2011. during 2011 , cam completed the modification of its first two boeing 767-300 freighter aircraft and leased the aircraft internally to its affiliate , ati , which began to operate the aircraft for customers under acmi agreements . during 2012 , we plan to further invest in the modification of boeing 767-300 and 757-200 aircraft . the fuel efficiency , cubic capacity , payload and operating costs of the boeing 767-300 , make it a desirable freighter aircraft in medium-range international air cargo markets and in certain transcontinental routes . additionally , existing customers have requested boeing 757-200 aircraft . as these aircraft are modified , we plan to place them into service under dry leasing arrangements to external customers or acmi operations using our airlines , depending on which alternative provides the best long term return and considering other factors , including geographical placement and customer diversification . additional information about our aircraft acquisition and modifications plans can be found below under commitments . acmi services segment as of december 31 , 2011 , acmi services included 49 in-service aircraft , including 31 leased internally from cam , five leased from external providers and 13 cam-owned freighter aircraft which were under lease to dhl and operated by abx under the cmi agreement . during 2011 , abx began to lease and operate two more dhl-owned aircraft , bringing to four the number of dhl-owned aircraft that abx leases from dhl and operates under the cmi agreement . during 2011 , ati leased two boeing 767-300 aircraft from cam and began to operate the aircraft under acmi agreements . also in december 2011 , ccia began to operate a boeing 757 aircraft under an acmi agreement . acmi services revenues were $ 605.5 million and $ 579.4 million during 2011 and 2010 , respectively . revenues from airline services increased 3 % during 2011 compared to 2010 , driven by higher block hours flown for customers . aircraft block hours flown for customers increased 2 % during the year , however , block hours for customers other than bax/schenker increased 11 % in 2011 compared to 2010. this increase in block hours reflects the additional boeing 767 aircraft placed into service during 2011 , as described above . reimbursable revenues increased $ 17.4 million during 2011 , compared to 2010. the comparison of airline services revenues and reimbursable revenues to 2010 reflects the new commercial agreements between abx and dhl which became effective in april 2010. airline services revenues for the first quarter of 2010 included compensation based on aircraft depreciation and certain maintenance expenses under the former cost-plus dhl acmi agreement . beginning in april 2010 , lease revenues for the dhl network aircraft have been reflected in cam 's revenues , while compensation for certain aircraft related maintenance costs have been reflected as reimbursable revenues . revenues from activities under the s & r agreement declined by $ 4.0 million during 2011 compared to 2010 , due to the termination of the s & r agreement in march 2010. acmi services incurred a pre-tax loss of $ 13.8 million during 2011 due to asset impairment charges of $ 20.4 million . the pre-tax earnings for acmi services , excluding asset impairment charges , were $ 6.6 million from airline services for 2011 compared to $ 17.3 million from airline services during 2010. operating results during 2011 were negatively impacted by the phase-out of bax/schenker 's north american air network , unscheduled aircraft downtime , start-up costs for new boeing 767 passenger operations and reductions in revenues from u.s. military charters . as a 26 result of unscheduled aircraft maintenance events , revenue flights were missed and higher operating expenses were incurred during the aircraft downtime . some of the downtime affected dc-8 combi aircraft and boeing 767 freighters operating in remote regions that were difficult to service . revenues from the u.s. military declined $ 2.6 million during 2011 compared to 2010 due to maintenance related cancellations and contractual rate reductions .
| cam during 2010 , cam completed the modification of six boeing 767-200 aircraft into a standard cargo configuration and acquired twelve other boeing 767-200 freighter aircraft from abx . as of december 31 , 2010 , cam had 60 aircraft that were under lease , 44 of them to abx , ati and ccia . cam 's revenues from abx , ati and ccia were $ 58.1 million and $ 49.8 million for 2010 and 2009 , respectively . cam 's revenues for 2010 grew $ 40.7 million to $ 101.4 million compared to $ 60.7 million in 2009. revenues from external customers , particularly dhl , accounted for $ 32.4 million of the increase . in april 2010 , as part of the cmi agreement and aircraft lease agreements with dhl , cam placed seven boeing 767-200 aircraft under lease with dhl . these seven aircraft were previously associated with the dhl network and were reflected in the acmi services segment revenues prior to april 1 , 2010. by the end of 2010 , cam leased four additional boeing 767-200 aircraft to dhl , bringing the total number of 767-200 aircraft leased to dhl to eleven . abx was operating two of its aircraft for dhl under short term , month-to-month bridging arrangements with economic terms similar to the leases for the 13 aircraft until cam completed the aircraft modification process in 2011 for the remaining two boeing 767-200 aircraft committed to dhl . in addition to the 11 leases with dhl in 2010 , cam placed two boeing 767-200 freighter aircraft under lease to a florida based operator in february and july 2010 , bringing the total number of external aircraft leases to 16 in 2010. pre-tax segment earnings for cam were $ 41.6 million for 2010 and $ 22.8 million in 2009. the increase in pre-tax earnings reflected 18 additional aircraft that cam had placed in service since december 31 , 2009 , 12 of them to external customers . cam 's results reflected an allocation of overhead
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additionally , we continue to devote resources to improving the supply chain processes across our business segments to find areas of synergy and cost reduction and to improve our supply chain management capability to ensure it can meet global customer demands . we also remain focused on improving on-time delivery and quality , while managing warranty costs as a percentage of sales across our global operations , through the assistance of a focused continuous improvement process ( `` cip '' ) initiative . the goal of the cip initiative , which includes lean manufacturing , six sigma business management strategy and value engineering , is to maximize service fulfillment to customers through on-time delivery , reduced cycle time and quality at the highest internal productivity . over the past year we have experienced a stabilization in business and improved conditions in certain of our key markets . with continued stability in oil prices at improved levels beginning in the second half of 2017 through the middle of 2018 , our large-project business is showing continued signs of recovery and we anticipate that customers will continue to invest in maintenance and short cycle equipment during 2019. during 2016 and 2017 , we were challenged by broad-based capital spending declines , originating in the oil and gas industry , heightened pricing pressures and negative currency impacts caused by a stronger u.s. dollar . in the second quarter of 2018 , we launched and committed resources to our flowserve 2.0 transformation , a program designed to transform our business model to drive operational excellence , reduce complexity , accelerate growth , expand margins , increase capital efficiency and improve organizational health . for further information regarding our flowserve 2.0 transformation , see “ our results of operations ” below and note 19 to our consolidated financial statements included in item 8 of this annual report . during the latter part of 2018 and in connection with the flowserve 2.0 transformation , we determined that there are meaningful operational synergies and benefits to combining our epd and ipd reportable segments into one reportable segment , the flowserve pump division ( `` fpd '' ) . the reorganization will be effective as of january 1 , 2019 and as a result , beginning in 2019 we will report a two operating segment structure , fpd and fcd , and prior periods will be retrospectively adjusted to reflect the new reportable segment structure . our markets the following discussion should be read in conjunction with the `` outlook for 2019 `` section included below in this md & a . our products and services are used in several distinct industries : oil and gas , chemical , power generation , water management , and several other industries , such as mining , steel and paper , that are collectively referred to as `` general industries . '' demand for most of our products depends on the level of new capital investment as well as planned and unplanned maintenance expenditures by our customers . the level of new capital investment depends , in turn , on capital infrastructure projects driven by the need for products that rely on oil and gas , chemicals , power generation and water resource management , as well as general economic conditions . these drivers are generally related to the phase of the business cycle in their respective industries and the expectations of future market behavior . the levels of maintenance expenditures are additionally driven by the reliability of equipment , planned and unplanned downtime for maintenance and the required capacity utilization of the process . sales to epc firms and original equipment manufacturers are typically for large project orders and critical applications , as are certain sales to distributors . project orders are typically procured for customers either directly from us or indirectly through contractors for new construction projects or facility enhancement projects . the quick turnaround business , which we also refer to as `` short-cycle , '' is defined as orders that are received from the customer ( booked ) and shipped generally within six months of receipt . these orders are typically for more standardized , general purpose products , parts or services . each of our three business segments generate certain levels of this type of business . in the sale of aftermarket products and services , we benefit from a large installed base of our original equipment , which requires periodic maintenance , repair and replacement parts . we use our manufacturing platform and global network of qrcs to offer a broad array of aftermarket equipment services , such as installation , advanced diagnostics , repair and retrofitting . in geographic regions where we are positioned to provide quick response , we believe customers have traditionally relied on us , rather than our competitors , for aftermarket products due to our highly engineered and customized products . however , the 29 aftermarket for standard products is competitive , as the existence of common standards allows for easier replacement of the installed products . as proximity of service centers , timeliness of delivery and quality are important considerations for all aftermarket products and services , we continue to selectively expand our global qrc capabilities to improve our ability to capture this important aftermarket business . oil and gas the oil and gas industry , which represented approximately 38 % of our bookings in both 2018 and 2017 , experienced an increase in capital spending in 2018 compared to the previous year . the increase was primarily due to increased broad-based maintenance and short cycle investment . aftermarket opportunities in this industry solidified throughout 2018 due to catch up of deferred spending on our customers ' repair and maintenance budgets from previous years . the outlook for the oil and gas industry is heavily dependent on the demand growth from both mature markets and developing geographies as well as changes in the regulatory environment . story_separator_special_tag in the short-term , we believe that stable oil prices will support oil and gas upstream and mid-stream investment and we further expect increased investment in later cycle downstream projects due to emerging market growth and certain regulatory requirements , such as imo 2020. a recovery in the overall level of spending by oil and gas companies could continue to increase demand for our aftermarket products and services . we believe the medium and long-term fundamentals for this industry remain attractive , and see a stabilized environment as the industry works through current excess supply . in addition , we believe projected depletion rates of existing fields and forecasted long-term demand growth will require additional investments . with our long-standing reputation in providing successful solutions for upstream , mid-stream and downstream applications , along with the advancements in our portfolio of offerings , we believe that we continue to be well-positioned to assist our customers in this improving environment . chemical the chemical industry represented approximately 22 % and 21 % of our bookings in 2018 and 2017 , respectively . the chemical industry is comprised of chemical-based and pharmaceutical products . capital spending in 2018 increased primarily due to global economic growth and forecasted demand for chemical-based products . the aftermarket opportunities solidified throughout 2018 due to catch up of deferred spending of our customers ' repair and maintenance budgets from previous years . the outlook for the chemical industry remains heavily dependent on global economic conditions . as global economies stabilize and unemployment conditions improve , a rise in consumer spending should follow . an increase in spending would drive greater demand for chemical-based products supporting improved levels of capital investment . we believe the chemical industry in the near-term will continue to invest in north america and middle east capacity additions , maintenance and upgrades for optimization of existing assets and that developing regions will selectively invest in capital infrastructure to meet current and future indigenous demand . we believe our global presence and our localized aftermarket capabilities are well-positioned to serve the potential growth opportunities in this industry . power generation the power generation industry represented approximately 11 % and 13 % of our bookings in 2018 and 2017 , respectively . in 2018 , the power generation industry continued to experience softness in thermal power generation capital spending in the mature and key developing markets . china continued to curtail the construction of new coal-fired power generation over the last year , while in india and southeast asia capital investment remained in place driven by increased demand forecasts . natural gas-fired combined cycle ( “ ngcc ” ) plants increased its share of the energy mix , driven by market prices for gas remaining low and stable ( partially due to the increasing global availability of liquefied natural gas ( “ lng ” ) ) , low capital expenditures , and the ability of ngcc to stabilize unpredictable renewable sources . with the potential of unconventional sources of gas , the global power generation industry is forecasting an increased use of this form of fuel for power generation plants . despite fewer new nuclear plants being constructed , nuclear power remains an important contributor to the global energy mix . we continue to support our significant installed base in the global nuclear fleet by providing aftermarket and life extension products and services . due to our extensive history , we believe we are well positioned to take advantage of this ongoing source of aftermarket and new construction opportunities . political efforts to limit the emissions of carbon dioxide may have some adverse effect on thermal power investment plans depending on the potential requirements imposed and the timing of compliance by country . however , many proposed methods of capturing and limiting carbon dioxide emissions offer business opportunities for our products and services . at 30 the same time , we continue to take advantage of new investments in concentrated solar power generating capacity , where our pumps , valves , and seals are uniquely positioned for both molten salt applications as well as the traditional steam cycle . we believe the long-term fundamentals for the power generation industry remain solid based on projected increases in demand for electricity driven by global population growth , growth of urbanization in developing markets and the increased use of electricity driven transportation . we also believe that our long-standing reputation in the power generation industry , our portfolio of offerings for the various generating methods , our advancements in serving the renewable energy market and carbon capture methodologies , as well as our global service and support structure , position us well for the future opportunities in this important industry . water management the water management industry represented approximately 4 % our bookings in both 2018 and 2017 . water management industry activity levels increased in 2018 as worldwide demand for fresh water , water treatment and re-use , desalination and flood control continued to create requirements for new facilities or for upgrades of existing systems , many of which require products that we offer , particularly pumps . capital and aftermarket spending is on the rise in developed and emerging markets with governments and private industry providing funding for critical projects . the proportion of people living in regions that find it difficult to meet water requirements is expected to double by 2025. we believe that the persistent demand for fresh water during all economic cycles supports continued investments , especially in north america and developing regions . general industries general industries represented , in the aggregate , approximately 25 % and 24 % of our bookings in 2018 and 2017 , respectively . general industries comprise a variety of different businesses , including mining and ore processing , pulp and paper , food and beverage and other smaller applications , none of which individually represented more than 5 % of total bookings in 2018 and 2017 . general industries also include sales to distributors , whose end customers operate in the industries we primarily serve .
| the increase in customer bookings was primarily driven by the oil and gas , water management and power generation industries and was partially offset by decreased customer bookings in general industries . increased customer bookings of $ 43.2 million into north america , $ 39.4 million into asia pacific and $ 10.0 million into africa were largely offset by decreased bookings of $ 66.8 million into europe and $ 18.8 million into latin america . the increase was driven by customer aftermarket bookings . of the $ 1.2 billion of bookings in 2017 , approximately 32 % were from oil and gas , 29 % from chemical , 21 % from general industries , 16 % from power generation and 2 % from water management . sales in 2018 increase d by $ 27.7 million , or 2.3 % , as compared with 2017 . the increase included currency benefits of approximately $ 8 million and was driven by increase d customer original equipment sales . sales increase d $ 62.4 million into north america , $ 40.1 million into asia pacific and $ 7.9 million into africa , partially offset by a decreased customer sales of $ 46.0 million into europe , $ 25.1 million into the middle east and $ 10.8 million into latin america . the impact of the adoption of the new revenue standard increased sales by approximately $ 8 million for the year ended december 31 , 2018 . sales in 2017 decreased by $ 45.6 million , or 3.7 % , as compared with 2016. the decrease included currency benefits of approximately $ 13 million and was driven by decreased customer original equipment sales . sales decreased $ 21.4 million into europe , $ 17.7 million into the middle east and $ 16.1 million into latin america , partially offset by an increase of $ 6.8 million into asia pacific . gross profit in 2018 increase d by $ 20.2 million , or 5.1 % , as compared with 2017 . gross profit margin in 2018 of 34.3 % increase d from 33.4 % in 2017 . the increase in gross profit margin was
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under the sub-metered model , a customer pays us monthly for the power attributable to its equipment in the data center as well as for its ratable allocation of the power used to provide the cooling , lighting , security and other requirements supporting the data center , in each case , at a rate substantially equivalent to our then current utility cost . under the breakered-amp model , a customer pays a fixed monthly fee per committed available 48 ampere of connected power . the extent to which this fixed monthly fee correlates to the monthly amount we pay to our utility provider for electricity at each data center facility varies depending upon the amount of power each customer utilizes each month relative to the amount of committed power and related infrastructure purchased . scheduled lease expirations . our ability to re-lease expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations . in addition to approximately 267,000 nrsf of space currently unoccupied in our total portfolio , 741 and 537 data center leases representing approximately 16.0 % and 14.0 % of the nrsf in our operating data center portfolio with current average annualized rental rates of $ 136 per nrsf and $ 164 per nrsf are scheduled to expire during the years ending december 31 , 2016 , and 2017 , respectively . our past performance may not be indicative of future results , and we can not assure that leases will be renewed or that our properties will be re-leased at all or at rental rates equal to or above the current average rental rates . further , re-leased/renewed rental rates in a particular market may not be consistent with rental rates across our portfolio as a whole and may fluctuate from one period to another due to a number of factors , including local real estate conditions , local supply and demand for datacenter space , competition from other datacenter developers or operators , the condition of a particular property and whether a property , or space within a property , has been developed . acquisitions , development and financing . our ability to grow rental and operating revenue depends on our ability to acquire , develop and lease data center space at favorable rental rates . as of december 31 , 2015 , we had approximately 869,000 nrsf of space available for future development and space currently under development , or approximately 30 % of the total space in our portfolio . we may encounter development delays , excess development costs , or delays in leasing developed space to customers . we generally fund the cost of data center development from additional capital , which , for future developments , we would expect to obtain through our revolving credit facility and other unsecured and secured borrowings , construction financings and the issuance of additional equity and debt securities if needed and when market conditions permit . we will require additional capital to finance future development activities , which capital may not be available or may not be available on terms acceptable to us . conditions in significant markets . positive or negative changes in conditions including supply and demand , rental rates , utility costs , and general economic conditions in any of our markets could impact our overall performance . the following table provides an overview of our property portfolio as a percentage of total data center annualized rent as of december 31 , 2015 : replace_table_token_13_th 49 story_separator_special_tag replace_table_token_17_th year ended december 31 , 2014 , compared to year ended december 31 , 2013 the discussion below relates to our financial condition and results of operations for the years ended december 31 , 2014 , and 2013. a summary of our operating results for the years ended december 31 , 2014 , and 2013 , is as follows ( in thousands ) . replace_table_token_18_th operating revenue operating revenue during the years ended december 31 , 2014 , and 2013 , was as follows ( in thousands ) : replace_table_token_19_th 52 a majority of the increase in total operating revenues was due primarily to a $ 29.8 million increase in data center rental and power revenue during the year ended december 31 , 2014 , compared to the 2013 period . the increase in data center rental and power revenue was due primarily to the net commencement of new and expansion leases during the year ended december 31 , 2014 , which increased occupied data center nrsf from 1,105,451 nrsf as of december 31 , 2013 , to 1,217,248 nrsf as of december 31 , 2014. leases that contributed to the increase in data center rental and power revenue include a 101,721 nrsf built-to-suit lease at sv5 , which commenced in november 2013 , a 7,711 nrsf lease at sv4 , which commenced in september 2013 , a 23,663 nrsf lease at bo1 , which commenced in april 2013 , a 5,694 nrsf lease at ch1 , which commenced in april 2014 , a 12,600 nrsf lease at sv3 , which commenced in may 2014 , and 27,347 nrsf of multiple leases at our newly developed ny2 data center which commenced throughout the year ended december 31 , 2014. these five leases and the ny2 leases increased data center rental and power revenue by $ 15.3 million during the year ended december 31 , 2014 , compared to the 2013 period , which represented 51 % of the total increase in data center rental and power revenue . the remainder of the increase in data center revenue was due to an additional 122,094 nrsf that commenced during the year ended december 31 , 2014 , partially offset by expiring leases that were not renewed . in addition , interconnection revenue increased $ 6.4 million during the year ended december 31 , 2014 , compared to the 2013 period , as a result of an increase in the volume of cross connects from new and existing customers . story_separator_special_tag operating expenses operating expenses during the years ended december 31 , 2014 , and 2013 , were as follows ( in thousands ) : replace_table_token_20_th property operating and maintenance expense increased $ 10.9 million as a result of an increase in power expense due to the commencement of new and expansion leases during the year ended december 31 , 2014 , and a 10 % increase in occupied data center nrsf from 1,105,451 nrsf as of december 31 , 2013 , to 1,217,248 nrsf as of december 31 , 2014. in addition , payroll and benefits expense increased due to an increase in facilities and operations headcount associated with increased occupied data center nrsf . real estate taxes and insurance decreased $ 0.9 million during the year ended december 31 , 2014 , compared to the 2013 period , as a result of a true-up of accrued real estate tax liabilities associated with estimated amounts from 2010 due to the change in ownership of our acquired properties at ipo located in california . the final tax assessments for two properties acquired at ipo became known in the second quarter of 2014 and , therefore , the estimated real estate tax accruals were reconciled to the actual tax liabilities , resulting in a $ 3.7 million reduction in expense . this decrease was partially offset by an increase in real estate taxes and insurance due to increases in assessed property values and taxes 53 on newly developed data centers at ny2 and sv5 . insurance premiums increased as a result of the completion of newly developed data centers , including ny2 and sv5 , and a corresponding increase in the insured values of these properties . we capitalize a portion of real estate taxes and insurance costs that are identifiable to data center projects under construction . depreciation and amortization expense increased $ 14.9 million as a result of the placement into service of approximately 68,300 nrsf of new operating space during the year ended december 31 , 2014. during the year ended december 31 , 2014 , we recognized a $ 2.0 million impairment charge as a result of internal-use software previously under development that was discontinued during the period and will not be placed into service . interest expense the $ 2.6 million increase in total interest expense was primarily a result of additional outstanding debt of $ 317.7 million as of december 31 , 2014 , compared to $ 232.4 million of outstanding debt as of december 31 , 2013. a summary of interest expense for the year ended december 31 , 2014 , and 2013 , is as follows ( in thousands ) : replace_table_token_21_th the company recognized a $ 1.2 million gain on land disposal in the consolidated statements of operations as a result of the massachusetts bay transportation authority acquiring 52,248 square feet of land at bo1 pursuant to an order of taking . liquidity and capital resources discussion of cash flows year ended december 31 , 2015 , compared to year ended december 31 , 2014 net cash provided by operating activities was $ 142.6 million for the year ended december 31 , 2015 , compared to $ 99.5 million for the year ended december 31 , 2014. the increase in cash provided by operating activities of $ 43.1 million , or 43 % , was due primarily to growth in data center rental , power and interconnection revenue from existing customers and completion and subsequent leasing of new data center space at several properties . also , we paid $ 3.8 million more of leasing commissions during the year ended december 31 , 2014 , compared to the 2015 period . net cash used in investing activities increased by $ 21.3 million , or 20 % , to $ 127.5 million for the year ended december 31 , 2015 , compared to $ 106.2 million for the year ended december 31 , 2014. this increase was due primarily to construction commencing on our sv6 and sv7 buildings at our santa clara campus . the increase was partially offset by the receipt of $ 2.4 million of cash proceeds during the year ended december 31 , 2015 , from a real estate disposal related to the massachusetts bay transportation authority acquiring 52,248 square feet of land at bo1 pursuant to an order of taking during the year ended december 31 , 2014 . 54 net cash used in financing activities was $ 18.8 million for the year ended december 31 , 2015 , compared to $ 12.0 million provided by financing activities for the year ended december 31 , 2014. the $ 30.8 million change in financing activities was primarily a result of net cash proceeds from debt instruments of $ 73.8 million during the year ended december 31 , 2015 , compared to net cash proceeds of $ 86.0 million during the year ended december 31 , 2014. the remaining change was due to an increase of $ 13.6 million in dividends and distributions paid on our common stock and operating partnership units during the year ended december 31 , 2015 , as a result of an increase in the quarterly dividend from $ 0.35 per share or unit paid during the year ended december 31 , 2014 , to $ 0.42 per share or unit paid during the year ended december 31 , 2015. year ended december 31 , 2014 , compared to year ended december 31 , 2013 net cash provided by operating activities was $ 99.5 million for the year ended december 31 , 2014 , compared to $ 97.7 million for the year ended december 31 , 2013. the increase in cash provided by operating activities of $ 1.8 million was due primarily to growth in data center rental , power and interconnection revenue from existing customers and completion and subsequent leasing of new data center space at several properties and an increase in prepaid rent and other liabilities .
| the amounts payable pursuant to this agreement are scheduled to expire as follows : $ 1.9 million in the second quarter of 2016 and $ 4.2 million in the second quarter of 2017. in addition to these reservation payments , we have successfully secured new leases for the vacated 50,000 nrsf to new customers as of december 31 , 2015. these new leases increased data center rental and power revenue by $ 18.3 million during the year ended december 31 , 2015 , compared to the 2014 period , which represented 35 % of the total increase in data center rental and power revenue . the remainder of the increase in data center revenue 50 is due to an additional 174,472 nrsf of customer leases that commenced during the year ended december 31 , 2015 , partially offset by expiring leases that were not renewed . in addition , interconnection revenue increased $ 8.9 million during the year ended december 31 , 2015 , compared to the 2014 period , primarily as a result of an increase in the volume of cross connects from new and existing customers . during the twelve months ended december 31 , 2015 , customers added 2,226 net cross connections . operating expenses operating expenses during the years ended december 31 , 2015 , and 2014 , were as follows ( in thousands ) : replace_table_token_16_th property operating and maintenance expense increased $ 14.7 million as a result of an increase in power expense due to the commencement of new and expansion leases during the year ended december 31 , 2015 , that resulted in a 22 % increase in occupied data center nrsf from 1,217,248 nrsf as of december 31 , 2014 , to 1,489,611 nrsf as of december 31 , 2015. in addition , payroll and benefits expense increased due to an increase in facilities and operations headcount associated with increased occupied data center nrsf . real estate taxes and insurance increased $ 4.6 million during the year ended december 31 , 2015 , compared to the 2014 period , primarily as a result of a true-up in 2014 of accrued real estate tax liabilities associated with estimated amounts from 2010 due to the change in ownership of our acquired properties at our ipo . the final tax
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debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity . debt securities are classified as available for sale when they might be sold before maturity due to changes in interest rates , prepayment risk , liquidity or other factors . securities available for sale are carried at fair value , with unrealized holding gains and losses reported in other comprehensive income , net of tax . management utilizes various inputs to determine the fair value of its investment portfolio . to the extent they exist , unadjusted quoted market prices in active markets for identical investments ( level 1 ) or quoted prices on similar assets ( level 2 ) are utilized to determine the fair value of each investment in the portfolio . in the absence of quoted prices , valuation techniques would be used to determine fair value of any investments that require inputs that are both significant to the fair value measurement and unobservable ( level 3 ) . valuation techniques are based on various assumptions , including , but not limited to , cash flows , discount rates , rate of return , adjustments for nonperformance and liquidity and liquidation values . a significant degree of judgment is involved in valuing investments using level 3 inputs . the use of different assumptions could have a positive or negative effect on the company 's consolidated financial condition or results of operations . securities are evaluated on at least a quarterly basis to determine whether a decline in fair value is other-than-temporary . to determine whether a decline in value is other-than-temporary , management considers the reasons underlying the decline , including , but not limited to , the length of time an investment 's book value is greater than fair value , the extent and duration of the decline and the near-term prospects of the issuer as well as any credit deterioration of the investment . if the decline in value of an investment is deemed to be other-than-temporary , the entire difference between amortized cost and fair value is recognized as impairment through earnings . the company records income taxes using the asset and liability method . accordingly , deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns ; are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases ; and are measured using enacted tax rates expected to apply in the years when 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 tax expense in the period of enactment . deferred tax assets are recorded on the consolidated balance sheet at net realizable value . the company periodically performs an assessment to evaluate the amount of deferred tax assets that it is more likely than not to realize . realization of deferred tax assets is dependent upon the amount of taxable income expected in future periods as tax benefits require taxable income to be realized . if a valuation allowance is required , the deferred tax asset on the consolidated balance sheet is reduced via a corresponding income tax expense in the consolidated statement of income . 31 story_separator_special_tag style= '' line-height:120 % ; text-align : justify ; text-indent:24px ; font-size:10pt ; '' > roaa and roae were 1.06 % and 10.11 % , respectively , for the year ended december 31 , 2018 compared to 0.67 % and 6.36 % , respectively , for the year ended december 31 , 2017. excluding the gain from bargain purchase , the merger-related expenses and the additional income tax expense , roaa and roae were 1.17 % and 11.21 % , respectively , for the year ended december 31 , 2018 compared to 0.86 % and 8.10 % , respectively , for the year ended december 31 , 2017 . 34 the table below shows the major components of net income for the years ended december 31 , 2018 and 2017 and a reconciliation of the non-gaap measures to reported net income discussed above . replace_table_token_8_th 35 net interest income and net interest margin net interest income , the company 's largest and most significant component of operating income , is the difference between interest and fees earned on loans , investment securities and other earning assets and interest paid on deposits and borrowed funds . this component represented 85 % , 85 % and 81 % of the company 's net revenues ( net interest income plus non-interest income ) for the years ended december 31 , 2019 , 2018 and 2017 , respectively . net interest income is determined by the difference between the yields earned on earning assets and the rates paid on interest-bearing liabilities ( `` net interest spread '' ) and the relative amounts of average earning assets and average interest-bearing liabilities . the company 's net interest spread is affected by the monetary policy of the federal reserve board , and regulatory , economic and competitive factors that influence interest rates , loan demand and deposit flows as well as general levels of nonperforming assets . the following table summarizes the company 's net interest income and related spread and margin for the periods indicated : replace_table_token_9_th 36 the following tables compare the company 's consolidated average balance sheets , interest income and expense , net interest spreads and net interest margins for the years ended december 31 , 2019 , 2018 and 2017 ( on a fully tax-equivalent basis ) . the average rates are derived by dividing interest income and expense by the average balance of assets and liabilities , respectively . replace_table_token_10_th ( 1 ) tax-equivalent basis , using 21 % federal tax rate in 2019 . ( 2 ) loan origination fees and costs are considered an adjustment to interest income . story_separator_special_tag for the purpose of calculating loan yields , average loan balances include non-accrual loans with no related interest income and average balance of loans held for sale . ( 3 ) the net interest spread is the difference between the average yield on interest earning assets and the average rate paid on interest bearing liabilities . ( 4 ) the net interest margin is equal to net interest income divided by average interest earning assets . 37 replace_table_token_11_th ( 1 ) tax-equivalent basis , using 21 % federal tax rate in 2018 . ( 2 ) loan origination fees and costs are considered an adjustment to interest income . for the purpose of calculating loan yields , average loan balances include non-accrual loans with no related interest income and average balance of loans held for sale . ( 3 ) the net interest spread is the difference between the average yield on interest earning assets and the average rate paid on interest bearing liabilities . ( 4 ) the net interest margin is equal to net interest income divided by average interest earning assets . 38 replace_table_token_12_th ( 1 ) tax-equivalent basis , using 34 % federal tax rate in 2017 . ( 2 ) loan origination fees and costs are considered an adjustment to interest income . for the purpose of calculating loan yields , average loan balances include non-accrual loans with no related interest income and average balance of loans held for sale . ( 3 ) the net interest spread is the difference between the average yield on interest earning assets and the average rate paid on interest bearing liabilities . ( 4 ) the net interest margin is equal to net interest income divided by average interest earning assets . 39 changes in net interest income and net interest margin result from the interaction between the volume and composition of interest earning assets , interest bearing liabilities , related yields and funding costs . the effect of volume and rate changes on net interest income ( on a tax-equivalent basis ) for the periods indicated are shown below : replace_table_token_13_th ( 1 ) tax-equivalent basis , using 21 % federal tax rate in 2019 . 2019 compared to 2018 for the year ended december 31 , 2019 , the company 's net interest income , on a fully tax-equivalent basis , increased by $ 3.8 million , or 8.7 % , to $ 47.8 million compared to $ 44.0 million for the year ended december 31 , 2018. this increase was due primarily to an increase in average earning assets , as well as an increase in the average yield on earning assets , which were partially offset by an increase in interest expense on average interest-bearing liabilities . average earning assets were $ 1.2 billion with a yield of 5.07 % for 2019 compared to average earning assets of $ 1.1 billion with a yield of 4.81 % for 2018. the generally higher interest rate environment during the first half of 2019 compared to 2018 had a positive effect on the yields of construction , commercial business and home equity loans despite a decline of 75 basis points in the federal reserve board 's targeted federal funds rate and the corresponding decrease in the prime rate in the third and fourth quarters of 2019. for the year ended december 31 , 2019 , interest income on interest earning assets increased by $ 8.5 million and interest income on average loans increased by $ 8.3 million as the average total loans increased $ 132.0 million year over year , reflecting growth in all segments of the loan portfolio . the shore merger contributed approximately $ 33.5 million to the increase in average loans for 2019 , which consisted primarily of commercial real estate loans . 40 interest expense on average interest-bearing liabilities was $ 12.8 million , or 1.43 % , for the year ended december 31 , 2019 compared to $ 8.0 million , or 1.00 % , for the year ended december 31 , 2018. the increase of $ 4.7 million in interest expense on average interest-bearing liabilities primarily reflected higher deposit interest rates and higher borrowing interest rates in 2019 compared to 2018. during the year ended december 31 , 2019 , average interest-bearing liabilities increased $ 89.4 million to $ 895.0 million . the change in the mix of deposits , with the average balance of money market , now and savings accounts lower than , and certificates of deposits higher than , in 2018 also increased the cost of total deposits because certificates of deposit generally have a higher interest cost than non-maturity deposits . the shore merger contributed approximately $ 26.1 million to the increase in average interest-bearing liabilities for 2019 . 2018 compared to 2017 for the year ended december 31 , 2018 , the company 's net interest income , on a fully tax-equivalent basis , increased by $ 6.8 million , or 18.2 % , to $ 44.0 million compared to $ 37.2 million for the year ended december 31 , 2017. this increase was due primarily to an increase in average earning assets , as well as an increase in the average yield on earning assets , which were partially offset by an increase in interest expense on average interest-bearing liabilities . average earning assets were $ 1.1 billion with a yield of 4.81 % for 2018 compared to average earning assets of $ 975.2 million with a yield of 4.33 % for 2017. the 100 basis point increase in the federal reserve board 's targeted federal funds rate and the corresponding increase in the prime rate since december of 2017 had a positive effect on the yields of construction and warehouse loans with variable interest rate terms . the generally higher interest rate environment in 2018 compared to 2017 also had a positive effect on the yields of commercial real estate and residential real estate loans .
| the shore merger , excluding merger-related expenses , contributed $ 682,000 to the net income and adjusted net income for the year ended december 31 , 2019. return on average total assets ( “ roaa ” ) and return on average shareholders ' equity ( “ roae ” ) were 1.06 % and 9.87 % , respectively , for the year ended december 31 , 2019 compared to 1.06 % and 10.11 % , respectively , for the year ended december 31 , 2018. excluding the merger-related expenses , roaa and roae were 1.17 % and 10.84 % , respectively , for the year ended december 31 , 2019 compared to 1.17 % and 11.21 % , respectively , for the year ended december 31 , 2018 . 32 adjusted net income , adjusted net income per diluted share , adjusted roaa and adjusted roae are non-gaap financial measures . each of these non-gaap financial measures is the same as the corresponding gaap measure , except that it excludes the after-tax effect of merger-related expenses from the shore merger in 2019 and the njcb merger in 2018. these non-gaap financial measures should be considered in addition to , but not as a substitute for , the company 's gaap financial results . management believes that the presentation of these non-gaap financial measures of the company may be helpful to readers in understanding the company 's financial performance when comparing the company 's financial statements for the years ended december 31 , 2019 and 2018 because these non-gaap financial measures present the company 's financial performance excluding the financial impact of the merger-related expenses related to the shore merger in 2019 and the njcb merger in 2018. the table below shows the major components of net income for the years ended december 31 , 2019 and 2018 and a reconciliation of the non-gaap measures to reported net income discussed above . replace_table_token_7_th 33 2018 compared to 2017 the company reported net income of $ 12.0 million for the year ended december 31 , 2018 compared to net income of $ 6.9
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in addition , we may not sell a gaylord hotels property if we are then in breach of the applicable management agreement . in addition to the marriott sale transaction , our trss entered into additional management agreements with marriott pursuant to which marriott assumed responsibility for managing the day-to-day operations of the general jackson showboat , gaylord springs and the wildhorse saloon beginning october 1 , 2012 , and the inn at opryland beginning december 1 , 2012. internal reorganization . in connection with our reit conversion , in order to comply with irs requirements , we transferred to marriott approximately 8,400 employees who worked at our various properties . in addition , we implemented a reorganization within , and a reduction in the number of members of , our executive management team and the other employees within the corporate and other segment . in connection with the reorganization , our corporate overhead expenses within the corporate and other segment have been reduced . costs related to reit conversion . we have segregated all costs related to the foregoing transactions from normal operations and reported these amounts as reit conversion costs in the accompanying consolidated statements of operations . we incurred $ 22.2 million and $ 102.0 million of reit conversion costs during 2013 and 2012 , respectively . reit conversion costs incurred during 2013 include employment and severance costs ( $ 14.4 million ) , professional fees ( $ 2.7 million ) , and various other transition costs ( $ 5.1 million ) . reit conversion costs incurred during 2012 include noncash impairment charges ( $ 33.3 million ) , professional fees ( $ 23.1 million ) , employment and severance costs ( $ 24.4 million ) , and various other transition costs ( $ 21.2 million ) . distribution of accumulated earnings and profits . a reit is not permitted to retain earnings and profits accumulated during years when the company or its predecessor was taxed as a c corporation . to qualify for taxation as a reit for the taxable year ended december 31 , 2013 , we were required to distribute to our stockholders on or before december 31 , 2013 , our undistributed accumulated earnings and profits attributable to taxable periods ended prior to january 1 , 2013. to satisfy this requirement , on november 2 , 2012 , our board of directors declared a special dividend in the amount of $ 6.84 per share of common stock , or an aggregate of approximately $ 309.8 million to stockholders of record as of the close of business on november 13 , 2012 , payable on december 21 , 2012. stockholders had the option to elect to receive the special dividend in cash or shares of common stock , with the total amount of cash payable to stockholders limited to 20 % of the total value of the special dividend , or approximately $ 62.0 million . cash elections exceeded the amount of cash available for distribution , and , therefore , the available cash was prorated among those stockholders that elected to receive cash , and the remainder of the special dividend was paid in shares of common stock . on december 21 , 2012 , we paid an aggregate of approximately $ 62.0 million in cash and issued approximately 6.7 million shares of common stock with a fair value of $ 247.8 million in connection with the special dividend . we believe that the total value of the special dividend was sufficient to fully distribute our accumulated earnings and profits , and that a portion of the special dividend exceeded our accumulated 36 earnings and profits . we have received a ruling from the internal revenue service that the special dividend was a taxable distribution to our stockholders for federal income tax purposes , without regard to the form of payment . pursuant to customary anti-dilution provisions in the indentures governing our 3.75 % convertible senior notes and in our call and warrant agreements , the dividend caused an adjustment to the conversion rate that was taxable to the holders of the convertible notes as of november 8 , 2012 , as well as an adjustment to the call and warrant exercise prices . dividend policy and share repurchase program pursuant to our current dividend policy , we plan to pay a quarterly cash dividend to stockholders in an amount equal to an annualized payment of at least 50 % of adjusted funds from operations ( as defined by us ) or 100 % of reit taxable income , whichever is greater . on february 14 , 2013 , our board of directors declared our first quarterly cash dividend in the amount of $ 0.50 per share of common stock , or an aggregate of approximately $ 25.8 million in cash , which was paid on april 12 , 2013 to stockholders of record as of the close of business on march 28 , 2013. on june 3 , 2013 , our board of directors declared a quarterly cash dividend in the amount of $ 0.50 per share of common stock , or an aggregate of approximately $ 25.3 million in cash , which was paid on july 15 , 2013 to stockholders of record as of the close of business on june 28 , 2013. on september 13 , 2013 , our board of directors declared a quarterly cash dividend in the amount of $ 0.50 per share of common stock , or an aggregate of approximately $ 25.3 million in cash , which was paid on october 15 , 2013 to stockholders of record as of the close of business on september 27 , story_separator_special_tag 2013. on december 5 , 2013 , our board of directors declared a quarterly cash dividend in the amount of $ 0.50 per share of common stock , or an aggregate of approximately $ 25.3 million in cash , which was paid on january 15 , 2014 to stockholders of record as of the close of business on december 27 , 2013. the declaration , timing and amount of dividends will be determined by future action of our board of directors . our dividend policy may be altered at any time by our board of directors . on december 17 , 2012 , we announced that our board of directors authorized a share repurchase program for up to $ 100.0 million of our common stock using cash on hand and borrowings under our revolving credit line , to be implemented through open market transactions on u.s. exchanges or in privately negotiated transactions , in accordance with applicable securities laws , with any market purchases to be made during open trading window periods or pursuant to any applicable sec rule 10b5-1 trading plans . in may 2013 , we completed our repurchases under the repurchase program by repurchasing approximately 2.3 million shares of our common stock for an aggregate purchase price of approximately $ 100.0 million , which we funded using cash on hand and borrowings under the revolving credit line of our credit facility . the repurchased stock was cancelled and has been reflected as a reduction of retained earnings in the consolidated financial statements included herein . 6.75 % senior note redemption , placement of 5.00 % senior notes , credit facility refinancing and convertible note repurchases as further described below in liquidity and capital resourcesprincipal debt agreements , ( i ) on january 17 , 2013 , we redeemed all of our outstanding 6.75 % senior notes at par at a cost of $ 152.2 million ; ( ii ) on april 3 , 2013 , certain of our subsidiaries completed the private placement of $ 350.0 million in aggregate principal amount of 5.00 % senior notes due 2021 ; ( iii ) on april 18 , 2013 , we refinanced our $ 925 million credit facility by entering into a $ 1 billion senior secured credit facility ; and ( iv ) in july 2013 , we repurchased and cancelled $ 54.7 million of our 3.75 % convertible notes in private transactions for aggregate consideration of $ 98.6 million . our current operations our ongoing operations are organized into three principal business segments : hospitality , consisting of gaylord opryland , gaylord palms , gaylord texan , gaylord national and the inn at opryland . beginning october 1 , 2012 , marriott assumed responsibility for the day-to-day management of our gaylord hotels properties . effective december 1 , 2012 , under an additional management agreement , marriott assumed responsibility for managing the day-to-day operations of the inn at opryland . opry and attractions , consisting of our grand ole opry assets , wsm-am and our nashville attractions . as a result of the reit conversion , we own our opry and attractions businesses in trss , which will conduct their business consistent with past practice , except for the management agreements with marriott for the general jackson , wildhorse saloon and gaylord springs discussed above . corporate and other , consisting of our corporate expenses . 37 for the years ended december 31 , 2013 , 2012 and 2011 , our total revenues were divided among these business segments as follows : replace_table_token_6_th our goal is to become the nation 's premier hospitality reit for group-oriented meetings hotel assets located in urban and resort markets . we intend to leverage our existing hotel properties that continue the all-in-one-place self-contained service offerings , as well as a longer-term growth strategy that includes acquisitions of hotels , particularly in the group meetings sector of the hospitality industry , either alone or through joint ventures or alliances with one or more third parties . we intend to pursue attractive investment opportunities which meet our acquisition parameters , specifically , group-oriented large hotels and overflow hotels with existing or potential leisure appeal . key performance indicators the operating results of our hospitality segment are highly dependent on the volume of customers at our hotels and the quality of the customer mix at our hotels , which are managed by marriott . these factors impact the price that marriott can charge for our hotel rooms and other amenities , such as food and beverage and meeting space . the following key performance indicators are commonly used in the hospitality industry : hotel occupancy ( a volume indicator ) ; average daily rate ( adr ) a price indicator calculated by dividing room revenue by the number of rooms sold ; revenue per available room ( revpar ) a summary measure of hotel results calculated by dividing room revenue by room nights available to guests for the period ; total revenue per available room ( total revpar ) a summary measure of hotel results calculated by dividing the sum of room , food and beverage and other ancillary service revenue by room nights available to guests for the period ; and net definite room nights booked a volume indicator which represents the total number of definite bookings for future room nights at our hotels confirmed during the applicable period , net of cancellations . for purposes of comparability , in the key performance indicators presented below , 2013 , 2012 and 2011 occupancy , revpar and total revpar are calculated using marriott 's method for calculating available rooms and do not exclude renovation rooms from the calculation of rooms available , which is different from how we previously accounted for renovation rooms prior to the marriott transition . in addition , 2013 , 2012 and 2011 occupancy and adr do not include complimentary room nights in the calculation
| interest expense decreased $ 0.6 million to $ 39.7 million in 2013 as compared to 2012 , and noncash interest expense , which includes amortization of deferred financing costs and debt discounts , the write-off of deferred financing costs , and capitalized interest , increased $ 2.9 million to $ 21.2 million in 2013 as compared to 2012. interest expense , net of amounts capitalized , decreased $ 16.1 million to $ 58.6 million ( net of capitalized interest of $ 0.5 million in 2012 ) in 2012 as compared to 2011 , due primarily to a decrease in interest expense associated with our refinanced credit facility , due to lower interest rates , as well as 2011 including the write-off of $ 1.7 million in deferred financing costs associated with our previous $ 1.0 billion credit facility . our weighted average interest rate on our borrowings , excluding the write-off of deferred financing costs during the period , was 5.4 % in 2012 as compared to 6.3 % in 2011. cash interest expense decreased $ 15.4 million to $ 40.3 million in 2012 as compared to 2011 , and noncash interest expense decreased $ 0.7 million to $ 18.3 million in 2012 as compared to 2011. interest income interest income for 2013 , 2012 and 2011 primarily includes amounts earned on the bonds that we received in april 2008 in connection with the development of gaylord national , which we hold as notes receivable . income from unconsolidated companies we account for our previous minority investments under the equity method of accounting . income from unconsolidated companies for the years ended december 31 , 2013 , 2012 and 2011 consisted of income from these investments . net loss on extinguishment of debt in july 2013 , we settled the repurchase of and subsequently cancelled $ 54.7 million of our 3.75 % convertible notes in private transactions for aggregate consideration of $ 98.6 million , which was funded by borrowings under our
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( 3 ) maximum maturity assumes all extension options are exercised by the borrower , however loans may be repaid prior to such date . subsequent activity during the period from january 1 , 2021 through march 22 , 2021 , we closed on seven senior floating-rate mortgage loans of which $ 127,883 was funded at closing . 52 results of operations the following table sets forth information regarding our consolidated results of operations for the years ended december 31 , 2020 , 2019 and 2018 : replace_table_token_12_th net interest income net interest income is generated on our interest-earning assets less related interest-bearing liabilities . the increase in interest income was attributable to debt investments acquired or originated in our portfolio and non-recurring prepayment fee income . the increase in interest expense was attributable to an increase in borrowings in order to support our investment activities . expenses general and administrative expenses include administrative services expenses , auditing and professional fees , independent director fees , transfer agent fees , loan servicing expenses and other costs associated with operating our business . expense limitation we have entered into an expense limitation agreement with fs real estate advisor and rialto pursuant to which fs real estate advisor and rialto have agreed to waive reimbursement of or pay , on a quarterly basis , our annualized ordinary operating expenses for such quarter to the extent such expenses exceed 1.5 % per annum of our average net assets attributable to each of our classes of common stock . ordinary operating expenses for each class of common stock consist of all ordinary expenses attributable to such class , including administration fees , transfer agent fees , fees paid to our board of directors , loan servicing expenses , administrative services expenses , and related costs associated with legal , regulatory compliance and investor relations , but excluding the following : ( a ) advisory fees , ( b ) interest expense and other financing costs , ( c ) taxes , ( d ) distribution or shareholder servicing fees and ( e ) unusual , unexpected and or nonrecurring expenses . we will repay fs real estate advisor 53 or rialto on a quarterly basis any ordinary operating expenses previously waived or paid , but only if the reimbursement would not cause the then-current expense limitation , if any , to be exceeded . in addition , the reimbursement of expenses will be made only if payable not more than three years from the end of the fiscal quarter in which the expenses were paid or waived . fs real estate advisor and rialto each agreed to waive the recoupment of any amounts that may be subject to conditional reimbursement during the quarterly period ended march 31 , 2020. to the extent that the conditions to recoupment are satisfied in a future quarter ( prior to the expiration of the three-year period for reimbursement set forth in the expense limitation agreement ) , such expenses may be subject to conditional recoupment in accordance with the terms of the expense limitation agreement . during the period from september 13 , 2017 ( commencement of operations ) to december 31 , 2020 , we accrued $ 5,783 for reimbursement of expenses that fs real estate advisor and rialto have agreed to pay , including $ 1,023 in reimbursements for the year ended december 31 , 2020. during the period from september 13 , 2017 ( commencement of operations ) to december 31 , 2020 , we received $ 5,339 in cash reimbursements from fs real estate advisor . as of december 31 , 2020 , we had $ 444 of reimbursements due from fs real estate advisor and rialto . other income ( loss ) during the year ended december 31 , 2020 , we sold all of our investments in available-for-sale cmbs for net proceeds of $ 16,082 , from which we realized a net loss of $ ( 556 ) . we did not have any realized gains or losses during the years ended december 31 , 2019 or 2018. non-gaap financial measures funds from operations and modified funds from operations we use funds from operations ( ffo ) , a widely accepted non-gaap financial metric , to evaluate our performance . ffo provides a supplemental measure to compare our performance and operations to other reits . due to certain unique operating characteristics of real estate companies , the national association of real estate investment trusts ( nareit ) has promulgated a standard known as ffo , which it believes more accurately reflects the operating performance of a reit . as defined by nareit , ffo means net income computed in accordance with gaap , excluding gains ( or losses ) from sales of operating property , plus depreciation and amortization and after adjustments for unconsolidated entities . in addition , nareit has further clarified the ffo definition to add-back impairment write-downs of depreciable real estate or of investments in unconsolidated entities that are driven by measurable decreases in the fair value of depreciable real estate and to exclude the earnings impacts of cumulative effects of accounting changes . we have adopted the nareit definition for computing ffo . our business plan is to operate as a mortgage reit with our portfolio consisting of senior floating-rate mortgage loans , including those that are secured by a first priority mortgage on transitional commercial real estate properties . we will typically have no ffo adjustments to our net income or loss computed in accordance with gaap . although we have the ability to acquire real property , we have not acquired any at this time and as such do not have any ffo adjustments to our net income or loss computed in accordance with gaap . story_separator_special_tag due to the unique features of publicly registered , non-listed reits , the institute for portfolio alternatives ( ipa ) , an industry trade group , published a standardized non-gaap financial measure known as modified funds from operations ( mffo ) , which the ipa has promulgated as a supplemental measure for publicly registered non-listed reits and which may be another appropriate supplemental measure to reflect the operating performance of a non-listed reit . 54 the ipa defines mffo as ffo adjusted for acquisition fees and expenses , amounts relating to straight line rents and amortization of premiums or accretion of discounts on debt investments , non-recurring impairments of real estate-related investments , mark-to-market adjustments included in net income , non-recurring gains or losses included in net income from the extinguishment or sale of debt , hedges , foreign exchange , derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan , unrealized gains or losses resulting from consolidation from , or deconsolidation to , equity accounting , and after adjustments for consolidated and unconsolidated partnerships and joint ventures . because mffo may be a recognized measure of operating performance within the non-listed reit industry , mffo and the adjustments used to calculate it may be useful in order to evaluate our performance against other non-listed reits . like ffo , mffo is not equivalent to our net income or loss as determined under gaap , as detailed in the table below , and mffo may not be a useful measure of the impact of long-term operating performance on value if we continue to acquire a significant amount of investments . our presentation of ffo and mffo may not be comparable to other similarly titled measures presented by other reits . we believe that the use of ffo and mffo provides a more complete understanding of our operating performance to stockholders and to management , and when compared year over year , reflects the impact on our operations from trends in operating costs , general and administrative expenses , and interest costs . neither ffo nor mffo is intended to be an alternative to net income or to cash flows from operating activities as determined by gaap as a measure of our capacity to pay distributions . management uses ffo and mffo to compare our operating performance to that of other reits and to assess our operating performance . neither the sec , any other regulatory body nor nareit has passed judgment on the acceptability of the adjustments that we use to calculate ffo or mffo . in the future , the sec , another regulatory body or nareit may decide to standardize the allowable adjustments across the non-listed reit industry and we would have to adjust our calculation and characterization of ffo or mffo . our ffo and mffo are calculated for the years ended december 31 , 2020 , 2019 and 2018 as follows : replace_table_token_13_th nav per share fs real estate advisor calculates our nav per share in accordance with the valuation guidelines approved by our board of directors for the purposes of establishing a price for shares sold in our public offering as well as establishing a repurchase price for shares repurchased pursuant to our share repurchase plan . 55 the following table provides a breakdown of the major components of our total nav as of december 31 , 2020 : replace_table_token_14_th ( 1 ) see reconciliation of stockholders ' equity to nav below for an explanation of the differences between the stockholder servicing fees accrued for purposes of nav and the amount accrued under gaap . the following table provides a breakdown of our total nav and nav per share by share class as of december 31 , 2020 : replace_table_token_15_th the following table sets forth a reconciliation of our stockholders ' equity to our nav as of december 31 , 2020 : reconciliation of stockholders ' equity to nav december 31 , 2020 total stockholders ' equity under gaap $ 305,712 preferred stock ( 125 ) total stockholders ' equity , net of preferred stock , under gaap 305,587 adjustments : accrued stockholder servicing fees ( 1 ) 15,335 net asset value $ 320,922 ( 1 ) stockholder servicing fees only apply to class t , class s , class d and class m shares . under gaap , we accrue future stockholder servicing fees in an amount equal to our best estimate of fees payable to fs investment solutions at the time such shares are sold . for purposes of nav , we recognize the stockholder servicing fee as a reduction of nav on a monthly basis . as a result , the estimated liability for the future stockholder servicing fees , which are accrued at the time each share is sold , will have no effect on the nav of any class . limits on the calculation of our per share nav although our primary goal in establishing our valuation guidelines is to produce a valuation that represents a fair and accurate estimate of the value of our investments , the methodologies used are based on judgments , assumptions and opinions about future events that may or may not prove to be correct , and if different judgments , assumptions or opinions were used , a different estimate would likely result . furthermore , our published per share 56 nav may not fully reflect certain extraordinary events because we may not be able to immediately quantify the financial impact of such events on our portfolio . fs real estate advisor monitors our portfolio between valuations to determine whether there have been any extraordinary events that may have materially changed the estimated market value of the portfolio . if required by applicable securities law , we will promptly disclose the occurrence of such event in a prospectus supplement and fs real estate advisor will analyze the impact of such extraordinary event on our portfolio and determine , in coordination with third-party valuation services , the appropriate adjustment to be made to our nav .
| our principal demands for funds will be for asset acquisitions/originations , the payment of operating expenses and distributions , the payment of interest on any outstanding indebtedness and repurchases of our common stock pursuant to our share repurchase plan . generally , cash needs for items other than asset acquisitions/originations will be met from operations , and cash needs for asset acquisitions/originations will be funded by public offerings of our shares and debt financings . however , there may be a delay between the sale of our shares and our purchase/originations of assets , which could result in a delay in the benefits to our stockholders of returns generated from our investment operations . our leverage may not exceed 300 % of our total net assets ( as defined in our charter ) . if we are unable to raise substantial funds in our public offering , we will make fewer investments resulting in less diversification in terms of the type , number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire . further , we will have certain fixed operating expenses , including certain expenses as a publicly offered reit , regardless of whether we are able to raise substantial funds in our public offering . our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income , reducing our net income and limiting our ability to make distributions . potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders or proceeds from the sale of assets or collection of loans receivable . in addition to making investments in accordance with our investment objectives , we expect to use our capital resources to make certain payments to fs real estate advisor and fs investment solutions , the dealer manager for our public offering . during the offering stage of our public offering , these payments will include payments to fs real estate advisor and its affiliates for reimbursement
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in response to these changing market conditions , we are executing a strategic plan for the core business that focuses on the following items and that we believe positions us for success over the long-term : profitably grow our stores accelerate our omni-channel platform promote communication , coordination and integration champion compliance key components of net earnings in this management 's discussion and analysis section , we review our consolidated results . for the years ended december 31 , 2015 , 2014 and 2013 , some of the key revenue and cost and expense items that affected earnings were as follows : revenues . we separate our total revenues into six components : lease revenues and fees , retail sales , non-retail sales , franchise royalties and fees , interest and fees on loans receivable and other . lease revenues and fees include all revenues derived from lease agreements at company-operated stores and retail locations serviced by progressive . retail sales represent sales of both new and returned lease merchandise from our company-operated stores . non-retail sales mainly represent new merchandise sales to our aaron 's sales & lease ownership franchisees . franchise royalties and fees represent fees from the sale of franchise rights and royalty payments from franchisees , as well as other related income from our franchised stores . interest and fees on loans receivable primarily represents the accretion of the discount on loans acquired in the dami acquisition , as well as finance charges and annual and other fees earned on loans originated since the acquisition . other revenues primarily relate to revenues from leasing real estate properties to unrelated third parties , as well as other miscellaneous revenues . depreciation of lease merchandise . depreciation of lease merchandise reflects the expense associated with depreciating merchandise held for lease and leased to customers by our company-operated stores and progressive . retail cost of sales . retail cost of sales represents the depreciated cost of merchandise sold through our company-operated stores . non-retail cost of sales . non-retail cost of sales primarily represents the cost of merchandise sold to our franchisees . operating expenses . operating expenses include personnel costs , occupancy costs , lease merchandise write-offs , bad debt expense , and advertising , among other expenses . other operating expense ( income ) , net . other operating expense ( income ) , net consists of gains or losses on sales of company-operated stores and delivery vehicles , fair value adjustments on assets held for sale and gains or losses on other transactions involving property , plant and equipment . critical accounting policies we discuss the most critical accounting policies below . for a discussion of the company 's significant accounting policies , see note 1 to the consolidated financial statements . revenue recognition lease revenues are recognized in the month they are due on the accrual basis of accounting . for internal management reporting purposes , lease revenues from sales and lease ownership agreements are recognized by the reportable segments as revenue in the month the cash is collected . on a monthly basis , we record an accrual for lease revenues due but not yet received , net of allowances , and a deferral of revenue for lease payments received prior to the month due . our revenue recognition accounting policy matches the lease revenue with the corresponding costs , mainly depreciation , associated with the lease merchandise . at december 31 , 2015 and 2014 , we had a revenue deferral representing cash collected in advance of being due or otherwise earned totaling $ 68.6 million and $ 60.5 million , respectively , and an accrued revenue receivable , net of allowance for doubtful accounts , based on historical collection rates of $ 34.5 million and $ 30.2 million , respectively . revenues from the sale of merchandise to franchisees are recognized at the time of receipt of the merchandise by the franchisee and revenues from such sales to other customers are recognized at the time of shipment . 31 lease merchandise our aaron 's sales & lease ownership and homesmart divisions depreciate merchandise over the applicable agreement period , generally 12 to 24 months ( monthly agreements ) or 65 to 104 weeks ( weekly agreements ) when leased , and generally 36 months when not leased , to a 0 % salvage value . the company 's progressive division depreciates merchandise over the lease agreement period , which is typically over 12 months , while on lease . our policies generally require weekly lease merchandise counts at our store-based operations , which include write-offs for unsalable , damaged , or missing merchandise inventories . full physical inventories are generally taken at our fulfillment and manufacturing facilities one to two times a year with appropriate provisions made for missing , damaged and unsalable merchandise . in addition , we monitor lease merchandise levels and mix by division , store and fulfillment center , as well as the average age of merchandise on hand . if unsalable lease merchandise can not be returned to vendors , its carrying amount is adjusted to net realizable value or written off . all lease merchandise is available for lease and sale , excluding merchandise determined to be missing , damaged or unsalable . we record lease merchandise carrying amount adjustments on the allowance method , which estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period based on historical write off experience . as of december 31 , 2015 and 2014 , the allowance for lease merchandise write-offs was $ 33.4 million and $ 27.6 million , respectively . lease merchandise adjustments totaled $ 136.4 million , $ 99.9 million and $ 58.0 million for the years ended december 31 , 2015 , 2014 and 2013 , respectively . acquisition accounting for businesses we account for acquisitions of businesses by recognizing the assets acquired and liabilities assumed at their respective fair values on the date of acquisition . story_separator_special_tag we estimate the fair value of identifiable intangible assets using discounted cash flow analyses or estimates of replacement cost based on market participant assumptions . the excess of the purchase price paid over the estimated fair values of the identifiable net tangible and intangible assets acquired in connection with business acquisitions is recorded as goodwill . we consider accounting for business combinations critical because management 's judgment is used to determine the estimated fair values assigned to assets acquired and liabilities assumed , as well as the useful life of and amortization method for intangible assets , which can materially affect the results of our operations . although management believes that the judgments and estimates discussed herein are reasonable , actual results could differ , and we may be exposed to an impairment charge if we are unable to recover the value of the recorded net assets . loans acquired in a business acquisition are recorded at their fair value at the acquisition date . the projected net cash flows from expected payments of principal , interest , fees and servicing costs and anticipated charge-offs are included in the determination of fair value ; therefore , an allowance for loan losses and an amount for unamortized fees is not recognized for the acquired loans . the difference , or discount , between the expected cash flows to be received and the fair value of the acquired loans is accreted to revenue based on the effective interest method . at each period end , the company evaluates the appropriateness of the accretable discount on the acquired loans based on actual and revised projected future cash receipts . goodwill and other intangible assets intangible assets are classified into one of three categories : ( 1 ) intangible assets with definite lives subject to amortization , ( 2 ) intangible assets with indefinite lives not subject to amortization and ( 3 ) goodwill . for intangible assets with definite lives , tests for impairment must be performed if conditions exist that indicate the carrying amount may not be recoverable . for intangible assets with indefinite lives and goodwill , tests for impairment must be performed at least annually , and sooner if events or circumstances indicate that an impairment may have occurred . factors which could necessitate an interim impairment assessment include a sustained decline in the company 's stock price , prolonged negative industry or economic trends and significant underperformance relative to historical or projected future operating results . as an alternative to this annual impairment testing for intangible assets with indefinite lives and goodwill , the company may perform a qualitative assessment for impairment if it believes it is not more likely than not that the carrying amount of a reporting unit 's net assets exceeds the reporting unit 's fair value . indefinite-lived intangible assets represent the value of trade names and trademarks acquired as part of the progressive acquisition . at the date of acquisition , the company determined that no legal , regulatory , contractual , competitive , economic or other factors limit the useful life of the trade name and trademark intangible asset and , therefore , the useful life is considered indefinite . the company reassesses this conclusion quarterly and continues to believe the useful life of this asset is indefinite . we estimate the fair value of indefinite-lived trade name and trademark intangible assets based on projected discounted future cash flows under a relief from royalty method . the company completed its indefinite-lived intangible asset impairment test as of october 1 , 2015 and determined that no impairment had occurred . 32 the following table presents the carrying amount of goodwill and other intangible assets , net as of december 31 , 2015 : ( in thousands ) 2015 goodwill $ 539,475 other indefinite-lived intangible assets 53,000 definite-lived intangible assets , net 222,912 goodwill and other intangibles , net $ 815,387 management has deemed its operating segments to be reporting units due to the fact that the operations included in each operating segment have similar economic characteristics . as of december 31 , 2015 , the company had six operating segments and reporting units : sales and lease ownership , progressive , homesmart , dami , franchise and manufacturing . as of december 31 , 2015 , the company 's sales and lease ownership , progressive , homesmart and dami reporting units were the only reporting units with assigned goodwill balances . the following is a summary of the company 's goodwill by reporting unit at december 31 , 2015 : ( in thousands ) 2015 sales and lease ownership $ 233,851 progressive 290,605 homesmart 14,729 dami 290 total $ 539,475 the company performs its annual goodwill impairment testing as of october 1 each year . when evaluating goodwill for impairment , the company may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit or intangible asset group is impaired . the decision to perform a qualitative impairment assessment for an individual reporting unit in a given year is influenced by a number of factors , including the size of the reporting unit 's goodwill , the current and projected operating results , the significance of the excess of the reporting unit 's estimated fair value over carrying amount at the last quantitative assessment date and the amount of time in between quantitative fair value assessments and the date of acquisition . during 2015 , the company performed a qualitative assessment for the goodwill of the progressive reporting unit and concluded no indications of impairment existed . for the other reporting units , we use a combination of valuation techniques to determine the fair value of our reporting units , including an income approach and a market approach . under the income approach , we estimate fair value based on estimated discounted cash flows , which require assumptions about short-term and long-term revenue growth rates , operating margins , capital requirements , and a weighted-average cost of capital and or discount rate .
| 35 results of operations – years ended december 31 , 2015 , 2014 and 2013 replace_table_token_8_th nmf—calculation is not meaningful 36 revenues information about our revenues by reportable segment is as follows : change year ended december 31 , 2015 vs. 2014 2014 vs. 2013 ( in thousands ) 2015 2014 2013 $ % $ % revenues : sales and lease ownership 1 $ 2,001,682 $ 2,037,101 $ 2,076,269 $ ( 35,419 ) ( 1.7 ) % $ ( 39,168 ) ( 1.9 ) % progressive 2 1,049,681 519,342 — 530,339 102.1 519,342 nmf homesmart 1 63,477 64,276 62,840 ( 799 ) ( 1.2 ) 1,436 2.3 dami 3 2,845
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as a result of these covid-19 related measures , we have incurred increased costs including increased employee costs , such as emergency pay and expanded benefits , and other operating costs , such as cleaning costs , personal protective equipment purchases and increased airfreight expenses , which have negatively impacted our profitability , partially offset by government credits provided to the company through the cares act . these incremental net charges totaled $ 4.3 in fiscal 2020. the company 's top priority during this time continues to be ensuring the health and welfare of our employees . additional measures have been put in place at all of our manufacturing locations to ensure the safety of our employees , including thermal scanning , requiring the use of proper protective gear , making hand sanitizer widely available throughout our facilities and following social distancing guidelines . additionally , we have implemented work-from-home policies for our employees that can work from home and have cancelled all non-essential company travel . we have not had any material operational disruption across our manufacturing and distribution facilities . there has been a slight increase in the level of absenteeism as our employees are taking intermittent leave ; however , this has not caused a significant disruption in our operations . as noted within the discussion of our consolidated results below , our earnings were negatively impacted by the covid-19 pandemic for the year ended september 30 , 2020 , which was largely driven by a decrease in demand for our sun care products , as the impact of the stay-at-home orders and phased approach to re-opening local economies has reduced vacation travel and certain outdoor activities . this decline was partially offset by an increase in demand for wet ones , due largely to consumers ' increased focus on personal hygiene . we expect to see continued strong demand for wet ones going forward . the impact that covid-19 continues to have on our customers and their cash flows and ability to operate remains uncertain at this time . however , in some cases we have seen changes in payment patterns , requests for extended payment terms or impact to customer operations , resulting in an increase in our bad debt expense . as the duration and severity of the covid-19 pandemic continues to affect economic conditions and therefore consumer spending and demand , we will continue to closely monitor the impact it has on our business and customers . we continue to closely monitor our supply chain and , to date , have not experienced any significant issues securing key ingredients for our products . the continued duration and severity of covid-19 may result in disruptions related to our key suppliers going forward ; however , the impact , timing and severity of potential disruptions can not be reasonably estimated at this time . we experienced increased volatility in foreign currency exchange rates and commodity prices in fiscal 2020 , which we believe is largely due to the economic uncertainty from covid-19 and the depreciation of certain foreign currencies against the u.s. dollar . we expect to see continued volatility in the foreign currency exchange rates ; however , we can not estimate the impact at this time . we expect to maintain adequate liquidity during these uncertain times . as noted within “ liquidity and capital resources ” below , covid-19 has not had a significant impact on our liquidity , cash flows or capital resources , including our ability to enter into the unsecured indenture agreement for 5.50 % senior notes in the amount of $ 750 due june 1 , 2028 ( “ 2028 notes ” ) , or to replace our former unsecured revolving credit facility in the u.s. with a new secured revolving credit facility in an aggregate principal amount of $ 425 ( the “ revolving credit facility ” ) . we will continue to assess the impact that covid-19 has on our liquidity needs and the current economic market conditions . significant events acquisitions on september 2 , 2020 , the company completed the acquisition of cremo , a premier men 's grooming company in the u.s , in an all-cash transaction at a purchase price of $ 233.6. as a result of the acquisition , cremo became a wholly owned subsidiary of the company . refer to note 3 of notes to consolidated financial statements for further discussion on the cremo acquisition . 25 divestiture on december 17 , 2019 , we completed the sale of our infant and pet care business included in the all other segment for $ 122.5 , which included consideration for providing services for up to one year under a transition services agreement . for further information on the divestiture of the infant and pet care business , refer to note 3 of notes to consolidated financial statements . goodwill and intangible asset impairment the company performs an annual test for impairment of goodwill and indefinite-lived intangible assets . the annual test performed in the fourth quarter of fiscal 2020 did not indicate that the company 's goodwill and intangible assets had a fair value below the carrying value . during the third quarter of fiscal 2019 , we determined a triggering event had occurred as a result of a decline in our market capitalization after a decline in the company 's share price . we performed an interim impairment analysis using financial information through june 30 , 2019 and forecasts for cash flows developed using our three-year strategic plan . the interim impairment review was performed on all long-lived assets , including definite-lived intangibles , goodwill , and indefinite-lived intangible assets . the results of the impairment review indicated the carrying value of the goodwill of the wet shave , infant care , and skin care reporting units were greater than their respective fair values , resulting in a non-cash goodwill impairment of $ 369.0 , $ 37.0 , and $ 2.0 , respectively . story_separator_special_tag additionally , the carrying value of the wet ones and diaper genie trade names were greater than the fair values and resulted in non-cash impairments of the indefinite-lived intangible assets of $ 87.0 and $ 75.0 , respectively . we performed an assessment in the fourth quarter of fiscal 2019 to determine if any significant events or changes in circumstances had occurred that would be considered a potential triggering event . we did not identify any indication of a triggering event that would indicate the existence of additional impairment of the reporting units , indefinite-lived intangible assets , and definite-lived intangible assets . during the third quarter of fiscal 2018 , we determined a triggering event had occurred as a result of a sustained decline in our market capitalization . we performed an interim impairment analysis using financial information through june 30 , 2018 and forecasts for cash flows developed using our strategic plan . the interim impairment review was performed across all reporting units and indefinite-lived intangible assets and we found the carrying value of the goodwill of our infant care reporting unit to be above its fair value , resulting in a non-cash goodwill impairment charge of $ 24.4. the impairment of the infant care reporting unit was caused by declining revenue and earnings forecasts and higher discount rates . higher discount rates were the result of certain market-based assumptions and company specific risks . refer to notes 2 and 7 of notes to consolidated financial statements for further discussion on the annual impairment test . project fuel project fuel is an enterprise-wide transformational initiative that was launched in the second quarter of fiscal 2018 to address all aspects of our business and cost structure , simplifying and transforming our organization , structure and key processes . project fuel is facilitating further re-investment in our growth strategy while enabling us to achieve our desired future state operations . in addition to the expected cost savings , project fuel is designed to strengthen our challenger culture and reinforce our consumer-centric organizational focus . it is also designed to simplify the organization and streamline ways of working in order to increase competitiveness , speed and agility , and ensure we have the skills , capabilities and investments needed to compete in a rapidly changing world . we expect that project fuel will generate $ 265 to $ 275 in total annual gross savings by the end of the 2021 fiscal year . the savings generated will be used to fuel investments and brand building in strategic growth initiatives , offset anticipated operational cost headwinds from inflation and other rising input costs and improve our overall profitability and cash flows . project fuel related gross savings were approximately $ 74 in fiscal 2020 , bringing cumulative gross savings to approximately $ 212. to implement the restructuring element of project fuel , we estimated one-time pre-tax charges to be approximately $ 160 to $ 165 , with an additional capital investment of $ 70 to $ 80 through the end of fiscal year 2021. project fuel restructuring charges were $ 38.1 for fiscal 2020 , bringing cumulative project fuel restructuring charges to $ 133.6. additionally , capital expenditures for project fuel were $ 24.4 in fiscal 2020 , bringing cumulative capital expenditures for project fuel to $ 58.1. for further information on our restructuring projects , refer to note 4 of notes to consolidated financial statements . 26 sun care reformulation costs as a result of discussions with one of our suppliers during the fourth quarter of fiscal 2018 , we made certain supply chain and procurement decisions , including implementing a raw material substitution due to anticipated regulatory changes related to european union regulation ( ec ) no . 1907/2006 concerning the registration , evaluation , authorization , and restriction of chemicals , establishing a european chemical agency ( “ reach ” ) , that affected the supply chain of select sun care products . to align with our raw material selection process , we chose to make those changes in advance of the fiscal 2019 sun care season to minimize potential impact to our distribution channels during the peak sales period . we incurred charges totaling $ 2.8 in cost of products sold in fiscal 2019 as a result of the changes to our supply chain . fiscal 2018 had charges totaling $ 25.3 to cost of products sold , primarily due to costs associated with the write-off of select sun care product inventories . 27 executive summary following is a summary of key results for fiscal 2020 , 2019 and 2018. net earnings and diluted earnings per share ( “ eps ” ) for the time periods presented were impacted by impairment charges , restructuring charges , acquisition and integration costs , cost of early debt retirement , covid-19 pandemic expenses , advisory expenses in connection with the evaluation of the feminine and infant care businesses , sun care reformulation costs , pension settlement expense , investor settlement expenses , the disposition of the infant and pet care business and the playtex gloves assets , the related tax effects of these items and the impact of the tax act . the impact of these items on reported net earnings and eps are provided below as a reconciliation of net earnings and eps to adjusted net earnings and adjusted diluted eps , which are non-gaap measures . fiscal 2020 net sales of $ 1,949.7 decreased 8.9 % from fiscal 2019 , inclusive of a 0.2 % increase due to the acquisition of cremo , a 4.4 % decrease due to the sale of the infant and pet care business and a 0.3 % decrease due to currency movements . excluding the impact of the cremo acquisition , the sale of the infant and pet care business and currency movements , organic net sales decreased 4.4 % for fiscal 2020 as compared to the prior year period , as declines primarily in wet shave and sun care products were partially offset by growth in skin care driven by wet ones and grooming products .
| ” gross profit gross profit was $ 880.9 in fiscal 2020 , as compared to $ 966.6 in fiscal 2019. gross margin as a percent of net sales for fiscal 2020 was 45.2 % , up 10 basis points as compared to fiscal 2019. excluding the impact of acquisitions , divestitures , and non-recurring charges such as covid-19 pandemic expenses and project fuel obsolescence , gross margin as a percent of sales increased by 10 basis points compared to fiscal 2019 , as project fuel related savings and lower input costs helped to offset the impact of lower volumes , and higher pricing in sun care offset unfavorable mix in wet shave . 29 selling , general and administrative expense sg & a was $ 408.8 in fiscal 2020 , or 21.0 % of net sales , as compared to $ 372.0 in fiscal 2019 , or 17.4 % of net sales . excluding the impact of non-recurring expenses , consisting of cremo acquisition and integration costs , the divestiture of infant and pet care , project fuel and feminine and infant care evaluation costs in both periods , sg & a as a percent of net sales increased 150 basis points compared to fiscal 2019. the increase in sg & a spend was driven by higher bad debt expense driven by the covid-19 pandemic and increased salary and benefits expense compared to the prior fiscal year . advertising and sales promotion expense for fiscal 2020 , a & p was $ 216.2 , down $ 34.7 as compared to fiscal 2019. a & p as a percent of net sales was 11.1 % for fiscal 2020 , compared with 11.7 % in fiscal 2019. the decrease was driven by lower spend across all segments . wet shave spend in fiscal 2020 was down across all product groups and geographies . additionally , feminine care a & p in north america declined in fiscal 2020. the decline in a & p was primarily caused by the covid-19 pandemic , as the company lowered
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factors that could cause actual results to differ materially include the following : inability to locate property with mineralization , lack of financing for exploration efforts , competition to acquire mining properties ; risks inherent in the mining industry , and risk factors that are listed in the company 's reports and registration statements filed with the securities and exchange commission . the company re-started the advancement of the south mountain project in 2019 with bemetals corp. – vancouver b.c . ( tsx-v : bmet ) – under an option agreement to complete the pre-development work and produce a preliminary economic analysis ( pea ) . the company 's plan of operation for the next twelve months is to continue supporting bemetals corp. during their option period and help ensure that the south mountain pea is completed on schedule and within budget . story_separator_special_tag style= '' position : absolute ; font:11pt symbol ; margin-left : -18pt '' > · the company will also consider other sources of funding , including potential mergers , the sale of all or part of the company ` s bemetals corp. ( tsx-v : bmet ) common shares beneficially held , and or additional farm-out of its other exploration property . for the year ended december 31 , 2020 , net cash used in operating activities was $ 271,260 , consisting of net income of $ 1,221,681 offset by the non-cash items , and changes in operating assets and liabilities . cash provided by financing activities for the year ended december 31 , 2020 totaled $ 250,000 from the receipt of $ 250,000 under the bemetals option agreement . net cash distributions of financing activities were $ 5,000 t o non-controlling interest . our future liquidity and capital requirements will depend on many factors , including timing , cost and progress of our exploration efforts , our evaluation of , and decisions with respect to , our strategic alternatives , and costs associated with the regulatory approvals . if it turns out that we do not have enough cash to complete our exploration programs , we will attempt to raise additional funds from a public offering , a private placement , mergers , farm-outs or loans . additional financing may be required in the future to fund our planned operations . we do not know whether additional financing will be available when needed or on acceptable terms , if at all . if we are unable to raise additional financing when necessary , we may have to delay our exploration efforts or any property acquisitions or be forced to cease operations . collaborative arrangements may require us to relinquish our rights to certain of our mining claims . private placement on february 27 , 2019 , the company entered into an option agreement , ( the “ bemetals option agreement ” ) with bemetals corp. , a british columbia corporation ( “ bemetals ” ) , and bemetals usa corp. , a delaware corporation ( “ bmet usa ” ) , a wholly owned subsidiary of bemetals . under the terms of the bemetals option agreement , in the second quarter 2019 , bemetals purchased 2.5 million shares of the company 's common stock at a price of $ 0.10 per share , for an aggregate purchase price of $ 250,000 , in a private placement . use of proceeds are for general corporate working capital . this private placement was approved by the tsx-v. the offerings are believed exempt from registration pursuant to the exemption for transactions by an issuer not involving any public offering under section 4 ( 6 ) the securities act of 1933 , as amended . the securities offered , sold , and issued in connection with the private placement have not been or are not registered under the securities act of 1933 , as amended , or any state securities laws and may not be offered or sold in the united states absent registration with the securities and exchange commission or an applicable exemption from the registration requirements . contractual obligations during 2008 and 2009 , three lease arrangements were made with landowners that own land parcels adjacent to the company 's south mountain patented and unpatented mining claims . the leases were for a seven-year period , with options to renew , with annual payments ( based on $ 20 per acre ) listed in the following table . the leases have no work requirements . replace_table_token_6_th ( 1 ) amounts shown are for the lease periods years 12 through 16 , a total of 4 years that remains after 2019. lease was extended an additional 10 years at $ 30/acre after 2014 . 26 ( 2 ) the lowry lease has an early buy-out provision for 50 % of the remaining amounts owed in the event the company desires to drop the lease prior to the end of the first seven-year period . ( 3 ) ogt llc , managed by the company 's wholly owned subsidiary smmi , receives a $ 5,000 per year payment for up to 10 years , or until a $ 5 million capped npi royalty is paid . critical accounting policies we have identified our critical accounting policies , the application of which may materially affect the financial statements , either because of the significance of the financials statement item to which they relate , or because they require management 's judgment in making estimates and assumptions in measuring , at a specific point in time , events which will be settled in the future . the critical accounting policies , judgments and estimates which management believes have the most significant effect on the financial statements are set forth below : a ) estimates . our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain . as the number of variables and assumptions affecting the future resolution of the uncertainties increase , these judgments become story_separator_special_tag factors that could cause actual results to differ materially include the following : inability to locate property with mineralization , lack of financing for exploration efforts , competition to acquire mining properties ; risks inherent in the mining industry , and risk factors that are listed in the company 's reports and registration statements filed with the securities and exchange commission . the company re-started the advancement of the south mountain project in 2019 with bemetals corp. – vancouver b.c . ( tsx-v : bmet ) – under an option agreement to complete the pre-development work and produce a preliminary economic analysis ( pea ) . the company 's plan of operation for the next twelve months is to continue supporting bemetals corp. during their option period and help ensure that the south mountain pea is completed on schedule and within budget . story_separator_special_tag style= '' position : absolute ; font:11pt symbol ; margin-left : -18pt '' > · the company will also consider other sources of funding , including potential mergers , the sale of all or part of the company ` s bemetals corp. ( tsx-v : bmet ) common shares beneficially held , and or additional farm-out of its other exploration property . for the year ended december 31 , 2020 , net cash used in operating activities was $ 271,260 , consisting of net income of $ 1,221,681 offset by the non-cash items , and changes in operating assets and liabilities . cash provided by financing activities for the year ended december 31 , 2020 totaled $ 250,000 from the receipt of $ 250,000 under the bemetals option agreement . net cash distributions of financing activities were $ 5,000 t o non-controlling interest . our future liquidity and capital requirements will depend on many factors , including timing , cost and progress of our exploration efforts , our evaluation of , and decisions with respect to , our strategic alternatives , and costs associated with the regulatory approvals . if it turns out that we do not have enough cash to complete our exploration programs , we will attempt to raise additional funds from a public offering , a private placement , mergers , farm-outs or loans . additional financing may be required in the future to fund our planned operations . we do not know whether additional financing will be available when needed or on acceptable terms , if at all . if we are unable to raise additional financing when necessary , we may have to delay our exploration efforts or any property acquisitions or be forced to cease operations . collaborative arrangements may require us to relinquish our rights to certain of our mining claims . private placement on february 27 , 2019 , the company entered into an option agreement , ( the “ bemetals option agreement ” ) with bemetals corp. , a british columbia corporation ( “ bemetals ” ) , and bemetals usa corp. , a delaware corporation ( “ bmet usa ” ) , a wholly owned subsidiary of bemetals . under the terms of the bemetals option agreement , in the second quarter 2019 , bemetals purchased 2.5 million shares of the company 's common stock at a price of $ 0.10 per share , for an aggregate purchase price of $ 250,000 , in a private placement . use of proceeds are for general corporate working capital . this private placement was approved by the tsx-v. the offerings are believed exempt from registration pursuant to the exemption for transactions by an issuer not involving any public offering under section 4 ( 6 ) the securities act of 1933 , as amended . the securities offered , sold , and issued in connection with the private placement have not been or are not registered under the securities act of 1933 , as amended , or any state securities laws and may not be offered or sold in the united states absent registration with the securities and exchange commission or an applicable exemption from the registration requirements . contractual obligations during 2008 and 2009 , three lease arrangements were made with landowners that own land parcels adjacent to the company 's south mountain patented and unpatented mining claims . the leases were for a seven-year period , with options to renew , with annual payments ( based on $ 20 per acre ) listed in the following table . the leases have no work requirements . replace_table_token_6_th ( 1 ) amounts shown are for the lease periods years 12 through 16 , a total of 4 years that remains after 2019. lease was extended an additional 10 years at $ 30/acre after 2014 . 26 ( 2 ) the lowry lease has an early buy-out provision for 50 % of the remaining amounts owed in the event the company desires to drop the lease prior to the end of the first seven-year period . ( 3 ) ogt llc , managed by the company 's wholly owned subsidiary smmi , receives a $ 5,000 per year payment for up to 10 years , or until a $ 5 million capped npi royalty is paid . critical accounting policies we have identified our critical accounting policies , the application of which may materially affect the financial statements , either because of the significance of the financials statement item to which they relate , or because they require management 's judgment in making estimates and assumptions in measuring , at a specific point in time , events which will be settled in the future . the critical accounting policies , judgments and estimates which management believes have the most significant effect on the financial statements are set forth below : a ) estimates . our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain . as the number of variables and assumptions affecting the future resolution of the uncertainties increase , these judgments become
| exploration expenses for the year ended december 31 , 2020 decreased by $ 15,461 when compared to same period in 2019. legal and accounting costs decreased for the year ended december 24 31 , 2020 compared to 2019 by $ 78,672 for a total of $ 56,343. this decrease can be associated with legal expenses surrounding the bemetals option agreement signed on february 27 , 2019. management and administrative expense increased by $ 56,874 or 11 % principally due to stock options compensation of $ 159,740 issued to our officers and directors on march 30 , 2020. liquidity and capital resources : the consolidated financial statements for the year ended december 31 , 2020 have been prepared under the assumption that we will continue as a going concern . such assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business . as shown in the consolidated financial statements for the year ended december 31 , 2020 , we have sufficient cash reserves to cover normal operating expenditures for the following 12 months . the liquidity of the company was enhanced on february 27 , 2019 when the company entered into the bemetals option agreement with bemetals corp. , and bmet usa , a wholly owned subsidiary of bemetals . under the terms of the bemetals option agreement , bmet usa will be entitled to purchase 100 % of the issued and outstanding shares of smmi from tmri , both wholly owned subsidiaries of the company . the term of the agreement is for two years with bemetals completing a preliminary economic assessment ( `` pea '' ) completed by a mutually agreed third-party engineering firm . over its term , this agreement requires cash payments to the company of $ 1,350,000 ; $ 1,100,000 in cash and $ 250,000 in exchange for shares of the company 's common stock . through december 31 , 2020 , cash proceeds of $ 600,000 and $ 250,000 in exchange for shares of the company 's common stock have been received . bemetals also agreed to pay the company $ 25,000 per month for management services . in the event that bemetals decides not to proceed with the south mountain project , bemetals will not be
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excluding the other items from all periods , fourth quarter 2017 adjusted ebitda was $ 197 million , compared to $ 167 million in the third quarter of 2017 and $ 102 million in the fourth quarter of 2016. segment performance wellbore technologies wellbore technologies generated revenues of $ 715 million in the fourth quarter of 2017 , an increase of three percent from the third quarter and an increase of 35 percent from the fourth quarter of 2016. demand for the segment 's products , technologies and services continues to drive growth that outpaced global activity levels during the fourth quarter . operating loss was $ 21 million , or 2.9 percent of sales . adjusted ebitda was $ 107 million , or 15.0 percent of sales , an increase of 14 percent sequentially and an increase of $ 87 million from the prior year . higher volumes and improved pricing resulted in 59 percent sequential adjusted ebitda incrementals ( the change in adjusted ebitda divided by the change in revenue ) . completion & production solutions completion & production solutions generated revenues of $ 690 million , an increase of one percent from the third quarter and an increase of 15 percent from the fourth quarter of 2016. revenues from growing deliveries of pressure pumping equipment and composite pipe , more than offset lower revenues from offshore products . operating profit was $ 19 million or 2.8 percent of sales . adjusted ebitda was $ 74 million , or 10.7 percent of sales , a decrease of 24 percent sequentially and an increase of seven percent from the prior year . higher costs and lower throughput in offshore products and processing equipment adversely impacted ebitda margins . backlog for capital equipment orders for completion & production solutions at december 31 , 2017 was $ 1.07 billion . new orders during the quarter were $ 501 million , representing a book-to-bill of 125 percent when compared to the $ 401 million of orders shipped from backlog . the majority of the segment 's business units secured orders in excess of 100 percent book-to-bill . the order book included topside equipment for an fpso and strong bookings for coiled tubing equipment . rig technologies rig technologies generated revenues of $ 614 million , an increase of 20 percent from the third quarter and an increase of $ 1 million from the fourth quarter of 2016. revenues improved from shipments to customers that deferred deliveries from the third quarter , increased order intake , and a seasonal improvement in service and repair work . operating loss was $ 51 million , or 8.3 percent of sales . adjusted ebitda was $ 70 million , or 11.4 percent of sales , an increase of 75 percent sequentially and a decrease of one percent from the prior year . higher volumes drove the improvement in adjusted ebitda . backlog for capital equipment orders for technologies at december 31 , 2017 was $ 1.89 billion . new orders during the quarter were $ 169 million . 28 oil & gas equipment and services market over the past decade , technological advancements in the oilfield equipment and service space unlocked production from formations that were previously deemed uneconomic , especially in north america . from 2004 to 2014 global oil and liquids supply increased dramatically from u.s. unconventional resources , deep-water ( defined as water depths greater than 400 feet ) resources and from other sources . the advances in technology combined with relatively high commodity prices caused by growing demand enabled and sustained an increase in global drilling activity . global supply started to catch up to demand , and , in the latter half of 2014 , demand growth in areas such as asia , europe and the u.s. weakened while drilling activity remained strong and production continued to grow . as a result , global inventories of crude and refined products grew and the price of oil declined significantly during early 2015 , remaining depressed throughout the year and undergoing another major reduction toward the end of 2015. in early 2016 , the market witnessed oil trading in the high $ 20 per barrel range , prices not seen since 2003. in response to rapidly deteriorating market conditions , operators acutely reduced both operating and capital expenditures . orders for nov 's equipment and services slowed and rig counts declined rapidly with active u.s. drilling rig counts hitting 70 year lows , and international rig counts reaching decade lows , during the second quarter of 2016. as a result of the sharp cutback in activity , production declined in certain areas of the world , global inventories began to decline and commodity prices started to rebound as oil markets began to re-balance . the market downturn began to stabilize during the second half of 2016 and showed early signs of improvement as the year ended . during 2017 , land drilling in north america continued to increase , while international markets stabilized and offshore activity remained depressed . the price of west texas intermediate cushing crude ended the year at $ 60.46 a barrel . outlook activity in north america increased sharply off historical lows during the last two quarters of 2016 and through 2017. declines in supply appear to have rebalanced the market ; however , commodity prices and global activity levels remain relatively low and challenging conditions persist offshore . consequently , the company anticipates that its customers will continue to moderate capital expenditures to the extent they remain uncertain of a sustainable recovery in commodity prices . while north america land drilling has increased , activity levels remain well below prior cyclical highs . international activity , which has been slower to fall than north american activity , may have reached the bottom of its cycle during 2017 , though strong signs of recovery are not yet apparent . story_separator_special_tag offshore activity , which has longer project cycle times and , in certain instances , more challenged economics , may continue to decline into 2018. low activity levels result in an oversupply of service capacity and capital equipment , creating challenging prospects for many of nov 's customers and reducing demand for the company 's products . in this environment , contractors have been hesitant to invest in their existing equipment to conserve as much capital as possible . equipment has been neglected and idle fleets have been stripped of parts to sustain assets that remains active . additionally , certain equipment becomes less desirable and obsolete as equipment manufacturers develop new technologies and produce more efficient equipment that improves efficiencies and lowers the marginal cost of supply for oil and gas operating companies . the company believes that the sharp spending reductions its customers have had in place for an extended period have created pent up demand for nov 's products that began to show in certain areas during the second half of 2017 as industry activity levels began to improve . nov 's global customer base includes national oil companies , international oil companies , independent oil and gas companies , onshore and offshore service companies and others whose strategies and reactions to low commodity prices vary . likewise , the company expects the timing and slope of revenue stabilization and recovery will be different across its operating regions and its three business segments . nov 's wellbore technologies segment and certain elements of its completion & production solutions and rig technologies segments are realizing a faster recovery as drilling of new wells increases , while a strong recovery for the more capital equipment oriented businesses are expected to come later in the cycle . nov will continue to adjust the size of its operations to fit anticipated levels of activity while investing in developing and acquiring new products , technologies and operations that advance the company 's longer term strategic goals . nov has a history of implementing cost-control measures and downsizing in response to depressed market conditions as well as cost effectively ramping operations to capitalize on rapidly increasing demand . the company has closed , or is in the process of closing , 385 locations over the past three years . it has reduced its annual expenses relating to salaries , wages , outside services , contractors , travel and entertainment by approximately $ 3.0 billion . the company remains optimistic regarding longer-term market fundamentals as existing oil and gas fields continue to deplete and numerous major projects to replenish supply have been deferred or canceled while global demand continues to grow . though the company benefited from a high concentration of orders for offshore drilling equipment and services in the preceding years , significant contraction in the offshore market during the recent downturn adversely effected the company 's performance . offshore market dynamics and equipment oversupply are expected to cause slower recovery there than in our land business , however , it is in nov 's strategic interest to maintain a leading position in offshore drilling equipment . the company has intentionally and successfully pivoted towards onshore and non-drilling related activities in recent years , highly responsive to the industry 's increased focus on onshore unconventional developments . approximately 65 % of consolidated revenues were derived from onshore businesses in 2017 , compared to approximately 40 % in 2014. nov expects unconventional shale resources to continue to gain a greater share of global production , and the company will continue to enhance its offering into unconventional resource focused products and technologies , including advanced , automated drilling rigs ; premium drillpipe and directional drilling technologies ; hydraulic fracture stimulation equipment ; and multistage completion tools . nov expects big data and predictive analytics to improve uptime and operating efficiency , and the company remains at the forefront of applying this promising technology to oilfield drilling and completion equipment . nov expects the oil and gas industry to adopt more efficient supply chain practices that the company is pioneering to construct floating production facilities to produce the immense resources discovered offshore . the company has used the recent downturn to vigorously advance these strategic initiatives , and is encouraged by its progress . 29 story_separator_special_tag font-family : times new roman '' > years ended december 31 , 2016 and december 31 , 2015 the following table summarizes the company 's revenue and operating profit ( loss ) by operating segment in 2016 and 2015 ( in millions ) : replace_table_token_5_th wellbore technologies revenue from wellbore technologies for the year ended december 31 , 2016 was $ 2,199 million , a decrease of $ 1,519 million ( 40.9 % ) compared to the year ended december 31 , 2015. the decrease was due to lower drilling activity . operating loss from wellbore technologies was $ 770 million for the year ended december 31 , 2016 , a decrease of $ 803 million ( 51.0 % ) compared to the year ended december 31 , 2015. operating loss percentage decreased to 35.0 % from 42.3 % in 2015. operating loss decreased due to $ 1,658 million in goodwill and intangible asset impairment charges , which occurred in the fourth quarter of 2015 and did not repeat in 2016 , partially offset by a decrease in drilling activity . included in operating profit are other items related to costs associated with a voluntary early retirement plan established by the company during the first quarters of 2016 and 2015 , costs related to severance and facility closures , and asset write-downs , including the impairment charge mentioned above .
| included in operating profit are other items related to costs associated with a voluntary early retirement plan established by the company during the first quarter of 2016 ; costs related to severance and facility closures ; items related to acquisitions , such as transaction costs , the amortization of backlog and inventory that was stepped up to fair value during purchase accounting ; and asset write-downs . other items included in operating profit for completion & production solutions were $ 33 million for the year ended december 31 , 2017 and $ 274 million for the year ended december 31 , 2016 . 30 the completion & productions solutions segment monitors its capital equipment backlog to plan its business . new orders are added to backlog only when the company receives a firm written order for major completion and production components or a signed contract related to a construction project . the capital equipment backlog was $ 1,066 million at december 31 , 2017 , an increase of $ 248 million , or 30 % from backlog of $ 818 million at december 31 , 2016. numerous factors may affect the timing of revenue out of backlog . considering these factors , the company reasonably expects approximately $ 953 million of revenue out of backlog in 2018 and approximately $ 113 million of revenue out of backlog in 2019 and thereafter . at december 31 , 2017 , approximately 59 % of the capital equipment backlog was for offshore products and approximately 73 % of the capital equipment backlog was destined for international markets . rig technologies revenue from rig technologies for the year ended december 31 , 2017 was $ 2,252 million , a decrease of $ 858 million ( 27.6 % ) compared to the year ended december 31 , 2016. the decrease was due to lower volumes in all areas . operating loss from rig technologies was $ 14 million for the year ended december 31 , 2017 , an improvement of $ 1,019 million ( 98.6 % ) compared to 2016 .
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” 27 ( loss ) income from discontinued operations replace_table_token_17_th * measure not meaningful the results from discontinued operations were a loss of $ 7.2 million and income of $ 135.4 million , net of income taxes , for the years ended december 31 , 2016 and 2015 , respectively . the activity from discontinued operations in 2016 and 2015 are primarily the result of the spin-off of the foodservice business . see additional discussion at note 3 , “ discontinued operations. ” year ended december 31 , 2015 compared to 2014 net sales ( in millions ) 2015 2014 change net sales $ 1,865.7 $ 2,305.2 ( 19.1 ) % consolidated net sales decreased 19.1 % in 2015 to $ 1.9 billion from $ 2.3 billion in 2014 . the company experienced a sharp drop in demand for its products in 2015 . the overall decrease was primarily due to weaker demand in the americas region for rough terrain and boom truck cranes . consolidated net sales were also unfavorably impacted by approximately $ 151.2 million due to changes in foreign currency exchange rates . gross profit replace_table_token_18_th gross profit for the year ended december 31 , 2015 decreased 28.9 % to $ 332.2 million compared to $ 467.2 million for the year ended december 31 , 2014 . the decrease in gross profit was attributable primarily to the decrease in sales volume discussed above and unfavorable absorption given the lower sales volumes , partially offset by manufacturing cost reduction initiatives . engineering , selling and administrative expenses replace_table_token_19_th es & a expenses for the year ended december 31 , 2015 decreased $ 33.3 million to $ 316.9 million compared to $ 350.2 million for the year ended december 31 , 2014 . this decrease was driven by changes in foreign currency exchange rates and decreases in wages and benefits due to headcount reductions and cost control initiatives . asset impairment expense ( in millions ) 2015 2014 change asset impairment expense $ 15.3 $ — * * measure not meaningful asset impairment expense for the year ended december 31 , 2015 was $ 15.3 million ; there was no impairment expense for the year ended december 31 , 2014 . the impairment expense recorded in 2015 resulted from the write-down of facilities in brazil and slovakia . restructuring expense replace_table_token_20_th restructuring expense for the year ended december 31 , 2015 totaled $ 9.4 million compared to $ 6.6 million in 2014 . these expenses related to restructuring plans to reduce the cost structure of crane operations through site closings , consolidations and 28 reductions in workforce across the globe . additionally , the 2015 restructuring expense included $ 3.5 million of expense related to executive severance . see further detail at note 20 , “ restructuring. ” interest expense & amortization of deferred financing fees replace_table_token_21_th interest expense for the year ended december 31 , 2015 totaled $ 95.6 million versus $ 92.8 million for the year ended december 31 , 2014 . the increase in interest expense of $ 2.8 million for the year ended december 31 , 2015 compared to the prior year was the result of lower 2014 interest expense due to the accelerated amortization of the swap monetization gain of $ 8.3 million resulting from the redemption of the 2018 notes , which was presented as a reduction to interest expense for this period . amortization expense for deferred financing fees was $ 4.2 million for the year ended december 31 , 2015 as compared to $ 4.4 million in 2014 . the decrease in amortization expense for deferred financing fees of $ 0.2 million was related to the lower balance of deferred financing fees as a result of the redemption of the 2018 notes and the company 's debt reduction efforts . see further detail at note 11 , “ debt. ” loss on debt extinguishment replace_table_token_22_th * measure not meaningful loss on debt extinguishment for the year ended december 31 , 2015 totaled $ 0.2 million , compared to $ 25.5 million in 2014 . the loss on debt extinguishment in 2014 consisted of $ 23.3 million related to the redemption of the former 2018 notes , of which $ 19.0 million related to the redemption premium and $ 4.3 million related to the write-off of deferred financing fees . a $ 2.0 million loss in 2014 related to the write-off of deferred financing fees as a result of the senior credit facility refinancing , and $ 0.2 million loss related to the accelerated paydown of term loan b associated with our new senior credit facility . other income ( expense ) - net replace_table_token_23_th * measure not meaningful other income ( expense ) - net for the year ended december 31 , 2015 was income of $ 1.4 million compared to expense of $ 4.8 million for the prior year . the change in other income ( expense ) - net in 2015 as compared to 2014 relates primarily to foreign currency exchange remeasurement . income taxes replace_table_token_24_th * measure not meaningful the effective tax rate for the year ended december 31 , 2015 was 37.0 % compared to 87.3 % for the year ended december 31 , 2014 . year over year effective annual tax rate changes were primarily driven by the near break-even 2014 pretax book income . see further detail at note 13 , “ income taxes. ” income from discontinued operations replace_table_token_25_th the results from discontinued operations was income of $ 135.4 million and $ 161.4 million , net of income taxes , for the years ended december 31 , 2015 and 2014 , respectively . the income from discontinued operations in 2015 and 2014 relates primarily to mfs , which was classified as discontinued operations in the first quarter of 2016 , as well as administrative costs of various businesses disposed of in prior years . see additional discussion at note 3 , “ discontinued operations. story_separator_special_tag ” 29 loss on sale of discontinued operations ( in millions ) 2015 2014 change loss on sale of discontinued operations $ — $ 11.0 * * measure not meaningful loss on sale of discontinued operations was $ 11.0 million for the year ended december 31 , 2014 . this was due to the sale of manitowoc dong yue for a loss of $ 9.9 million in the first quarter of 2014 and the settlement of a pension obligation related to a previously disposed entity for a loss of $ 1.1 million in the third quarter of 2014. there were no losses on the sale of discontinued operations for the year ended december 31 , 2015 . see additional discussion at note 3 , “ discontinued operations. ” net income attributable to noncontrolling interest ( in millions ) 2015 2014 change net income attributable to noncontrolling interest $ — $ 3.9 * * measure not meaningful net income attributable to noncontrolling interest was from our former chinese joint venture , manitowoc dong yue , which was sold in january 2014 ; therefore , for the year ended december 31 , 2015 , there was no net income attributable to a noncontrolling interest . the net income of $ 3.9 million attributable to the minority partner in connection with manitowoc dong yue for 2014 was primarily due to loan forgiveness resulting in income of $ 35.6 million by the joint venture partner shown as part of net income attributable to noncontrolling interest , net of income taxes , which effectively reduced net income attributable to manitowoc shareholders . see note 3 , “ discontinued operations , ” for further details on this transaction . non-gaap measures the company uses ebitda , adjusted ebitda and adjusted operating loss , which are non-gaap financial measures , as additional metrics to evaluate the company 's performance . the company defines ebitda as income ( loss ) before interest , taxes , depreciation and amortization . the company defines adjusted ebitda as ebitda plus the addback of restructuring expense , asset impairment expense and other ( expense ) income - net . the company defines adjusted operating loss as adjusted ebitda excluding the addback of depreciation . the company believes these non-gaap measures provide important supplemental information to readers regarding business trends that can be used in evaluating its results of operations because these financial measure provide a consistent method of comparing financial performance and are commonly used by investors to assess performance . these non-gaap financial measures should be considered together with the gaap financial information provided herein . 30 the company 's adjusted ebitda and adjusted operating loss for the year ended december 31 , 2016 was income of $ 18.2 million and a loss of $ 27.4 million , respectively . the reconciliation of gaap net ( loss ) income to ebitda , and further to adjusted ebitda , adjusted operating ( loss ) income and gaap operating ( loss ) income is as follows ( in millions ) : replace_table_token_26_th ( 1 ) other expense ( income ) - net includes loss on debt extinguishment , other ( expense ) income and other ( expense ) income - net . covenant compliant ebitda was $ 49.9 million as of december 31 , 2016 on a trailing basis since april 1 , 2016 , as defined by the abl revolving credit facility . the calculation of covenant compliant ebitda has certain limitations and restrictions on addbacks and has been included for informational purposes only . 31 market conditions and outlook although we have observed some pockets of stabilization across the globe , the overall crane business remains weak , with demand at historically low levels . manitowoc continues to maintain or increase its market share in selected product categories , but based on current activity levels we do not anticipate any meaningful recovery in the global demand for cranes in 2017 , which is reflected in the guidance below . full year 2017 guidance : net sales - down 8 % to 10 % over 2016 ; adjusted ebitda * - approximately $ 41 to $ 59 million ; adjusted operating income margin * - approximately zero to 1 % ; depreciation expense - approximately $ 40 to $ 45 million ; amortization of intangible assets - approximately $ 2 to $ 2.5 million ; and capital expenditures - approximately $ 30 million . * adjusted ebitda and adjusted operating income margin are non-gaap financial measures that should be considered together with the gaap financial information provided herein . see “ non-gaap financial measures ” in the preceding “ results of consolidated operations ” section . because actual gaap results will be subject to various factors that are outside of the company 's control and or are not known at this time , the company is not able to provide comparable gaap expectations or a reconciliation of these expected ranges to gaap without unreasonable expense and effort . a significant portion of manitowoc 's backlog entering 2016 was comprised of vpc crawler cranes which had been booked in previous years . the vast majority of this backlog was shipped and recognized as revenue in the first half of 2016 , and due to continued weak market conditions is not anticipated to repeat in 2017. as a result , our 2017 revenue guidance is more consistent with revenue levels experienced in the second half of 2016. the company is cautiously optimistic regarding the stated priorities of the new u.s. administration to invest in infrastructure projects , but this may not translate into new crane orders quickly , or at all , given the nature of potential projects . further , any benefits may be offset by negative effects of any administration changes in international trade policy . additionally , the supply of underutilized cranes needs to be absorbed into the market before we will see any inflection in the demand for mobile cranes .
| in conjunction with the decision to close its manufacturing location in manitowoc , wisconsin , it permanently suspended implementation of its sap enterprise resource planning ( “ erp ” ) platform and recorded a write-off of $ 58.6 million related to sap construction-in-progress and $ 18.6 million related to sap and other it assets . this amount also included a $ 13.8 million write-down to fair value of the company 's fixed assets at the manitowoc , wisconsin manufacturing facility . the impairment recorded in 2015 resulted from the write-down of facilities in brazil , which is currently shut down , and slovakia , which was sold in 2016. restructuring expense replace_table_token_12_th restructuring expense for the year ended december 31 , 2016 totaled $ 23.4 million compared to $ 9.4 million in 2015 . these costs related primarily to employee termination benefits associated with workforce reductions . the workforce reductions in 2016 are part of ongoing manufacturing and operations rationalization programs , including the planned consolidations of the company 's manufacturing facilities in manitowoc , wisconsin into its shady grove , pennsylvania facility and fanzeres , portugal into its baltar , portugal facility . during the third quarter of 2016 , the company announced its intent to relocate its crawler crane manufacturing operations located in manitowoc , wisconsin to shady grove , pennsylvania , with completion anticipated by the middle of 2017. this initiative is intended to increase operational efficiency , and thereby increase future operating results and liquidity , allowing the company to reallocate resources to invest in future growth . including amounts already incurred , the company expects to incur cash charges related to severance costs and other employment-related benefits in the range of $ 10 to $ 15 million , capital expenditures in the range of $ 10 to $ 15 million and other costs in the range of $ 15 to $ 20 million related to the plant consolidation into shady grove , pennsylvania . the company anticipates that the majority of the cash charges will be settled by the end of 2017. non-cash
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we believe the most significant opportunities for growth are in providing our government partners with available beds within facilities we currently own or that we will develop . over the long-term , we would like to see meaningful utilization of our available capacity and better visibility from our customers into their potential future needs before we develop new correctional or detention capacity on a speculative basis . we will , however , respond to customer demand and may develop or expand correctional and detention facilities when we believe potential long-term returns justify the capital deployment , like the recent expansion of our otay mesa detention center in san diego , california . we expanded the otay mesa facility by 512 beds as a result of long-standing demand from the united states marshals service , or the usms , and the u.s. immigration and customs enforcement , or ice , and limited detention capacity in the southwest region of the united states . the expansion was completed during the third quarter of 2019 at an estimated cost of approximately $ 39.0 million . both the usms and ice currently utilize the otay mesa detention center under an existing contract that enables both agencies to utilize the additional capacity . we also believe that owning the facilities in which we provide management services enables us to more rapidly replace business lost compared with managed-only facilities , since we can offer the same beds to new and existing customers and , with customer consent , may have more flexibility in moving our existing populations to facilities with available capacity . our management contracts generally provide our customers with the right to terminate our management contracts at any time without cause . we are actively engaged in marketing our available capacity as solutions to meet the needs of potential customers . historically , we have been successful in substantially filling our inventory of available beds and the beds that we have constructed . for example , pursuant to a new management contract we executed in november 2017 , the commonwealth of kentucky began utilizing our 816-bed lee adjustment center in kentucky , one of our previously idled prison facilities , in the first quarter of 2018 , and we completed the activation in the third quarter of 2018. more recently , in the second quarter of 2019 , we announced that we entered into new contracts under inter-governmental service agreements , or igsas , with ice at our previously idled 910-bed torrance county detention facility in new mexico and with the usms at our previously idled 1,422-bed eden detention center in texas . filling these available beds could provide substantial growth in revenues , cash flow , and earnings per share . however , we can provide no assurance that we will be able to fill our available beds . 63 we are also pursuing additional investment opportunities in other real estate assets with a bias toward those used to provide mission-critical governmental services , as well as other businesses that expand the range of solutions we provide to government partners , and expect to complete additional acquisitions that would further diversify our cash flows and generate attractive risk-adjusted returns for our shareholders . we also remain steadfast in our efforts to contain costs . approximately 60 % of our operating expenses consist of salaries and benefits . the turnover rate for correctional officers for our company , and for the corrections industry in general , remains high . we are making investments in systems and processes intended to help manage our workforce more efficiently and effectively , especially with respect to overtime and costs of turnover . we are also focused on workers ' compensation and medical benefits costs for our employees due to continued rising healthcare costs throughout the country . effectively managing these staffing costs requires a long-term strategy to control such costs , and we continue to dedicate resources to enhance our benefits , provide specialized training and career development opportunities to our staff in order to attract and retain quality personnel . through ongoing company-wide initiatives , we continue to focus on efforts to manage costs and improve operating efficiencies . through the combination of our initiatives to ( i ) increase our revenues by increasing the utilization of our available beds , ( ii ) deliver new bed capacity through new facility construction and expansion opportunities , ( iii ) invest in real estate-only solutions , ( iv ) acquire community corrections facilities , ( v ) acquire other businesses that expand the range of solutions we provide to government partners and diversify our cash flows , and ( vi ) contain our operating expenses , we believe we will be able to maintain our competitive advantage and continue to diversify the range of services we provide to our customers at an attractive price , thereby producing value for our stockholders . critical accounting policies the consolidated financial statements in this report are prepared in conformity with u.s. generally accepted accounting principles , or gaap . as such , we are required to make certain estimates , judgments , and assumptions that we believe are reasonable based upon the information available . these estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period . a summary of our significant accounting policies is described in note 2 of the notes to the consolidated financial statements contained in this annual report . the significant accounting policies and estimates which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following : asset impairments . the primary risk we face for asset impairment charges , excluding goodwill , is associated with facilities we own . as of december 31 , 2019 , we had $ 2.7 billion in property and equipment , including $ 136.3 million in long-lived assets , excluding equipment , at five idled corecivic safety correctional facilities . story_separator_special_tag the carrying values of the five idled facilities as of december 31 , 2019 were as follows ( in thousands ) : prairie correctional facility $ 14,863 huerfano county correctional center 16,266 diamondback correctional facility 39,729 marion adjustment center 11,351 kit carson correctional center 54,041 $ 136,250 as of december 31 , 2019 , we also had two idled non-core facilities in our safety segment containing 440 beds with an aggregate net book value of $ 3.8 million ; two facilities in our community segment that became idle during 2019 , as further described hereafter , containing an aggregate of 381 beds with an aggregate net book value of $ 6.5 million ; and three previously leased residential reentry centers in our properties segment that became idle in 2019 , as further described hereafter , containing an aggregate of 430 beds with an aggregate net book value of $ 9.3 million . we incurred approximately $ 8.0 million , $ 8.2 million , and $ 8.9 million in operating expenses at these idled facilities for the years ended december 31 , 2019 , 2018 , and 2017 , respectively . 64 during the second quarter of 2019 , we idled a residential reentry center in oklahoma due to declining utilization from the state of oklahoma and the consolidation of residents into our other reentry facilities located in the state . further , we received notice during the second quarter of 2019 of the federal bureau of prisons ' , or the bop , decision to award the rebid of a contract at one of our residential reentry facilities in arizona to another operator . the residential reentry facility in arizona was idled in the third quarter of 2019 upon expiration of its contract with the bop on august 31 , 2019 . as a result of these residential reentry centers becoming idle , we tested the facilities for impairment during the second quarter of 2019 . we concluded that the residential reentry facility in oklahoma had a recoverable value in excess of the corresponding carrying value . we concluded that the residential reentry facility in arizona would likely be marketed for use other than as a residential reentry facility , and recorde d an asset impairment of $ 4.3 million in the second quarter of 2019 to reduce the carrying value of the facility to its estimated fair value as a commercial real estate property . during the third quarter of 2019 , leases at three single-tenant residential reentry centers in our corecivic properties segment expired and were not renewed . the three properties located in pennsylvania total approximately 54,000 square feet and contain an aggregate of 430 beds with an aggregate net book value of $ 9.3 million as of december 31 , 2019. we have begun to market the facilities to other potential customers to operate as a corecivic community facility or for future lease as a corecivic properties facility . as a result of the expiration of the leases at the three properties located in pennsylvania , we tested the facilities for impairment during the third quarter of 2019. we concluded that each of the properties had a recoverable value in excess of the corresponding carrying value . we evaluate the recoverability of the carrying values of our long-lived assets , other than goodwill , when events suggest that an impairment may have occurred . such events primarily include , but are not limited to , the termination of a management contract , a significant decrease in populations within a facility we own , and the expiration and non-renewal of lease agreements in our corecivic properties segment . accordingly , we tested each of the idled properties for impairment when we were notified by the respective customers or tenants that they would no longer be utilizing such facility or property . we re-perform the impairment analyses on an annual basis for each of the idle facilities or properties as well as any other properties indicating indicators of impairment . in performing our annual impairment analyses , the estimates of recoverability are initially based on projected undiscounted cash flows that are comparable to historical cash flows from management contracts or lease agreements at facilities similar to the idled facilities , including historical operations for the idled facilities when such facilities were operating . our impairment evaluations also take into consideration our historical experience in securing new management contracts to utilize correctional facilities that had been previously idled for substantial periods of time . such previously idled correctional facilities are currently being operated under contracts that continue to generate cash flows resulting in the recoverability of the net book value of the previously idled facilities by material amounts . we also perform sensitivity analyses that consider reductions to such cash flows . our sensitivity analyses included reductions in projected cash flows by as much as half of the historical cash flows generated by the respective facility as well as prolonged periods of vacancies . in all cases , the projected undiscounted cash flows in our analyses as of december 31 , 2019 , exceeded the carrying amounts of each facility . we also evaluate on a quarterly basis market developments for the potential utilization of each of these facilities in order to identify events that may cause us to reconsider our most recent assumptions . such events could include negotiations with a prospective customer for the utilization of an idle facility at terms significantly less favorable than those used in our most recent impairment analysis , or changes in legislation surrounding a particular facility that could impact our ability to care for certain types of populations at such facility , or a demolition or substantial renovation of a facility . further , a substantial increase in the number of available beds at other facilities we own could lead to a deterioration in market conditions and cash flows that we might be able to obtain under a new contract at our idle facilities .
| 68 our current operations our ongoing operations are organized into three principal business segments : corecivic safety segment , consisting of the 50 correctional and detention facilities that are owned , or controlled via a long-term lease , and managed by corecivic , as well as those correctional and detention facilities owned by third parties but managed by corecivic . corecivic safety also includes the operating results of our subsidiary that provides transportation services to governmental agencies , transcor america , llc , or transcor . corecivic community segment , consisting of the 29 residential reentry centers that are owned , or controlled via a long-term lease , and managed by corecivic . corecivic community also includes the operating results of our electronic monitoring and case management services . corecivic properties segment , consisting of the 28 real estate properties owned by corecivic for lease to third parties and used by government agencies . for the years ended december 31 , 2019 and 2018 , our total facility net operating income was divided among our three business segments as follows : replace_table_token_7_th 69 facility operations a key performance indicator we use to measure the revenue and expenses associated with the operation of the correctional , detention , and residential reentry facilities we own or manage is expressed in terms of a compensated man-day , which represents the revenue we generate and expenses we incur for one offender for one calendar day . revenue and expenses per compensated man-day are computed by dividing facility revenue and expenses by the total number of compensated man-days during the period . a compensated man-day represents a calendar day for which we are paid for the occupancy of an offender . we believe the measurement is useful because we are compensated for operating and managing facilities at an offender per-diem rate based upon actual or minimum guaranteed occupancy levels . we also measure our costs on a per-compensated man-day basis , which is largely dependent upon the number of offenders we accommodate . further , per compensated man-day measurements are also
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◦ in april 2018 , we announced that we received market approval for the itero element intra-oral scanner from the china food and drug administration , and we began offering this scanner in china . the itero element scanner launch in china not only supports growth of our base invisalign clear aligner business but also represents a major milestone for digital dentistry in china . as we continue to expand into markets where we sell our intra-oral scanners , we expect continued growth for the foreseeable future due to the size of the market opportunities and our relatively low market penetration in these regions . we believe that over the long-term , clinical solutions and treatment tools will increase adoption of invisalign and increase sales of our intraoral scanners ; however , it is difficult to predict the rate of adoption which may vary by region and channel . the use of itero and other digital scanners for invisalign case submission in place of pvs impressions continues to grow and remains a positive catalyst for invisalign utilization . for the fourth quarter of 2018 , total invisalign cases submitted with a digital scanner in the americas increased to 72.6 % , up from 71.0 % in the third quarter of 2018. international scans increased to 57.5 % , up from 53.9 % in the third quarter of 2018. in china , invisalign cases submitted using a digital scanner increased to 45.9 % from close to 0 % in only one year . we believe that over the long-term , technology innovation and added features and functionality of our itero scanners will increase adoption of invisalign and increase sales of our intraoral scanners ; however , it is difficult to predict the rate of adoption which may vary by region and channel . invisalign adoption . our goal is to establish invisalign as the treatment of choice for treating malocclusion ultimately driving increased product adoption and frequency of use by dental professionals , also known as `` utilization rates . '' our annual utilization rates for the last three fiscal years are as follows : * invisalign utilization rates = # of cases shipped divided by # of doctors cases were shipped to . beginning in the first quarter of 2018 , we report international region to include emea and apac . latam is excluded from above chart as it is not material . our historical utilization numbers have been recast to reflect this new classification . ◦ total utilization in 2018 increased to 15.7 cases per doctor compared to 14.5 cases in 2017 . ▪ north america : utilization among our north american orthodontist customers increased in 2018 to 56.7 cases per doctor compared to 46.6 cases per doctor in 2017. the increase in north american 35 orthodontist utilization in 2018 reflects improvements in product and technology which continues to strengthen our doctors ' clinical confidence such that they now utilize invisalign more often and on more complex cases , including their teenage patients . ▪ international : international doctor utilization was 13.9 cases per doctor in 2018 compared to 13.2 cases in 2017. the increase in international utilization reflects increased utilization and continued expansion of our customer base in both emea and apac regions due to increasing adoption of the product due in part to its ability to treat more complex cases . we expect that over the long-term , our utilization rates will gradually improve as a result of advancements in product and technology , which continue to strengthen our doctors ' clinical confidence in the use of invisalign . in addition , since the teenage and younger market makes up 75 % of the approximately 12 million total orthodontic case starts each year , and as we continue to drive adoption of teenage and younger patients through sales and marketing programs , we expect our utilization rate to improve . our utilization rates , however , may fluctuate from period to period due to a variety of factors , including seasonal trends in our business along with adoption rates of new products and features . number of new invisalign doctors trained . we continue to expand our invisalign customer base through the training of new doctors . in 2018 , we trained approximately 19,655 new invisalign doctors of which 7,885 were trained in the americas region and 11,770 in the international region . international invisalign growth . we continue to focus our efforts towards increasing invisalign clear aligner adoption by dental professionals in the emea and apac markets . on a year-over-year basis , our international invisalign volume increased 45.3 % driven primarily by increased adoption as well as expansion of our customer base in both the emea and apac regions . we continue to see growth from our international orthodontists and general practitioner ( “ gp ” ) customers and are seeing more positive traction in the gp channel from segmenting our sales and marketing resources and programs specifically around each customer channel . in addition , we believe that continuous product introductions and feature improvements , such as invisalign treatment with mandibular advancement , provide our customers with continued confidence in treating complex cases as well as teen-aged patients with invisalign clear aligners . in 2019 , we are continuing to expand in our existing markets through targeted investments in sales coverage and professional marketing and education programs , along with consumer marketing in select country markets . we expect international revenues to continue to grow at a faster rate than the americas for the foreseeable future due to our continued investment in international market expansion , the size of the market opportunities , and our relatively low market penetration of these regions . our future growth is dependent upon the continued growth of invisalign adoption and international market penetration ( refer to item 1a risk factors - “ we are exposed to fluctuations in currency exchange rates , which could negatively affect our financial condition and results of operations. ” for information on related risk factors ) . story_separator_special_tag establish regional order acquisition , treatment planning and manufacturing operations . we will continue to establish and expand additional order acquisition , treatment planning and manufacturing operations closer to our international customers in order to improve our operational efficiency and to provide doctors confidence in using invisalign clear aligners to treat more patients and more often . in the fourth quarter of 2018 , we began fabricating our aligners in our new manufacturing facility in ziyang , china , our first aligner fabrication facility outside of juarez , mexico . we expect that it will take several quarters to ramp this facility up to full capacity and as a result manufacturing labor and overhead in this facility will be underutilized during this transition period . ( refer to item 1a risk factors - “ as we continue to grow , we are subject to growth related risks , including risks related to excess or constrained capacity at our existing facilities. ” for information on related risk factors ) . invisalign experience program . in 2018 , we expanded the interactive brand experience that was piloted in 2017 and finished the year with a total of twelve invisalign locations in major u.s. cities . the program expansion is designed to address the rapidly-evolving consumer market for clear aligners and connects consumers interested in invisalign treatment with invisalign doctors in their communities ( refer to item 3 `` legal proceedings '' for details on sdc dispute which may impact the invisalign locations ) . increased sales force . in order to provide more comprehensive sales and service coverage , in the fourth quarter of 2018 , we increased our sales force in the americas by adding approximately 100 sales team members . in the first quarter of 2019 , we plan to add 50 new sales representatives in emea to cover gp dentist channel . ( refer to item 1a risk factors - “ we primarily rely on our direct sales force to sell our products , and any failure to maintain our direct sales force could harm our business '' for information on related risk factors ) . 36 expenses . we expect expenses to increase in 2019 due in part to : ◦ investments in manufacturing capacity and facilities to enhance our regional capabilities ; ◦ investments in international expansion in new country markets ; ◦ investments in expansion of number of direct sales force personnel ; ◦ increases in sales , marketing and customer support resources ; ◦ product and technology innovation to enhance product efficiency and operational productivity ; ◦ increases in legal expenses , primarily related to the continued protection of our intellectual property rights including our patents along with the additional costs related to the planned corporate structure reorganization . we believe that these investments will position us to increase our revenues and continue to grow our market share , but will negatively impact results of operations , particularly in the near term . stock repurchases : ◦ april 2016 repurchase program . in 2018 , we repurchased approximately $ 200.0 million of our common stock on the open market , completing the april 2016 repurchase program . ◦ may 2018 repurchase program . in may 2018 , we announced that our board of directors had authorized a plan to repurchase up to $ 600.0 million of our common stock . in august 2018 , we repurchased $ 50.0 million of our common stock on the open market . in november 2018 , we entered into an accelerated share repurchase ( `` 2018 asr '' ) to repurchase $ 50.0 million of our common stock which was completed in december 2018. as of december 31 , 2018 , we have $ 500.0 million remaining under the may 2018 repurchase program . in february 2019 , we repurchased $ 50.0 million of our common stock on the open market ( refer to note 11 `` common stock repurchase programs '' of the notes to consolidated financial statements for details on common stock repurchase programs ) . smiledirectclub . in february 2018 , we received a communication on behalf of sdc financial llc , smiledirectclub llc , and the members of sdc financial llc other than the company ( collectively , the sdc entities ) alleging that the launch and operation of the invisalign locations pilot program constitutes a breach of non-compete provisions applicable to the members of sdc financial llc , including align . as a result of this alleged breach , sdc financial llc notified us that its members ( other than align ) seek to exercise a right to repurchase all of align 's sdc financial llc membership interests for a purchase price equal to the current capital account balance . the sdc entities ' communication also alleged that we breached confidentiality provisions applicable to the sdc financial llc members and demanded that we cease all activities related to the invisalign pilot project , close existing invisalign locations and cease using sdc 's confidential information . in april 2018 , the sdc entities served a demand for arbitration alleging that we breached the non-compete clause and confidentiality clause , misused the sdc entities ' alleged trade secrets , and violated fiduciary duties to sdc financial llc . the sdc entities seek through the arbitration the rights to repurchase all of align 's sdc financial llc membership interests for a purchase price equal to the current capital account balance as defined by the internal revenue service which likely is significantly below the current fair market value of such investment , an injunction requiring us to close our invisalign locations and to cease using the sdc entities ' confidential information , and financial damages in an unspecified amount . we filed a response in which we denied the sdc entities ' allegations and denied that the sdc entities are entitled to any relief . in april 2018 the sdc entities also filed a motion for preliminary injunction in the tennessee court of chancery seeking to enjoin align from opening additional invisalign locations until the arbitration is completed .
| 38 fiscal year 2018 compared to fiscal year 2017 total net revenues increased by $ 493.1 million in 2018 as compared to 2017 primarily as a result of clear aligner case and scanner volume growth across all regions . clear aligner - americas americas net revenues increased by $ 149.2 million in 2018 as compared to 2017 , primarily due to case volume growth across all channels and products which increased net revenues by $ 177.9 million . this increase was offset in part by lower average selling prices ( `` asp '' ) , which was mainly the result of higher promotional discounts , which reduced net revenues by $ 44.7 million , and increased net revenue deferrals by $ 3.0 million . this decline was partially offset by higher prices from the new products introduced in july 2018 , which increased net revenues by $ 19.2 million . clear aligner - international international net revenues increased by $ 210.7 million in 2018 as compared to 2017 , primarily driven by case volume growth across all channels and products which increased net revenues by $ 213.0 million . this increase was slightly offset by lower asp which reduced net revenues by $ 2.3 million . the asp decline was mainly the result of increased net revenue deferrals mostly for additional aligners , which reduced net revenues by $ 20.1 million , and higher promotions discounts , which reduced net revenues by $ 17.4 million . these were partially offset by the favorable foreign exchange rates of $ 20.8 million and the higher prices of $ 18.3 million related to our new products effective july 2018. clear aligner - non-case non-case net revenues , consisting of vivera retainers , training fees and other product revenues , increased by $ 22.3 million in 2018 compared to 2017 . this was primarily due to increased vivera volume across all regions , which increased revenue by $ 14.4 million , and training revenues across all regions , which increased revenue by $ 6.5 million . scanner
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borrowings , consisting of fhlb long-term advances , long-term debt and subordinated debt , increased $ 155.0 million to $ 268.7 million as of december 31 , 2020 compared to $ 113.7 million as of december 31 , 2019. the company had no short-term fhlb advances and $ 150.0 million in long-term advances at december 31 , 2020 , compared to none at december 31 , 2019. the allowance for loan losses was $ 29.3 million at december 31 , 2020 , an increase of $ 10.5 million or 55.9 % , from $ 18.8 million at december 31 , 2019. during 2020 , there was a $ 11.8 million provision for loan losses compared to $ 2.4 million for 2019. the alll to hfi loans and leases outstanding was 1.08 % and 0.86 % as of december 31 , 2020 and december 31 , 2019 , respectively . shareholders ' equity increased $ 20.8 million , or 5.1 % , to $ 428.5 million as of december 31 , 2020 from $ 407.7 million at december 31 , 2019. the increase during 2020 was primarily due to $ 32.9 million of net income , less $ 6.6 million of common dividends paid and $ 7.9 million from the repurchase of common stock . our capital ratios under the basel iii capital framework regulatory standards remain well capitalized . as of december 31 , 2020 , the company 's tier 1 leverage capital ratio was 11.32 % , common equity tier 1 ratio was 14.62 % , tier 1 risk-based capital ratio totaled 15.21 % , and total risk-based capital ratio was 20.77 % . 49 story_separator_special_tag a $ 168.5 million increase in the average balance of interest-bearing deposits . the increase in the average balance of deposits resulted primarily from the pgbh acquisition in early 2020 and organic growth in 2020. interest expense on borrowings decreased from $ 10.6 million in 2019 to $ 9.2 million or 13.8 % in 2020. this decrease reflected decreased interest expense on subordinated notes , subordinated debentures , and other borrowed funds consisting of fhlb short-term and long-term advances . in 2020 , the average rate on these liabilities was 3.70 % compared to 4.66 % in 2019. a five year fhlb advance was obtained in march 2020 to provide for additional liquidity . 51 average balance sheet , interest and yield/rate analysis the principal component of our earnings is net interest income , which is the difference between the interest and fees earned on loans and investments ( interest-earning assets ) and the interest paid on deposits and borrowed funds ( interest-bearing liabilities ) . net interest margin is net interest income as a percentage of average interest-earning assets for the period . the level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin . the net interest spread is the yield on average interest earning assets minus the cost of average interest-bearing liabilities . net interest margin and net interest spread are included on a tax equivalent ( “ te ” ) basis by adjusting interest income utilizing the federal statutory tax rate of 21 % for 2020 , 2019 and 2018. our net interest income , interest spread , and net interest margin are sensitive to general business and economic conditions . these conditions include short-term and long-term interest rates , inflation , monetary supply , and the strength of the international , national and state economies , in general , and more specifically , the local economies in which we conduct business . our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance . we manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities , changes in the level of interest-bearing liabilities in proportion to interest-earning assets , and in the growth and maturity of earning assets . see “ analysis of financial condition— capital resources and liquidity management ” and item 7a quantitative and qualitative disclosures about market risk included herein . the following tables present average balance sheet information , interest income , interest expense and the corresponding average yields earned and rates paid for the years 2020 , 2019 and 2018. the average balances are principally daily averages and , for loans , include both performing and nonperforming balances . interest income on loans includes the effects of discount accretion and net deferred loan origination costs accounted for as yield adjustments . replace_table_token_7_th ( 1 ) includes income and average balances for fhlb stock , term federal funds , interest-bearing time deposits and other miscellaneous interest-bearing assets . ( 2 ) interest income and average rates for tax-exempt securities are presented on a tax-equivalent basis . ( 3 ) average loan balances include nonaccrual loans and loans held for sale . interest income on loans includes amortization of deferred loan fees , net of deferred loan costs . ( 4 ) includes purchased receivables , which are short term loans made to investment grade companies and are used for cash management purposes by the company . 52 interest rates and operating interest differential increases and decreases in interest income and interest expense result from changes in average balances ( volume ) of interest-earning assets and interest-bearing liabilities , as well as changes in average interest rates . the following tables show the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities . the effect of changes in volume is determined by multiplying the change in volume by the previous period 's average rate . similarly , the effect of rate changes is calculated by multiplying the change in average rate by the previous period 's volume . changes which are not due solely to volume or rate have been allocated to these categories based on the respective percent changes in average volume and average rate as they compare to each other . story_separator_special_tag year ended december 31 , 2020 compared with year ended december 31 , 2019 year ended december 31 , 2019 compared with year ended december 31 , 2018 change due to : change due to : ( tax-equivalent basis , dollars in thousands ) volume rate interest variance volume rate interest variance earning assets : federal funds sold , cash equivalents & other ( 1 ) $ 1,574 $ ( 3,230 ) $ ( 1,656 ) $ 1,772 $ ( 142 ) $ 1,630 securities ( 2 ) available for sale 1,696 ( 1,336 ) 360 363 ( 28 ) 335 held to maturity ( 49 ) 2 ( 47 ) ( 79 ) 44 ( 35 ) mortgage loans held for sale ( 12,474 ) ( 1,501 ) ( 13,975 ) 1,586 861 2,447 loans held for investment : ( 3 ) real estate 21,540 ( 4,598 ) 16,942 37,963 ( 433 ) 37,530 commercial ( 4 ) 1,397 ( 5,629 ) ( 4,232 ) ( 2,274 ) ( 24 ) ( 2,298 ) total loans held for investment 22,937 ( 10,227 ) 12,710 35,689 ( 457 ) 35,232 total earning assets $ 13,684 $ ( 16,292 ) $ ( 2,608 ) $ 39,331 $ 278 $ 39,609 interest-bearing liabilities now and money market deposits $ 1,092 $ ( 2,390 ) $ ( 1,298 ) $ ( 68 ) $ 523 $ 455 savings deposits 43 ( 91 ) ( 48 ) 103 ( 80 ) 23 time deposits 737 ( 8,419 ) ( 7,682 ) 11,676 5,123 16,799 total interest-bearing deposits 1,872 ( 10,900 ) ( 9,028 ) 11,711 5,566 17,277 fhlb short-term advances 336 ( 1,783 ) ( 1,447 ) ( 271 ) 595 324 long-term debt 21 ( 22 ) ( 1 ) 3,324 ( 47 ) 3,277 subordinated debentures 273 ( 293 ) ( 20 ) 341 ( 3 ) 338 total interest-bearing liabilities 2,502 ( 12,998 ) ( 10,496 ) 15,105 6,111 21,216 changes in net interest income $ 11,182 $ ( 3,294 ) $ 7,888 $ 24,226 $ ( 5,833 ) $ 18,393 ( 1 ) includes income and average balances for fhlb stock , term federal funds , interest-bearing time deposits and other miscellaneous interest-bearing assets . ( 2 ) interest income and average rates for tax-exempt securities are presented on a tax-equivalent basis . ( 3 ) average loan balances include nonaccrual loans and loans held for sale . interest income on loans includes amortization of deferred loan fees , net of deferred loan costs . ( 4 ) includes purchased receivables , which are short term loans made to investment grade companies and are used for cash management purposes by the company . 53 provision for credit losses the provision for credit loss expense in 2020 was $ 11.8 million compared to $ 2.4 million in 2019. the increase in the 2020 provision expense was primarily attributable to covid-19 pandemic related market effects of $ 2.3 million , increases in the size of our overall loan portfolio , and increases in past due loans , substandard loans and impaired loans . non-performing loans that increased during the year were individually analyzed , with $ 525,000 in 2020 and none in 2019 , net addition to the allowance for loan losses . noninterest income noninterest income decreased $ 4.3 million , or 23.4 % , to $ 14.0 million in 2020 from $ 18.3 million in 2019. the following table sets forth the major components of noninterest income for the years ended december 31 , 2020 , 2019 and 2018 : replace_table_token_8_th service charges , fees and others . the increase in noninterest income from service charges , fees and other income was primarily from service charges on the additional transactional deposit accounts originated organically and acquired in the pgbh acquisition in 2020. in 2020 , the income from gain on sale of loans . the gain on sales of loans decreased $ 3.9 million due primarily to the decrease of $ 2.9 million in sfr mortgage loans sold and a $ 788,000 decrease in premiums received on sba loans sold . decreases in gain on sales of loans were due to decreases of $ 15.1 million on sba loans sold and $ 288.3 million on mortgage loans held for sale . the decrease in the mortgage loan sales is attributable to the change in market conditions in the secondary market primarily caused by covid-19 . replace_table_token_9_th 54 loan servicing income , net of amortization . servicing income decreased due to increased loan pre-payments in the sfr loans serviced causing a decrease in the volume of mortgage loans we are servicing . sba loan servicing income increased due to a decline in sba pre-payments . replace_table_token_10_th recoveries on loans acquired in business combinations . recoveries on loans acquired in business combinations decreased by $ 59,000 to $ 84,000 in 2020 compared to $ 143,000 in 2019. gain on derivatives . due to the amount of loans that were committed to be delivered to fnma at year-end , we recorded a derivative which resulted in a gain of $ 78,000 in 2020. cash surrender value income of bank owned life insurance . cash surrender value income of bank owned life insurance ( “ boli ” ) decreased $ 8,000 due to slightly lower rates . gain on sales of securities , net . gain on sales of securities , net was $ 210,000 in 2020 from the sale of $ 11.7 million securities . loss on sale of oreo . in 2020 , there were no sales of oreo . a $ 106,000 loss on sale of oreo was recognized in 2019 from the sale of two oreo properties . 55 noninterest expense noninterest expense increased $ 2.0 million , or 3.5 % , to $ 59.5 million in 2020 from $ 57.5 million in 2019. the following table sets forth the major components of our noninterest expense for the years ended december 31 , 2020 , 2019 and 2018 : replace_table_token_11_th salaries and employee benefits .
| this was partially offset by increases in the average balance of total loans of $ 147.5 million , average balance of securities of $ 88.2 million , and average balance of federal funds sold , cash equivalents and other investments of $ 77.5 million . 50 interest and fees on loans was $ 133.9 million in 2020 compared to $ 135.2 million in 2019. the $ 1.3 million , or 0.94 % , decrease in interest income on loans was primarily due to a 46 basis point decrease in the average yield on loans held for investment and 51 basis point decrease in the average yield on loans held for sale , partially offset by a $ 147.5 million increase in the average balance of held for investment and held for sale loans outstanding . the increase in the average balance of loans outstanding was primarily due to the pgbh acquisition in january 2020 plus organic growth in commercial real estate and single-family residential mortgage loans during 2020. the yield on the loan portfolio benefited from accretion income associated with purchase accounting discounts established on loans acquired in prior acquisitions . for the years 2020 and 2019 , the reported yield on total loans was 5.18 % and 5.54 % , respectively . the impact of accretion income on our yield on total loans for the years 2020 and 2019 was to increase our reported yield on total loans by 0.08 % and 0.11 % , respectively . a substantial portion of our acquired loan portfolio that is subject to discount accretion consists of commercial real estate loans and single family residential mortgages . the table below illustrates by loan type the accretion income for the years 2020 , 2019 and 2018 : replace_table_token_6_th interest income from our securities portfolio increased $ 315,000 , or 11.7 % , to $ 3.0 million in 2020. the increase in interest income on securities was primarily due to an increased average balance of $ 88.2 million , or 93.1 % , partially offset by a 120 basis point
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revenues for wwe studios is impacted by the timing of our film releases and change in our distribution model . the increase in revenue in the current year is primarily related to the made-for-television movie , christmas bounty , which was released in the fourth quarter of 2013. although , there were five feature films released in 2013 compared to four films released in 2012 , revenues for these 2013 films will be recognized on a net basis as participation statements are received rather than upon release as was the case with our self-distributed titles , including christmas bounty . wwe studios oibda decreased $ 7.2 million in 2013 as compared to 2012 , primarily as a result of recording impairment charges of $ 11.7 million in 2013 compared with $ 1.2 million in 2012. at december 31 , 2013 , the company had $ 16.0 million ( net of accumulated amortization and impairment charges ) of feature film production assets capitalized on its consolidated balance sheet , of which $ 9.4 million relates to films completed and in release and $ 6.6 million relates to various films not yet released . we review and revise estimates of ultimate revenue and participation 29 costs at each reporting period to reflect the most current information available . if estimates for a film 's ultimate revenue are revised and indicate a significant decline in a film 's profitability or if events or circumstances change that indicate we should assess whether the fair value of a film is less than its unamortized film costs , we calculate the film 's estimated fair value using a discounted cash flow model . if fair value is less than unamortized cost , the film asset is written down to fair value . in 2013 , the company recorded impairments totaling $ 11.7 million , including $ 4.7 million and $ 0.9 million , for dead man down and no one lives , respectively , which were 2013 releases and $ 6.1 million from previously released films . during 2012 , we recorded impairment charges of $ 1.2 million related to the feature films , bending the rules and barricade . unallocated corporate expenses the following table presents the amounts and percent change of certain significant unallocated corporate expenses ( dollars in millions ) : replace_table_token_10_th unallocated corporate expenses increased by $ 8.4 million or 7 % in 2013 compared to 2012. this was primarily due to increased expenses related to supporting our content related initiatives , including the launch of wwe network in 2014 , as well as to develop our advertising sales and international infrastructure , partially offset by decreased management incentive compensation due to 2013 operating performance . depreciation and amortization ( dollars in millions ) replace_table_token_11_th depreciation and amortization expense increased by $ 4.5 million , or 23 % , in 2013 compared to 2012. depreciation expense for 2013 reflects higher property and equipment balances to support our emerging content and distribution efforts , including our new wwe network . investment income , interest expense and other expense , net ( dollars in millions ) replace_table_token_12_th investment income , interest and other expense , net yielded an expense of $ 1.3 million in 2013 compared to $ 0.5 million in 2012 , reflecting lower interest and investment income . 30 income taxes ( dollars in millions ) replace_table_token_13_th the 2012 effective tax rate was positively impacted by $ 4.4 million of previously unrecognized tax benefits primarily related to the settlement of various audits , including the state of connecticut , the irs , and other state and local jurisdictions . the current year effective tax rate was negatively impacted due to the size of permanent differences relative to our pre-tax income , i.e . certain non-deductible expenses are driving the effective rate higher due to decreased income levels in the current year . 31 year ended december 31 , 2012 compared to year ended december 31 , 2011 ( dollars in millions ) summary replace_table_token_14_th the comparability of our results for 2012 was positively impacted by the recognition of approximately $ 4.4 million in previously unrecognized tax benefits . we also incurred $ 8.2 million in operating expenses associated with our emerging content and distribution efforts and recorded a $ 1.2 million impairment charge relating to our two feature films bending the rules and barricade in 2012 compared to $ 4.0 million in operating expenses associated with our emerging content and distribution effort and $ 23.4 million in impairment charges for nine feature films in 2011. additionally , 2012 results reflect the return to more normalized levels of management incentive compensation , which resulted in increased expense of $ 9.8 million before taxes in 2012 compared to 2011 . our live and televised entertainment segment revenues increased primarily due to the increased revenues in our pay-per-view and television rights business of 7 % and 6 % , respectively . our consumer products segment experienced a 7 % decline in revenues reflecting declines in our licensing business and magazine publishing business . our digital media segment experienced a 23 % increase in revenues , driven by incremental fees from new agreements entered into with youtube and hulu . our wwe studios segment reflected a $ 13.0 million decrease in revenue primarily due to the timing and number of film releases . 32 live and televised entertainment the following tables present the performance results and key drivers for our live and televised entertainment segment : replace_table_token_15_th 33 live events revenues decreased $ 1.0 million in 2012 as compared to 2011 primarily due to seven fewer events held during 2012. our international live events business decreased $ 8.2 million , primarily driven by fourteen fewer events held during 2012. average attendance at our international events declined 10 % to 6,000 attendees and international ticket prices increased by 8 % in 2012 as compared to 2011. our north american live events business increased by $ 7.2 million during 2012 , primarily due to the strong performance of our annual wrestlemania event held during 2012 which story_separator_special_tag generated $ 3.3 million more in ticket sales than the prior year event . average ticket prices for our north america events increased by 8 % to $ 45.39. we also experienced an increase in event sponsorship revenues of $ 1.0 million . cost of revenue for live events decreased by $ 1.5 million , primarily due to lower venue related expenses which was partially offset by additional sponsorship expenses . the live events oibda as a percentage of revenues was 26 % in both 2012 and 2011. venue merchandise revenues increased $ 0.5 million in 2012 as compared to 2011. this increase is primarily due to a 3 % increase in north america events held in 2012 as compared to 2011. cost of revenue for venue merchandise increased $ 0.8 million from 2011 , driven by increased costs of materials due to product mix . as a result , venue merchandise oibda as a percentage of revenues decreased to 36 % from 39 % in 2011. pay-per-view revenues increased $ 5.3 million from 2011 , primarily due to a 5 % increase in total buys and a 3 % increase in average revenue per buy . the growth in buys for 2012 events was predominantly due to an increase in buys for our wrestlemania and summerslam events , which was partially offset by the elimination of one event in the current year . the increase in the average revenue per buy is attributable to incremental fees charged for viewing our events in high definition , which was implemented in 2008. cost of revenues for pay-per-view remained flat from 2011 , driven primarily by increases in talent expenses which was offset by lower production costs partially driven by the receipt of television production tax credits associated with a prior year event . the pay-per-view oibda as a percentage of revenues increased to 54 % from 51 % in 2011. television rights fees increased $ 8.0 million in 2012 compared to 2011. domestically , television rights fees increased by $ 8.6 million , primarily due to incremental license fees from the production and distribution of new programs and contractual increases from our existing programs . an additional hour of our raw program was licensed to usa network and debuted in july 2012. moreover , during 2012 , we produced two new original series , the wwe main event which airs on the ion television network and saturday morning slam , which aired on the cw network . this was partially offset by the absence of rights fees from our wwe superstars program , which moved to wwe.com in april 2011. internationally , our television rights fees decreased by $ 0.6 million , primarily due to the expiration and non-renewal of our south korea distribution agreement . television rights cost of revenues increased by $ 6.6 million in 2012 due to higher direct costs for staff related expenses , including the reset of management incentive compensation as compared to 2011. as a result , television rights fee oibda as a percentage of revenues decreased to 38 % from 40 % in 2011 . 34 consumer products the following tables present performance results and key drivers for our consumer products segment ( dollars in millions ) : replace_table_token_16_th licensing revenues decreased $ 8.1 million in 2012 as compared 2011 , as weaker performance in our video game category was offset in part by increases in our collectibles category . our video game licensing revenues decreased $ 7.8 million in 2012 , primarily due to one fewer release , wwe all stars , which was originally released in march 2011 and was not refreshed in 2012. in addition , we experienced a 22 % decline in unit shipments of our franchise video game release in 2012 compared to unit shipments of our comparable video game release in 2011. the decline in unit shipments of our annual franchise video game release was due to difficult trends in our international markets , broader industry challenges and a reduction in the number of gaming platforms that supported our franchise video game . licensing cost of revenues decreased $ 3.8 million from 2011 , primarily due to lower talent expense driven by the mix of products sold . licensing oibda as a percentage of revenues was 70 % in 2012 compared to 68 % in 2011 partially as a result of product mix . on december 19 , 2012 , our former video game licensee thq declared bankruptcy . in february 2013 , the company and thq reached an agreement to terminate its video game license , which agreement was approved by the u.s. bankruptcy court on february 19 , 2013. in connection with this termination , the company waived its rights to the pre-petition amounts due under its license agreement with thq , and thq agreed to transfer certain intellectual property rights and paid post-petition royalties to wwe in early 2013. in connection with the thq license termination , the company recognized approximately $ 8.0 million of revenue during the first quarter of 2013 relating to the unrecognized portion of an advance received when the company entered into the license agreement with thq in 2009. as a result of thq 's bankruptcy , the company was not able to collect and recognize a portion of anticipated royalties due in the first quarter of 2013 of approximately $ 4.0 million to $ 5.0 million . this loss did not have a material adverse effect on the company 's business , financial condition or results of operations . after termination with thq , the company entered into a multi-year agreement with take-two to be the company 's video game licensee .
| 24 live and televised entertainment the following tables present the performance results and key drivers for our live and televised entertainment segment : replace_table_token_6_th 25 live events revenues increased by $ 7.8 million in 2013 as compared to 2012. revenues from our north america live events business increased $ 9.3 million or 13 % due in part to a strong performance of our annual wrestlemania event which contributed $ 3.6 million in incremental ticket revenue in the current year . in addition , we held eight more events and experienced a 7 % increase in average ticket prices in 2013 as compared to 2012. our international live events business decreased $ 1.5 million in the current year primarily due to lower attendance and a decrease in average ticket prices partially offset by stronger attendance at the events held during our european tour in the current year and higher average ticket prices from the tour in abu dhabi . the decrease in average attendance was predominantly due to venue mix . the live events oibda as a percentage of revenues increased to 27 % in 2013 from 26 % in 2012. venue merchandise revenues increased by $ 0.6 million in 2013 as compared to 2012. increased sales of merchandise at our domestic and canadian events were partially offset by lower international licensing revenues . total paid attendance at our domestic events increased 5 % while the per capita merchandise spend at those events decreased 4 % to $ 10.24 in the current year . the venue merchandise oibda as a percentage of revenues increased to 39 % from 36 % in 2012. pay-per-view revenues decreased by $ 1.1 million from 2012 , primarily as result of a 5 % decline in the number of pay-per-view buys in 2013. this decrease was partially offset by a 4 % increase in average revenue per buy from 2012 due , in part , to an increase in the domestic retail price charged for viewing wrestlemania and higher retail prices charged for viewing our events in high definition . the pay-per-view oibda as a percentage of revenues decreased to 41 % in 2013 from 54 % in 2012 due primarily to an additional $ 5.1 million in talent related expenses . television rights fees revenues increased by $ 21.4 million in 2013 as compared to 2012. domestically , television rights fees increased by
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in a non-alcoholic steatohepatitis ( nash ) mouse model , crv431 demonstrated anti-fibrotic potential , thus addressing an important concern of the downstream effects of chronic hbv infection and liver disease . both animal models confirmed that crv431 is orally active and appeared to be well tolerated . fv-100 fv-100 is an orally available , small molecule , nucleoside analogue pro-drug of cf-1743 that we are developing for the treatment of herpes zoster , which is an infection caused by the reactivation of varicella zoster virus or vzv . vzv is responsible for producing the infectious disease known as chicken pox in individuals upon initial exposure to the virus . after the initial infection , the virus can remain dormant in nerve endings for many years and if reactivated , causes a painful rash called shingles . fv-100 is being developed specifically for the treatment of shingles . nucleoside analogs are capable of disrupting replication of the virus . fv-100 is a pro-drug of cf-1743 , which enables us to take advantage of fv-100 's more readily absorbed properties compared to cf-1743 when given orally . fv-100 is then broken down to the active moiety , cf-1743 , upon entry into the blood stream . published preclinical studies demonstrate that fv-100 is significantly more potent against vzv than currently marketed compounds acyclovir , valacyclovir , and famciclovir , the fda-approved drugs used for the treatment of shingles . we conducted an extensive review of the clinical data from the completed phase 2 trial , including performing post-hoc analyses . we performed additional market research ( including unmet medical need ) , reimbursement , pricing , and competitive landscape analyses , etc . we also evaluated a number of clinical , regulatory and commercial pathways for the potential future development of fv-100 . based upon the analyses of the completed phase 2 study coupled with the additional market research , we approached the fda to discuss our clinical development program and requested an end of phase 2 ( eop2 ) meeting . the meeting was granted and the result was a streamlined development plan for fv-100 that allowed us to proceed directly into a phase 3 trial without the need to conduct any additional phase 2 studies . we had satisfied these criteria and initiated protocol 007 during 2q/2015 . in parallel to the phase 3 initiation , study 008 , a drug-drug interaction trial was conducted during january-march , 2015. the study 's objective was to highlight potential drug interactions with compounds which are metabolized using the cyp450 pathway . this is a very common trial in virology and in drug development overall . financial operations overview from inception through june 30 , 2016 , we have an accumulated deficit of approximately $ 44.6 million . from inception through june 30 , 2016 , we have not generated any revenue from operations and expect to incur additional losses to perform further research and development activities and do not currently have any commercial biopharmaceutical products . we do not expect to have such for several years , if at all . on february 4 , 2014 , we entered into a securities purchase agreement with accredited investors to sell securities and raise gross proceeds of $ 3,225,000 in a private placement and incurred expenses of approximately $ 15,000 related to this placement . we sold 9,485,294 units to the investors with each unit consisting of one share of our common stock and one warrant to purchase an additional one half share of our common stock . the purchase price paid by the investor was $ 0.34 for each unit . the warrants expire after six years and are exercisable at $ 0.37 per share . on august 20 , 2014 , the warrants were exchanged for common stock . on october 14 , 2014 , we closed a private offering of series a convertible preferred stock ( the series a ) and issued 900,000 shares of series a preferred at $ 10.00 per share , generating gross proceeds of approximately $ 9,000,000. we also granted the purchaser the option to purchase up to an additional 350,000 shares of series a prior to february 28 , 2015. the series a are classified as permanent equity in accordance with asc topic 480 , distinguishing liabilities from equity . we issued an additional 50,000 shares of series a preferred at $ 10.00 per share on december 23 , 2014 , an additional 30,000 shares of series a preferred at $ 10.00 per share on february 10 , 2015 and an additional 270,000 shares on february 26 , 2015 , generating aggregate gross proceeds of $ 3,500,000. on december 17 , 2014 , we issued 120,000 of series b convertible preferred stock ( the series b ) in exchange for an exclusive license for further clinical development and commercialization of cmx157 from chimerix , inc. on october 7 , 2015 , we entered into an underwriting agreement related to the public offering and sale of 5,000,000 51 shares of common stock and warrants to purchase up to 3,000,000 shares of common stock , at a fixed combined price to the public of $ 3.00 under our current shelf registration statement on form s-3 . the shares of common stock and warrants were issued separately on october 13 , 2015. the warrants are immediately exercisable and will be exercisable for a period of five years from the date of issuance at an exercise price of $ 4.25 per share . there is not , nor is there expected to be , any trading market for the warrants issued in the offering contemplated by the underwriting agreement . story_separator_special_tag the gross proceeds were $ 15,000,000 , before deducting the underwriting discount and other offering expenses payable of approximately $ 1,474,000. if the warrants were exercised in full , we would receive additional proceeds of approximately $ 12,750,000. on april 4 , 2016 , the company closed on a public offering of 4,929,578 shares of its common stock and warrants to purchase up to 2,464,789 shares of common stock , at a fixed combined price to the public of $ 1.42 under the company 's current shelf registration statement on form s-3 . the warrants are immediately exercisable and will be exercisable for a period of five years from the date of issuance at an exercise price of $ 1.70 per share . there is not , nor is there expected to be , any trading market for the warrants issued in the offering contemplated by the underwriting agreement . the gross proceeds to the company were $ 7,000,000 , before deducting the underwriting discount and other offering expenses payable by the company of approximately $ 700,000. if the warrants were exercised in full , contravir would receive additional proceeds of approximately $ 4,200,000. our product development efforts are thus in their early stages and we can not make estimates of the costs or the time they will take to complete . the risk of completion of any program is high because of the many uncertainties involved in bringing new drugs to market including the long duration of clinical testing , the specific performance of proposed products under stringent clinical trial protocols , the extended regulatory approval and review cycles , our ability to raise additional capital , the nature and timing of research and development expenses and competing technologies being developed by organizations with significantly greater resources . critical accounting policies this discussion and analysis of our financial condition and results of operations is based on our financial statements , which have been prepared in accordance with generally accepted accounting principles in the united states of america , or gaap . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period . in accordance with gaap , we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances . actual results may differ from these estimates under different assumptions or conditions . while our significant accounting policies are more fully described in note 3 to our audited financial statements appearing elsewhere in this annual report , we believe the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements . going concern as of june 30 , 2016 we had $ 7.4 million in cash . net cash used in operating activities was $ 16.6 million for the year ended june 30 , 2016. net loss for the year ended june 30 , 2016 was $ 17.0 million . as of june 30 , 2016 we had an accumulated deficit of $ 44.6 million . as of june 30 , 2016 , contravir had working capital of $ 2.8 million , whereas on june 30 , 2015 contravir had working capital of $ 3.3 million . we expect to incur losses for the next several years as we expand our research , development and clinical trials of fv-100 , cmx157 and crv143 . we are unable to predict the extent of any future losses or when we will become profitable , if at all . these financial statements have been prepared under the assumption that we will continue as a going concern . due to our recurring and expected continuing losses from operations , we concluded there is substantial doubt in our ability to continue as a going concern within one year after the financial statements are issued without additional capital becoming available to attain further operating efficiencies and , ultimately , to generate revenue . our financial statements do not include any adjustments that might result from the outcome of this uncertainty . we will be required to raise additional capital within the next year to continue the development and commercialization of current product candidates and to continue to fund operations at the current cash expenditure levels . we can not be certain that additional funding will be available on acceptable terms , or at all . to the extent that we raise additional funds by issuing equity securities , our stockholders may experience significant dilution . any debt financing , if available , may involve restrictive covenants that impact our ability to conduct business . if we are unable to raise additional capital when 52 required or on acceptable terms , we may have to ( i ) significantly delay , scale back or discontinue the development and or commercialization of product candidates ; ( ii ) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available ; or ( iii ) relinquish or otherwise dispose of rights to technologies , product candidate or products that we would otherwise seek to develop or commercialize ourselves on unfavorable terms . fair value of financial instruments financial instruments consist of cash , accounts payable and derivative instruments . these financial instruments are stated at their respective historical carrying amounts , which approximate fair value due to their short term nature , except for derivative instruments , which are marked to market at the end of each reporting period . warrants we have issued common stock warrants in connection with the execution of certain equity financings . the fair value of certain warrants , deemed to be derivative instruments , were recorded as derivative liabilities under the provisions of fasb asc topic 815 derivatives and hedging ( asc 815 ) upon issuance .
| in the years ended june 30 , 2016 and 2015 , we had income of $ 3.8 million and a loss of $ 0.4 million , respectively , related to a change in the fair value of our warrant liabilities . this change in fair value of the derivative liabilities primarily due to a decrease in the company 's stock price , which is one of the inputs used in the black-scholes option pricing model used to revalue the liability-classified warrants each reporting period . net loss for the years ended june 30 , 2016 and 2015 was $ 17.0 million and $ 14.3 million , respectively , which was a result of the operating expenses and change in fair value of our warrant liability discussed above . liquidity and capital resources the following table summarizes our cash flows for the years ended june 30 , 2016 and 2015 : replace_table_token_3_th as of june 30 , 2016 , we had $ 7.4 million in cash , as compared to $ 4.6 million as of june 30 , 2015. net cash used in operating activities was approximately $ 16.6 million for the year ended june 30 , 2016 , as compared to $ 9.7 million for the year ended june 30 , 2015. this cash was primarily used to continue development of fv-100 , development of cmx157 as well as general and administrative costs and expenses . additionally , the cash used in operations included a decrease of $ 3.8 million related to the non cash change in fair market value of our warrant liability , partially offset by $ 0.9 million of non-cash stock-based compensation expense . as of june 30 , 2016 , we had working capital of $ 2.8 million , as compared to $ 3.3 million as of june 30 , 2015. net cash used in investing activities for the year ended june 30 , 2016 includes $ 0.5 million of cash used to acquire ciclofilin in june 2016. net cash
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we account for share-based compensation in accordance with the provisions of financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) 718 , “ compensation—stock compensation ” ( “ asc 718 ” ) using the modified prospective method which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values . asc 718 requires the use of subjective assumptions , including expected stock price volatility and the estimated term of each award . we estimate the fair value of stock options granted using the black-scholes option-pricing model , which is then amortized on a straight-line basis over the requisite service periods of the awards , which is generally the vesting period . this model also utilizes the fair value of our common stock and requires that , at the date of grant , we use the expected term of the share-based award , the expected volatility of the price of our common stock over the expected term , the risk free interest rate and the expected dividend yield of our common stock to determine the estimated fair value . we determine the amount of share-based compensation expense based on awards that we ultimately expect to vest , reduced for estimated forfeitures . asc 718 requires forfeitures to be estimated at the time of grant and revised , if necessary , in subsequent periods if actual forfeitures differ from those estimates . 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 . 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 its 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 its carrying value . this generally occurs 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 . warranty expense is recorded in cost of revenues . we evaluate the adequacy of this reserve each reporting period . 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 . deferred tax asset . we have provided a full valuation reserve related to our substantial deferred tax assets . in the future , if sufficient evidence of our ability to generate sufficient future taxable income in certain tax jurisdictions becomes apparent , we may be required to reduce our valuation allowances , resulting in income tax benefits in our consolidated statement of operations . we evaluate quarterly the realizability of the deferred tax assets and assess the need for a valuation allowance . utilizing the net operating loss ( “ nol ” ) carry forwards in future years could be substantially limited due to restrictions imposed under federal and state laws upon a change in ownership or control . included in the nol carryforward are deductions from stock options that , if recognized , will be recorded as a credit to additional paid-in capital rather than through our results of operations . 18 recent accounting pronouncements new pronouncements issued for future implementation are discussed in note 3 , recent accounting pronouncements , to our consolidated financial statements . segment and related information we are engaged in the design , development and commercialization of directed sound technologies and products . we present our business as one reportable segment due to the similarity in nature of products marketed , financial performance measures ( revenue growth and gross margin ) , methods of distribution ( direct and indirect ) and customer markets ( each product is sold by the same personnel to government and commercial customers , domestically and internationally ) . our chief operating decision making officer reviews financial information on sound products on a consolidated basis . see note 15 to our consolidated financial statements for further discussion . comparison of results of operations for fiscal years ended september 30 , 201 4 and 201 3 the following table provides for the periods indicated certain items of our consolidated statements of operations expressed in dollars and as a percentage of net sales . story_separator_special_tag the financial information and discussion below should be read in conjunction with the consolidated financial statements and notes contained in this annual report . replace_table_token_3_th revenues revenues increased $ 7,503,412 , or 43.9 % in the fiscal year ended september 30 , 2014 , as a result of an 92 % increase in international revenue , primarily in the public safety market for crowd and riot control and military vehicles , as well as other diverse markets such as border and perimeter security , navy and coast guard ships , tsunami warning and emergency notification systems , wildlife control , maritime security , marine surveillance and oil and gas . the international growth is partially offset by a 51 % reduction in u.s. military sales due to federal defense budget constraints and sequestration . gross profit gross profit for the year ended september 30 , 2014 increased by $ 5,517,756 , or 66.9 % , primarily due to increased revenue , favorable channel mix , and increased fixed overhead absorption , partially offset by an increase in manufacturing overhead costs which were variable with the increased volume , and warranty expense as a result of a higher reserve related to increased shipments . the favorable gross profit was partially offset by a $ 395,790 increase in third party commission expense reported in operating expenses , as there was a higher mix of direct customer sales where a commission is paid , rather than sales through our reseller network at lower reseller pricing . 19 selling , general and administrative expenses selling , general and administrative expenses increased by $ 2,520,597 , or 46.3 % , primarily due to $ 1,818,845 for accrued bonus for meeting established performance targets , $ 550,464 for salaries and consulting fees as a result of adding business development personnel , $ 395,790 for commissions paid to our third party sales representatives , $ 178,360 for travel expense due to increased business development personnel , $ 46,665 for marketing expenses primarily for trade shows , and $ 72,803 of other increases . these expenses were partially offset by a decrease of $ 361,266 for legal and other professional fees related to a lawsuit in the prior year and $ 181,064 for lower non-cash share-based compensation expense . we incurred non-cash share-based compensation expenses of $ 500,083 and $ 681,147 in the fiscal years ended september 30 , 2014 and 2013 , respectively . the decrease is due to options becoming fully vested , partially offset by new grants in november 2013. research and development expenses r & d expenses increased by $ 639,866 , or 34.7 % , primarily due to $ 704,915 for accrued bonus for meeting established performance targets and $ 88,550 for increased salaries and benefits , partially offset by $ 75,328 lower impairment of patents , $ 66,898 lower development and testing costs and $ 11,373 of other expense reductions . included in r & d expenses for the year ended september 30 , 2014 was $ 73,041 of non-cash share-based compensation expenses , compared to $ 47,895 for the year ended september 30 , 2013. during fiscal years 2014 and 2013 , we reviewed the ongoing value of our capitalized intangible assets and identified some of these assets as being no longer consistent with our business strategy . as a result of this review , we reduced the value of these patents by $ 4,580 and $ 81,307 for the fiscal years ended september 30 , 2014 and 2013 , respectively . other income other income decreased due to $ 270,559 in income recognized in relation to a terminated license agreement in the year ended september 30 , 2013. we also recognized interest income of $ 20,523 in the year ended september 30 , 2014 , compared to $ 28,631 in the year ended september 30 , 2013. net income the increase in net income was primarily due to the increase in revenues and gross margin , partially offset by an increase in operating expenses . in addition , we recognized income tax expense of $ 16,252 in the year ended september 30 , 2014 compared to $ 1,902 in the year ended september 30 , 2013. for additional details , refer to note 10 , income taxes . liquidity and capital resources cash at september 30 , 2014 was $ 23,894,744 , compared to $ 15,805,195 at september 30 , 2013. other than cash and expected future cash flows from operating activities in subsequent periods , we have no other unused sources of liquidity at this time . principal factors that could affect the availability of our internally generated funds include : ability to meet sales projections ; government spending levels ; introduction of competing technologies ; product mix and effect on margins ; ability to reduce and manage inventory levels ; and product acceptance in new markets . principal factors that could affect our ability to obtain cash from external sources include : volatility in the capital markets ; and market price and trading volume of our common stock . our board of directors approved a share buyback program under which the company may utilize up to $ 4 million in cash to repurchase outstanding common shares using available cash and from future cash flow from operations through december 31 , 2014. based on our current cash position , our order backlog , and assuming the accuracy of our currently planned expenditures , we believe we have sufficient capital to fund planned levels of operations for at least the next twelve months . however , we operate in a rapidly evolving and often unpredictable business environment that may change the timing or amount of expected future cash receipts and expenditures . accordingly , there can be no assurance that we may not be required to raise additional funds through the sale of equity or debt securities or from credit facilities .
| gross profit remained strong at 56 % of revenues , compared to 48 % of net revenues in fiscal 2013 , primarily due to fixed overhead absorption , and a higher mix of direct customer sales where a commission is paid , rather than sales through our reseller network at lower reseller pricing . operating expenses increased by $ 3.2 million or 43 % , primarily due to accrued bonus for meeting established performance targets , increased salaries and benefits due to staff additions , primarily in business development , and third party commission expense . net income grew by $ 2.1 million or 164 % in fiscal 2014 , compared to the prior year . we increased our working capital by $ 4.0 million during fiscal 2014. future cash flows from operating activities are expected to fluctuate based on working capital requirements , operating expense levels and other factors . we believe we have adequate financial resources to fund operations for the next twelve months . our lrad-x product line uses directionality and focused acoustic output to clearly transmit critical information , instructions and warnings up to 5,500 meters . the lrad-x product line features improved voice intelligibility and meets the military 's stringent environmental requirements in a number of packages and form factors . through the use of powerful voice commands , prerecorded messages in multiple languages , and deterrent tones , the lrad creates large safety zones while determining the intent and influencing the behavior of an intruder . we continue to expand our lrad-x product line to provide a complete range of systems from single operator portable to permanently installed , remotely operated . our lrad products have been competitively selected over other commercially available systems by the united states military and by several international militaries . 16 we incurred $ 2,481,235 of research and development expense during fiscal 2014. we designed , developed and launched the lrad 450xl unit which is the loudest long range ahd for its size and weight , using and enhanced patent pending technology
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these cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this annual report on form 10-k. we undertake no obligation to update or revise any forward-looking statements , whether as a result of new information , future events or otherwise . overview we are a leading global manufacturer , marketer and distributor of high performance coatings systems . we have over a 150 -year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technologies and customer service . our diverse global footprint of 49 manufacturing facilities , four technology centers , 47 customer training centers and approximately 13,300 employees allows us to meet the needs of customers in over 130 countries . we serve our customers through an extensive sales force and technical support organization , as well as through approximately 4,000 independent , locally based distributors . we operate our business in two operating segments , performance coatings and transportation coatings . our segments are based on the type and concentration of customers served , service requirements , methods of distribution and major product lines . through our performance coatings segment , we provide high-quality liquid and powder coatings solutions to a fragmented and local customer base . we are one of only a few suppliers with the technology to provide precise color matching and highly durable coatings systems . the end-markets within this segment are refinish and industrial . through our transportation coatings segment we provide advanced coating technologies to oems of light and commercial vehicles . these increasingly global customers require a high level of technical support coupled with cost-effective , environmentally responsible , coatings systems that can be applied with a high degree of precision , consistency and speed . the end-markets within this segment are light vehicle and commercial vehicle . 37 business highlights general business highlights our net sales increased 7.0 % for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 , driven primarily by impacts of acquisitions within our performance coatings segment . organic volume growth in our transportation coatings segment was largely offset by decreases in our performance coatings segment , resulting in an overall increase of 0.2 % , excluding acquisitions . declines in average selling prices in our transportation coatings segment resulting primarily from pricing across all regions within our light vehicle end-market were offset partially by price increases in our refinish end-market , contributing to a net decrease of 1.0 % . currency translation contributed to an increase of net sales of 0.4 % . the following trends have impacted our segment and end-market sales performance : performance coatings : net sales increased 11.5 % driven by stronger volumes in our industrial end-market , including the impacts of acquisitions , combined with organic volume growth in emea and asia and increases in average selling price in our refinish end-market . performance coatings volumes were impacted in 2017 due partially to the absence of our now deconsolidated venezuelan operations and impacts from distributor working capital adjustments in north america . transportation coatings : net sales increased modestly by 0.4 % compared to 2016 with offsetting impacts from stronger volumes in both our light vehicle and commercial vehicle end-markets and lower average selling prices in our light vehicle end-market , primarily in north america and asia . our business serves four end-markets globally as follows : replace_table_token_4_th acquisitions highlights during the year ended december 31 , 2017 , we successfully completed eight strategic business acquisitions ( `` 2017 acquisitions '' ) within our performance coatings segment . included in these acquisitions was the purchase of the industrial wood business in north america , which is discussed in further detail at note 5 to the consolidated financial statements included elsewhere in this annual report on form 10-k. our 2017 aggregate spending for these 2017 acquisitions was $ 564.4 million . the impact of acquisitions contributed $ 299.3 million to net sales in 2017 compared to 2016. capital and liquidity highlights during the year ended december 31 , 2017 , we entered into the fifth amendment of our senior secured credit facilities , which increased the aggregate principal balance of our dollar term loans to $ 2.0 billion of which the net proceeds were used to fund the industrial wood acquisition and certain other 2017 acquisitions . in addition , this amendment extended the maturity date on our dollar term loans and lowered interest rates . the benefits of this refinancing transaction are anticipated to save approximately $ 7.7 million in annual cash interest compared to the previous principal balances . for additional information , refer to note 20 to the consolidated financial statements included elsewhere in this annual report on form 10-k and our liquidity and capital resource discussion within this item 7. other highlights in march 2017 , we announced that our board of directors authorized a common share repurchase program of up to $ 675.0 million . we expect the share repurchases to be made from time to time in the open market or through privately-negotiated transactions , or otherwise , subject to applicable laws , regulations and approvals . the pace of repurchase activity will be subject to our discretion , and will be based upon market conditions and other capital allocation decisions , while incorporating key factors including cash balances and needs of the business , cash flow from operations , stock price and acquisition opportunities . there is no expiration date on the share repurchase program . during the year ended december 31 , 2017 , repurchases totaled $ 58.4 million . 38 on december 22 , 2017 , the u.s. tcja legislation was enacted into law , which significantly revises the internal revenue code of 1986 , as amended . story_separator_special_tag we have assessed the impacts of the changes from the u.s. tcja , in accordance with staff accounting bulletin 118 , income tax accounting implications of the tax cuts and jobs act ( `` sab 118 '' ) , and recorded a provisional net tax charge of $ 107.8 million . the provisionally estimated net tax charge reflects our current estimate of the new legislation 's impact , which may differ with further regulatory guidance , changes in our current interpretations and assumptions and actions we may take as a result of the tax legislation . for more information refer to note 12 to the consolidated financial statements included elsewhere in this annual report on form 10-k. factors affecting our operating results the following discussion sets forth certain components of our statements of operations as well as factors that impact those items . net sales we generate revenue from the sale of our products across all major geographic areas . our net sales include total sales less estimates for returns and price allowances . price allowances include discounts for prompt payment as well as volume-based incentives . our overall net sales are generally impacted by the following factors : fluctuations in overall economic activity within the geographic markets in which we operate ; underlying growth in one or more of our end-markets , either worldwide or in particular geographies in which we operate ; the type of products used within existing customer applications , or the development of new applications requiring products similar to ours ; changes in product sales prices ( including volume discounts and cash discounts for prompt payment ) ; changes in the level of competition faced by our products , including price competition and the launch of new products by competitors ; our ability to successfully develop and launch new products and applications ; changes in buying habits of our customers ( including our distributors ) ; and fluctuations in foreign exchange rates . while the factors described above impact net sales in each of our operating segments , the impact of these factors on our operating segments can differ , as described below . for more information about risks relating to our business , see part i , item 1a , `` risk factors—risks related to our business . '' other revenue other revenue consists primarily of consulting and other service revenue and royalty income . cost of goods sold ( `` cost of sales '' ) our cost of sales consists principally of the following : production materials costs . we purchase a significant amount of the materials used in production on a global lowest-cost basis . employee costs . these include the compensation and benefit costs , including share-based compensation expense , for employees involved in our manufacturing operations . these costs generally increase on an aggregate basis as production volumes increase and may decline as a percent of net sales as a result of economies of scale associated with higher production volumes . depreciation expense . property , plant and equipment are stated at cost and depreciated or amortized on a straight-line basis over their estimated useful lives . property , plant and equipment acquired through the acquisition were recorded at their estimated fair value on the acquisition date resulting in a new cost basis for accounting purposes . other . our remaining cost of sales consists of freight costs , warehousing expenses , purchasing costs , costs associated with closing or idling of production facilities , functional costs supporting manufacturing , product claims and other general manufacturing expenses , such as expenses for utilities and energy consumption . the main factors that influence our cost of goods sold as a percentage of net sales include : changes in the price of raw materials ; production volumes ; 39 the implementation of cost control measures aimed at improving productivity , including reduction of fixed production costs , refinements in inventory management and the coordination of purchasing within each subsidiary and at the business level ; and fluctuations in foreign exchange rates . selling , general and administrative expenses our selling , general and administrative expense consists of all expenditures incurred in connection with the sales and marketing of our products , as well as technical support for our customers and administrative overhead costs , including : compensation and benefit costs for management , sales personnel and administrative staff , including share-based compensation expense . expenses relating to our sales personnel increase or decrease principally with changes in sales volume due to the need to increase or decrease sales personnel to meet changes in demand . expenses relating to administrative personnel generally do not increase or decrease directly with changes in sales volume ; and depreciation , advertising and other selling expenses , such as expenses incurred in connection with travel and communications . changes in selling , general and administrative expense as a percentage of net sales have historically been impacted by a number of factors , including : changes in sales volume , as higher volumes enable us to spread the fixed portion of our administrative expense over higher sales ; changes in our customer base , as new customers may require different levels of sales and marketing attention ; new product launches in existing and new markets , as these launches typically involve a more intense sales activity before they are integrated into customer applications ; customer credit issues requiring increases to the allowance for doubtful accounts ; and fluctuations in foreign exchange rates . research and development expenses research and development expense represents costs incurred to develop new products , services , processes and technologies or to generate improvements to existing products or processes . interest expense , net interest expense , net consists primarily of interest expense on institutional borrowings and other financing obligations and changes in fair value of interest rate derivative instruments , net of capitalized interest expense . interest expense , net also includes the amortization of debt issuance costs and debt discounts associated with our senior secured credit facilities and other indebtedness .
| the increase in net sales for the year ended december 31 , 2017 was driven by an increase in sales volumes which contributed to growth of 3.0 % . this included organic volume increases in both end-markets as well as a 0.7 % benefit from acquisitions . further contributing to the increase was the favorable impacts of currency exchange related to strengthening of the euro and certain currencies in latin america compared to the u.s. dollar which contributed to a 0.5 % increase in net sales . partially offsetting these increases were lower average selling prices across both end-markets contributing to a 3.1 % decrease . adjusted ebitda decreased $ 31.7 million , or 9.0 % , to $ 321.0 million for the year ended december 31 , 2017 compared to adjusted ebitda of $ 352.7 million for the year ended december 31 , 2016 . the decrease in adjusted ebitda for the year ended december 31 , 2017 was primarily driven by lower average selling prices and higher variable costs in our light vehicle end-market , partially offset by volume growth across both end-markets . 49 segment results year ended december 31 , 2016 compared to the year ended december 31 , 2015 the following table presents net sales by segment and segment adjusted ebitda for the following periods : replace_table_token_9_th performance coatings segment net sales increase d $ 16.7 million , or 0.7 % , to $ 2,398.5 million for the year ended december 31 , 2016 compared to net sales of $ 2,381.8 million for the year ended december 31 , 2015 . the increase in net sales for the year ended december 31 , 2016 was a result of higher average selling prices and volumes which contributed 3.7 % and 2.8 % , respectively . contributions from price included a stronger product mix which was driven by our north america and latin america regions . volume growth in both our refinish and industrial end-markets included a 3.2 % benefit from our acquisitions , slightly offset
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in those situations , the portion of the total impairment that is attributable to the credit loss would be recognized in earnings , and the remaining difference between the debt security 's amortized cost and its fair value would be included in other comprehensive income . goodwill and goodwill impairment goodwill resulting from business combinations prior to january 1 , 2009 , represents the excess of the purchase price over the fair value of the net assets of the businesses acquired . goodwill resulting from business combinations after january 1 , 2009 , is generally determined as the excess of the fair value of the consideration transferred , plus the fair value of any noncontrolling interest in the acquiree , over the fair value of the net assets acquired and liabilities assumed as of the acquisition date . goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized , but tested for impairment at least annually , or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed . intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values . goodwill is the only intangible asset with an indefinite life on our balance sheets . based on the company 's annual impairment test , there was zero recorded impairment as of december 31 , 2014. other intangible assets consist of core deposit intangible assets arising from business combinations and are amortized using an accelerated method over their estimated useful lives . purchase credit impaired loans purchase credit impaired ( pci ) loans are those loans that we acquired in the san joaquin bank ( sjb ) acquisition for which we were covered for reimbursement for a substantial portion of any future losses under the terms of the federal deposit insurance corporation ( fdic ) loss sharing agreement . we account for pci loans under asc 310-30 , loans and debt securities acquired with deteriorated credit quality ( acquired impaired loan accounting ) when ( i ) we acquire loans deemed to be impaired when there is evidence of credit deterioration since their origination and it is probable at the date of acquisition that we would be unable to collect all contractually required payments and ( ii ) as a general policy election for non-impaired loans that we acquire in a distressed bank acquisition . acquired impaired loans are accounted for individually or in pools of loans based on common risk characteristics . the excess of the loan 's or pool 's scheduled contractual principal and interest payments over all cash flows expected at acquisition is the nonaccretable difference . the remaining amount , representing the excess of the loan 's cash flows expected to be collected over the fair value is the accretable yield ( accreted into interest income over the remaining life of the loan or pool ) . refer to note 6 acquired sjb assets and fdic loss sharing asset for pci loans by type . fair value of financial instruments we use fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures . investment securities available-for-sale and interest-rate swaps are financial instruments recorded at fair value on a recurring basis . additionally , from time to time , we may be required to record at fair value other financial assets on a non-recurring basis , such as impaired loans and other real estate owned ( oreo ) . these nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets . further , we include in note 20 of the consolidated financial statements information about the extent to which fair value is used to measure assets and liabilities , the valuation methodologies used and its impact to earnings . additionally , for financial instruments not recorded at fair value we disclose the estimate of their fair value . stock-based compensation consistent with the provisions of asc 718 , stock compensation , we recognize expense for the grant date fair value of stock options and restricted shares issued to employees , officers and non-employee directors over the their requisite service periods ( generally the vesting period ) . the service periods may be subject to performance conditions . 33 at december 31 , 2014 , the company has three stock-based employee compensation plans . the company accounts for stock compensation using the modified prospective method . under this method , awards that are granted , modified , or settled after december 31 , 2005 , are measured at fair value as of the grant date with compensation costs recognized over the vesting period on a straight-lined basis . also under this method , unvested stock awards as of january 1 , 2006 are recognized over the remaining service period with no change in historical reported earnings . the fair value of each stock option grant is estimated as of the grant date using the black-scholes option-pricing model . management assumptions used at the time of grant impact the fair value of the option calculated under the black-scholes option-pricing model , and ultimately , the expense that will be recognized over the life of the option . the grant date fair value of restricted stock awards is measured at the fair value of the company 's common stock as if the restricted share was vested and issued on the date of grant . for complete discussion and disclosure of other accounting policies see note 3 summary of significant accounting policies to the company 's consolidated financial statements presented elsewhere in this report . overview for the year ended december 31 , 2014 , we reported net earnings of $ 104.0 million , compared with $ 95.6 million for 2013 , an increase of $ 8.4 million , or 8.80 % . diluted earnings per share were $ 0.98 per share for the year ended december 31 , 2014 , compared to $ 0.91 per share for 2013. story_separator_special_tag net income for 2014 included a $ 16.1 million loan loss provision recapture . by comparison , net income for 2013 was positively impacted by a $ 16.8 million loan loss provision recapture and $ 4.1 million in insurance reimbursements for prior years ' legal costs . at december 31 , 2014 , total assets of $ 7.38 billion increased $ 713.0 million , or 10.70 % , from total assets of $ 6.66 billion at december 31 , 2013. earning assets totaled $ 7.02 billion at december 31 , 2014 , an increase of $ 695.4 million , or 11.00 % , when compared with total earning assets of $ 6.32 billion at december 31 , 2013. the increase in earning assets was primarily due to a $ 473.3 million increase in investment securities and a $ 267.2 million increase in total loans . this was partially offset by a $ 38.1 million decrease in interest earning deposits with other institutions and a $ 7.0 million decrease in fhlb stock . investment securities totaled $ 3.14 billion at december 31 , 2014 , up from $ 2.67 billion at december 31 , 2013. as of december 31 , 2014 , we had a pre-tax unrealized net gain of $ 53.6 million on our overall investment securities portfolio , compared to a pre-tax unrealized net loss of $ 16.1 million at december 31 , 2013. the increase in the net unrealized holding gains resulted primarily from fluctuations in market interest rates and the growth of the portfolio . total loans and leases , net of deferred fees and discount , of $ 3.82 billion at december 31 , 2014 , increased by $ 267.2 million , or 7.53 % , from $ 3.55 billion at december 31 , 2013. the $ 267.2 million increase in loans was principally due to increases of $ 248.5 million in commercial real estate loans , $ 15.8 million in sfr mortgage loans ( net of a $ 16.9 million decrease in sfr pool loans ) , $ 13.6 million in consumer loans , and $ 7.4 million in construction loans . this growth was partially offset by decreases of $ 16.2 million in dairy & livestock and agribusiness loans and $ 11.3 million in municipal lease finance receivables . the increase in total loans year-over-year included approximately $ 240 million of loans acquired from asb . also contributing to our overall loan growth was a strengthened new loan pipeline and reduced loan runoff . the market for new loans continued to remain very competitive with pressure on our existing loans and new loan origination opportunities , particularly from the larger banks . 34 noninterest-bearing deposits were $ 2.87 billion at december 31 , 2014 , an increase of $ 303.4 million , or 11.84 % , compared to $ 2.56 billion at december 31 , 2013. at december 31 , 2014 , noninterest-bearing deposits were 51.14 % of total deposits , compared to 52.41 % at december 31 , 2013. our average cost of total deposits for 2014 was 9 basis points , compared to 10 basis points for 2013. fhlb advances were $ 199.4 million at december 31 , 2014 , compared to $ 199.2 million at december 31 , 2013. at december 31 , 2014 , we had $ 46.0 million in short-term borrowings , compared to $ 69.0 million at december 31 , 2013. at december 31 , 2014 , we had $ 25.8 million of junior subordinated debentures , unchanged from december 31 , 2013. the allowance for loan losses totaled $ 59.8 million at december 31 , 2014 , compared to $ 75.2 million at december 31 , 2013. the $ 16.1 million recapture of loan loss provision during 2014 was primarily the result of overall improvement in credit quality . this compares with a $ 16.8 million recapture of loan loss provision for 2013. the allowance for loan losses was 1.62 % and 2.22 % of total loans and leases outstanding , excluding pci loans , at december 31 , 2014 and december 31 , 2013 , respectively . our capital ratios remain well-above regulatory standards . as of december 31 , 2014 , our tier 1 leverage capital ratio totaled 10.86 % , our tier 1 risk-based capital ratio totaled 16.99 % and our total risk-based capital ratio totaled 18.24 % . 35 analysis of the results of operations financial performance replace_table_token_4_th noninterest expense and efficiency ratio reconciliation ( non-gaap ) we use certain non-gaap financial measures to provide supplemental information regarding our performance . noninterest expense for the year ended december 31 , 2012 included a debt termination expense of $ 20.4 million . we believe that presenting the efficiency ratio , and the ratio of noninterest expense to average assets , excluding the impact of debt termination expense and related net interest expense savings , provides additional clarity to the users of financial statements regarding core financial performance . the company did not incur debt termination expense during the years ended december 31 , 2014 and 2013 , respectively . replace_table_token_5_th 36 income and expense related to acquired sjb assets the following table summarizes the components of income and expense related to sjb assets excluding normal accretion of interest income on pci loans for the periods indicated : replace_table_token_6_th income and expense related to pci loans include accretion of the difference between the carrying amount of the pci loans and their expected cash flows , net decrease in the fdic loss sharing asset as well as the other noninterest income and noninterest expenses related to sjb assets . 2014 compared to 2013 the discount accretion of $ 5.8 million in 2014 , recognized as part of interest income , decreased $ 7.0 million , compared to $ 12.9 million in 2013. the net decrease in the fdic loss sharing asset was $ 3.6 million for 2014 , compared to a net decrease of $ 12.9 million for 2013. at december 31 , 2014 , the remaining discount associated with the pci loans approximated $ 7.1 million .
| this increase in interest income was offset by an increase of $ 2.3 million in interest expense and a $ 2.6 million increase in noninterest expense for 2014 , compared to 2013. for the year ended december 31 , 2013 , the centers ' segment pre-tax profits decreased by $ 8.9 million , or 6.30 % , compared to 2012. the $ 7.4 million decrease in interest income was principally due to a 41 basis point drop in the loan yield to 5.33 % in 2013 , compared to $ 5.74 % in 2012. the market for new loans continued to remain very competitive but the recent rise in long term interest rates has started to moderate refinance pressure on our existing loans , particularly from the larger banks . the drop in interest income was partially offset by a decrease of $ 1.0 million in interest expense . noninterest income also decreased $ 2.1 million , or 9.09 % for 2013 , compared to 2012 . 48 treasury replace_table_token_13_th ( 1 ) interest income and interest expense include credit for funds provided and charges for funds used , respectively . these are eliminated in the consolidated presentation . for the year ended december 31 , 2014 , the company 's treasury department reported a pre-tax profit of $ 6.1 million , compared to a pre-tax loss of $ 355,000. this increase was primarily due to an $ 18.1 million increase in interest income due to a $ 456.1 million increase in average investments and a 23 basis point increase in yield on investments ( te ) . the increase in interest income was partially offset by a $ 9.5 million increase in interest expense . for the year ended december 31 , 2013 , the company 's treasury department reported a pre-tax loss of $ 355,000 , compared to a pre-tax loss of $ 21.2 million for 2012. excluding the $ 20.4 million debt termination expense for 2012 , segment pre-tax loss decreased by $ 481,000. the improvement was primarily due to a $ 2.1 million net gain on the sale of investment securities in 2013. interest income decreased $ 3.3 million due to a 39 basis point drop in yield on investments ( te ) offset by a $ 168.3 million increase in average investment securities for
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on december 26 , 2019 , we announced the successful completion of a private exchange of $ 276 million of our convertible senior notes due in 2021 in exchange for a combination of approximately $ 207 million aggregate principal amount of newly-issued convertible senior secured notes due 2024 and $ 55.2 million in cash . the new convertible senior secured notes have a conversion price of approximately $ 3.50 per share . as a result of the exchange , approximately $ 69 million of convertible senior notes due in 2021 , with a conversion price of $ 42.56 , remain outstanding . we are evaluating alternatives to address the remaining portion of the convertible notes due 2021 , and this is a top priority in addition to our focus on the inbrija launch . refer to note 10 to our consolidated financial statements included in this report for more information about the terms and conditions of the 2021 and 2024 convertible notes . as of december 31 , 2019 , we had cash , cash equivalents , short-term investments and restricted cash of approximately $ 169 million . restricted cash includes $ 42.7 million in escrow related to the 6 % semi-annual interest portion of the new convertible senior secured notes due 2024. if we elect to pay interest due in stock , the cash equivalent will be released from escrow . inbrija ( levodopa inhalation powder ) /parkinson 's disease inbrija ( levodopa inhalation powder ) is the first and only inhaled levodopa , or l-dopa , for intermittent treatment of off episodes , also known as off periods , in people with parkinson 's disease treated with carbidopa/levodopa regimen . our new drug application , or nda , for inbrija was approved by the u.s. food and drug administration , or fda , on december 21 , 2018. the approval is for a single dose of 84 mg ( administered as two capsules ) , which may be taken up to five times per day . inbrija became commercially available in the u.s. on february 28 , 2019. currently , inbrija is available in the u.s. without the need for a medical exception for approximately 72 % of commercial and 25 % of medicare plan lives . net revenue for inbrija was $ 15.3 million for the year ended december 31 , 2019. we project peak u.s. annual net revenue of inbrija to be in the range of $ 300 to $ 500 million . on september 24 , 2019 , we announced that the european commission , or ec , approved our marketing authorization application , or maa , for inbrija . the approved dose is 66 mg ( administered as two capsules ) up to five times per day ( per european union , or eu , convention , this reflects emitted dose and is equivalent to the 84 mg labelled dose in the u.s. ) . under the maa , inbrija is indicated in the eu for the intermittent treatment of episodic motor fluctuations ( off episodes ) in adult patients with parkinson 's disease treated with a levodopa/dopa-decarboxylase inhibitor . the maa approved inbrija for use in what were then the 28 countries of the eu , as well as iceland , norway and liechtenstein . following the ratification of the withdrawal agreement between the united kingdom and the eu , the united kingdom left the european union on january 31 , 2020. however , this eu marketing authorization remains valid in the uk during a transitional period that will end on december 31 , 2020 , unless it is extended . we are in discussions with potential partners regarding the distribution of inbrija outside of the u.s. , with potential partners in europe and japan . inbrija is marketed in the u.s. through our own specialty sales force and commercial infrastructure , and is distributed in the u.s. primarily through a network of specialty pharmacies , which deliver the medication to patients by mail , and asd specialty healthcare , inc. ( an amerisource bergen affiliate ) . our neuro-specialty sales and marketing team , built through our 67 commercialization of ampyra , includes our own sales representatives as well as established teams of medical science liaisons , regional reimbursement directors , and market access account directors who provide information to payers and physicians on our marketed products ; a national trade account director who works with our network of specialty pharmacies for inbrija and ampyra ; and market development managers who work collaboratively with field teams and corporate personnel to assist in the execution of the company 's strategic initiatives . our sales representatives , which we are supplementing with contract sales representatives , are targeting approximately 10,000 healthcare providers , currently focusing on a priority list of approximately 2,000 physicians who are high volume prescribers of levodopa/carbidopa . our inbrija launch activities have thus far been focused on physician awareness and market access . as we enter our next phase of the launch , we will be maintaining these efforts while increasing focus on patient awareness , education and training . in january 2019 , we established prescription support services , which we sometimes refer to as the inbrija hub , a service provided by acorda which is designed to help patients navigate their insurance coverage and offer reimbursement support services , when appropriate . services fall into one of these four categories : insurance verification , to research patient insurance benefits and confirm insurance coverage ; prior authorization support , to identify prior authorization requirements ; appeals support ; and assistance identifying which specialty pharmacy a patient will utilize based on their insurance coverage . story_separator_special_tag for patients that may need assistance paying for their medication , prescription support services offers several support options , including : a program that provides no cost medication to patients who meet specific program eligibility requirements ; co-pay support , which may help commercially insured ( non-government funded ) patients lower their out-of-pocket costs ; and a bridge program , for federally-insured patients who experience a delay in coverage determination . we have implemented a no-cost sample program , available at physician offices , to enable patients and their physicians to assess the value of inbrija before the patient incurs out-of-pocket co-pay or co-insurance costs . in addition , we have implemented a free trial program , available through the inbrija hub , for commercially insured patients who can not access the free samples because of offices and institutions that have policies that prohibit samples . parkinson 's disease is a progressive neurodegenerative disorder resulting from the gradual loss of certain neurons in the brain . these neurons are responsible for producing dopamine and that loss causes a range of symptoms including impaired movement , muscle stiffness and tremors . the standard baseline treatment of parkinson 's disease is oral carbidopa/levodopa , but oral medication can be associated with wide variability in the timing and amount of absorption and there are significant challenges in creating a regimen that consistently maintains therapeutic effects . as parkinson 's progresses , people are likely to experience off periods , which are characterized by the return of parkinson 's symptoms that result from low levels of dopamine between doses of oral carbidopa/levodopa . off periods are often highly disruptive to people with parkinson 's . approximately one million people in the u.s. and 1.2 million europeans are diagnosed with parkinson 's ; it is estimated that approximately 40 % of people with parkinson 's in the u.s. experience off periods . inbrija is for as needed use and utilizes our arcus platform for inhaled therapeutics . arcus is a dry-powder pulmonary drug delivery technology that we believe has potential to be used in the development of a variety of inhaled medicines . the arcus platform allows systemic delivery of medication through inhalation , by transforming molecules into a light , porous dry powder . this allows delivery of substantially higher doses of medication than can be delivered via conventional dry powder technologies . we acquired the arcus technology platform as part of our 2014 acquisition of civitas therapeutics . we have worldwide rights to our arcus drug delivery technology , which is protected by extensive know-how and trade secrets and various u.s. and foreign patents , including patents that protect the inbrija dry powder capsules beyond 2030. we have several patents listed in the orange book for inbrija , including patents expiring between 2022 and 2032 , and inbrija is entitled to three years of new product exclusivity , through december 2021 , as posted in the orange book . ampyra ampyra was approved by the fda in january 2010 to improve walking in adults with multiple sclerosis . to our knowledge , ampyra is the first drug approved for this indication . efficacy was shown in people with all four major types of ms ( relapsing remitting , secondary progressive , progressive relapsing and primary progressive ) . net revenue for ampyra was $ 163.2 million for the year ended december 31 , 2019.we have been engaged in litigation with certain generic drug manufacturers relating to our five initial orange book-listed ampyra patents . in 2017 , the united states district court for the district of delaware ( the “ district court ” ) issued a ruling that upheld our ampyra orange book-listed patent that expired on july 30 , 2018 , but invalidated our four other orange book-listed patents pertaining to ampyra that were set to expire between 2025 and 2027. under this decision , our patent exclusivity with respect to ampyra terminated on july 30 , 2018. we appealed the district court decision to the united states court of appeals for the federal circuit ( the “ federal circuit ” ) , which issued a ruling in september 2018 upholding the district court 's decision ( the “ appellate decision ” ) . in january 2019 , the federal circuit denied our petition for rehearing en banc . in october 2019 , the u.s. supreme court denied our petition for certiorari requesting review of the case . this litigation is discussed further in part i , item 3 of this report . we have 68 experienced a significant decline in ampyra sales due to competition from generic versions of ampyra that are being marketed following the appellate decision . additional manufacturers may market generic versions of ampyra , and we expect our ampyra sales will continue to decline over time . license and collaboration agreement with biogen ampyra is marketed as fampyra outside the u.s. by biogen international gmbh , or biogen , under a license and collaboration agreement that we entered into in june 2009. fampyra has been approved in a number of countries across europe , asia and the americas . under our agreement with biogen , we are entitled to receive double-digit tiered royalties on net sales of fampyra and we are also entitled to receive additional payments based on achievement of certain regulatory and sales milestones . we received a $ 25 million milestone payment from biogen in 2011 , which was triggered by biogen 's receipt of conditional approval from the european commission for fampyra . the next expected milestone payment would be $ 15 million , due when ex-u.s. net sales exceed $ 100 million over four consecutive quarters . in november 2017 , we announced a $ 40 million fampyra royalty monetization transaction with healthcare royalty partners , or hcrp . in return for the payment to us , hcrp obtained the right to receive these fampyra royalties up to an agreed-upon threshold .
| payment of coverage gap discounts is required under the affordable care act , the health care reform legislation enacted in 2010. discounts and allowances may increase as a percentage of sales as we enter into managed care contracts in the future . other product revenues we recognized net revenue from the sale of other products of $ 2.3 million for the year ended december 31 , 2019 as compared to $ 4.6 million for the year ended december 31 , 2018. royalty revenue we recognized $ 11.7 million in royalty revenue for both the years ended december 31 , 2019 and 2018 , related to ex-u.s. sales of fampyra by biogen . 71 cost of sales we recorded cost of sales of $ 34.8 million for the year ended december 31 , 2019 as compared to $ 97.6 million for the year ended december 31 , 2018. cost of sales for the year ended december 31 , 2019 consisted primarily of $ 32.2 million in inventory costs related to recognized revenues , $ 0.9 million in royalty fees based on net product shipments , idle capacity costs of $ 0.7 million , $ 0.5 million in period costs related to freight , stability testing , and packaging and $ 0.5 million for costs related to sales of the authorized generic version of ampyra . cost of sales of $ 1.8 million for inventory manufactured pre-launch for inbrija was not recorded for the year ended december 31 , 2019 , since the inventory manufactured prior to the fda approval was expensed as research and development expense as incurred and was combined with other research and development expenses in 2018. production costs related to idle capacity are not included in the cost of inventory but are charged directly to cost of sales in the period incurred . cost of sales for the year ended december 31 , 2018 consisted primarily of $ 80.8 million in inventory costs related to
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in connection with a lawsuit filed by the trustee and certain holders of the convertible notes in the court of chancery in the state of delaware , captioned wells fargo bank , national association , wolverine flagship fund trading limited , highbridge international llc , and highbridge tactical credit & convertibles master fund , l.p. v. merrimack pharmaceuticals , inc. , or the delaware action , in april 2017 , we deposited $ 60.0 million in proceeds from the asset sale into an escrow account to provide security to the plaintiffs for their claims in the delaware action . in october and november 2017 , we settled the delaware action and redeemed all outstanding convertible notes as described below . see note 11 , “ borrowings , ” in the accompanying notes to the consolidated financial statements for additional information . on october 3 , 2016 , we announced a 22 % reduction in headcount as part of a major corporate restructuring with the objective of prioritizing our research and development on a focused set of systems biology-derived oncology products and strengthening our financial runway . on this same date , we also announced the resignation of robert mulroy , our former president and chief executive officer . see note 12 , “ restructuring activities , ” in the accompanying notes to the consolidated financial statements for additional information . in connection with this corporate restructuring , we also initiated a strategic review of our pipeline , including a clinical and financial prioritization of our programs . this strategic review was concluded in january 2017 , as described in more detail below . on november 8 , 2016 , we entered into a loan and security agreement , or the credit agreement , with biopharma credit investments iv sub , lp , or pharmakon , pursuant to which a credit facility of an aggregate principal amount of at least $ 15.0 million and up to $ 25.0 million was available to us . the credit facility was originally available at any time through march 15 , 2017 upon our request and upon compliance with certain funding conditions . on april 7 , 2017 , the credit agreement expired . in connection with the asset sale we completed on january 7 , 2017 , ipsen also agreed to sublease 70,237 square feet of our manufacturing facility . in addition , at the closing of the asset sale , we and ipsen entered into an intellectual property license agreement pursuant to which ipsen granted us an exclusive license with respect to the portion of the transferred patents relating to certain liposomal technology and a non-exclusive license to the remainder of the transferred patents , in both cases for use outside of the field in which the commercial business will operate . in turn , we granted ipsen a non-exclusive license with respect to the remaining patents owned by us at the closing of the asset sale for use in the field in which the commercial business will operate . on january 8 , 2017 , we announced a planned reduction in our headcount by approximately 30 % in connection with the closing of the asset sale and the completion of our strategic pipeline review , and upon the closing of the asset sale , we had approximately 80 employees . on january 16 , 2017 , we announced the hiring of richard peters , m.d. , ph.d. , as our new president and chief executive officer , effective as of february 6 , 2017. dr. peters was also elected as a member of our board of directors . we entered into an employment agreement with dr. peters commencing on february 6 , 2017 whereby dr. peters will receive an annual base salary of $ 700,000 and is eligible for an annual bonus of up to 65 % of his base salary . dr. peters also received a one-time signing bonus of $ 900,000 and an option to purchase 200,000 shares of our common stock with an exercise price per share equal to the fair market value of our common stock on the date of grant . the option vests over four years , with 25 % having vested on february 6 , 2018 and the remainder vesting in equal quarterly installments over the following three years . on august 11 , 2017 , our stockholders approved an amendment to our certificate of incorporation to effect a one-for-ten reverse stock split of our issued and outstanding common stock , or the reverse split . on september 5 , 2017 , we filed an amendment to our 62 certificate of incorporation to effect the reverse split , and o n september 6 , 2017 , the reverse split wa s effective for trading purposes . as a result of the reverse split , every ten shares of common stock issued and outstanding was converted into one share of common stock , reducing the number of issued and outstanding shares of common stock from approximatel y 132.8 million shares to approximately 13.28 million shares . no fractional shares were issued in connection with the reverse split . the amendment to the certificate of incorporation also proportionately reduced the number of authorized shares of common st ock from 200 million to 20 million . the reverse split did not change the par value of the common stock . the reverse split did not change the number of authorized shares or par value of our preferred stock , of which there are no shares issued or outstanding . all outstanding stock options and convertible notes entitling their holders to purchase shares of common stock or acquire shares of common stock upon conversion , as the case may be , were adjusted as a result of the reverse split , as required by the terms of these securities . as a result , all share and per share amounts have been adjusted retroactively to reflect the reverse split for all periods presented . story_separator_special_tag in october and november 2017 , we paid approximately $ 59.1 million , including $ 0.7 million for accrued and unpaid interest and $ 3.8 million of transaction costs , to purchase all of the remaining $ 60.8 million aggregate principal amount of outstanding convertible notes . the company paid , in cash , an amount equal to $ 900 per $ 1,000 principal amount of convertible notes purchased , plus accrued and unpaid interest to , but not including , the date of purchase . a loss on extinguishment was recognized in interest expense in the consolidated statement of operations and comprehensive income ( loss ) for the year ended december 31 , 2017. the $ 0.3 million loss on extinguishment represents the difference between the total settlement consideration transferred to the holders that was attributed to the liability component of the convertible notes , based on the fair value of that component at the time of settlement , and the net carrying value of the liability . the remaining settlement consideration transferred was allocated to the reacquisition of the embedded conversion option and recognized as a $ 4.2 million reduction of additional paid-in capital . transaction costs incurred with third parties related to the conversion were allocated to the liability and equity components and resulted in an additional $ 3.5 million of interest expense and a $ 0.3 million reduction on additional paid-in capital . as of december 31 , 2017 , we had unrestricted cash and cash equivalents of $ 93.4 million . on april 3 , 2017 , we closed the asset sale with ipsen and received a $ 575.0 million upfront cash payment , plus a working capital adjustment of $ 5.7 million . we used a portion of the cash payment to redeem the $ 175.0 million outstanding aggregate principal amount of 11.50 % senior secured notes due 2022 , or the 2022 notes , which also required an additional make-whole premium payment of approximately $ 20.1 million , and deposited $ 60.0 million into an escrow account in response to a lawsuit filed by the trustee and certain holders of convertible notes . we also distributed $ 140.0 million of the upfront cash payment in the form of a special cash dividend to stockholders in may 2017. as a result of the cash received from the consummation of the asset sale , w e believe that at our currently forecasted spending rates , our existing financial resources , together with the net milestone payments we expect to receive under the baxalta agreement , assuming certain milestones under such agreement are met , will be sufficient to fund our planned operations into the second half of 2019. we have never been profitable and , as of december 31 , 2017 , we had an accumulated deficit of $ 482.8 million . our net loss from continuing operations was $ 76.0 million for the year ended december 31 , 2017 , $ 156.3 million for the year ended december 31 , 2016 and $ 151.6 million for the year ended december 31 , 2015. we expect to continue to incur significant expenses and operating losses for at least the next several years . we expect to continue to incur significant research and development expenses in connection with our ongoing activities , particularly as we continue the research , development and clinical trials of our product candidates , including multiple simultaneous clinical trials for certain product candidates . until such time , if ever , as we can generate sufficient product revenues , we expect to finance our cash needs through a combination of equity offerings , debt financings , collaborations , licensing arrangements and other marketing and distribution arrangements . we also could engage in discussions with third parties regarding partnerships , joint ventures , combinations or divestitures of one or more of our businesses as we seek to further the development of our research programs , improve our cash position and maximize stockholder value . there can be no assurance as to the timing , terms or consummation of any financing , collaboration , licensing arrangement or other marketing and distribution arrangement , partnership , joint venture , combination or divestiture . we may be unable to raise capital when needed or on attractive terms , which would force us to delay , limit , reduce or terminate our research and development programs . we will need to generate significant revenues to achieve profitability , and we may never do so . strategic partnerships , licenses and collaborations baxalta on september 23 , 2014 , we entered into the baxalta agreement for the development and commercialization of onivyde outside of the united states and taiwan , or the licensed territory . as part of the baxalta agreement , we granted baxalta an exclusive , royalty-bearing right and license under our patent rights and know-how to develop and commercialize onivyde in the licensed territory . on april 3 , 2017 , the baxalta agreement and all other agreements related to our collaboration with baxalta and any associated obligations , including our agreement related to commercial supply of onivyde , were assigned to ipsen in connection with the completion of the asset sale . we retained the rights to receive net milestone payments that may become payable pursuant to the baxalta agreement for the ex-u.s. development and commercialization of onivyde for up to $ 33.0 million , which is comprised 63 of potential payments of $ 18.0 million from the sale of onivyde in two additional major european countries , $ 5.0 million related to the sale of onivyde in the first major non-european , non-asian country and $ 1 0.0 million for the first patient dosed in a pivotal clinical trial in an indication other than pancreatic cancer .
| this decrease was primarily attributable to a decrease in corporate expenses related to reduced headcount levels and stock-based compensation in 2017 compared to 2016. restructuring expenses no restructuring expenses were recognized in continuing operations during the year ended december 31 , 2017. we recognized restructuring expenses of $ 5.7 million during the year ended december 31 , 2016 related to our october 2016 corporate restructuring activities described above . interest expense interest expense was $ 34.7 million for the year ended december 31 , 2017 , compared to $ 22.5 million for the year ended december 31 , 2016. this increase was primarily attributable to interest expense related to the settlement of the 2022 notes and an additional make-whole premium payment of approximately $ 20.1 million in the year ended december 31 , 2017. gain on deconsolidation we deconsolidated silver creek from our financial statements on july 13 , 2017 , the date we were no longer the primary beneficiary of silver creek , in accordance with asc 810-10-40-4 ( c ) , consolidation . as a result , we recorded a gain on the deconsolidation of silver creek of $ 10.8 million in the year ended december 31 , 2017 in our consolidated statement of operations and comprehensive income ( loss ) . other expense , net other expense , net was $ 1.4 million for the year ended december 31 , 2017 , compared to less than $ 0.1 million for the year ended december 31 , 2016. the increase was primarily attributable to the $ 0.8 million of losses recognized in the year ended december 31 , 2017 for our proportionate share of silver creek 's losses . income tax benefit ( expense ) we recognized an income tax benefit of $ 42.4 million in continuing operations and an income tax expense of $ 46.6 million in discontinued operations for the year ended december 31 , 2017. we recognized an income tax benefit of $ 13.2 million in continuing operations and an income tax expense of $ 13.2 million in discontinued operations for the year ended december 31 , 2016. these increases were primarily related to the asset sale . 72 discontinued operations we recognized income from discontinued operations , net of tax of $ 546.9 million for the year ended
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during 2020 , traditional hiv and hcv testing programs and drug testing in the workplace market were reduced or terminated as a result of the various “ stay-at-home ” orders and social distancing guidelines issued by federal , state and local governments to contain the spread of the covid-19 pandemic in the united states . on the international front , we experienced some reductions and stoppages of professional hiv and hcv testing in europe and asia due to the pandemic and delays with international shipments due to a reduction of customs and transportation personnel , a reduced number of air flights and shipping congestion . in our molecular segment , clinical and research work during the year , particularly in the academic market , has reduced demand for our products . these trends had a material impact on our results of operations during 2020 and we believe they will continue to have a material and adverse impact on the revenues of certain parts of our business for an indeterminate time period , depending on the duration and severity of the covid-19 pandemic . we also believe there are potentially significant opportunities for increase d revenues as a result of the pandemic . during 2020 , we began selling our saliva collection devices for use in molecular covid-19 testing . in addition , we are developing and will be seeking eua of a rapid covid-19 antigen test and a laboratory-based oral fluid sars-cov-2 antibody test . a description of these products can be found in the “ business ” section of part i one of this a nnual r eport . in 2020 , we generated additional revenues of approximately $ 49.8 million from sales of our molecular collection devices related to covid-19 testing during the year . in the u.s. , public health customers are purchasing increased quantities of our oraquick ® in-home hiv test in order to permit continued hiv testing while allowing clients and patients to adhere to “ stay-at-home ” and social distancing requirements . in addition , we are seeing increased demand for our molecular collection products from customers who conduct both saliva and blood-based testing . as it becomes increasingly difficult to collect blood in clinics or healthcare settings , these customers are increasingly relying on the saliva collection alternative . however , the degree to which these and other opportunities will offset the negative trends caused by the covid-19 pandemic in future periods can not be predicted with certainty . public offering in june 2020 , the company completed the issuance and sale of 9,200,000 shares of its common stock . the price to the public in the offering was $ 11.00 per share , with net proceeds from the offering equaling approximately $ 95.0 million after deducting underwriting discounts and offering expenses paid by the company . ursure acquisition on july 22 , 2020 , the company acquired all of the outstanding stock of ursure , pursuant to the terms of a merger agreement . subsequently in december 2020 , ursure was merged into orasure . the activities of this line of business are described in the “ business ” section of part i of this annual report . the acquisition of ursure supports our strategy of expanding our product offerings to include additional diagnostic products particularly point-of-care tests , that complement our current infectious disease portfolio and pipeline . we used cash of $ 3.0 million to pay for this acquisition and have incurred a total of $ 393,000 of acquisition related costs , including accounting , legal , and other professional fees , all of which were expensed and reported as a component of general and administrative expense in the consolidated statement of income for the year ended december 31 , 2020. current consolidated financial results during the year ended december 31 , 2020 , our consolidated net revenues increased 11 % to $ 171.7 million , compared to $ 154.6 million for the year ended december 31 , 2019. net product and services revenues during the year ended december 31 , 2020 increased 12 % when compared to the same period of 2019 , due to the inclusion of product revenues associated with covid-19 testing , higher international sales of our oraquick ® hiv self-test , and higher laboratory services revenues . partially offsetting these increases were lower sales of our genomics , hcv , risk assessment , domestic hiv and microbiome products and the absence of cryosurgical sales as a result of the divestiture of our cryosurgical systems business in august 2019 . other revenues for the year ended december 31 , 2020 were $ 5.3 million compared to $ 6.5 million in the same period of 2019. this decline was largely due to lower royalty income partially offset by increased revenues from funded research and development associated with the development of our adherence tests and covid-19 products . 53 our consolidated net loss for the year ended december 31 , 2020 was $ 14 . 9 million , or $ ( 0.2 2 ) per share on a fully diluted basis , compared to consolidated net income of $ 16.7 million , or $ 0.27 per share on a fully diluted basis , for the year ended december 31 , 2019 story_separator_special_tag style= '' text-align : justify ; margin-bottom:0pt ; margin-top:0pt ; text-indent:0 % ; font-weight : bold ; font-size:10pt ; font-family : times new roman ; font-style : normal ; text-transform : none ; font-variant : normal ; '' > consolidated operating results consolidated gross profit percentage was 59 % for the year ended december 31 , 2020 compared to 61 % for 2019. the decrease in gross profit percentage was primarily due to lower labor utilization as we increased our manufacturing headcount with full-time and temporary employees to prepare for expected product production increases , increased scrap and spoilage expense and the decline in other revenues which contribute 100 % to our gross profit percentage . these declines in gross profit percentage were partially offset by a more favorable product mix . story_separator_special_tag consolidated operating loss in 2020 was $ 5.2 million , a $ 23.8 million decline from the $ 18.6 million of operating income reported in 2019. results in 2020 were negatively impacted by increased operating expenses related to covid-19 product development , higher staffing costs and the inclusion of expenses attributable to diversigen and ursure . the operating loss in 2020 included $ 1.1 million of non-cash income related to the fair value change of acquisition-related contingent consideration compared to $ 664,000 of non-cash income in the comparable period of the prior year . results in 2019 also included the pre-tax gain of $ 10.2 million from the sale of our cryosurgical systems business . operating income by segment diagnostic segment the gross profit percentage of the diagnostics business was 42 % in 2020 compared to 55 % in 2019. this decrease is largely due to a less favorable product mix , lower labor utilization as we increased our manufacturing headcount with full-time and temporary employees to prepare for expected product production increases and increased scrap and spoilage expense . research and development expenses increased 75 % to $ 21.3 million in 2020 from $ 12.2 million in 2019 , largely due to spending associated with covid-19 product development , higher staffing costs , and the inclusion of ursure expenses not present in 2019. sales and marketing expenses increased 24 % to $ 22.4 million in 2020 from $ 18.1 million in 2019 , due to higher staffing costs as a result of increased headcount , increased commissions and the additional costs associated with the retirement of a senior executive who previously led our diagnostics business unit and the on-boarding costs of his successor . also contributing to the higher sales and marketing expense was an increase in our reserve for uncollectible accounts associated primarily with one of our distributors located in africa , higher marketing costs and the inclusion of ursure expenses not present in 2019. these increases were partially offset by lower travel and trade show costs due to the covid-19 pandemic . general and administrative expenses increased 25 % to $ 28.1 million in 2020 from $ 22.5 million in 2019 largely due to higher staffing costs associated with increased employee bonuses as a result of our strong financial performance in 2020 and an increase in headcount , and the inclusion of $ 393,000 in transaction costs associated with the ursure acquisition . these increases were partially offset by a decline in professional fees related to business development activities and lower travel expenses due to the covid-19 pandemic . operating income in 2019 also included a $ 10.2 million pre-tax gain on the sale of our cryosurgical systems business . in august 2019 , we sold all assets necessary to operate this line of business to a third party for $ 12.0 million . the $ 10.2 million gain includes the $ 12.0 million proceeds received net of the fair value of the assets sold , which consisted of inventory and fully-depreciated fixed assets , the legal fees associated with the transaction , and a value attributed to the transition services . all of the above contributed to an operating loss of $ 43.2 million for 2020 , which included non-cash charges of $ 3.3 million for depreciation and amortization and $ 6.0 million for stock-based compensation . the diagnostics segment operating loss also included a non-cash pre-tax gain of $ 989,000 associated with the change in the fair value of acquisition-related contingent consideration . molecular solutions segment the gross profit percentage of the molecular solutions segment was 70 % in 2020 compared to 68 % in 2019. this increase was attributable to a more favorable product mix as a result of higher sales of higher gross profit products and services partially offset by the decline in other revenues which contribute 100 % to the gross profit percentage . research and development expenses increased 31 % to $ 9.8 million in 2020 from $ 7.5 million in 2019 due higher staffing costs and the inclusion of research and development expenses incurred by diversigen for the full year in 2020 compared to two months in 2019. sales and marketing expenses decreased 12 % to $ 12.0 million in 2020 compared to $ 13.7 million in 2019 largely due to a prior period increase in our reserve for uncollectible accounts associated primarily with a receivable from a large chinese genomics customer and 57 a decline in travel expenses due to the covid-19 pandemic . these decreases were partially offset by increased staffing costs and a full year of expenses incurred by diversigen compared to two months in 2019. general and administrative expenses increased 14 % to $ 14.6 million in 2020 compared to $ 12.8 million in 2019 , due to the inclusion of expenses incurred by diversigen for in the full year 2020 compared to two months in 2019 . all of the above contributed to operating income of $ 38.0 million for 2020 , which included non-cash charges of $ 6.0 million for depreciation and amortization and $ 1.1 million for stock-based compensation . the molecular solutions segment operating income also included a non-cash pre-tax gain of $ 110,000 associated with the change in the fair value of acquisition-related contingent consideration . consolidated income taxes we continue to believe the full valuation allowance established in 2008 against our total u.s. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed . for the year ended december 31 , 2020 , we recorded a federal tax benefit of $ 637,000 and a state income tax benefit of $ 156,000 compared to a federal tax benefit of $ 832,000 and state income tax expense of $ 892,000 for the year ended december 31 , 2019. foreign income tax expense of $ 12.2 million and $ 4.6 million was recorded in 2020 and 2019 , respectively . the increase in income tax expense was largely a result of the increase in income before taxes generated by our canadian subsidiary .
| these increases were partially offset by lower sales of our genomics , hcv , risk assessment , domestic hiv , and microbiome products and the absence of cryosurgical sales as a result of the divestiture of our cryosurgical systems business in august 2019. other revenues for the year ended december 31 , 2020 were $ 5.3 million compared to $ 6.5 million in 2019. this decline was largely due to lower royalty income partially offset by increased revenues from funded research and development associated with the development of our adherence tests and covid-19 products . consolidated net revenues derived from products sold to customers outside of the united states were $ 40.9 million and $ 47.3 million , or 24 % and 31 % of total net revenues , during the years ended december 31 , 2020 and 2019 , respectively . because the majority of our international sales are denominated in u.s. dollars , the impact of fluctuating foreign currency exchange rates was not material to our total consolidated net revenues . 54 net revenues by segment diagnostics segment the table below shows the amount of total net revenues ( dollars in thousands ) generated by our diagnostics segment . replace_table_token_4_th infectious disease testing market sales to the infectious disease testing market decreased 7 % to $ 54.2 million in 2020 from $ 58.0 million in 2019. this decrease resulted from lower world-wide sales of our oraquick ® hcv products and lower domestic sales of our oraquick ® hiv products partially offset by higher international sales of our oraquick ® hiv products . the table below shows a breakdown of our total net oraquick ® hiv and hcv product revenues ( dollars in thousands ) during 2020 and 2019. replace_table_token_5_th domestic oraquick ® hiv sales decreased 16 % to $ 15.2 million for the year ended december 31 , 2020 from $ 18.0 million for the year ended december 31 , 2019. this decrease was primarily the result of the decline in domestic hiv testing
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of the registrant and in the capacities and on the dates indicated : signature title date ronald s. boreta president ( chief executive officer ) , treasurer ( principal financial officer ) and director april 1 , 2019 ronald s. boreta steven miller director april 1 , 2019 steven miller cara corrigan director april 1 , 2019 cara corrigan john boreta director april 1 , 2019 john boreta story_separator_special_tag the following information should be read in conjunction with the company 's financial statements and the notes thereto included in this report . critical accounting policies and estimates our financial statements are prepared in accordance with accounting principles generally accepted in the united states ( “ gaap ” ) in connection with the preparation of the financial statements , we are required to make assumptions and estimates about future events that affect the reported amounts of assets , liabilities , revenue , expenses and the related disclosures . we base our assumption and estimate on historical experience and other factors that management believes are relevant at the time our financial statements are prepared . on a periodic basis , management reviews the accounting policies , assumptions and estimates to ensure that our financial statements are presented fairly and in accordance with gaap . however , because future events and their effects can not be determined with certainty , actual results could differ from the estimates and assumptions , and such differences could be material . 6 our significant accounting policies are discussed in note 2 , summary of significant accounting policies in the notes to the financial statements . the following accounting policies are most critical in fully understanding and evaluating our reported financial results . use of estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , and the disclosure of contingent assets and liabilities at the date of the financial statements , and the reported amount of revenues and expenses during the reporting period . significant estimates and assumptions made by management include , but are not limited to , the determination of the provision for income taxes and the fair value of stock-based compensation . the company bases the estimates on historical experience and on various other assumptions that are believed to be reasonable . actual results could differ from those estimates . fair value of financial instruments fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability ( an exit price ) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date . an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value . there are three levels of inputs that may be used to measure fair value : level 1 - quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities . level 2 - quoted prices for similar assets and liabilities in active markets ; quoted prices for identical or similar assets and liabilities in markets that are not active ; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets . level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities . level 3 assets and liabilities include financial instruments whose value is determined using pricing models , discounted cash flow methodologies , or similar techniques , as well as instruments for which the determination of fair value requires significant management judgment or estimation . inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions , including assumptions about risk . an investment 's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement . however , the determination of what constitutes “ observable ” requires significant judgment by the company . management considers observable data to be market data which is readily available , regularly distributed or updated , reliable and verifiable , not proprietary , provided by multiple , independent sources that are actively involved in the relevant market . the categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the company 's perceived risk of that investment . 7 at december 31 , 2018 , and 2017 , the carrying amount of prepaid , accounts payable and accrued liability , accounts payable and accrued liability–related parties and due to related parties approximate fair value because of the short maturity of these instruments . revenue the company has no revenue . earnings per share basic earnings per share are computed by dividing income from continuing operations . earnings per common share – basic earnings per share excludes any dilutive effects of options , warrants and convertible securities . basic earnings per share is computed using the weighted-average number of outstanding common shares during the applicable period . diluted earnings per share is computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period . common stock equivalent shares are excluded from the computation if their effect is antidilutive . recent accounting pronouncements the company believes there was no new accounting guidance adopted but not yet effective that either has not already been disclosed in prior reporting periods or is relevant to the readers of the company 's financial statements . story_separator_special_tag story_separator_special_tag of the registrant and in the capacities and on the dates indicated : signature title date ronald s. boreta president ( chief executive officer ) , treasurer ( principal financial officer ) and director april 1 , 2019 ronald s. boreta steven miller director april 1 , 2019 steven miller cara corrigan director april 1 , 2019 cara corrigan john boreta director april 1 , 2019 john boreta story_separator_special_tag the following information should be read in conjunction with the company 's financial statements and the notes thereto included in this report . critical accounting policies and estimates our financial statements are prepared in accordance with accounting principles generally accepted in the united states ( “ gaap ” ) in connection with the preparation of the financial statements , we are required to make assumptions and estimates about future events that affect the reported amounts of assets , liabilities , revenue , expenses and the related disclosures . we base our assumption and estimate on historical experience and other factors that management believes are relevant at the time our financial statements are prepared . on a periodic basis , management reviews the accounting policies , assumptions and estimates to ensure that our financial statements are presented fairly and in accordance with gaap . however , because future events and their effects can not be determined with certainty , actual results could differ from the estimates and assumptions , and such differences could be material . 6 our significant accounting policies are discussed in note 2 , summary of significant accounting policies in the notes to the financial statements . the following accounting policies are most critical in fully understanding and evaluating our reported financial results . use of estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , and the disclosure of contingent assets and liabilities at the date of the financial statements , and the reported amount of revenues and expenses during the reporting period . significant estimates and assumptions made by management include , but are not limited to , the determination of the provision for income taxes and the fair value of stock-based compensation . the company bases the estimates on historical experience and on various other assumptions that are believed to be reasonable . actual results could differ from those estimates . fair value of financial instruments fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability ( an exit price ) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date . an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value . there are three levels of inputs that may be used to measure fair value : level 1 - quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities . level 2 - quoted prices for similar assets and liabilities in active markets ; quoted prices for identical or similar assets and liabilities in markets that are not active ; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets . level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities . level 3 assets and liabilities include financial instruments whose value is determined using pricing models , discounted cash flow methodologies , or similar techniques , as well as instruments for which the determination of fair value requires significant management judgment or estimation . inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions , including assumptions about risk . an investment 's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement . however , the determination of what constitutes “ observable ” requires significant judgment by the company . management considers observable data to be market data which is readily available , regularly distributed or updated , reliable and verifiable , not proprietary , provided by multiple , independent sources that are actively involved in the relevant market . the categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the company 's perceived risk of that investment . 7 at december 31 , 2018 , and 2017 , the carrying amount of prepaid , accounts payable and accrued liability , accounts payable and accrued liability–related parties and due to related parties approximate fair value because of the short maturity of these instruments . revenue the company has no revenue . earnings per share basic earnings per share are computed by dividing income from continuing operations . earnings per common share – basic earnings per share excludes any dilutive effects of options , warrants and convertible securities . basic earnings per share is computed using the weighted-average number of outstanding common shares during the applicable period . diluted earnings per share is computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period . common stock equivalent shares are excluded from the computation if their effect is antidilutive . recent accounting pronouncements the company believes there was no new accounting guidance adopted but not yet effective that either has not already been disclosed in prior reporting periods or is relevant to the readers of the company 's financial statements . story_separator_special_tag
| we may acquire assets and establish wholly-owned subsidiaries in various businesses or acquire existing businesses as subsidiaries . the company has not entered into any definitive or binding agreements and there are no assurances that such transactions will occur . such a combination would normally take the form of a merger , stock-for-stock exchange or stock-for-assets exchange . the company may determine to structure any business combination to be within the definition of a tax-free reorganization under section 351 or section 368 of the internal revenue code of 1986 , as amended . it is anticipated that any securities issued in any such business combination would be issued in reliance upon an exemption from registration under applicable federal and state securities laws . in some circumstances , however , as a negotiated element of its transaction , the company may agree to register all or a part of such securities immediately after the transaction is consummated or at specified times thereafter . if such registration occurs , it will be undertaken by the surviving entity after the company has entered into an agreement for a business combination or has consummated a business combination . the issuance of additional securities and their potential sale into any trading market in the company 's securities may depress the market value of the company 's securities in the future . results of operations – year ended december 31 , 2018 versus year ending december 31 , 2017. general and administrative ( “ g & a ” ) g & a expenses consist principally of administrative payroll , professional fees , and other corporate costs . these expenses decreased by $ 5,216 to $ 80,774 in 2018 from $ 85,990 in 2017 the decrease is attributed to a decline in legal fees from 2017 to 2018. impairment on property and equipment in 2018 and 2017 there was no impairment on property and equipment . depreciation and amortization depreciation and amortization decreased by $ 196 in 2018 to $ 55 from $ 251 in 2017. the decrease in depreciation is
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in june 2020 , we announced the rebranding of our firm as stonex group inc. , following approval by an overwhelming majority of our shareholders during a shareholder meeting held the same day . the name change was effective july 6 , 2020 , and additionally our common stock is now traded under the symbol snex . the stonex group inc. name and its trade name `` stonex '' carry forward the foundation established by saul stone in 1924 to today 's modern financial services firm . today , we provide an institutional-grade financial services ecosystem connecting our 31 table of content s clients to 36 derivatives exchanges , 175 foreign exchange markets , nearly every global securities marketplace , and a number of bi-lateral liquidity venues via our network of highly integrated digital platforms and experienced professionals . our platform delivers support throughout the entire lifecycle of a transaction , from consulting and boots-on-the-ground intelligence , to efficient execution , to post-trade clearing , custody and settlement . covid impact beginning in the second quarter of fiscal 2020 and continuing through the end of fiscal 2020 , worldwide social and economic activity became severely impacted by the spread and threat of coronavirus ( “ covid-19 ” ) . in march 2020 , covid-19 was recognized as a global pandemic and has spread to many regions of the world , including all countries in which we have operations . the response by governments and societies to the covid-19 pandemic , which include temporary closures of businesses , social distancing , travel restrictions , “ shelter in place ” and other governmental regulations , has significantly impacted market volatility and general economic conditions . we are closely tracking the evolving impact of covid-19 and are focused on helping our customers and employees through these difficult times . current results of operations the covid-19 pandemic has resulted in significant market volatility and unprecedented market conditions . our fourth quarter results continue to reflect revenue growth in equity and debt capital markets over the prior year primarily related to increased customer flow to our equity market making desk and a widening of spreads in fixed income products , albeit to a lesser extent than the third quarter of fiscal 2020 , as a result of periods of higher volatility in the global markets due to economic concerns related to the covid-19 pandemic . we have also seen a a significant increase in customer demand for precious metals in light of the covid-19 global pandemic and the resulting effect on the global economy . this revenue growth has been partially offset by the effect of the actions of the federal open market committee ( “ fomc ” ) to immediately reduce short term interest rates by 100 basis points in march 2020 in response to the economic effect of the pandemic and the resulting effect on our interest and fee income earned on client balances as well as increases in bad debt expense , reflective of the effect of the global pandemic on our client base . impact on current balance sheet and liquidity we currently have a strong balance sheet and liquidity profile . in addition to our cash and cash equivalents as of september 30 , 2020 , we had $ 173.5 million of committed funds available under our credit facility for general working capital requirements . we believe we have sufficient liquidity and have preserved financial flexibility in light of current uncertainty in the global markets resulting from the covid-19 pandemic . impact on clients our top priority is to service and care for our current clients . during this period of highly volatile markets , we have worked to prudently manage or reduce market risk exposures . employees we have taken actions to minimize risk to our employees , including restricting travel and providing secure and efficient remote work options for our team members . this leveraged our existing operational contingency plans at every level of the organization which ensured business process and control continuity . these actions have helped prevent major disruption to our clients and operations . business continuity plans we deployed business continuity plans to ensure operational flexibility through any environment , including the ability to work remotely . we continue to serve our customers while maintaining social distancing and other safety protocols to keep our employees and customers safe . the full extent to which the covid-19 pandemic will impact our business and operating results will depend on future developments that are highly uncertain and can not be accurately predicted , including new information that may emerge concerning covid-19 and the mitigation efforts by government entities , as well as our own immediate and continuing covid-19 operational response . we have and will continue to take active and decisive steps in this time of uncertainty and remain committed to the safety of our employees , while also continuing to serve our customers . closing of $ 350 million of senior secured notes due 2025 and closing of gain acquisition on june 11 , 2020 , we closed on the offering of $ 350 million in aggregate principal amount of 8.625 % senior secured notes due 2025 ( the “ notes ” ) at the offering price of 98.5 % of the aggregate principal amount thereof . we used the net proceeds from the sale of the notes to fund the cash consideration for the acquisition of gain , to pay certain related transaction-related fees and expenses , and together with cash on hand , to fund the september 2020 repayment of $ 91.5 million of gain 's 5.00 % convertible senior notes due 2022 . 32 table of content s fiscal 2020 highlights realized records in operating revenues of $ 1,308.3 million , net operating revenues of $ 868.0 million , and net income of $ 169.6 million . achieved a return on average stockholders ' equity of 24.9 % , exceeding our internal target of 15 % . rebranded the company to stonex group inc. and changed the nasdaq ticker symbol to snex . story_separator_special_tag closed on the issuance of $ 350 million senior secured notes due 2025 to fund the purchase of gain capital holding , inc. completed the acquisition of gain capital holdings , inc. , a global provider of trading services and solutions in spot foreign exchange , precious metals and cfds in an all-cash transaction . completed the acquisition of the futures and options brokerage and clearing business of uob bullion and futures limited . completed the acquisitions of the brokerage business of tellimer group , commodity risk manager ifcm commodities gmbh , and online payment and foreign exchange service provider giroxx gmbh . executive summary fiscal 2020 was a period marked with the global social and economic effects of the covid-19 pandemic as well as well as two significant transactions for the company , the acquisition of gain capital holding , inc. and the related $ 350 million senior secured note offering . beginning in the second quarter of fiscal 2020 , we saw the effect of the covid-19 pandemic on the global economy with heightened volatility and customer demand driving improved performance in our equity , fixed income and precious metals businesses which was partially offset by the effect of the actions of the federal open market committee ( “ fomc ” ) to immediately reduce short term interest rates by 100 basis points in march 2020 in response to the economic effect of the pandemic as well as an increase in bad debt expense . while this reduction of interest rates combined with fomc actions in the first and second quarters of fiscal 2020 will result in a significant decline in interest income for the company in the near future , we have been successful in continuing to grow our client balances , as average client equity increased 33 % to $ 2.8 billion and average money-market/fdic sweep balances increased 43 % to $ 1.1 billion in fiscal 2020 as compared to the prior year . we continued to diversify our business offering and client base with the acquisition of gain in august of 2020. this acquisition significantly expands our retail distribution channel , adding over 130,000 new retail clients , that we had previously established with the acquisition of sterne agee 's independent wealth management business as well as the acquisitions of coininvest and european precious metals . this acquisition broadens our product offering and adds a global digital platform which we aim to expand across our asset classes . as part of this acquisition , we issued $ 350.0 million of senior secured notes which was our first issuance into the institutional debt markets and we believe adds diversification to our capital structure . in addition , following a shareholder vote , we completed a rebranding of the company , changing our name to stonex group inc. , and our ticker symbol to snex . we believe the stonex brand signals an exciting new phase for our company , keeping our roots in the stone name which dates back to 1924 while continuing to pursue our goal of becoming recognized as a best in class financial services franchise . our net income increased $ 84.5 million to a record $ 169.6 million in fiscal 2020 compared to $ 85.1 million in fiscal 2019. diluted earnings per share were $ 8.61 for fiscal 2020 compared to $ 4.39 in fiscal 2019. the increases in net income and diluted earnings per shares were significantly impacted by a gain on the acquisition of gain capital holdings , inc. , discussed further below . overall segment income increased $ 89.4 million , or 29 % , versus the prior year . this growth in segment income was led by our institutional segment , which added $ 64.3 million , or 73 % versus fiscal 2019. this growth was driven by a 65 % increase in net operating revenues , most notably in securities products where we experienced heightened volatility in equity and fixed income markets related to covid-19 . this was partially offset by a $ 26.4 million decline in interest and fee income earned on average client equity and fdic sweep balances as well as a $ 8.4 million increase in bad debts , net of recoveries and impairments . segment income in our retail segment increased $ 25.3 million or 395 % versus fiscal 2019 , primarily as a result of the acquisition of gain as well as strong performance in retail precious metals , which benefited from increased customer demand related to an increase in volatility and precious metals prices during fiscal 2020. global payments segment income increased $ 2.5 million , or 4 % versus fiscal 2019 , as average daily volumes were relatively flat with the prior year , as the effect of covid-19 on global economic markets drove a decline in the number of debt-capital market related payments from our large international banking clients . finally , segment income in our commercial segment , declined $ 2.7 million , or 2 % versus fiscal 2019 , as strong growth in net operating revenues from physical transactions , most notably precious metals were offset by a $ 14.5 million decline in interest income earned on client balances in our listed and otc derivative businesses . in addition , we recorded a lower of cost or net 33 table of content s realizable adjustment for certain physical energy inventories as well as $ 7.2 million increase in bad debts , net of recoveries and impairment versus fiscal 2019. also , fiscal 2019 included recoveries on the bad debt on physical coal of $ 12.4 million . income before tax for fiscal 2020 was $ 206.7 million , an increase of $ 95.7 million , or 86 % versus fiscal 2019 and includes an $ 81.8 million bargain purchase gain on the acquisition of gain included in ‘ gain on acquisitions and other gains ' on the consolidated income statement , while fiscal 2019 includes a $ 5.4 million bargain purchase on the acquisition of gmp securities .
| operating revenues in otc derivatives increased 13 % to $ 111.2 million in fiscal 2020 , driven by a 19 % increase in otc derivative volumes driven by heightened volatility in energy and renewable fuels markets . operating revenue from securities transactions increased 39 % to $ 458.3 million in fiscal 2020 , primarily as a result of a 20 % increase in securities average daily volume ( “ adv ” ) as well as a 23 % increase in rpm , each of which were driven by heightened volatility in the global equity and fixed income markets due to economic concerns related to the covid-19 pandemic . 35 table of content s operating revenues from fx/cfd contracts increased 207 % to $ 66.9 million in fiscal 2020 , as a result of $ 42.9 million increase in retail fx/cfd contracts operating revenues driven by the acquisition of gain in the fourth quarter fiscal 2020. operating revenues from global payments increased by 3 % to $ 114.6 million in fiscal 2020 , as a result of a 3 % increase in rpm as the adv was relatively flat with the prior year at $ 45 as the result global economic slowdown related to the covid-19 pandemic . operating revenues from physical contracts increased 65 % to $ 122.4 million in fiscal 2020 , primarily due to a significant increase in customer demand for precious metals as well as a widening of spreads due to market dislocations related to the covid-19 pandemic . this was partially offset by a $ 7.6 million lower of cost or net realizable value adjustment for certain physical inventories in energy commodities . finally , interest and fee income earned on client balances , which is associated with our listed and otc derivative businesses , as well as our correspondent clearing and independent wealth management businesses , declined 49 % as compared to the prior year as a result of a significant declines in short term interest rates related to fomc actions to reduce the federal funds rate beginning in august 2019. partially offsetting the decline in short term interest rates was an increase in average
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however , as described below , our licensing revenue is subject to uncertainties and trends relating to technology and market growth , as well as the mix of ce products sold that incorporate our technologies . our licensing business also could be affected by adverse general economic conditions , because many of the products in which our technologies are incorporated are discretionary goods . furthermore , our products business is subject to intense competition and uncertainties relating to the transition to digital cinema and purchasing decisions by our cinema customers . we expect recent declines in our 3d revenue to continue , as the market for 3d products becomes increasingly saturated . licensing licensing revenue constitutes the majority of our total revenue , representing 86 % , 83 % , and 77 % of total revenue in fiscal 2012 , 2011 , and 2010 , respectively . the entertainment industry is in transition . as consumers are presented with more options for receiving entertainment content , competition across the delivery channels has intensified . we see this reflected in the changing composition of our licensing revenue , driven by a shift away from optical disc based products . our optical disc based revenue is generated from the sale of technology solutions that enable dvd or blu-ray disc playback functionality , licensing including the windows 7 operating system , independent pc dvd software players , dvd , and blu-ray disc technologies included in consumer products . however , most of these products can also receive content over mobile or online networks and we have increased our technology penetration into these other distribution channels . non-optical disc based revenue is generated from the sale of technology solutions other than those used to enable dvd or blu-ray disc playback functionality . non-optical disc based revenue includes licensing revenue derived from products such as tvs , set-top boxes , and mobile devices , as well as from the incorporation of our post processing technologies in a range of devices . we remain focused on delivering the products , tools , and technologies needed to ensure a high quality audio experience from any device . looking forward , we expect continued growth in the proportion of our licensing revenue we derive from non-optical disc sources . this will be driven partly by the maturity of optical disc as a method for delivering content , but also by the significant opportunities presented by digital broadcast and online and mobile distribution , as well as the inclusion of our technologies in the windows 8 operating system to enable the playback of online content . we also see significant opportunities to offer encode/decode solutions in video and voice that leverage our expertise in signal processing , compression , and the capture and playback of content . our licensing revenue comes from the following markets and primarily from the inclusion of our technologies in the products indicated for each market : broadcast market : primarily televisions and set-top boxes pc market : primarily dvd software players and microsoft windows operating systems ce market : primarily dvd and blu-ray disc players and recorders , audio/video receivers , and home-theater-in-a-box systems other markets : mobile – primarily cell phones , tablets and other mobile devices gaming – primarily video game consoles licensing services – primarily administration of joint licensing programs automotive – primarily in-car dvd players the growth of the internet , and the related shift by consumers toward online entertainment content , has resulted in a global trend toward an array of online content streaming and download services . today content is captured , delivered , and played back in more ways than ever before . content creators and distributors are increasingly focused on delivering content across a multitude of media and devices with varying bandwidth and performance requirements , including pcs , connected tvs , set-top boxes , gaming consoles , connected blu-ray disc players , and a variety of mobile devices . many of these mobile devices 33 are increasingly designed to capture and distribute content through improved camera and wifi technologies , as well as to play back rich entertainment experiences . this increasingly complex array of devices , with capability for both creating and playing back content , presents a challenge for content creators and device manufacturers seeking consistent audio quality . we believe this challenge provides an opportunity similar to that of digital broadcast , whereby we can provide solutions to optimize the audio experience across the online and portable device ecosystem . in the area of content creation and delivery , our technologies are included in dvd , blu-ray disc , and certain broadcast standards , and we are working to extend our technologies to online delivery services . online content aggregators , including netflix , amazon , vudu , apple , hbo go , samsung 's acetrax , and the roxio now platform , use our technologies to encode video and audio content . leading music services such as rhapsody and omnifone use our audio encoding tools to deliver a rich music experience to their subscribers . in the second quarter of fiscal 2012 , hbo adopted dolby digital plus in its hbo go content for select connected tvs . hbo will also offer dolby digital plus in its hbo go service for content delivered to blu-ray disc players . in addition , samsung now offers dolby digital plus surround sound audio through the acetrax video on demand application . our broadcast market , driven by demand for our technologies in televisions and set-top boxes , represented approximately 34 % , 31 % , and 27 % of our licensing revenue in fiscal 2012 , 2011 , and 2010 , respectively . dolby technology was included in a higher percentage of televisions and set-top boxes in fiscal 2012 which drove increased revenue relative to fiscal 2011 . story_separator_special_tag we view the broadcast market as an area for potential continued growth , primarily in geographic markets outside of the u.s. we see opportunities in working with specific operators and standards bodies across emerging markets to adopt our multichannel formats . given , the percentage of the world 's population that lives in countries in emerging markets and the number of televisions and set-top boxes sold in such markets , we believe that these markets present significant opportunities for growth . while there is no guarantee that the counties in the emerging markets will convert to digital television , we intend to ensure that we are well positioned to benefit from such transition if it occurs . we also view broadcast services , such as terrestrial broadcast or iptv services , which operate under bandwidth constraints , as another area of opportunity for dolby digital plus . these technologies enable the delivery of high quality audio content at reduced bit rates , thereby conserving bandwidth . we may not , however , be able to extend our current success in the broadcast market to these new opportunities . our pc market represented approximately 28 % , 30 % , and 36 % of our licensing revenue in fiscal 2012 , 2011 , and 2010 , respectively . our technologies are incorporated in the majority of pcs sold today , primarily because of the inclusion of dvd and blu-ray disc playback in the majority of pcs and the inclusion of dolby technologies in the dvd and blu-ray disc standards . historically , we have licensed our technologies to a range of pc licensees , including independent software vendors ( “ isv ” ) , pc oems , and operating system providers . the release of new versions of major pc operating systems has often resulted in changes in the mix of our pc licensees . in 2007 , microsoft introduced its windows vista operating system , which included our technologies to enable dvd audio playback in two of its editions . in fiscal 2009 , microsoft released its current operating system , windows 7 , which includes our technologies within four editions . as a result , since 2007 the mix of our pc licensing revenue from operating systems has increased relative to that from oems and isvs . we currently license our audio codec technologies directly to oems such as apple , toshiba , and sony to support optical disc playback on pcs , and we license our pc entertainment experience ( “ pcee ” ) technologies to multiple pc oems through our pcee licensing program . in may 2012 , we entered into an agreement with microsoft under which dolby digital plus 5.1 channel decoding and dolby digital two-channel encoding will be in cluded in all pcs and tablets licensed to run the windows 8 operating system . under the arrangement , oems generally will be required to directly license and pay us a base royalty rate for the right to use the dolby technologies included in windows 8 installed on the pcs and tablets they produce for online and file-based content . oems will be required to pay a higher per-unit royalty for windows 8 pcs that also include optical disc playback functionality , which will be implemented by isv applications . this higher rate is consistent with rates paid historically for the inclusion of dolby disc playback software in the pc market . in the near term , we expect the majority of pcs to continue to ship with optical disc drives and to include optical disc playback functionality . we believe the microsoft windows 8 arrangement provides a simple and consistent way for oems to enable playback with our technologies of content delivered by online services and video in local files on the device . this is a different licensing arrangement than the one we have for windows 7. the release of windows 8 did not have a material financial impact in fiscal 2012 , as microsoft continued to license its windows 7 operating systems with our technologies . the ultimate financial impact of these licensing arrangements for windows 8 on our licensing revenue is uncertain and will depend on several factors , including : the extent and rate at which windows 8 is adopted in the marketplace ; the extent to which oems include optical disc playback in windows 8 devices ; the extent to which earlier versions of microsoft operating systems , including windows 7 , continue to be licensed after the release of windows 8 ; 34 our ability to establish and extend licensing relationships directly with pc oems and isvs ; the rate at which entertainment content shifts from optical disc media to online media , thus reducing the need for pcs to have optical disc drives and dvd and blu-ray disc software players ; and our ability to extend the adoption of our technologies to online and mobile platforms . in the short term , revenue from our pc market remains dependent on several factors , including underlying pc unit shipment growth and the extent to which our technologies are included in operating systems and isv media applications . we continue to face risks relating to : purchasing trends away from traditional pcs and towards portable devices without optical disc drives , such as ultrabooks and tablets , which may not include our technologies ; the prevalence of pc software that includes our technologies on an unauthorized and infringing basis , for which we receive no royalty payments ; and continued decreasing inclusion of isv media applications by pc oems in their windows 7-based pcs , as windows 7 already incorporates dvd playback software . our ce market , driven primarily by revenue attributable to sales of dvd and blu-ray disc players and recorders , represented approximately 18 % , 21 % , and 22 % of licensing revenue in fiscal 2012 , 2011 , and 2010 , respectively .
| the decrease in revenue from our pc market was primarily driven by decreased isv media applications in pc shipments . products . the 21 % decrease in products revenue from fiscal 2011 to fiscal 2012 was primarily due to decreases in our 3d and traditional cinema products driven by lower shipments and lower selling prices . the 27 % decrease in products revenue from fiscal 2010 to fiscal 2011 was due to decreases in 3d and traditional cinema products revenue in fiscal 2011 , coupled with our adoption of new revenue recognition accounting standards in fiscal 2010 . decreases in 3d products revenue in fiscal 2011 resulted from increased competition and promotional pricing , while decreases in traditional cinema products revenue were primarily due to lower shipments , as more exhibitors converted to digital cinema . in addition , products revenue in fiscal 2010 included recognition of $ 29.7 million of deferred revenue related to sales prior to the beginning of the year , which were accounted for under previous revenue accounting standards . in fiscal 2011 substantially all products revenue resulting from current period sales were accounted for under the new accounting standards . services . the 16 % decrease in services revenue from fiscal 2011 to fiscal 2012 was attributable primarily to a decrease in film-based production services revenue as the cinema industry transitions to digital cinema as well as decreases in virtual print fees , which were generated from certain leased digital cinema assets , as we discontinued this program in fiscal 2011 . this decrease was partially offset by an increase in maintenance and support services . the 5 % increase in services revenue from fiscal 2010 to fiscal 2011 was primarily driven by increases in revenue from support and maintenance for digital cinema equipment and from other theater services . gross margin replace_table_token_5_th licensing gross margin . we license intellectual property to our customers that may
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the level and movement of interest rates impacts the bank 's earnings as well . the federal open market committee ( “ fomc ” ) increased the federal funds target rate during the year ended december 31 , 2018 from 1.50 % to 2.50 % . from time to time the bank has considered growth through mergers or acquisition as an alternative to its strategy of organic growth . on september 5 , 2017 , the company entered into an agreement and plan of merger with twinco , a montana corporation , and twinco 's wholly-owned subsidiary , ruby valley bank , a montana chartered commercial bank to acquire 100 % of twinco 's equity voting interests . the merger agreement provided that ruby valley bank would merge with and into opportunity bank of montana and that twinco would merge with and into the company . ruby valley bank operated 2 branches in madison county , montana . the transaction provided an opportunity to expand market presence and lending activities , particularly in agricultural lending . the acquisition closed january 31 , 2018 , after receipt of approvals from regulatory authorities , approval of twinco shareholders and the satisfaction of other closing conditions . the total consideration paid was $ 18.93 million and included cash consideration of $ 9.90 million and common stock issued of $ 9.03 million . effective january 1 , 2019 , eagle completed its previously announced merger ( the “ merger ” ) with big muddy bancorp , inc. ( “ bmb ” ) , pursuant to an agreement and plan of merger , dated as of august 21 , 2018 , by and among eagle , opportunity bank of montana , bmb and bmb 's wholly-owned subsidiary , the state bank of townsend , a montana chartered commercial bank ( “ sbot ” ) . at the effective time of the merger , bmb merged with and into eagle , with eagle continuing as the surviving corporation . sbot operates four branches in townsend , dutton , denton and choteau , montana . eagle acquired approximately $ 108.00 million in assets , $ 92.00 million in deposits and $ 92.00 million in gross loans based on bmb 's september 30 , 2018 financial statements . recent accounting pronouncements in may 2014 , the fasb issued asu no . 2014-09 , revenue from contracts with customers ( topic 606 ) . this guidance is a comprehensive new revenue recognition standard that supersedes substantially all existing revenue recognition guidance . the new standard 's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services . in doing so , companies will need to use more judgment and make more estimates than under existing guidance . these may include identifying performance obligations in the contract , estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation . in july 2015 , the fasb agreed to delay the effective date of the standard by one year . therefore , the new standard was effective in the first quarter of 2018 and was adopted by the company . our revenue is comprised of net interest income on financial assets and financial liabilities , which is explicitly excluded from the scope of asu 2014-09 , and non-interest income . the largest percentage of our non-interest income is derived from the gain on sale of mortgage loans . the gains are recognized at the time of the sale of the loan , when proceeds are sent to us by the investor purchasing the loan . no change in the recognition of revenue on that portion of our noninterest income was recognized . we also evaluated the impact of this standard on our revenue from our wealth management division and it did not have a significant impact on our consolidated financial statements . in january 2016 , the fasb issued asu no . 2016-01 , financial instruments – overall : recognition and measurement of financial assets and financial liabilities ( subtopic 825-10 ) . the amendment has a number of provisions including the requirements that public business entities use the exit price notion when measuring the fair value of financial instruments for disclosure purposes , a separate presentation of financial assets and financial liabilities by measurement category and form of financial asset ( i.e . securities or loans receivables ) , and eliminating the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost . the amendment is effective for annual and interim reporting periods beginning after december 15 , 2017 and was adopted by the company in the first quarter of 2018 . 25 in february 2016 , the fasb issued asu no . 2016-02 , leases ( topic 842 ) intended to improve financial reporting regarding leasing transactions . the new standard affects all companies and organizations that lease assets . the standard will require organizations to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases if the lease terms are more than 12 months . the guidance also will require qualitative and quantitative disclosures providing additional information about the amounts recorded in the financial statements . the amendments in this update are effective for fiscal years beginning after december 15 , 2018 , including interim periods within those fiscal years . the company is evaluating the potential impact of the amendment on the company 's consolidated financial statements . we currently lease seven locations that serve as full-service branches , with the longest running lease expiring in 2028. we are using a third party vendor to assist with the implementation of this standard . in september 2016 , the fasb issued asu no . story_separator_special_tag 2016-13 , financial instruments – credit losses ( topic 326 ) intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations . the standard requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience , current conditions and reasonable and supportable forecasts . financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates . the standard also requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses , as well as the credit quality and underwriting standards of an organization 's portfolio . these disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements . additionally , the standard amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration . the amendments in this update are effective for fiscal years beginning after december 15 , 2019 , including interim periods within those fiscal years . all entities may adopt the amendments in this update earlier as of the fiscal years beginning after december 15 , 2018 , including interim periods within those fiscal years . an entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective ( that is , a modified-retrospective approach ) . the company believes the amendments in this update will have an impact on the company 's consolidated financial statements and is working to evaluate the significance of that impact . in that regard , we have established a working group under the direction of our chief financial officer and chief credit officer . the group is composed of individuals from the finance and credit administration areas of the company . we are currently developing an implementation plan , including assessment of processes , segmentation of the loan portfolio and identifying and adding data fields necessary for analysis . the adoption of this standard is likely to result in an increase in the allowance for loan and lease losses as a result of changing from an “ incurred loss ” model to an “ expected loss ” model . while we currently can not reasonably estimate the impact of adopting this standard , we expect the impact will be influenced by the composition , characteristics and quality of our loan and securities portfolios , as well as the general economic conditions and forecasts as of the adoption date . in january 2017 , the fasb issued asu no . 2017-04 , intangibles – goodwill and other ( topic 350 ) to amend and simplify current goodwill impairment testing to eliminate step 2 from the current provisions . under the new guidance , an entity should perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit 's fair value . an entity still has the option to perform the qualitative assessment for a reporting unit to determine if a quantitative impairment test is necessary . the guidance will be effective for the company on january 1 , 2020 and is not expected to have a significant impact on the company 's consolidated financial statements . we have improved our internal reporting systems as it relates to profitability by divisions and markets within the company . we expect these systems to help in our evaluation of potential impairment . in march 2017 , the fasb issued asu no . 2017-08 , receivables–nonrefundable fees and other costs ( subtopic 310-20 ) to shorten the amortization period for certain purchased callable debt securities held at a premium to the earliest call date . currently , entities generally amortize the premium as a yield adjustment over the contractual life of the security . the guidance does not change the accounting for callable debt securities held at a discount . for public business entities , the guidance is effective for fiscal years beginning after december 15 , 2018 , and interim periods within those fiscal years . early adoption is permitted , including in an interim period . we have currently been following this guidance based on our internal investment policy guidelines . there is little impact on our consolidated financial statements , as we typically do not invest in these types of securities . 26 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 . 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 .
| interest and fees on loans increased to $ 30.40 million for the year ended december 31 , 2018 from $ 24.78 million for the same period ended december 31 , 2017. this increase of $ 5.62 million , or 22.7 % , was due to an increase in the average balance of loans , as well as an increase in the average yield of loans for the year ended december 31 , 2018. average balances for loans receivable , net , including loans held for sale , for the year ended december 31 , 2018 were $ 590.06 million , compared to $ 507.98 million for the prior year period . this represents an increase of $ 82.08 million , or 16.2 % and was due in part to the twinco acquisition . the average interest rate earned on loans receivable increased by 27 basis points , from 4.88 % to 5.15 % . interest and dividends on investment securities available-for-sale increased by $ 1.17 million or 40.3 % for the year ended december 31 , 2018 compared to the same period last year . 43 average balances on investments increased to $ 151.02 million for the year ended december 31 , 2018 , from $ 126.56 million for the year ended december 31 , 2017. this increase is largely due to the twinco acquisition . the average interest rate earned on investments increased to 2.69 % for the year ended december 31 , 2018 from 2.29 % for the year ended december 31 , 2017. interest expense total interest expense increased for the year ended december 31 , 2018 to $ 5.10 million from $ 4.09 million for the year ended december 31 , 2017 , an increase of $ 1.01 million , or 24.7 % . the increase was due to an increase in interest expense on deposits , as well as interest expense on borrowings . the average balance for total deposits was $ 617.18 million for the year ended december 31 , 2018 compared to $ 518.64 million for the same period in the prior year . this increase was due in part to the twinco acquisition . the overall average rate on total deposits was 0.33 % for the year ended december 31 , 2018 compared to 0.30 % for the same period in the prior year . the average borrowing balance increased from $ 107.29 million for the year ended
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as part of this initiative , in first quarter of 2014 we announced our plan to close our research model production facility in michigan by the end of the 2014 , which will include associated severance and accelerated depreciation charges of approximately $ 4 million in 2014. other projects in support of our global efficiency initiative are expected in 2014 , but as of the date of this filing no specific decisions have been made . in the fourth quarter we announced organizational changes , including a new role for dr. jörg geller who is tasked with leading a new global initiative to enhance efficiency and drive increased productivity across all of our businesses . during 2013 , we made two growth acquisitions : acquired a 75 % interest in vital river in china and purchased the business of an emd products and services provider in singapore . we continue to repurchase our stock with the intent to drive immediate shareholder value and earnings per share accretion . during 2013 we repurchased 3.5 million shares on the open market based on our share buy-back program . our weighted average shares outstanding 48.5 million for the year ending december 28 , 2013 were consistent with the prior year as a result of significant stock option exercises during 2013. during 2013 , our board of directors approved a total of $ 250 million in increases in our share buy-back program . total net sales in 2013 were $ 1,165.5 million , an increase of 3.2 % from $ 1,129.5 million in 2012 . foreign currency translation had a negative impact on sales of 0.8 % . we report two segments : research models and services ( rms ) and preclinical services ( pcs ) . sales increased in both our rms and pcs reportable segments . our rms segment , which represented 60.7 % of net sales in 2013 , includes three categories : research models , research model services , and endotoxin and microbial detection ( emd ) . research models includes production of small and large research models as well as avian products . research model services include four business units : genetically engineered models and services ( gems ) , which performs contract breeding and associated services , research animal diagnostics ( rads ) , which provides health monitoring and diagnostics services , discovery research services ( drs ) , which provides non-regulated efficacy testing , and insourcing solutions ( is ) , which provides management services for our client 's in vivo operations . our pcs segment , which represented 39.3 % of net sales in 2013 , includes services required to take a drug through the development process including drs , safety assessment and biologics testing services . net sales for the rms segment increased 1.7 % in 2013 compared to 2012 , primarily driven by the acquisition of 75 % of vital river and the resulting expansion of our research model sales in china , and by continued growth of our emd business . rms sales growth was partially offset by foreign currency translation , which had a negative impact on sales of 1.2 % , and sales declines in our legacy research model production operations in the u.s. , europe and japan , which offset net sales growth . net sales for the pcs segment increased 5.5 % year -over-year , driven by higher demand for our preclinical services , partially offset by unfavorable foreign currency , which decreased sales growth by 0.4 % . our operating income was $ 151.4 million for 2013 , compared to operating income of $ 165.8 million for 2012 . the reduction in operating income was due to several factors , including accelerated depreciation expense of $ 15.4 million related to two facilities in the u.s. that were consolidated or vacated in 2013. operating income for the rms segment was $ 181.3 million in 2013 , compared to $ 202.4 million in 2012. operating income in the current year was negatively affected by accelerated depreciation of $ 13.5 million related to consolidation of a research model production facility in california and lower volume of research model sales in the u.s. , europe and japan . operating income for the pcs segment increased to $ 44.1 million in 2013 compared to $ 34.6 million in 2012. the increase was driven by higher sales volume , a favorable mix including longer term contracts , and the benefit of efficiency initiates . income from continuing operations , net of tax , was $ 105.4 million for 2013 compared to $ 102.1 million for 2012 . for 2013 , diluted earnings per share attributable to common shareholders were $ 2.12 compared to $ 2.01 in 2012 . net income attributable 30 to common shareholders increased to $ 102.8 million in 2013 , compared to $ 97.3 million in 2012 . cash flows provided by operating activities in 2013 were $ 209.0 million compared to $ 208.0 million in 2012. critical accounting policies and estimates preparation of these financial statements requires management to use judgment when making assumptions that are involved in preparing estimates that affect the reported amounts of assets , liabilities , revenues and expenses during the reporting period . on an ongoing basis , management evaluates its estimates and assumptions . some of those estimates can be complex and require management to make estimates about the future and actual results could differ from those estimates . management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . for any given estimate or assumption made by management , there may also be other estimates or assumptions that are reasonable . we consider the following accounting estimates important in understanding our operating results and financial condition . story_separator_special_tag for additional accounting policies see notes to consolidated financial statements-note 1. description of business and summary of significant accounting policies . valuation and impairment of goodwill , indefinite-lived intangible assets and definite-lived intangible assets a significant portion of the purchase price in our business acquisitions is assigned to intangible assets and goodwill . assigning value to intangible assets requires that we use significant judgment in determining ( i ) the fair value and ( ii ) whether such intangibles are amortizable or non-amortizable and , if the former , the period and the method by which the intangible assets will be amortized . we utilize commonly accepted valuation techniques , such as the income approach and the cost approach , as appropriate , in establishing the fair value of long-lived assets . typically , key assumptions include projected revenue and expense levels used in establishing the fair value of business acquisitions as well as discount rates based on an analysis of our weighted average cost of capital , adjusted for specific risks associated with the assets . changes in the initial assumptions could lead to changes in amortization expense recorded in our future financial statements . we test for goodwill impairment annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable . our annual goodwill impairment assessment has historically been completed in the fourth quarter . we have elected not to apply the guidance available in asu 2011-08 , testing goodwill for impairment , to assess purely qualitative factors to determine whether it is more likely than not that the fair value of our reporting units is less than their carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test . we performed the first step of the two-step goodwill impairment test for our reporting units as of the first day of fiscal november , 2013. the first step , identifying a potential impairment , compares the fair value of the reporting unit with its carrying amount . if the carrying amount exceeds fair value , the second step would need to be performed ; otherwise , no further step is required . the second step , measuring the impairment loss , compares the implied fair value of the reporting unit 's goodwill with its carrying amount . any excess of the goodwill carrying amount over the implied fair value is recognized as an impairment loss , and the carrying value of goodwill is written down to fair value . our 2013 impairment test indicated that goodwill was not impaired for any reporting unit . please refer to note 3 to the consolidated financial statement for further information on goodwill . as noted above , the goodwill impairment analysis is a two-step process . the first step is used to identify potential impairment and involves comparing each reporting unit 's estimated fair value to its carrying value , including goodwill . fair value is determined by using a weighted combination of a market-based approach and an income approach , as this combination is deemed to be the most indicative of our fair value in an orderly transaction between market participants . under the market-based approach , we utilize information about our company as well as publicly available industry information to determine earnings multiples and sales multiples that are used to value our reporting units . under the income approach , we determine fair value based on the estimated future cash flows of each reporting unit , discounted by an estimated weighted-average cost of capital which reflects the overall level of inherent risk of the reporting unit and the rate of return an outside investor would expect to earn . determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions , including revenue growth rates , profit margin percentages , discount rates , perpetuity growth rates , future capital expenditures and future market conditions , among others . our projections are based on our internal plans . key assumptions , strategies , opportunities and risks from this strategic review along with a market evaluation are the basis for our assessment . if the estimated fair value of a reporting unit exceeds its carrying value , goodwill is not considered to be impaired . however , if the carrying value exceeds estimated fair value , there is an indication of potential impairment and the second step is performed to measure the amount of impairment . the second step of the goodwill impairment process , if required , measures the goodwill impairment by calculating an implied fair value of goodwill for each reporting unit for which step one indicated impairment . the implied fair value of goodwill is 31 determined similar to the manner in which goodwill is calculated in a business combination : by measuring the excess of the estimated fair value of the reporting unit over the estimated fair values of the individual assets , liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination . if the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill , an impairment charge is recorded for the excess . in determining the fair value of assets , we utilize appraisals for the fair value of property and equipment and valuations of certain intangible assets , including client relationships . valuation and impairment of long-lived assets we assess the carrying value of property , plant and equipment and definite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable . factors we consider important which could trigger an impairment review include but are not limited to the following : significant underperformance relative to expected historical or projected future operating results ; significant negative industry or economic trends ; or significant changes or developments in strategy or operations that negatively affect the utilization of our long-lived assets .
| these increases were partially offset by decreased sales of research models in our legacy production operations in the u.s. , europe and japan , due primarily to infrastructure reductions by our global biopharmaceutical clients . in addition , unfavorable foreign currency translation decreased sales by 1.2 % . preclinical services . for the year ending december 28 , 2013 , net sales for our pcs segment were $ 458.4 million , an increase of $ 24.0 million , or 5.5 % , from $ 434.4 million for the year ending december 29 , 2012 . foreign currency translation had an unfavorable impact of 0.4 % on sales growth . net sales increased due to higher demand for our services from both global pharmaceutical and mid-tier biotechnology companies , as well as a more favorable mix of longer-term services . cost of products sold and services provided . cost of products sold and services provided during 2013 was $ 766.4 million , an increase of $ 32.5 million , or 4.4 % , from $ 733.9 million in 2012 . cost of products sold and services provided for 2013 was 65.8 % of net sales as compared to 65.0 % for the year ending december 29 , 2012 . research models and services . cost of products sold and services provided for rms during 2013 was $ 421.9 million , an increase of $ 20.1 million , or 5.0 % , compared to $ 401.8 million in 2012 . cost of products sold and services provided exclude asset impairment charges of $ 0.4 million and $ 3.5 million in 2013 and 2012 , respectively , which are discussed below . the increase in cost of products sold and services provided was due to the acquisition of vital river , which contributed $ 10.5 million to the increase , and the acceleration of depreciation at our california facility , which contributed $ 13.5 million to the increase ; partially offset by declines in cost of products sold in our legacy research model operations due to lower volume . cost of products sold and services provided for the year ending 2013
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while franchised sales are not recorded as revenues by the company , management believes the information is important in understanding the company 's financial performance because these sales are the basis on which the company calculates and records franchised revenues and are indicative of the financial health of the franchisee base . ▪ return on incremental invested capital ( `` roiic '' ) is a measure reviewed by management over one-year and three-year time periods to evaluate the overall profitability of the business units , the effectiveness of capital deployed and the future allocation of capital . the return is calculated by dividing the change in operating income plus depreciation and amortization ( numerator ) by the cash used for investing activities ( denominator ) , primarily capital expenditures . the calculation uses a constant average foreign exchange rate over the periods included in the calculation . 12 mcdonald 's corporation 2014 annual report strategic direction and financial performance the strength of the alignment among the company , its franchisees and suppliers ( collectively referred to as the `` system '' ) has been key to mcdonald 's long-term success . by leveraging our system , we are able to identify , implement and scale ideas that meet customers ' changing needs and preferences . in addition , our business model enables mcdonald 's to consistently deliver locally-relevant restaurant experiences to customers and be an integral part of the communities we serve . mcdonald 's customer-focused plan to win ( `` plan '' ) provides a common framework that aligns our global business and allows for local adaptation through an emphasis on the plan 's five pillars - people , products , place , price and promotion . in 2014 , we evolved our plan framework , refocusing our planning and actions on what matters most to our customers . the following four strategic growth priorities support our global plan : ▪ optimizing our menu so that we offer our customers more of their favorite food and drinks ; ▪ modernizing the customer experience so interactions with the brand are more memorable ; ▪ broadening accessibility to deliver unparalleled convenience ; and ▪ taking meaningful actions to become an even more trusted brand . we believe that our strategic growth priorities align with our customers ' evolving needs and - combined with our competitive advantages of convenience , scale , geographic diversification and system alignment - will enhance our customers ' experience and build shareholder value over the long-term . to measure our performance as we strive to build the business , we have the following long-term , average annual constant currency financial targets : ▪ systemwide sales growth of 3 % to 5 % ; ▪ operating income growth of 6 % to 7 % ; and ▪ roiic in the high teens . in 2014 , our results were disappointing as unforeseen events and weak operating performance pressured results in each of our geographic segments . systemwide sales decreased 2 % ( increased 1 % in constant currencies ) , operating income decreased 9 % ( 8 % in constant currencies ) , one-year roiic was negative 21.9 % and three-year roiic was 1.4 % ( see reconciliation on page 27 ) . each metric fell below our long-term financial targets , reflecting the impact of soft comparable sales performance and cost pressures , negatively impacting all segments . given our heavily franchised business model , growing comparable sales is vital to increasing the company 's operating income and returns . we experienced challenges growing sales and guest counts in 2014 , as comparable sales decreased 1.0 % , reflecting negative guest traffic in all segments . while some of the challenges were anticipated , others were not , such as the impact of a supplier issue in china , japan and certain other markets ( see explanation under apmea ) and the volatile operating environment in russia and the ukraine . results were also impacted by under-performance in key opportunity markets that are significant contributors to consolidated results , most notably the u.s. we anticipate many of these challenges will persist in 2015 , particularly in the first half of the year ; however , we continue to believe that our long-term financial targets remain achievable over the long term , keeping us focused on making the best decisions for the benefit of our shareholders and our system . we are intensely focused on increasing customer relevance , driving customer visits , and positioning the company for future growth . in 2014 , we took a number of important steps to lay the foundation for our turnaround . the following is a summary of our sales performance and critical actions taken to advance our longer-term strategies by major segment . u.s. in the u.s. , comparable sales declined 2.1 % and comparable guest counts declined 4.1 % . guest visits were down as customer-focused initiatives did not resonate strongly amid the increasingly competitive marketplace and sluggish industry growth . to enhance customer relevance and loyalty , the u.s. is focused on addressing menu , service and value opportunities . in 2014 , we brought in new leadership to provide innovative thinking and a fresh strategic perspective , and we announced actions to create a flatter , more nimble u.s. organization that places greater decision making and accountability closer to the customer . menu strategies included a focus on continued growth at breakfast , which remains our strongest daypart , and an ongoing emphasis on core food and beverages . in addition , we executed initiatives to build brand trust through strengthened marketing efforts , including the launch of a national food quality campaign . the u.s. focused on improving the service experience through an increased emphasis on operations excellence and investments made in establishing our digital platform , including being the first in our industry to accept apple pay in the drive-thru . we continued to invest in new and existing restaurants by opening 222 new restaurants and reimaging approximately 260 locations , of which the majority added or enhanced drive-thru capacity . story_separator_special_tag currently , about half of our restaurant interiors and exteriors reflect our contemporary restaurant design . we evolved our value platform to reposition entry-level affordability for future growth by providing a means to transition products to a higher price point when appropriate . europe in europe , comparable sales declined 0.6 % , while comparable guest counts declined 2.2 % . comparable sales reflected negative performance in germany and russia , mostly offset by positive performance in the uk . low consumer confidence and other external issues related to the operating environment in russia and ukraine negatively impacted business performance . in 2014 , we pursued customer-focused initiatives to deliver menu variety , a contemporary restaurant experience and value enhancements . we further optimized our menu through premium menu additions and expanded our mccafé platform with over 4,000 restaurants now serving blended ice beverages . we remain committed to reinvesting in existing restaurants through reimaging and technology initiatives to provide a relevant , contemporary customer experience . europe completed about 260 restaurant reimages during the year . by the end of 2014 , nearly 100 % of restaurant interiors and 85 % of exteriors were modernized . we continued to leverage technology , with over 2,000 self-order kiosks and mobile ordering and payment capability available in certain markets . we increased our accessibility and convenience through daypart expansion , including breakfast and overnight , opening approximately 320 new restaurants , and optimizing our drive-thrus . as value is paramount to european customers , we continued to evolve and emphasize value offerings at every price tier . mcdonald 's corporation 2014 annual report 13 apmea in apmea , comparable sales declined 3.3 % and comparable guest counts declined 4.7 % due to negative performance in japan and china . this was slightly offset by positive results in australia , the first of our priority markets to demonstrate signs of recovery due to strengthened marketing , re-emphasized value , menu improvements and stronger franchisee alignment . in mid-july , food quality issues were discovered at a supplier to mcdonald 's and other food companies in china , negatively impacting results in china , japan and certain other markets . we moved quickly to source from alternative suppliers and initiated aggressive recovery plans to restore consumer trust and confidence . as a result of our efforts , sales trends in china are showing signs of improvement . mcdonald 's japan is not recovering as quickly and has been working to overcome significant challenges . we continued to make progress in our reimaging program , completing about 340 restaurant reimages during the year . by the end of 2014 , over 70 % of restaurant interiors and over 60 % of exteriors were modernized . we are committed to ongoing restaurant expansion , although the pace of new openings was slowed in china in response to local market dynamics . we opened 655 new restaurants , including 227 in china . global globally , we have been focused on strengthening the foundational elements of our business , namely value across the menu , marketing and operations excellence to deliver a better customer experience while actively pursuing comprehensive initiatives to capture the sizeable longer-term growth opportunities in our industry . even in periods of softer performance , mcdonald 's unique business model and structure enable us to generate significant cash flows . cash from operations benefits from our heavily franchised business model as the rent and royalty income we receive from franchisees provides a stable revenue stream that has relatively low costs and enables us to return significant cash to shareholders . in addition , the franchise business model is less capital intensive than the company-owned model . we believe locally-owned and operated restaurants are important to mcdonald 's being not just a global brand , but also a locally-relevant one . in 2014 , cash from operations totaled $ 6.7 billion . our substantial cash flow , strong credit rating and continued access to credit provided us flexibility to invest in critical growth initiatives while still returning significant amounts of cash to shareholders . capital expenditures of approximately $ 2.6 billion were invested in our business , of which more than half was devoted to new restaurant openings and the remainder was reinvested in our existing restaurants . across the system , 1,316 restaurants were opened and about 930 existing locations were reimaged . as part of our ongoing commitment to build long-term shareholder value , in may 2014 , the company announced a 3-year cash return target of $ 18 to $ 20 billion between 2014 and 2016 through a combination of dividends and share repurchases , representing a 10 % to 20 % increase over the amount of cash returned between 2011 and 2013. this target is based on several activities including the significant free cash flow generated from our operations , as well as the use of cash proceeds from our debt additions and refranchising at least 1,500 restaurants over the 2014-2016 period ( over 400 restaurants were refranchised in 2014 ) , primarily in apmea and europe . in 2014 , we returned $ 6.4 billion to shareholders consisting of $ 3.2 billion in dividends and $ 3.2 billion in share repurchases and remain on track to meet our 3-year target . story_separator_special_tag font-size:10pt ; '' > ▪ with about 75 % of mcdonald 's grocery bill comprised of 10 different commodities , a basket of goods approach is the most comprehensive way to look at the company 's commodity costs . for the full year 2015 , the total basket of goods cost is expected to increase 1.5-2.5 % in the u.s. and europe .
| ▪ the company returned $ 6.4 billion to shareholders through dividends and share repurchases , in connection with our $ 18- $ 20 billion , 3-year cash return target for the years 2014-2016. outlook for 2015 mcdonald 's begins 2015 taking decisive action to drive foundational improvements in our major markets and executing our recovery efforts in markets affected by unforeseen events . while we expect pressures on operating performance to persist as we continue to face significant headwinds , particularly in the first half of the year , sizable growth opportunities exist in the $ 1.2 trillion global ieo segment . we are committed to pursuing these opportunities by relentlessly focusing on the customer and adapting to the changing marketplace through the following initiatives . we are redefining menu choice and personalization , exploring solutions that will provide our guests a customizable restaurant experience . we are also focused on enhancing the appeal of our core products and addressing food perceptions by improving and highlighting the quality of our ingredients and engaging with our customers in more transparent dialogue . convenience continues to be a cornerstone of mcdonald 's business , and we will evolve our value platform , strategically evaluating pricing relationships across the entry level , core and premium tiers . service elements focus on hospitality and 14 mcdonald 's corporation 2014 annual report additional ways to serve customers , such as self-order kiosks and table service , and in-store pick up or in-car delivery in certain markets . our digital strategy is built around improving the customer experience and customer engagement . collectively , these customer-focused initiatives represent the restaurant experience of the future and build upon investments we have already made in reimaging and technology . the company is investing in these significant initiatives in a disciplined manner , by partly redirecting g & a dollars from the u.s. business and corporate toward these long-term growth initiatives . we will continue to invest in geographically diversified new restaurant development and reimaging of our existing restaurants ' interiors and exteriors . our 2015 capital expenditure plan of approximately $ 2.0 billion - our lowest capital budget in more
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some leases have contractual terms that have features reflective of both 40 long-term and service leases and we classify such leases as either long-term or service leases , depending upon which features we believe are predominant . the following table provides a summary of our lease portfolio by lease type , based on ceu on-hire as of december 31 , 2016 and the combined lease portfolios of tcil and tal as of december 31 , 2015 and 2014 : replace_table_token_8_th as of december 31 , 2016 , 2015 , and 2014 , our long-term and finance leases combined had an average remaining contractual term of approximately 39 months , 39 months , and 40 months , respectively , assuming no leases are renewed . operating performance the following discussion of market conditions and our operating performance refers to a variety of the company 's critical business metrics and trends including fleet size , utilization , average per diem rates and used container sale prices and volumes . in this section , for the period prior to the merger , the relevant performance measures for tcil and tal have been combined by mathematical addition for comparative purposes . these combined operating metrics do not necessarily reflect what the result would have been if the transaction occurred as of the beginning of the year . triton 's market environment was negative for much of 2015 and 2016 due to a combination of adverse factors including less than expected trade growth , excess container supply , low steel and new container prices , low market lease rates and low used container selling prices . during this time , most of triton 's key operating measures deteriorated . market conditions stabilized in the middle of 2016 , and then improved significantly toward the end of the year . triton 's key operating metrics and trends also improved significantly in the second half of 2016. market conditions and triton 's operating trends remain generally strong during the first quarter of 2017 , but there is no assurance that market conditions and triton 's operating trends will not revert back to the levels experienced for most of the last two years . fleet size . as of december 31 , 2016 , our fleet included 6,567,434 ceu , including 3,206,565 ceu added as a result of the merger , compared to a combined fleet size for tcil and tal of 6,215,142 as of december 31 , 2015 , an increase of 5.7 % . the increase in our combined fleet size in 2016 was primarily due to investments in new containers and sale-leaseback transactions by triton after the merger . in 2016 , tcil , tal and triton invested approximately $ 810 million in their combined fleets , purchasing approximately 184,300 teu of new containers and approximately 371,500 teu of used containers through sale-leaseback transactions . triton invested roughly $ 615 million or 76 % of the combined fleet investment level in 2016 after the merger on july 12 , 2016. global containerized trade growth in 2016 was relatively weak reflecting modest global economic growth and a minimal difference between global economic growth and global trade growth . until recently , global trade growth had typically been a multiple of global gdp growth , providing an extra lever for growth in global containerized trade . over the last twelve months , the combined equipment fleets of tcil and tal has grown faster than containerized trade growth , reflecting an increase in the share of leased containers relative to the share of containers owned by our shipping line customers as well as an increase in triton 's share of new container leasing transactions .. the increased share for leased containers reflects an increase in the portion of containers purchased by leasing companies and increased interest from our customers in concluding sale-leaseback transactions for previously owned containers in their fleets . our shipping line customers have faced several years of weak freight rates and poor profitability due to excess vessel capacity , making leased containers a more attractive option relative to direct investment . utilization . the average utilization for the combined fleets of tcil , tal and triton was 93.3 % during 2016 , a decrease from 96.5 % in 2015 , and our ending utilization was 94.8 % as of december 31 , 2016 , up slightly from 94.4 % at the end of 2015 . this decrease in the average combined utilization was due to weak leasing demand at the beginning of 2016 coupled with the impact of the hanjin bankruptcy at the end of august . while average combined utilization decreased from 2015 to 2016 , utilization trends were positive at the end of 2016 and remained positive into 2017 . 41 we faced weak leasing demand from the middle of 2015 through the middle of 2016. market analysts estimate trade growth was below 3 % in 2015 , while we believed most market participants had expected trade growth in 2015 to be in the 5 % -6 % range . due to their expectations for solid growth , leasing companies and shipping lines placed sizable orders for new containers for delivery during the first half of 2015. a significant surplus of containers developed when the expected level of containerized trade growth did not materialize . shipping lines responded to the lower than expected level of trade growth and excess inventory of containers by increasing the number of containers they returned off lease and reducing the number of containers picked up on lease . container drop-offs significantly exceeded container pick-ups from the combined tcil and tal fleets from the second quarter of 2015 to the first quarter of 2016 , and the combined average utilization decreased from 97.7 % in the first quarter of 2015 to 94.0 % in the first quarter of 2016. shipping lines and leasing companies reduced their purchases of new containers in response to the lower than expected trade growth . story_separator_special_tag we estimate that from the third quarter of 2015 through the end of 2016 , new container production was roughly equal to the number of containers disposed out of the shipping market , resulting in little or no growth in the global container fleet . while trade growth during this period was much lower than average historical levels , it remained modestly positive , and the container supply and demand balance gradually improved . by the end of 2016 , inventories of new and used containers were at historically low levels . net pick-up activity for the combined tcil , tal and triton fleets started to improve in the second quarter of 2016 , and then accelerated in the third quarter of 2016. total pick-ups for the combined fleet in the third and fourth quarters of 2016 were close to combined record levels . we believe the very strong pick-up activity at the end of 2016 was driven by the tightening supply and demand balance for containers coupled with an ongoing reluctance of our shipping line customers to purchase large volumes of containers . triton 's utilization began to recover in the third quarter in response to the strong pick-up activity , reaching 94.0 % as of august 30 , 2016. however , on august 31 , 2016 , one of our largest customers , hanjin , filed for court protection and defaulted on our leases . roughly 3 % of our containers were on-hire to hanjin , and since we no longer recognized revenue on these containers , they were immediately reflected as off-hire for the purpose of calculating utilization , and our utilization dropped by 3 % as a result . as of march 14 , 2017 we have recovered or issued delivery clearances for approximately 78 % of the containers previously on-hire to hanjin , and roughly 36 % have already been placed on-hire to other customers . while the ongoing hanjin recovery process continues to negatively impact our utilization , our utilization as of march 14 , 2017 is 95.5 % . we expect we will eventually recover the vast majority of the containers that had been on-hire to hanjin , and our utilization will benefit as more of the containers are recovered and redeployed into the leasing market . the following tables set forth the combined equipment fleet utilization ( 1 ) for the periods indicated below : replace_table_token_9_th replace_table_token_10_th _ ( 1 ) utilization is computed by dividing our total units on lease ( in ceu ) by the total units in our fleet ( in ceu ) excluding new units not yet leased and off-hire units designated for sale . for the periods prior to the july 12 , 2016 merger , the utilization reflects the combined utilization of the tcil and tal equipment fleets . 42 average lease rates . average lease rates for our combined dry container product line decreased by 11.8 % in 2016 compared to 2015 . market lease rates were well below the average lease rates in the combined dry container lease portfolio for much of 2015 and 2016 due to a combination of low steel and new container prices , weak leasing demand and aggressive competition by leasing companies to secure available lease transactions . the average dry container lease rates of the combined fleet decreased as new containers were placed on lease at the lower market rate level , and more significantly , as existing expiring leases were renegotiated and extended at lower market lease rate levels or as containers were returned off leases with higher rates and picked up onto new leases reflecting the lower market rates . the combined dry container fleet was highly exposed to lease re-pricing in 2015 and 2016 due to the large numbers of dry containers expiring off lease and the high average lease rates on the expiring leases . both tcil and tal had originated a high volume of lease transactions with unusually high lease rates from 2010 - 2012 , reflecting the very strong market conditions at that time . most leases for new containers have lease terms of five to eight years , and these high-rate 2010 - 2012 leases are now expiring in large numbers . market lease rates for dry containers increased strongly during the fourth quarter of 2016 due to a rebound in steel and new container prices and increased leasing demand . market lease rates for dry containers are currently above the average rate of triton 's dry container lease portfolio . triton will remain highly exposed to dry container lease repricing in 2017 and 2018 due to a large number of lease expirations with above average rates . however , we expect the impact of these dry container lease expirations to be relatively limited if the current higher market lease rate level is sustained . average lease rates for our combined refrigerated container product line decreased by 5.2 % in 2016 compared to 2015 . the cost of refrigerated containers has trended down over the last few years , which has led to lower market lease rates . lease rates for new refrigerated containers have also been negatively impacted by aggressive pricing from new entrants seeking to build market share . market lease rates for refrigerated containers increased in the fourth quarter of 2016 due to increased prices for new refrigerated containers and less aggressive investment by leasing companies , though refrigerated container market lease rates increased at a slower pace than rates for dry containers and remain below the average refrigerated container lease rates in triton 's lease portfolio . the average lease rates for our combined special container product line decreased by 3.5 % in 2016 compared to 2015 due to low market lease rates for special containers . market lease rates for special containers remain below the average lease rates in triton 's lease portfolio . equipment disposals .
| per diem revenue increased by $ 104.5 million in 2016 compared to 2015 . the primary reasons for this increase are as follows : $ 179.7 million increase due to the inclusion of per diem revenue , net of lease intangible amortization from the tal fleet from the date of the merger partially offset by ; $ 58.9 million decrease due to a decrease in average ceu per diem rates ; and a $ 16.3 million decrease due to a decrease in the average number of containers on-hire under operating leases of 59,993 ceu . fee and ancillary lease revenue increased by $ 9.1 million in 2016 compared to 2015 . the primary reasons for this increase are as follows : $ 17.0 million increase due to the inclusion of fees and ancillary revenues from the tal fleet from the date of the merger ; partially offset by $ 7.9 million decrease in re-delivery fees due to a decrease in the volume of customer re-deliveries particularly in the second half of 2016. finance lease revenue increased $ 7.3 million in 2016 compared to 2015 primarily due to the inclusion of $ 7.0 million of finance lease revenue from the tal fleet from the date of the merger . the average finance lease portfolio remained relatively flat with the scheduled runoff of the existing portfolio offset by the addition of a large finance lease in the fourth quarter of 2016. trading margin . prior to the merger , triton did not have a trading business . trading margin was $ 0.6 million in 2016 due to the inclusion of trading margin from the tal fleet from the date of the merger . 46 net ( loss ) gain on sale of leasing equipment . loss on sale of equipment was $ 20.3 million in 2016 compared to a gain on sale of equipment of $ 2.0 million in 2015 , a decrease of $ 22.3
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overall , we expect that revenues in our wealth management business will remain susceptible to being adversely affected in future periods in which pandemic-influenced economic and market factors remain present . in our tax preparation segment , our revenue and operating income generation is highly seasonal , with a significant portion of our annual revenue typically earned in the first four months of our fiscal year . during the third and fourth quarters , the tax preparation segment typically reports losses because revenue from the segment during this period is minimal while core operating expenses continue . as a result of the covid-19 pandemic , the internal revenue service ( “ irs ” ) extended the filing and payment deadline for tax year 2019 federal tax returns to july 15 , 2020. this extension resulted in the shifting of a significant portion of tax preparation segment revenue that would typically have been expected to be earned in the first and second quarters of 2020 to the third quarter of 2020. in addition , sales and marketing expenses were elevated in 2020 due to incremental investment in march 2020 to address weak performance through the first two months of the tax season , as well as increased marketing required due to the extended tax season . additionally , the irs was selected by the u.s congress as the vehicle for distribution of the eip1 payments , which caused significant disruption to the 2020 tax season . as a result of the extension of the 2020 tax season and the eip1 disruption , our results of operations for our tax preparation segment were negatively impacted in 2020 compared to prior years . in december 2020 , the u.s. congress authorized eip2 . as acknowledged by the irs , in january 2021 , the irs directed millions of eip2 payments , including eip2 payments payable to our customers , to incorrect bank accounts . in order to allow time to correct this error , the irs delayed the start of the 2021 tax season . the u.s. congress is currently considering eip3 . should the u.s. congress authorize eip3 during the 2021 tax season , and should the irs again be selected as the vehicle for distribution of eip3 , it could disrupt and or delay the tax filing deadline for the 2021 tax season and could cause customer confusion and or diversion . it is currently unknown if the irs will need to extend the tax filing deadline in 2021 , however , the irs has revoked its earlier commitment to end the 2021 tax season on time . an extension of the tax filing deadline in 2021 could result in customer and revenue disruptions and increased expenses in 2021. for additional information on the effects of the covid-19 pandemic on our results of operations , see “ story_separator_special_tag style= '' color : # 000000 ; font-family : 'arial ' , sans-serif ; font-size:10pt ; font-weight:400 ; line-height:120 % '' > wealth management revenue is derived from multiple sources . we track sources of revenue , primary drivers of each revenue source , and recurring revenue . in addition , we focus on several business and key financial metrics in evaluating the success of our business relationships , our resulting financial position and operating performance . a summary of our sources of revenue and business and financial metrics is as follows : replace_table_token_3_th ( 1 ) our “ financial professionals ” were formerly referred to as “ advisors. ” blucora , inc. | 2020 form 10-k 47 table of contents recurring revenue consists of advisory fees , trailing commissions , fees from cash sweep programs , and certain transaction and fee revenue , all as described further under the headings “ advisory revenue , ” “ commission revenue , ” “ asset-based revenue , ” and “ transaction and fee revenue , ” respectively . certain recurring revenues are associated with asset balances and fluctuate depending on market values and current interest rates . accordingly , our recurring revenue can be negatively impacted by adverse external market conditions . however , we believe recurring revenue is meaningful despite these fluctuations because it is not dependent upon transaction volumes or other activity-based revenues , which are more difficult to predict , particularly in declining or volatile markets . business metrics replace_table_token_4_th ( 1 ) our “ financial professionals ” were formerly referred to as “ advisors. ” ( 2 ) the number of independent financial professionals includes licensed financial professionals that work with avantax wealth management and operate as independent contractors , as well as licensed referring representatives at cpa firms that partner with avantax planning partners . ( 3 ) the number of in-house financial professionals includes licensed financial planning consultants , all of which are employees of avantax planning partners . ( 4 ) calculation based on advisory and commission revenue for the years ended december 31 , 2020 and 2019 , respectively . client assets . total client assets includes assets that we hold directly or indirectly on behalf of clients under a safekeeping or custody arrangement or for which we provide administrative services for clients . to the extent that we provide more than one service for a client 's assets , the value of the asset is only counted once in the total amount of total client assets . total client assets include advisory assets , non-advisory brokerage accounts , annuities , and mutual fund positions held directly with fund companies . these assets are not reported on the consolidated balance sheets . advisory assets includes external client assets for which we provide investment advisory and management services , typically as a fiduciary under the investment advisers act of 1940. our compensation for providing such services is typically a fee based on the value of the advisory assets for each advisory client . these assets are not reported on the consolidated balance sheets . brokerage assets represent total clients assets other than advisory assets . story_separator_special_tag total client assets increased $ 12.3 billion at december 31 , 2020 compared to december 31 , 2019 primarily due to $ 9.6 billion of favorable market change and client reinvestment levels and $ 4.5 billion in client assets acquired in the hkfs acquisition . partially offsetting this increase were net client outflows of $ 1.8 billion , which primarily occurred during the pandemic-influenced market disruption in the second quarter of 2020. in addition , net client outflows of $ 1.8 billion included $ 0.4 billion of outflows due to the departure of two in-house financial professionals . at this time , we can not predict with certainty the extent of the impact of the covid-19 pandemic and future financial market fluctuations on our client assets . however , the continued volatility in the u.s. and global economy and uncertainty in economic and financial markets due to the pandemic may cause declines in the amount of our blucora , inc. | 2020 form 10-k 48 table of contents total client assets . for more information on the risks associated with our wealth management business , see part i , item 1a under the subheading , “ the current covid-19 pandemic could have a material adverse effect. ” financial professionals . the wealth management business worked with a nationwide network of 3,770 financial professionals as of december 31 , 2020. avantax wealth management offers its tax-focused wealth management solutions through its network of financial professionals that operate as independent contractors . avantax planning partners operates as a captive , or employee-based , ria and wealth management business and utilizes a team of in-house financial professionals who partner with cpa firms in order to provide their consumer and small business clients with holistic planning and financial advisory services . the number of our financial professionals decreased by 5 % at december 31 , 2020 compared to december 31 , 2019 , with the decrease primarily due to expected attrition following the integration of hd vest and 1st global , as well as the impact of financial professionals leaving the wealth management industry . the large majority of this attrition related to lower-producing financial professionals . the decrease in the number of financial professionals was partially offset by our recruitment of independent financial professionals , as well as the addition of financial professionals as a result of the hkfs acquisition , which ( as of the hkfs acquisition date ) included the addition of 19 in-house financial professionals and 131 licensed referring representatives at cpa firms that partner with avantax planning partners . advisory revenue . advisory revenue includes fees charged to clients in advisory accounts for which we are the ria . these fees are based on the value of assets within these advisory accounts . for advisory revenues generated by avantax wealth management , advisory fees are typically billed quarterly , in advance , and the related advisory revenues are deferred and recognized ratably over the period in which our performance obligations have been completed . for advisory revenues generated by avantax planning partners , advisory fees are typically billed quarterly , in arrears , and the related advisory revenues are accrued and recognized ratably over the period in which our performance obligations were completed . advisory asset balances were as follows : replace_table_token_5_th ( 1 ) represents individual client and retirement advisory assets for which avantax wealth management serves as the ria . ( 2 ) represents individual client advisory assets for which avantax planning partners serves as the ria . ( 3 ) represents advisory assets for which avantax planning partners provides retirement plan services and serves as the ria . ( 4 ) the advisory assets associated with our in-house professionals were acquired in connection with the hkfs acquisition . the activity within our advisory assets was as follows : replace_table_token_6_th ( 1 ) inflows from acquisitions for the year ended december 31 , 2020 related to the hkfs acquisition . inflows from acquisitions for the year ended december 31 , 2019 related to the 1st global acquisition . for the year ended december 31 , 2020 , advisory assets increased $ 8.0 billion primarily due to $ 4.2 billion in advisory assets acquired in the hkfs acquisition and $ 3.7 billion of favorable market change and client reinvestment levels . advisory assets also benefited from a net increase in new advisory assets , although this increase was tempered by net outflows that occurred during the pandemic-influenced market disruption in the blucora , inc. | 2020 form 10-k 49 table of contents second quarter of 2020 , as well as $ 0.4 billion of outflows that primarily occurred after the departure of two in-house financial professionals . for the year ended december 31 , 2020 compared to the year ended december 31 , 2019 , advisory revenue increased by $ 62.4 million primarily due to advisory assets acquired in the 1st global acquisition and hkfs acquisition . partially offsetting this increase in advisory revenue for the year ended december 31 , 2020 , advisory revenue was negatively affected by suppressed advisory asset levels in the first quarter of 2020 that resulted from the financial market disruption and the covid-19 pandemic . advisory asset levels subsequently recovered but remain susceptible to future financial market disruptions . in addition , the average advisory fee rate decreased due to the lower advisory fee structures of 1st global and hkfs . commission revenue . the wealth management segment generates two types of commissions : ( 1 ) transaction-based commissions and ( 2 ) trailing commissions . transaction-based commissions , which occur when clients trade securities or purchase investment products , represent gross commissions generated by our financial professionals . the level of transaction-based commissions can vary from period-to-period based on the overall economic environment , number of trading days in the reporting period , market volatility , interest rate fluctuations , and investment activity of our financial professionals ' clients . we earn trailing commissions ( a commission or fee that is paid periodically over time ) on certain mutual funds and variable annuities held by clients .
| we believe the complementary nature of the hkfs acquisition has expanded our established leadership in tax-aware investing and enhanced our ability to better service clients and enable better outcomes for our wealth management business through the following primary drivers : increasing our total addressable market by swiftly entering the large , adjacent captive ria space ; expanding our product offerings , enabling us to serve an expanded set of cpa firms and tax professionals , as well as enabling us to offer end-to-end retirement plan services for small business clients ; and providing multiple avenues for enhancing future growth opportunities by improving asset retention , increasing prospect conversion , and offering turn-key retirement plan services to the full avantax wealth management financial professional and client base , all on top of a highly scalable hkfs platform . for additional information , see “ item 8. financial statements and supplementary data—note 3. ” 1st global acquisition on may 6 , 2019 , we closed the acquisition of all of the issued and outstanding common stock of 1st global , inc. and 1st global insurance services , inc. ( together , “ 1st global ” ) , a tax-focused wealth management company , for a cash purchase price of $ 180.0 million ( the “ 1st global acquisition ” ) . the 1st global acquisition was strategically important as it expanded our presence as the leading tax-focused independent broker-dealer while also providing the scale to compete more broadly in the wealth management market . the operations of 1st global are included in our operating results as part of the wealth management segment from the date of the 1st global acquisition . blucora , inc. | 2020 form 10-k 45 table of contents results of operations summary replace_table_token_1_th ( 1 ) calculation is not meaningful . for the year ended december 31 , 2020 compared to the year ended december 31 , 2019 , net income decreased $ 390.9 million primarily due to the following factors : wealth management segment operating income increased $ 3.9 million primarily due to a $ 38.2 million increase in revenue ,
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the study met its primary endpoints and we previously reported topline data from this study in march 2019. publication of iliad study results of peginterferon lambda ( lambda ) in covid-19 in lancet respiratory medicine 2021 on february 8 , 2021 , we announced that final results from the phase 2 iliad ( interferon lambda for immediate antiviral therapy at diagnosis in covid-19 ) study published in lancet respiratory medicine . iliad , an investigator sponsored randomized trial of lambda in outpatients with mild to moderate covid-19 conducted at toronto general hospital , university health network in toronto , canada , demonstrated a single dose of lambda accelerated clearance of sars-cov2 in newly diagnosed , non-hospitalized patients . we previously reported topline data from this study on october 15 , 2020. completion of sale of priority review voucher on november 23 , 2020 , we announced that we had entered into a definitive agreement to sell our priority review voucher ( prv ) for a lump sum payment of $ 95.0 million to abbvie inc. ( abbvie ) . the transaction was subject to customary closing conditions including anti-trust review . the prv was granted to us in conjunction with the november 20 , 2020 approval by the fda of our new drug application for zokinvy . on january 7 , 2021 , we announced that we had completed the sale to abbvie following the early termination of the applicable waiting period under the hart-scott-rodino antitrust improvements act of 1976 , as amended . eiger retained 50 % , or approximately $ 47.4 million , of the prv proceeds under the terms of the collaboration and supply agreement with the progeria research foundation . 75 update on impact of covid-19 pandemic on clinical development activities and business operations we have taken proactive steps to ensure the safety of patients and the integrity of our hdv phase 3 d-livr trial , which is expected to complete enrollment in 2021. we have adequate clinical drug product supply for the d-livr study and do not anticipate any interruption in availability of study drug to patients . we do not anticipate any impact to our planned u.s. commercial launch of zokinvy , including availability of commercial drug supply . we previously announced that the ema review of our maa will follow a standard review timeline . we have put into place remote operations and new policies , which are in-line with local , state and federal guidelines , to maintain the safety and well-being of our employees , while working to maintain business continuity as this unprecedented global situation continues to evolve . w e continue to monitor the situation closely , including its potential effect on our clinical development plans and timelines . financial operations overview research and development expenses research and development expenses represent costs incurred to conduct research and development , such as the development of our product candidates . we recognize all research and development costs as they are incurred . research and development expenses consist primarily of the following : expenses incurred under agreements with consultants , contract research organizations and clinical trial sites that conduct research and development activities on our behalf ; laboratory and vendor expenses related to the execution of clinical trials ; contract manufacturing expenses , primarily for the production of clinical trial supplies ; license fees associated with our license agreements ; and internal costs that are associated with activities performed by our research and development organization and generally benefit multiple programs . these costs are not separately allocated by product candidate . unallocated internal research and development costs consist primarily of : o personnel costs , which include salaries , benefits and stock-based compensation expense ; o allocated facilities and other expenses , which include expenses for rent and maintenance of facilities and depreciation expense ; and o regulatory expenses and technology license fees related to development activities . the largest component of our operating expenses has historically been the investment in clinical trials , including contract manufacturing arrangements , clinical trial material related costs and other research and development activities . however , we do not allocate internal research and development costs , such as salaries , benefits , stock-based compensation expense and indirect costs to product candidates on a program-specific basis . the following table shows our research and development expenses for the years ended december 31 , 2020 , 2019 and 2018 ( in thousands ) : replace_table_token_1_th 76 we expect research and development expenses will continue to be significant and may increase in the future as we advance our product candidates into and through later stage clinical trials and pursue regulatory approvals , which will require a significant investment in regulatory support and contract manufacturing and clinical trial material related costs . in addition , we continue to evaluate opportunities to acquire or in-license other product candidates and technologies , which may result in higher research and development expenses due to license fees and or milestone payments . the process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming . we may never succeed in timely developing and achieving regulatory approval for our product candidates . the probability of success of our product candidates may be affected by numerous factors , including clinical data , competition , intellectual property rights , manufacturing capability and commercial viability . as a result , we are unable to determine the duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates . story_separator_special_tag the covid-19 pandemic presents additional risks and uncertainties associated with developing drugs , including : delays in trial activities and patient enrollment or diversion of healthcare resources as a result of the evolving effects of the covid-19 pandemic or otherwise ; production shortages or other supply interruptions in clinical trial materials resulting from the evolving effects of the covid-19 pandemic or otherwise ; our ability to hire and retain key research and development personnel ; the scope , rate of progress , results and expense of our ongoing , as well as any additional , clinical trials and other research and development activities ; and the timing and receipt of any regulatory approvals . general and administrative expenses general and administrative expenses consist of personnel costs , allocated expenses and expenses for outside professional services , including legal , audit , accounting services , insurance costs and costs associated with being a public company . personnel costs consist of salaries , benefits and stock-based compensation . allocated expenses consist of facilities and other expenses , which include direct and allocated expenses for rent and maintenance of facilities , depreciation expense and other supplies . our expenses include costs related to compliance with the rules and regulations of the sec and nasdaq , insurance , investor relations , banking fees and other administrative expenses and professional services . we expect our general and administrative expenses to increase in the future due to sales and marketing activities from the commercialization of zokinvy . interest expense interest expense consists of interest and amortization of the debt discount related to the oxford loan . interest income interest income consists of interest earned on our investments in debt securities and cash equivalents . critical accounting policies and estimates our management 's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements , which have been prepared in accordance with generally accepted accounting principles in the united states . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities and expenses . on an ongoing basis , we evaluate these estimates and judgments . we base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances . these estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not 77 readily apparent from other sources . actual results may differ materially from these estimates . we believe that the accounting policies discussed below are critical to understanding our historical and future performance , as these policies relate to the more significant areas involving management 's judgments and estimates . accrued research and development costs we record accrued expenses for estimated costs of research and development activities conducted by external service providers , which include the conduct of clinical research and contract formulation and manufacturing activities . we record the estimated costs of development activities based upon the estimated amount of services provided but not yet invoiced and include these costs in accrued liabilities in the consolidated balance sheets and within research and development expenses in the consolidated statements of operations . we record accrued expenses for these costs based on the estimated amount of work completed and in accordance with agreements established with these external service providers . we estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services . we make judgments and estimates in determining the accrued balance in each reporting period . as actual costs become known , we adjust our accrued estimates . stock-based compensation we recognize compensation costs related to stock options and restricted stock units based on the estimated fair value of the awards on the date of grant . we estimate the grant date fair value of stock options , and the resulting stock-based compensation expense , using the black-scholes option-pricing model . the grant date fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period , which is generally the vesting period of the respective awards . we record forfeitures when they occur . the black-scholes option-pricing model includes the following assumptions : expected term . our expected term represents the period that our stock-based awards are expected to be outstanding and is determined using the simplified method ( based on the mid-point between the vesting date and the end of the contractual term ) . expected volatility . since we have only been publicly traded for a short period and do not have adequate trading history for our common stock , the expected volatility was estimated based on the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants . the comparable companies were chosen based on their similar size , stage in the life cycle , or area of specialty . beginning in the third quarter of 2019 , as we had been publicly traded for four and a half years , we began to layer in our historical volatility in the calculation of expected volatility . risk-free interest rate . the risk-free interest rate is based on the u.s. treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option . expected dividend . we have never paid dividends on our common stock and have no plans to pay dividends on our common stock . therefore , we used an expected dividend yield of zero . we use the contractual term to determine the non-employee awards ' fair value at the grant date . the contractual term of options granted under the plan is 10 years .
| sources of liquidity as of december 31 , 2020 , we had $ 128.9 million of cash , cash equivalents and investments , comprised of $ 28.9 million of cash and cash equivalents and $ 100.0 million of debt securities available-for-sale , and an accumulated deficit of $ 306.5 million . in december 2019 , we filed a shelf registration statement on form s-3 ( file no . 333-235655 ) with the securities and exchange commission , which permits the offering , issuance and sale by us of up to a maximum aggregate offering price of $ 150.0 million of our common stock , preferred stock , debt securities and warrants . up to a maximum of $ 50.0 million of the maximum aggregate offering price of $ 150.0 million may be issued and sold 79 pursuant to an at-the-market ( atm ) financing facility ( 2019 atm facility ) under a sales agreement with jefferies llc ( jefferies ) . in august 2020 , we entered into a new sales agreement with jefferies for up to $ 50 .0 million of the remaining amount on the shelf registration statement which may be sold pursuant to an atm financing facility ( 2020 atm facility ) . as of december 31 , 2020 , we completed both the 2019 atm facility and the 2020 atm facility for a total of 9,267,760 shares resulting in $ 97.3 million in net proceeds , after deducting commissions . on december 18 , 2020 , we filed a new shelf registration statement on form s-3 ( file no . 333-251497 ) with the securities and exchange commission , which permits the offering , issuance and sale by us up to a maximum aggregate offering price of $ 200.0 million of our common stock , preferred stock , debt securities and warrants . up to a maximum of $ 50.0 million of the maximum aggregate offering price of $ 200.0 million may be issued and sold pursuant to a new atm financing facility under a sales agreement with jefferies . we have not issued any
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these initial efforts were primarily targeted toward small and medium sized businesses , with smaller average annual contract values , or acv , and lower renewal rates . over time , the breadth of our platform 's capabilities attracted an increasing number of enterprise customers , and we have continued to expand our presence within those customers . given the higher average acv and renewal rates we experience with larger customers , we are focusing on customers with over $ 100 million in revenue , with a particular emphasis on enterprise customers , which we define as customers with over $ 1 billion in revenue . with a view towards improving sales efficiency , we have shifted our strategy from broad-based digital marketing to enterprise-targeted marketing campaigns and user events to increase our growth with enterprise customers . from inception through january 31 , 2019 , we have invested $ 395.0 million in the development of our platform . given our investments , we believe that we are well positioned to expand the number of , and increase contract values with enterprise customers . we have also introduced tools that allow customers to manage their own encryption keys and maintain a broad array of security and compliance certifications that enterprise customers require , particularly those in regulated industries . as of january 31 , 2019 , we had 236 employees in our research and development organization . while we expect research and development expenses to increase in absolute dollars , we anticipate that it will decrease as a percentage of revenue over time . for the years ended january 31 , 2017 , 2018 and 2019 , we had total revenue of $ 74.5 million , $ 108.5 million and $ 142.5 million , respectively , representing year-over-year growth of 46 % and 31 % for the years ended january 31 , 2018 and 2019 , 53 respectively . for the years ended january 31 , 2017 , 2018 and 2019 , no single customer accounted for more than 10 % of our total revenue , nor did any single organization when accounting for multiple subsidiaries or divisions which may have been invoiced separately . revenue from customers with billing addresses in the united states comprised 86 % , 82 % and 77 % of our total revenue for the years ended january 31 , 2017 , 2018 and 2019 , respectively . we are focused on growing our international business and will continue to invest in sales operations outside the united states . we have incurred significant net losses since our inception , including net losses of $ 183.1 million , $ 176.6 million and $ 154.3 million for the years ended january 31 , 2017 , 2018 and 2019 , respectively , and had an accumulated deficit of $ 912.1 million at january 31 , 2019 . we expect to incur losses for the foreseeable future and may not be able to achieve or sustain profitability . recent developments on july 3 , 2018 , we closed our initial public offering , or ipo , in which we issued and sold 10,580,000 shares of class b common stock at $ 21.00 per share for aggregate net proceeds of $ 202.5 million , after deducting underwriters ' discounts and offering expenses payable by us . in january 2019 , we entered into an amendment to our $ 100.0 million credit facility which extended the maturity date for all outstanding loans to october 1 , 2022. the amendment also revised the maximum debt ratio financial covenant , increased the amount of the closing fee to $ 7.0 million , and increased the number of warrants to purchase class b common stock . factors affecting performance continue to attract new customers we believe that our ability to expand our customer base is an important indicator of market penetration , the growth of our business , and future business opportunities . we define a customer at the end of any particular quarter as an entity that generated revenue greater than $ 2,500 during that quarter . in situations where an organization has multiple subsidiaries or divisions , each entity that is invoiced at a separate billing address is treated as a separate customer . in cases where customers purchase through a reseller , each end customer is counted separately . as of january 31 , 2019 , we had over 1,700 customers . from january 31 , 2014 to january 31 , 2019 , the number of our customers with revenue over $ 1 billion increased from 36 to 447 , representing a 66 % compound annual growth rate . for the years ended january 31 , 2017 , 2018 and 2019 , our enterprise customers accounted for 47 % , 46 % and 45 % of our revenue , respectively . we focus our sales and marketing resources on obtaining customers with over $ 100 million in revenue , with a particular emphasis on enterprise customers . in order to accelerate customer growth , we intend to further develop our partner ecosystem by establishing agreements with more software resellers , systems integrators and implementation partners to provide broader customer and geographic coverage . we believe we are underpenetrated in the overall market and have significant opportunity to expand our customer base over time . customer upsell and retention we employ a land and expand sales model , and our performance depends on our ability to retain customers and expand the number of users and use cases at existing customers over time . it currently takes multiple years for our customers to fully embrace the power of our platform . we believe that as customers deploy greater volumes and sources of data for multiple use cases , the unique features of our platform can address the needs of everyone within their organization . we are still in the early stages of expanding within many of our customers . story_separator_special_tag we have invested in platform capabilities and online support resources that allow our customers to expand the use of our platform in a self-guided manner . our professional services , customer support and customer success functions also support our sales force by helping customers to successfully deploy our platform and implement additional use cases . in addition , we believe our partner ecosystem will become increasingly important over time . we work closely with our customers to drive increased engagement with our platform by identifying new use cases through our customer success teams , as well as in-platform , self-guided experiences . we actively engage with our customers to assess whether they are satisfied and fully realizing the benefits of our platform . while these efforts often require a substantial commitment and upfront costs , we believe our investment in product , customer support , customer success and professional services will create opportunities to expand our customer relationships over time . our ability to drive growth and generate incremental revenue depends heavily on our ability to retain our customers and increase their usage of our platform . an important way that we measure our performance in this area is to track the growth in 54 our subscription revenue generated from a cohort of customers over time . with that objective in mind , we allocate our customer success and customer support resources to align with maximizing the retention and expansion of our subscription revenue . our subscription net revenue retention rate compares the subscription revenue in a given period from the cohort of customers that generated subscription revenue at the beginning of the same period in the prior fiscal year , excluding customers from the cohort who canceled during the prior period . the subscription net revenue retention rate is the quotient obtained by dividing the subscription revenue generated from that cohort in a period , by the subscription revenue generated from that same cohort in the corresponding prior year period . the following table sets forth our subscription net revenue retention rate for each of the eight quarters in the period ended january 31 , 2019 : replace_table_token_4_th our gross subscription dollars churned is equal to the amount of subscription revenue we lost in the current period from the cohort of customers who generated subscription revenue in the prior year period . in the year ended january 31 , 2019 , we lost $ 15.4 million of subscription revenue generated by the cohort in the prior year period , or 18 % of subscription revenue for the year ended january 31 , 2018 . of this amount , $ 6.5 million was lost from our cohort of enterprise customers and $ 8.9 million was lost from our cohort of non-enterprise customers . by comparison , in the year ended january 31 , 2018 , we lost $ 12.4 million of subscription revenue generated by the cohort in the prior year period , or 21 % of subscription revenue for the year ended january 31 , 2017 . of this amount , $ 5.0 million was lost from our cohort of enterprise customers and $ 7.4 million was lost from our cohort of non-enterprise customers . as we continue to enhance our product and develop methods to encourage wider and more strategic adoptions , including shifting our sales and marketing activities towards enterprise customers , we expect that our subscription net revenue retention rate will increase over the long term ; however , our ability to successfully upsell and the impact of cancellations may vary from period to period , with greater variability on a quarterly basis , particularly among our cohort of enterprise customers , due to fewer customers in this cohort compared to non-enterprise customers , higher average contract values and more significant expansion opportunities . the extent of this variability depends on a number of factors including the size and timing of upsells and cancellations relative to the initial subscriptions . sales and marketing efficiency we are focused on increasing the efficiency of our sales force and marketing activities by enhancing account targeting , messaging , field sales operations and sales training in order to reduce our sales and marketing expense as a percentage of revenue and accelerate the adoption of our platform . our sales strategy depends on our ability to continue to attract top talent , increasing our pipeline of business , and enhancing sales productivity . we focus on productivity per quota-carrying sales representative and the time it takes our sales representatives to reach full productivity . the acv per sales representative per year increased by approximately 11 % from january 31 , 2018 to january 31 , 2019 and 14 % from january 31 , 2017 to january 31 , 2018 . we manage our pipeline by sales representative to ensure sufficient coverage of our sales targets . our ability to manage our sales productivity and pipeline are important factors to the success of our business . we also intend to shift marketing spending from broad based initiatives that are better suited to attracting smaller organizations towards enterprise-targeted marketing campaigns and user events that we believe will result in larger initial new customer acv and more upsell acv potential . leverage research and development investments for future growth historically , given building domo was like building seven start-ups in one , we had to make significant investments in research and development to build a platform that powers a business and provides enterprises with features and functionality that they require . we plan to continue to make investments in areas of our business to continue to expand our platform functionality . however , the amount of new investments required to achieve our plans is expected to decrease as a percentage of revenue compared to historical years . 55 key business metric billings billings represent our total revenue plus the change in deferred revenue in a period . billings reflect sales to new customers plus subscription renewals and upsells to existing customers , and represent amounts invoiced for subscription , support and professional services .
| this increase is due to a higher volume of implementation and training services provided to our customers . 59 cost of revenue , gross profit and gross margin replace_table_token_10_th cost of subscription revenue was $ 32.8 million for the year ended january 31 , 2019 , compared to $ 32.4 million for the year ended january 31 , 2018 , an increase of $ 0.4 million , or 1 % . the majority of the increase in cost of subscription revenue was due to employee-related costs , which increased by $ 2.1 million primarily as a result of salary increases . other increases included $ 0.9 million related to our data center and $ 0.7 million in amortization of capitalized software development costs . these increases were offset by a decrease of $ 3.3 million related to optimization of our third-party hosting services . cost of professional services and other revenue was $ 16.8 million for the year ended january 31 , 2019 , compared to $ 12.5 million for the year ended january 31 , 2018 . this increase is primarily due to a higher volume of services provided by third-party consultants related to implementation and training . subscription gross margin improved due to economies of scale driven by increased subscription revenue and cost improvements due to more proactive management and optimization of our third-party hosting services . we expect subscription gross margin to improve as we continue to effectively manage our data center operations and third-party hosting services . services gross margin declined due to heavier use of third-party consultants to perform services for our customers . in addition , rates for these consultants have increased from the prior year . while we expect the cost of professional services will decline as a percentage of total revenue over the long term as our business scales and as we continue to develop our partner ecosystem , such costs could fluctuate from period to period depending on the mix of
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10-k or described in any of the company 's annual , quarterly or current reports . any forward-looking statement made by the company or on its behalf speaks only as of the date that it was made . the company does not undertake to update any forward-looking statement to reflect the impact of events , circumstances , or results that arise after the date that the statement was made , except as required by applicable securities laws . you , however , should consult further disclosures ( including disclosures of a forward-looking nature ) that the company may make in any subsequent annual report on form 10-k , quarterly report on form 10-q , or current report on form 8-k. results of operations overview the company focuses on the following four core strategic objectives . management believes these strategic objectives will guide its efforts to achieving its vision , to deliver the unparalleled customer experience , all the while seeking to improve net income and strengthen the balance sheet while undertaking prudent risk management . 23 the first strategic objective is a focus to continuously improve operating efficiencies . the company has recently focused on identifying efficiencies that simplify our organizational and reporting structures , streamline back office functions and take advantage of synergies and newer technologies among various platforms and distribution networks . during 2015 , the company identified a total of $ 32.9 million in annualized savings related to the elimination of employee positions and business process improvements . at december 31 , 2016 , all but $ 3 million of these savings had been recognized , which decelerated the growth rate of the company 's operating expenses . the remainder of such savings is expected to be phased in throughout 2017. in addition , the company has and expects to continue identifying ongoing efficiencies through the normal course of business that , when combined with increased revenue , will contribute to improved operating leverage . during 2016 , total revenue increased 10.6 percent , while noninterest expense increased 4.0 percent . as part of this initiative , the company continues to invest in technological advances that it believes will help management drive operating leverage in the future through improved data analysis and automation . the company also continues to evaluate core systems and will invest in enhancements that it believes will yield operating efficiencies . the second strategic objective is a focus on net interest income through profitable loan and deposit growth and the optimization of the balance sheet . during 2016 , we made progress on this strategy , as illustrated by an increase in net interest income of $ 83.3 million , or 20.2 percent , from the previous year . the company has continued to show increased net interest income in a historically low interest rate environment through the effects of increased volume and mix of average earning assets and a low cost of funds in its consolidated balance sheets . in addition , on may 31 , 2015 ( the acquisition date ) , the company acquired all of the outstanding common stock of marquette financial companies ( marquette ) . information related to the acquisition is set forth in note 15 , acquisitions , in the notes to the consolidated financial statements , which can be found in part ii , item 8 , pages 101 through 103 of this report . the marquette acquisition added earning assets with an acquired value of $ 1.2 billion to the company 's consolidated balance sheets . average earning assets at december 31 , 2016 , increased $ 1.8 billion , or 10.7 percent from december 31 , 2015. the funding for these assets was driven primarily by a 17.6 percent increase in average interest-bearing liabilities . average loan balances increased $ 1.6 billion , or 18.6 percent compared to the same period in 2015. net interest margin , on a tax-equivalent basis , increased 24 basis points compared to the same period in 2015. the third strategic objective is to grow the company 's revenue from noninterest sources . the company has continued to emphasize its diverse operations throughout all economic cycles . this strategy has provided revenue diversity , helping to reduce the impact of sustained low interest rates and position the company to benefit in periods of growth . during 2016 , noninterest income increased $ 9.6 million , or 2.1 percent , to $ 476.1 million for the year ended december 31 , 2016 , compared to the same period in 2015. this change is discussed in greater detail below under noninterest income . the company continues to emphasize its asset management , brokerage , bankcard services , healthcare services , institutional banking , and treasury management businesses . at december 31 , 2016 , noninterest income represented 49.0 percent of total revenues , compared to 53.1 percent at december 31 , 2015. the fourth strategic objective is a focus on capital management . the company places a significant emphasis on maintaining a strong capital position , which management believes promotes investor confidence , provides access to funding sources under favorable terms , and enhances the company 's ability to capitalize on organic growth , new business development , and acquisition opportunities . the company continues to maximize shareholder value through a mix of reinvesting in organic growth , evaluating acquisition opportunities that complement the strategies , increasing dividends over time , and appropriately utilizing a share repurchase program . at december 31 , 2016 , the company had a total risk-based capital ratio of 12.87 percent and $ 2.0 billion in total shareholders ' equity , an increase of $ 68.7 million , or 3.6 percent , compared to total shareholders ' equity at december 31 , 2015. the company repurchased 323,058 shares of common stock at an average price of $ 50.66 per share during 2016 and paid $ 49.0 million in dividends , which represents a 6.6 percent increase compared to dividends paid during 2015 . story_separator_special_tag 24 earnings summary the company recorded consolidated net income of $ 158.8 million for the year-ended december 31 , 2016. this represents a 36.8 percent increase over 2015. net income for 2015 was $ 116.1 million , or a decrease of 3.8 percent compared to 2014. basic earnings per share for the year ended december 31 , 2016 , were $ 3.25 per share compared to $ 2.46 per share in 2015 , an increase of 32.1 percent . basic earnings per share were $ 2.69 per share in 2014 , or a decrease of 8.6 percent from 2014 to 2015. fully diluted earnings per share increased 32.0 percent from 2015 to 2016 , and decreased 7.9 percent from 2014 to 2015. the company 's net interest income increased to $ 495.3 million in 2016 compared to $ 412.1 million in 2015 and $ 350.1 million in 2014. in total , a favorable volume variance coupled with a favorable rate variance , resulted in an $ 83.3 million increase in net interest income in 2016 , compared to 2015. see table 2 on page 28. the favorable volume variance on earning assets was predominantly driven by the increase in average loan balances of $ 1.6 billion , or 18.6 percent , for 2016 compared to the same period in 2015. net interest margin , on a tax-equivalent basis , increased to 2.88 percent for 2016 , compared to 2.64 percent for the same period in 2015. the marquette acquisition added earning assets with an acquired value of $ 1.2 billion primarily from loan balances with an acquired value of $ 980.4 million at may 31 , 2015. marquette also added interest-bearing liabilities with an acquired value of $ 910.8 million primarily from interest-bearing deposits of $ 708.7 million at may 31 , 2015. despite the current low interest rate environment , the company continues to see benefit from interest-free funds . the impact of this benefit increased one basis point compared to 2015 and is illustrated on table 3 on page 29. the current economic environment has made it difficult to anticipate the future of the company 's margins . the magnitude and duration of this impact will be largely dependent upon the frb 's policy decisions and market movements . see table 19 in item 7a on page 52 for an illustration of the impact of an interest rate increase or decrease on net interest income as of december 31 , 2016. the company had an increase of $ 9.6 million , or 2.1 percent , in noninterest income in 2016 , as compared to 2015 , and a $ 32.2 million , or 6.5 percent , decrease in 2015 , compared to 2014. the increase in 2016 is primarily attributable to unrealized equity gains on alternative investments , increase in bank-owned and company-owned life insurance income , and brokerage income , partially offset by lower trust and securities processing income . the change in noninterest income in 2016 from 2015 , and 2015 from 2014 is illustrated on table 6 on page 32. noninterest expense increased in 2016 by $ 28.2 million , or 4.0 percent , compared to 2015 and increased by $ 38.1 million , or 5.7 percent , in 2015 compared to 2014. the increase in 2016 is primarily driven by an increase of $ 26.3 million , or 6.5 percent , in salary and employee benefit expense . the increase in noninterest expense in 2016 from 2015 , and 2015 from 2014 is illustrated on table 7 on page 33. net interest income net interest income is a significant source of the company 's earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities . the volume of interest earning assets and the related funding sources , the overall mix of these assets and liabilities , and the interest rates paid on each affect net interest income . table 2 summarizes the change in net interest income resulting from changes in volume and rates for 2016 , 2015 and 2014. net interest margin , presented in table 1 on page 26 , is calculated as net interest income on a fully tax equivalent basis ( fte ) as a percentage of average earning assets . net interest income is presented on a tax-equivalent basis to adjust for the tax-exempt status of earnings from certain loans and investments , which are primarily obligations of state and local governments . a critical component of net interest income and related net interest margin is the percentage of earning assets funded by interest-free sources . table 3 analyzes net interest margin for the three years ended december 31 , 2016 , 2015 and 2014. net interest income , average balance sheet amounts and the corresponding yields earned and rates paid for the years 2014 through 2016 are presented in table 1 below . 25 the following table presents , for the periods indicated , the average earning assets and resulting yields , as well as the average interest-bearing liabilities and resulting yields , expressed in both dollars and rates . table 1 three year average balance sheets/yields and rates ( tax-equivalent basis ) ( in millions ) replace_table_token_5_th 26 ( 1 ) interest income and yields are stated on a fully tax-equivalent ( fte ) basis , using a marginal tax rate of 35 % . the tax-equivalent interest income and yields give effect to tax-exempt interest income net of the disallowance of interest expense , for federal income tax purposes related to certain tax-free assets . rates earned/paid may not compute to the rates shown due to presentation in millions . the tax-equivalent interest income totaled $ 31.0 million , $ 23.8 million , and $ 21.2 million in 2016 , 2015 , and 2014 , respectively . ( 2 ) loan fees are included in interest income . such fees totaled $ 13.3 million , $ 11.4 million , and $ 9.9 million in 2016 , 2015 , and 2014 , respectively .
| noninterest expense increased $ 25.2 million , or 4.6 percent , to $ 577.7 million for the year ended december 31 , 2016 , compared to the same period in 2015. this increase was primarily driven by increases of $ 19.7 million in salaries and benefits , $ 1.7 million in regulatory fees , $ 1.6 million in software and equipment expense , $ 1.6 million in services and supplies , and $ 1.0 million in amortization of intangibles . the increase in salaries and benefits is driven by increases of $ 11.3 million in salary and wage expense , $ 6.8 million of which is related to the acquisition of marquette , $ 5.4 million in bonus and commission expense , of which marquette represented a decrease of $ 0.4 million , and $ 3.0 million in employee benefit expense , of which $ 1.8 million is related to marquette . the increase in employee benefit expense was driven , in part , by a $ 1.6 million increase in the fair value of the company 's deferred compensation plan . additionally , there was an increase in other noninterest expense of $ 2.9 million , largely due to an increase of $ 2.5 million in fair value adjustments to contingent consideration liabilities incurred in 2015 , each being partially offset by a decline in operational losses in the comparative periods . these increases were partially offset by a decrease of $ 1.8 million in legal and professional fees expense due to decreased acquisition costs related to marquette in 2016 as compared to the prior period . 35 table 9 institutional investment management operating results replace_table_token_15_th for the year ended december 31 , 2016 , institutional investment management net income decreased $ 15.5 million , or 90.7 percent , compared to the same period in 2015. noninterest income decreased $ 19.2 million , or 20.2 percent , due to a $ 22.2 million decrease in advisory fees from the scout funds which was partially offset by an increase of $ 0.6 million in advisory fees from separately managed accounts , both of which are driven by changes in
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the increase in revenue for fiscal 2011 is attributable to ( i ) a 6.9 % increase in retail unit volumes together with a 2.5 % increase in the average unit sales price , ( ii ) a 23.9 % increase in interest and other income and , ( iii ) a $ 5.0 million increase in wholesale sales . cost of sales , as a percentage of sales , increased to 57.3 % in fiscal 2011 from 56.1 % in fiscal 2010. the company 's cost of sales as a percentage of sales was negatively affected by a higher percentage of wholesale sales , increased average selling price , higher inventory repair costs and a lower margin for the payment protection plan product primarily related to increased claims due to severe weather in a few of our service areas . wholesale sales , for the most part , relate to repossessed vehicles sold at or near cost . the company 's selling prices are based upon the cost of the vehicle purchased , with lower-priced vehicles typically having higher gross margin percentages . the company will continue to focus efforts on minimizing the average retail sales price in order to help keep the contract terms shorter , which helps customers to maintain appropriate equity in their vehicles . the consumer demand for vehicles the company purchases for resale remains high . this high demand has been exacerbated by the decrease in domestic new car sales , which results in higher purchase costs for the company . selling , general and administrative expenses , as a percentage of sales , decreased 0.3 % to 18.2 % in fiscal 2011 from 18.5 % in fiscal 2010. the percentage decrease was principally the result of higher sales levels as a large majority of the company 's operating costs are more fixed in nature . in dollar terms , overall selling , general and administrative expenses increased $ 4.9 million from fiscal 2010 , which consisted primarily of increased payroll costs and other incremental costs related to new lot openings . many of the company 's compensation arrangements are tied to financial performance and as such , more payroll costs are incurred during periods of improved financial results . 23 provision for credit losses , as a percentage of sales , increased 0.6 % to 20.8 % in fiscal 2011 from 20.2 % in fiscal 2010. the company continued to push for improvements and better execution of its collection practices , which were offset by negative macro-economic issues that were prevalent during most of fiscal 2010 and fiscal 2011. the slight increase for the fiscal 2011 related primarily to higher credit losses during the second fiscal quarter as the company experienced some operational difficulties , specifically as related to working individually with its customers concerning collection issues . the company continued to take steps to improve dealership level execution regarding collections . additionally , the company continued to increase its investment in the corporate infrastructure within the collection area which was expected to have a positive effect on results by providing more oversight and providing more accountability on a consistent basis . the company believes that the proper execution of its business practices is the single most important determinant of credit loss experience . the company incurred a yield maintenance fee of $ 507,000 associated with the early payoff of the term loan . this amount is reflected in the fiscal 2011 operating results in loss on prepayment of debt . interest expense ( excluding the non-cash charge related to the change in fair value of the interest rate swap agreement described below ) as a percentage of sales remained constant at 0.8 % for fiscal 2011 and fiscal 2010. higher average borrowings during the fiscal year 2011 ( $ 48.4 million compared to $ 33.0 million in the prior year ) were partially offset by lower interest rates on the company 's variable rate debt . the company had an interest rate swap agreement ( the “ agreement ” ) which was not designated as a hedge by company management ; therefore , the gain ( loss ) of the agreement is reported as a component of interest expense in earnings . the non-cash charge related to the agreement was caused by a number of factors , including changes in interest rates , amount of notional debt outstanding , and number of months until maturity . the company terminated the interest rate swap agreement in april 2011 for $ 1.3 million due to unfavorable interest rate movements . the net income for the agreement reported in earnings as interest income was $ 72,000 for fiscal 2011 compared to net income of $ 155,000 for fiscal 2010. the interest on the credit facilities , the net settlements under the interest rate swap , the changes in the fair value of the agreement , and the termination payment are all reflected as interest expense in the company 's consolidated statement of operations . 24 financial condition the following table sets forth the major balance sheet accounts of the company at april 30 , 2012 , 2011 and 2010 ( in thousands ) : replace_table_token_6_th historically , finance receivables tended to grow slightly faster than revenue growth . this was historically due , to a large extent , to an increasing weighted average term necessitated by increases in the average retail sales price . the following table shows receivables growth compared to revenue growth . the average term for installment sales contracts at april 30 , 2012 was 28.1 months compared to 27.3 months at april 30 , 2011 and collections were relatively constant between fiscal years . charge-offs were slightly higher during fiscal 2011 and fiscal 2012 contributing to the growth in receivables being less than revenue growth . revenue growth results from same store revenue growth and the addition of new dealerships . with the company benefiting from expected stronger collections on an annual basis , it is anticipated going forward that growth in finance receivables will approximate overall revenue growth on an annual basis . story_separator_special_tag replace_table_token_7_th in fiscal 2012 , inventory increased 15.5 % ( $ 3.6 million ) as compared to revenue growth of 13.4 % . the increase resulted primarily from ( i ) slightly higher overall price increases for the type of vehicle the company purchases for resale , ( ii ) the company 's desire to offer a broad mixture and increased quantities of vehicles to adequately serve its expanding retail customer base and ( iii ) new dealership openings . the company will continue to manage inventory levels in the future to ensure adequate supply of vehicles , in volume and mix , and to meet sales demand . property and equipment , net increased $ 2.0 million in fiscal 2012 as compared to fiscal 2011 as the company incurred expenditures related to new dealerships as well as to refurbish and expand a number of existing locations . accounts payable and accrued liabilities increased $ 1.6 million at april 30 , 2012 as compared to april 30 , 2011 due primarily to increased payables related to higher inventory levels and other volume related expenditures as well as increased compensation payable as a result of the increased profit levels . the unearned portion of the payment protection plan product increased $ 1.8 million in fiscal 2012 over fiscal 2011 , primarily resulting from the increased sales of the payment protection plan product . 25 deferred tax liabilities , net increased $ 3.3 million at april 30 , 2012 as compared to april 30 , 2011 primarily due to increased finance receivables and increased book/tax difference on fixed assets due to bonus depreciation , partially offset by deferred tax assets related to the increased accrued liabilities and increased share based compensation . 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 2012 the company had a $ 30.4 million net increase in total debt to help finance receivables growth of $ 34.5 million , capital expenditures of $ 4.5 million and common stock repurchases of $ 39.4 million . 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_8_th 26 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 . 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 , capital expenditures and common stock repurchases exceed income from operations ; generally the company 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 2012 compared to fiscal 2011 were positively impacted by ( i ) higher sales volumes and increased interest income , ( ii ) inventory acquired in both repossessions and payment protections plan claims , ( iii ) an increase in the change of accounts payable and accrued liabilities , offset by the net effect of other components of the change in finance receivables including originations and collections . finance receivables , net , increased by $ 28.9 million during fiscal 2012. cash flows from operations in fiscal 2011 compared to fiscal 2010 were positively impacted by ( i ) higher sales volumes and increased interest income , ( ii ) a positive impact from current and deferred income taxes , ( iii ) inventory acquired in both repossessions and payment protections plan claims , offset by the net effect of other components of the change in finance receivables including originations and collections , as well as a decrease in the change of accounts payable and accrued liabilities . finance receivables , net , increased by $ 16.9 million during fiscal 2011. the purchase price the company pays for a vehicle has a significant effect on liquidity and capital resources . several external factors can negatively affect the purchase cost of vehicles . decreases in the overall volume of new car sales , particularly domestic brands , leads to decreased supply in the used car market . also , the expansion of the customer base due in part to constrictions in consumer credit , as well as general economic conditions , can have an overall effect on the demand for the type of vehicle the company purchases for resale . 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 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 payment must remain affordable within their individual budgets . the company has seen increases in the purchase cost of vehicles and resulting increases in selling prices and terms over the last few years . management does expect continuing increases in vehicle purchase costs on a going-forward basis . the company has experienced recent increases in average vehicle purchase costs which can be attributed to the continuing tight supply of vehicles . management also expects the availability of consumer credit within the automotive industry to continue to be constricted when compared to recent history and that this will continue to result in overall increases in demand for most , if not all , of the vehicles the company purchases for resale .
| credit losses in fiscal 2008 were 22 % of sales as the company continued to focus on operational initiatives , including credit and collections efforts . in fiscal 2009 , the company saw the benefit of continuing operational improvements despite negative macro-economic factors and experienced a reduction in credit losses to 21.5 % of sales . improvements in credit losses continued into fiscal 2010 as the provision for credit losses was 20.2 % of sales for the year ended april 30 , 2010. the company experienced credit losses of 20.8 % of sales for fiscal 2011 and 21.1 % of sales for fiscal 2012. in fiscal 2011 the higher credit losses primarily related to credit losses during the second fiscal quarter as the company did experience some modest operational difficulties . in fiscal 2012 the company experienced slightly higher credit losses ; however , the losses were within the range of credit losses that the company targets annually . credit results have been acceptable and have been consistent over the past several years , and the overall quality of the portfolio at april 30 , 2012 was good based on performance factors underlying the outstanding loan pools . as a result , management reduced the allowance for credit losses at april 30 , 2012 to 21.5 % from 22.0 % at april 30 , 2011. the company continues to make improvements its business practices , including better underwriting and better collection procedures . these improvements in business practices have led to consistent collection results . negative macro-economic issues do not always lead to higher credit loss results for the company because the company provides basic affordable transportation which in many cases is not a discretionary expenditure for customers . the company has installed a proprietary credit scoring system which enables the company to monitor the quality of contracts on the front end . corporate office personnel monitor proprietary credit scores and work with dealerships when the distribution of scores falls outside of prescribed thresholds . additionally , the company has increased its investment in the
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as of november 30 , 2010 , the key assumptions used in the discounted cash flow analyses are as follows : revenue growth rate 1.7 % - 4.0 % market revenue shares at maturity 0.5 % - 43.5 % operating income margins at maturity 31.8 % - 41.5 % discount rate 9.5 % if we had made different assumptions or used different estimates , the fair value of our licenses could have been materially different . if actual results are different from assumptions or estimates used in the discounted cash flow analyses , we may incur impairment losses in the future and they may be material . cash flows and operating income are dependent on advertising revenues . advertising revenues are influenced by competition from other radio stations and media , demographic changes , and changes in government rules and regulations . in addition , advertising is generally considered a discretionary expense meaning advertising expenditures tend to decline disproportionately during economic downturns as compared to other types of business expenditures . the discounted cash flow analyses reflect a revenue growth rate of 3.0 % in 2011 and 3.5 % to 4 % in 2012. if actual results are lower , we may incur impairment losses in the future and they may be material . the carrying amount of fcc broadcasting licenses for each reporting unit and the percentage by which fair value exceeded carrying value is as follows : replace_table_token_4_th as a result of our annual test during the fourth quarter of 2010 , we recorded no impairment losses related to our fcc broadcasting licenses . however , there can be no assurance that impairments of our fcc broadcasting licenses will not occur in future periods . 22 goodwill . as of december 31 , 2010 , goodwill with an aggregate carrying amount of $ 13.6 million represented 5.4 % of our total assets . we are required to test our goodwill for impairment on an annual basis , or more frequently if events or changes in circumstances indicate that our goodwill might be impaired . goodwill impairment is determined using a two-step process which is performed as of december 31. the first step involves a comparison of the estimated fair value of each of our reporting units to their carrying amount , including goodwill . for the purpose of testing our goodwill for impairment , we have identified our market clusters as our reporting units . if the estimated fair value of a reporting unit exceeds its carrying amount , goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary . if the carrying amount of a reporting unit exceeds its estimated fair value , then the second step of the goodwill impairment test must be performed . we used the average of ( i ) a multiple ranging from 9.1 to 14.1 times projected operating income for each market cluster ; and ( ii ) a discounted cash flow analysis for each market cluster to determine the fair value of each reporting unit . radio stations are generally sold on the basis of a multiple of projected operating income . if we had made different assumptions or used different estimates , the fair value of our reporting units could have been materially different . the key assumptions used in the discounted cash flow analyses are as follows : revenue growth rate 1.4 % - 8.9 % operating income margins 13.9 % - 53.9 % discount rate 9.5 % the carrying amount of goodwill for each reporting unit and the percentage by which fair value exceeded carrying amount after step 1 is as follows : replace_table_token_5_th the second step of the goodwill impairment test compares the implied fair value of the reporting unit 's goodwill with its goodwill carrying amount to measure the amount of impairment , if any . the implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination . in other words , the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit ( including any unrecognized intangible assets ) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid . if the carrying amount of the reporting unit 's goodwill exceeds the implied fair value of that goodwill , an impairment is recognized in an amount equal to that excess . the fair value of each reporting unit determined in step 1 will be used as the implied purchased price paid for the reporting unit in step 2. as the estimated fair value of each reporting unit exceeded its carrying amount after step 1 , completion of step 2 was not required . as a result of our annual test during the fourth quarter of 2010 , we recorded no impairment losses related to our goodwill . however , there can be no assurance that impairments of our goodwill will not occur in future periods . property and equipment . we are required to assess the recoverability of our property and equipment whenever an event has occurred that may result in an impairment loss . if such an event occurs , we will compare estimates of related future undiscounted cash flows to the carrying amount of the asset . if the future undiscounted 23 cash flow estimates are less than the carrying amount of the asset , we will reduce the carrying amount to the estimated fair value . the determination of when an event has occurred and estimates of future cash flows and fair value all require management judgment . the use of different assumptions or estimates may result in alternative assessments that could be materially different . story_separator_special_tag we did not identify any events that may have resulted in an impairment loss on our property and equipment in 2010. there can be no assurance that impairment of our property and equipment will not occur in future periods . accounts receivable . we continually evaluate our ability to collect our accounts receivable . our ongoing evaluation includes review of specific accounts at our radio stations , the current financial condition of our customers and our historical write-off experience . this ongoing evaluation requires management judgment and if we had made different assumptions about these factors , the allowance for doubtful accounts could have been materially different . recent accounting pronouncements recent accounting pronouncements are described in note 2 to the accompanying financial statements . story_separator_special_tag 25 we believe that we will have sufficient liquidity and capital resources to permit us to provide for our liquidity requirements and meet our financial obligations for the next twelve months . however , poor financial results , unanticipated acquisition opportunities or unanticipated expenses could give rise to defaults under our credit facility , additional debt servicing requirements or other additional financing or liquidity requirements sooner than we expect and we may not secure financing when needed or on acceptable terms . our ability to reduce our total debt ratio , as defined by our credit agreement , by increasing operating cash flow and or decreasing long-term debt will determine how much , if any , of the remaining commitments under the revolving portion of our credit facility will be available to us in the future . poor financial results or unanticipated expenses could result in our failure to maintain or lower our total leverage ratio and we may not be permitted to make any additional borrowings under the revolving portion of our credit facility . the following summary table presents a comparison of our capital resources for the years ended december 31 , 2009 and 2010 with respect to certain of our key measures affecting our liquidity . the changes set forth in the table are discussed in greater detail below . this section should be read in conjunction with the financial statements and notes to financial statements included in item 8 of this report . replace_table_token_7_th net cash provided by operating activities . net cash provided by operating activities increased by $ 4.8 million during the year ended december 31 , 2010 compared to the same period in 2009 primarily due to a $ 5.5 million decrease in cash paid for station operating expenses . this increase was partially offset by a $ 0.5 million decrease in cash receipts from the sale of advertising airtime , and a $ 0.5 million increase in cash paid for corporate general and administrative expenses . net cash provided by ( used in ) investing activities . net cash used in investing activities in the year ended december 31 , 2010 was primarily due to cash payments for capital expenditures of $ 1.2 million . net cash provided by investing activities for the same period in 2009 was primarily due to cash proceeds of $ 15.3 million from the sale of assets in las vegas , nevada , which were partially offset by cash payments for capital expenditures of $ 1.0 million . net cash used in financing activities . net cash used in financing activities in the year ended december 31 , 2010 was primarily due to repayments of $ 9.8 million under our credit facility and payments of $ 0.6 million of loan fees related to the amended credit facility . net cash used in financing activities for the same period in 2009 was primarily due to repayments of $ 22.7 million under our credit facility and payments of $ 0.8 million of loan fees related to the amended credit facility . credit facility . as of february 28 , 2011 , the outstanding balance of our credit facility was $ 142.0 million . as of december 31 , 2010 , the credit facility consists of a revolving credit loan with a maximum commitment of $ 65.0 million and a term loan with a remaining balance of $ 87.2 million . as of december 31 , 2010 , we had $ 10.2 million in remaining commitments available under the revolving credit loan of our credit facility . the revolving credit loan includes a $ 5.0 million sub-limit for letters of credit which may not be increased . at our election , the revolving credit loan and term loan may bear interest at either the base rate or libor plus a margin that is determined by our debt to operating cash flow ratio . the base rate is equal to the higher of the prime rate , the federal funds effective rate , or the one month libor quoted rate plus 1.0 % . interest on base rate loans is 26 payable quarterly through maturity . interest on libor loans is payable on the last day of the selected libor period and , if the selected period is longer than three months , every three months after the beginning of the libor period . the revolving credit loan and term loan carried interest , based on libor , at 4.2747 % and 4.0625 % as of december 31 , 2009 and 2010 , respectively , and mature on june 30 , 2015. the scheduled reductions in the amount available under the revolving credit loan may require principal repayments if the outstanding balance at that time exceeds the maximum amount available under the revolving credit loan . as of december 31 , 2010 , the scheduled repayments of the credit facility for the next five years , and thereafter are as follows : replace_table_token_8_th the credit agreement requires us to comply with certain financial covenants which are defined in the credit agreement . as of december 31 , 2010 , these financial covenants included : consolidated total debt ratio .
| the decrease in miami-fort lauderdale was primarily due to the non-renewal of the miami dolphins football team program rights agreement which incurred station operating expenses of $ 3.3 million during the during the year ended december 31 2009. the radio station assets sold in las vegas in august 2009 incurred station operating expenses of $ 1.4 million during the year ended december 31 , 2009. this decrease was partially offset by an increase at our remaining radio stations in that market . 24 corporate general and administrative expenses . corporate general and administrative expenses during the year ended december 31 , 2010 were comparable to the same period in 2009. net gain on sale or disposal of assets . net gain on sale or disposal of assets includes a $ 1.7 million gain related to the sale of substantially all of the assets used in the operation of radio station kbet-am and certain assets used in the operation of radio stations kcye-fm and kfrh-fm in las vegas , nevada to silver state broadcasting llc on august 25 , 2009. loss on extinguishment of long-term debt . in connection with the amendment to our credit agreement during the first quarter of 2009 , we recorded a $ 0.5 million loss on extinguishment of long-term debt during the year ended december 31 , 2009. income tax expense . our effective tax rate was approximately 53 % in 2009 and 40 % in 2010 , which differ from the federal statutory rate of 34 % due to the effect of state income taxes and certain expenses that are not deductible for tax purposes . the effective tax rate in 2009 also includes additional tax expense due to restricted stock vesting at stock prices lower than the grant-date stock prices of those awards and reflects a $ 0.4 million increase to the valuation allowance for unrealized losses on investments which we have determined , more likely than not , that such losses will not be utilized . net income . net income for the year ended december 31 , 2010 increased $ 4.5 million as a result of the factors described
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income from discontinued operations , net of tax , was $ 42 million during 2015. in the fourth quarter of 2015 , we reached settlements with two entities that controlled guaranteed leases representing approximately 46 percent of the recorded accrual at that time . under the settlement terms , these entities have subrogated to us their claims against the canada subsidiaries . the settlement amounts were materially consistent with our previously recorded accruals . as part of a march 2016 settlement between the canada subsidiaries and all of their former landlords , we have agreed to subordinate a portion of our intercompany claims and make certain cash contributions to the estate in exchange for a full release from obligations under guarantees of certain leases . this agreement remains subject to creditor and court approval . the financial impact of this agreement is materially consistent with amounts recorded in our financial statements . for more information about our canada exit , see note 7 of the financial statements . 22 reconciliation of non-gaap financial measures to gaap measures to provide additional transparency , we have disclosed non-gaap adjusted diluted earnings per share from continuing operations ( adjusted eps ) . this metric excludes the impact of the 2015 sale of our pharmacy and clinic businesses , the 2013 sale of our u.s. consumer credit card receivables portfolio , losses on early retirement of debt , net expenses related to the 2013 data breach , and other matters presented below . we believe this information is useful in providing period-to-period comparisons of the results of our continuing operations . this measure is not in accordance with , or an alternative to , generally accepted accounting principles in the united states ( gaap ) . the most comparable gaap measure is diluted earnings per share from continuing operations . adjusted eps from continuing operations should not be considered in isolation or as a substitution for analysis of our results as reported under gaap . other companies may calculate non-gaap adjusted eps from continuing operations differently than we do , limiting the usefulness of the measure for comparisons with other companies . prior year amounts have been revised to present adjusted eps on a continuing operations basis . replace_table_token_14_th note : the sum of the non-gaap adjustments may not equal the total adjustment amounts due to rounding . ( a ) for 2015 , includes the gain on the pharmacies and clinics transaction . refer to note 6 of the financial statements for more information . for 2013 , includes the gain on receivables transaction . refer to note 9 of the financial statements for more information . ( b ) refer to note 8 of the financial statements . ( c ) refer to note 19 of the financial statements . ( d ) for 2015 , represents impairments related to our decision to wind down certain noncore operations . refer to note 16 of the financial statements for more information . 2014 includes impairments of $ 16 million related to undeveloped land in the u.s. and $ 13 million of expense related to converting co-branded card program to mastercard . 2013 includes a $ 23 million workforce-reduction charge primarily related to severance and benefits costs , a $ 22 million charge related to part-time team member health benefit changes , and $ 19 million in impairment charges related to certain parcels of undeveloped land . 23 we have also disclosed after-tax return on invested capital for continuing operations ( roic ) , which is a ratio based on gaap information , with the exception of adjustments made to capitalize operating leases . operating leases are capitalized as part of the roic calculation to control for differences in capital structure between us and our competitors . we believe this metric provides a meaningful measure of the effectiveness of our capital allocation over time . other companies may calculate roic differently than we do , limiting the usefulness of the measure for comparisons with other companies . replace_table_token_15_th replace_table_token_16_th after-tax return on invested capital 16.0 % ( f ) 12.4 % ( a ) represents the add-back to operating income driven by the hypothetical capitalization of our operating leases , using eight times our trailing twelve months rent expense and an estimated interest rate of six percent . ( b ) see the following reconciliation of capitalized operating leases table for the adjustments to our gaap total rent expense to obtain the hypothetical capitalization of operating leases and related operating lease interest . ( c ) calculated using the effective tax rate for continuing operations , which was 32.5 percent and 33.0 percent for the trailing twelve months ended january 30 , 2016 and january 31 , 2015 . ( d ) calculated as eight times our trailing twelve months rent expense . ( e ) average based on the invested capital at the end of the current period and the invested capital at the end of the prior period . ( f ) excluding the net gain on the sale of our pharmacy and clinic businesses , roic was 13.9 percent for the trailing twelve months ended january 30 , 2016. capitalized operating lease obligations and operating lease interest are not in accordance with , or an alternative for , gaap . the most comparable gaap measure is total rent expense . capitalized operating lease obligations and operating lease interest should not be considered in isolation or as a substitution for analysis of our results as reported under gaap . replace_table_token_17_th 24 analysis of financial condition liquidity and capital resources our period-end cash and cash equivalents balance increased to $ 4,046 million from $ 2,210 million in 2014 , primarily reflecting the proceeds from the sale of the pharmacy and clinic businesses . due to the timing of the sale late in 2015 , we did not fully deploy the net proceeds by the end of 2015. short-term investments of $ 3,008 million and $ 1,520 million were included in cash and cash equivalents at the end of 2015 and 2014 , respectively . story_separator_special_tag our investment policy is designed to preserve principal and liquidity of our short-term investments . this policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less . we also place dollar limits on our investments in individual funds or instruments . cash flows our 2015 operations were funded by internally generated funds . operating cash flow provided by continuing operations was $ 5,140 million in 2015 compared with $ 5,131 million in 2014 . proceeds from the sale of our pharmacy and clinic businesses to cvs are included in investing cash flows provided by continuing operations . these cash flows , combined with period year-end cash position , allowed us to invest in the business , pay dividends and repurchase shares under our share repurchase program . inventory year-end inventory was $ 8,601 million , compared with $ 8,282 million in 2014 . the increase was due to investments to drive growth in certain merchandise categories , improve in-stocks , and earlier receipts of certain merchandise . share repurchases in june 2015 , our board of directors authorized a $ 5 billion expansion of our existing share repurchase program to $ 10 billion . under this program , we have repurchased 94.6 million shares of common stock through january 30 , 2016 , at an average price of $ 69.57 , for a total investment of $ 6.6 billion . during 2015 , we repurchased 44.7 million shares of our common stock , for a total investment of $ 3,441 million ( $ 77.07 per share ) , including shares repurchased under accelerated share repurchase agreements . we did not repurchase any shares on the open market during 2014. however , as described in note 25 to the financial statements , we reacquired 0.8 million shares upon the noncash settlement of prepaid forward contracts related to nonqualified deferred compensation plans . dividends we paid dividends totaling $ 1,362 million in 2015 and $ 1,205 million in 2014 , an increase of 13.0 percent . we declared dividends totaling $ 1,378 million ( $ 2.20 per share ) in 2015 , a per share increase of 10.6 percent over 2014 . we declared dividends totaling $ 1,271 million ( $ 1.99 per share ) in 2014 , a per share increase of 20.6 percent over 2013 . we have paid dividends every quarter since our 1967 initial public offering , and it is our intent to continue to do so in the future . short-term and long-term financing our financing strategy is to ensure liquidity and access to capital markets , to manage our net exposure to floating interest rate volatility , and to maintain a balanced spectrum of debt maturities . within these parameters , we seek to minimize our borrowing costs . our ability to access the long-term debt and commercial paper markets has provided us with ample sources of liquidity . our continued access to these markets depends on multiple factors , including the condition of debt capital markets , our operating performance , and maintaining strong credit ratings . as of january 30 , 2016 , our credit ratings were as follows : credit ratings moody 's standard and poor 's fitch long-term debt a2 a a- commercial paper p-1 a-1 f2 25 if our credit ratings were lowered , our ability to access the debt markets , our cost of funds , and other terms for new debt issuances could be adversely impacted . each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same as described above . in 2015 , we funded our peak holiday sales period working capital needs through internally generated funds . in 2014 , we funded our peak holiday sales period working capital needs through internally generated funds and the issuance of commercial paper . replace_table_token_18_th we have additional liquidity through a committed $ 2.25 billion revolving credit facility that expires in october 2018. no balances were outstanding at any time during 2015 , 2014 , or 2013 under this facility . most of our long-term debt obligations contain covenants related to secured debt levels . in addition to a secured debt level covenant , our credit facility also contains a debt leverage covenant . we are , and expect to remain , in compliance with these covenants . additionally , at january 30 , 2016 , no notes or debentures contained provisions requiring acceleration of payment upon a credit rating downgrade , except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both ( i ) a change in control and ( ii ) our long-term credit ratings are either reduced and the resulting rating is non-investment grade , or our long-term credit ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is non-investment grade . we believe our sources of liquidity will continue to be adequate to maintain operations , finance anticipated expansion and strategic initiatives , fund obligations incurred as a result of our exit from canada , pay dividends , and execute purchases under our share repurchase program for the foreseeable future . our exit from canada increased our after-tax cash flows beginning in 2015. we continue to anticipate ample access to commercial paper and long-term financing . capital expenditures replace_table_token_19_th capital expenditures decreased in 2015 from the prior year as we opened fewer large-format stores and realized efficiency gains in technology , partially offset by increased guest experience and supply chain investments . capital expenditures were less than our initial expectations reflecting efficiency gains in technology combined with the impact of project timing shifts as we aligned investments against specific initiatives to drive growth , invest in our supply chain , and build out our omnichannel capabilities .
| a reconciliation of non-gaap financial measures to gaap measures is provided on page 23. we report after-tax return on invested capital ( roic ) from continuing operations as we believe roic provides a meaningful measure of the effectiveness of our capital allocation over time . for the trailing twelve months ended january 30 , 2016 , roic was 16.0 percent , compared with 12.4 percent for the trailing twelve months ended january 31 , 2015 . excluding the net gain on the sale of our pharmacy and clinic businesses , roic was 13.9 percent for the trailing twelve months ended january 30 , 2016. a reconciliation of roic is provided on page 24. pharmacies and clinics transaction in december 2015 , we closed the previously announced sale of our pharmacy and clinic businesses to cvs for cash consideration of $ 1.9 billion . cvs now operates the pharmacy and clinic businesses in our stores under a perpetual operating agreement , subject to termination in limited circumstances . no profit-sharing arrangement exists , but cvs will make an annual , inflation-adjusted occupancy-related payment to us , starting at $ 20 million to $ 25 million in the first year of the agreement . we also entered into a development agreement with cvs through which we may jointly develop small-format stores . in connection with the sale , we recognized a pretax gain of $ 620 million , which we recorded outside of segment results and excluded from adjusted eps . we also recorded deferred income of $ 694 million , which we will amortize into income evenly over the 23-year weighted average remaining accounting useful life of our stores . during 2015 , we used a portion of the $ 1.9 billion cash consideration to repurchase shares of our common stock and settle approximately $ 200 million of retained pharmacy and clinic net liabilities . we expect to use the remaining proceeds to pay approximately $ 500
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in august 2018 , alexion initiated a phase 1 trial to study a next-generation subcutaneous formulation of alxn1210 co-administered with enhanze technology , triggering a $ 5.0 million milestone payment . in july 2018 , we announced the fda accepted a biologics license application ( bla ) from genentech , a member of the roche group , for a subcutaneous version of herceptin in its fda-approved breast cancer indications . this is the same co-formulation with enhanze technology marketed under the herceptin sc brand in many countries outside the u.s. in june 2018 , roche initiated a global phase 3 study of a fixed-dose combination of perjeta ® ( pertuzumab ) and herceptin ( trastuzumab ) with enhanze technology in patients with her2-positive early breast cancer . this study follows supportive phase 1 results from the same combination shared at the 2017 san antonio breast cancer symposium . in january 2018 , roche initiated a phase 1 study for an undisclosed target with enhanze technology , triggering a $ 1.0 million milestone payment . clinical trials in november 2018 , the fda agreed to our request to change the primary endpoint of the halo-301 study from two primary endpoints of progression-free survival ( pfs ) and overall survival ( os ) to a single primary endpoint of os . as a result , the previously planned interim analysis for the pfs endpoint will not be conducted . in january 2019 , the fda completed their review of the submitted clinical study protocol amendment and statistical analysis plan with no additional questions or comments . the study completed enrollment with approximately 500 patients by the end of 2018. in march 2018 , the u.s. patent and trademark office granted us a patent covering the combination of pegph20 , abraxane and gemcitabine . this is the combination being studied in our halo-301 registration trial in pancreas cancer . following this action , we obtained exclusive rights to the claimed combination through march 2033. the same application is pending or has been issued in multiple countries outside of the united states . in january 2018 , the phase 1b portion of the study of halaven ( eribulin ) with pegph20 in her2-negative metastatic breast cancer closed enrollment . as a result of an eisai portfolio decision , no further clinical development is planned on 35 the phase 2 portion of the study . results from this study were presented at the 2018 annual meeting of the european society of medical oncology ( esmo ) . story_separator_special_tag style= '' line-height:120 % ; padding-top:6px ; text-align : center ; text-indent:32px ; font-size:10pt ; '' > replace_table_token_7_th research and development expenses relating to our pegph20 program increased in 2018 by 6 % compared to 2017 , primarily due to increased clinical trial activities related to the halo-301 study and the halo 110-101 study , partially offset by decreased clinical trial activities related to the halo-202 study , the halo 107-101 study , and the eisai clinical collaboration . research and development expenses relating to our pegph20 program increased in 2017 by 15 % compared to 2016 , primarily due to increased clinical trial activities . we expect these expenses to continue to increase in the near term . research and development expenses relating to our enhanze collaborations and our rhuph20 platform in 2018 decreased by 10 % compared to 2017 , primarily due to a decrease in expenses incurred to establish an additional contract manufacturing facility , which was completed in the second quarter of 2017 , and a decrease in manufacturing inventory with no alternative use , partially offset by increased costs to support new partners and targets related to our enhanze collaboration activity . research and development expenses relating to our enhanze collaborations and our rhuph20 platform in 2017 decreased by 37 % compared to 2016 , primarily due to a decrease in manufacturing expenses related to the new contract manufacturing facility . we expect research and development expenses relating to our enhanze collaborations and our rhuph20 platform to increase in the near term as we support our collaboration partners advancing through clinical development and preparation for commercialization . the rhuph20 platform includes research , development and manufacturing expenses related to our proprietary rhuph20 enzyme . when these expenses were incurred , they were not designated to a specific program . research and development expenses related to other programs decreased in 2018 by 74 % compared to 2017 , and decreased in 2017 by 39 % compared to 2016 , primarily due to a decrease in preclinical development of hti-1511 and peg-ada2 . selling , general and administrative – selling , general and administrative ( sg & a ) expenses increased in 2018 compared to 2017 by $ 7.0 million , or 13 % , primarily due to increases in market research expense as we prepare for a potential commercial launch of pegph20 and compensation expense including stock compensation . sg & a expenses increased in 2017 compared to 37 2016 by $ 8.0 million , or 17 % , primarily due to increases in compensation expense including stock compensation . we expect sg & a expenses to increase in future periods as our operations expand and we prepare for commercial launch . interest expense – interest expense included interest expense and amortization of the debt discount related to the long-term debt . interest expense decreased by $ 3.9 million in 2018 compared to 2017 primarily due to a decrease in the royalty-backed loan balance . interest expense increased by $ 2.0 million in 2017 as compared to 2016 , primarily due to interest expense incurred on the royalty-backed loan we received in january 2016. income taxes – income tax expense was $ 0.5 million in 2018 compared to income tax benefit of $ 1.4 million in 2017 . the 2018 amount was comprised primarily of state income tax while the 2017 benefit was primarily comprised of u.s. federal alternative minimum tax expense in the amount of $ 4.1 million offset by a u.s federal alternative minimum tax credit of $ 5.5 million . story_separator_special_tag income tax expense of $ 1.2 million in 2016 comprised of u.s. federal alternative minimum tax . the u.s. federal amt was eliminated via the tax cuts and jobs act that was enacted on december 22 , 2017. the amt credit carryovers will be used to offset regular tax liability for any taxable year beginning after 2017. if not utilized before 2022 , any remaining amt credit carryforward amount is fully refundable . the remaining amt credit carryforward of $ 3.0 million was recognized as a deferred tax asset at december 31 , 2018 as realization is certain . for the years ended december 31 , 2018 , 2017 and 2016 , we generated taxable income in the u.s. , which was partially offset by utilizing net operating losses carried forward from earlier years . liquidity and capital resources our principal sources of liquidity are our existing cash , cash equivalents and available-for-sale marketable securities . as of december 31 , 2018 , we had cash , cash equivalents and marketable securities of $ 354.5 million . we will continue to have significant cash requirements to support product development activities . the amount and timing of cash requirements and cash on hand will depend on the progress and success of our clinical development programs , regulatory and market acceptance , the resources we devote to research and commercialization activities and the achievement of various milestones and royalties under our existing collaborative agreements . we believe that our current cash , cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months . we expect to fund our operations going forward with existing cash resources , anticipated revenues from our existing collaborations and cash that we may raise through future transactions . we may raise cash through any one of the following financing vehicles : ( i ) the public offering of securities ; ( ii ) new collaborative agreements ; ( iii ) expansions or revisions to existing collaborative relationships ; ( iv ) private financings ; ( v ) other equity or debt financings ; and or ( vi ) monetizing assets . in february 2017 , we filed an automatic shelf registration statement on form s-3 ( registration no . 333-216315 ) with the sec , which allow us , from time to time , to offer and sell equity , debt securities and warrants to purchase any of such securities , either individually or in units . in may 2017 , we completed an underwritten public offering pursuant to which we sold 11.5 million shares of common stock , generating $ 134.9 million in net proceeds , after deducting underwriting discounts and commissions and other offering expenses . we may , in the future , offer and sell additional equity , debt securities and warrants to purchase any of such securities , either individually or in units to raise capital to fund the continued development of our product candidates , the commercialization of our products or for other general corporate purposes . our existing cash , cash equivalents and marketable securities may not be adequate to fund our operations until we become profitable , if ever . we can not be certain that additional financing will be available when needed or , if available , financing will be obtained on favorable terms . if we are unable to raise sufficient funds , we may need to delay , scale back or eliminate some or all of our research and development programs , delay the launch of our product candidates , if approved , and or restructure our operations . if we raise additional funds by issuing equity securities , substantial dilution to existing stockholders could result . if we raise additional funds by incurring debt financing , the terms of the debt may involve significant cash payment obligations , the issuance of warrants that may ultimately dilute existing stockholders when exercised and covenants that may restrict our ability to operate our business . 38 cash flows operating activities net cash used in operations was $ 49.5 million in 2018 compared to net cash provided by operations of $ 134.1 million in 2017 . the increase in utilization of cash in operations was mainly due to lower net income as a result of reduced revenues combined with an increase in working capital for the year ended december 31 , 2018 compared to the prior year . net cash provided by operations was $ 134.1 million in 2017 compared to net cash used in operations of $ 50.4 million in 2016. the increase in cash provided by operations was mainly due to an increase in operating income driven by license payments and milestones achieved and changes in working capital for the year ended december 31 , 2017 compared to the prior year . investing activities net cash provided by investing activities was $ 2.5 million in 2018 compared to net cash used in investing activities of $ 163.7 million in 2017 . the increase in net cash provided by investing activities was primarily due to an increase in proceeds from maturities of marketable securities and less purchases of marketable securities . net cash used in investing activities was $ 163.7 million in 2017 compared to net cash used in investing activities of $ 76.8 million in 2016. the increase in net cash used in investing activities was primarily due to net purchases of marketable securities using cash provided by operating and financing activities .
| revenues under collaborative agreements – revenues under collaborative agreements were as follows ( in thousands ) : replace_table_token_6_th revenue from license fees decreased in 2018 , compared to 2017 due to $ 41.0 million in upfront license fees and milestone revenue for the roche , bms and alexion collaborations recognized in 2018 , compared to $ 186.4 million in upfront license fees 36 and milestone revenue for the roche , bms , alexion and janssen collaborations recognized in 2017. in 2016 , we recognized $ 15.5 million in license fee and milestone revenue in connection with the lilly , abbvie and pfizer collaborations . revenue from upfront licenses fees , license fees for the election of additional targets , license maintenance fees and other license fees and event-based payments vary from period to period based on our enhanze collaboration activity . we expect these revenues to continue to fluctuate in future periods based on our collaborators ' ability to meet various clinical and regulatory milestones set forth in such agreements and our abilities to obtain new collaborative agreements . revenue from reimbursements for research and development services decreased in 2018 compared to 2017 , mainly due to a decrease in services provided to roche related to the validation of a new manufacturing facility , which was was completed in the second quarter of 2017 , combined with a decrease in services provided to janssen and baxalta . research and development services rendered by us on behalf of our collaborators are at the request of the collaborators ; therefore , the amount of future revenues related to reimbursable research and development services is uncertain . cost of product sales – cost of product sales were $ 10.1 million in 2018 compared to $ 31.2 million in 2017 and $ 33.2 million in 2016 . the decrease of $ 21.1 million in cost of product sales in 2018 compared to 2017 and the decrease of $ 2.0 million in 2017 compared to 2016 were mainly due to a decrease in sales of bulk rhuph20 to roche and baxalta . there were $ 2.6 million in costs of bulk rhuph20 and enhanze drug product sales
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priced capital that was used primarily for share repurchases and debt reduction . during the year , we closed on the sales of all or a portion of our interests in 30 east 40th street , 1055 washington boulevard , williamsburg terrace , 410 tenth avenue , 333 east 22nd street , 400 east 58th street , the retail condominium at 609 fifth avenue , and 315 west 33rd street - `` the olivia '' for total gross valuations of $ 1.7 billion . debt and preferred equity in 2019 and 2020 , in our debt and preferred equity portfolio we continued to focus on the origination of financings for owners , acquirers or developers of properties in new york city , while selectively selling certain investments , the proceeds of which were utilized to repurchase shares of common stock or for debt repayment . this investment strategy provides us with the opportunity to fill a need for additional debt financing , while achieving attractive risk adjusted returns to us on the investments and receiving a significant amount of additional information on the new york city real estate market . the typical investments made by us during 2019 and 2020 were to reputable owners or acquirers which have sizable equity subordinate to our last dollar of exposure . during 2020 , our debt and preferred equity activities included purchases and originations , inclusive of advances under future funding obligations , discount and fee amortization , and paid-in-kind interest , net of premium amortization , of $ 0.6 billion , and sales , redemption and participations of $ 1.0 billion . for descriptions of significant activities in 2020 , refer to `` part i , item 1. business - highlights from 2020 . '' critical accounting policies our discussion and analysis of financial condition and results of operations is based on our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods . we evaluate our assumptions and estimates on an ongoing basis . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements . investment in commercial real estate properties real estate properties are presented at cost less accumulated depreciation and amortization . costs directly related to the development or redevelopment of properties are capitalized . ordinary repairs and maintenance are expensed as incurred ; major replacements and betterments , which improve or extend the life of the asset , are capitalized and depreciated over their estimated useful lives . we recognize the assets acquired , liabilities assumed ( including contingencies ) and any noncontrolling interests in an acquired entity at their respective fair values on the acquisition date . the company classifies those leases under which the company is the lessee at lease commencement as finance or operating leases . leases qualify as finance leases if the lease transfers ownership of the asset at the end of the lease term , the lease grants an option to purchase the asset that we are reasonably certain to exercise , the lease term is for a major part of the remaining economic life of the asset , or the present value of the lease payments exceeds substantially all of the fair value of the asset . leases that do not qualify as finance leases are deemed to be operating leases . on the consolidated statements of operations , operating leases are expensed through operating lease rent while financing leases are expensed through amortization and interest expense . we incur a variety of costs in the development and leasing of our properties . after the determination is made to capitalize a cost , it is allocated to the specific component of a project that is benefited . determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment . the costs of land and building under development include specifically identifiable costs . the capitalized costs include , but are not limited to , pre-construction costs essential to the development of the property , development costs , construction costs , interest costs , real estate taxes , salaries and related costs and other costs incurred during the period of development . we consider a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements , but no later than one year after major 35 construction activity ceases . we cease capitalization on the portions substantially completed and occupied or held available for occupancy , and capitalize only those costs associated with the portions under construction . on a periodic basis , we assess whether there are any indications that the value of our real estate properties may be impaired or that their carrying value may not be recoverable . a property 's value is considered impaired if management 's estimate of the aggregate future cash flows ( undiscounted ) to be generated by the property is less than the carrying value of the property . to the extent impairment has occurred , the loss will be measured as the excess of the carrying amount of the property over the fair value of the property as calculated in accordance with asc 820. we also evaluate our real estate properties for impairment when a property has been classified as held for sale . story_separator_special_tag real estate assets held for sale are valued at the lower of their carrying value or fair value less costs to sell and depreciation expense is no longer recorded . see note 4 , `` properties held for sale and dispositions . '' investments in unconsolidated joint ventures we account for our investments in unconsolidated joint ventures under the equity method of accounting in cases where we exercise significant influence over , but do not control , these entities and are not considered to be the primary beneficiary . we consolidate those joint ventures that we control or which are variable interest entities ( each , a `` vie '' ) and where we are considered to be the primary beneficiary . in all these joint ventures , the rights of the joint venture partner are both protective as well as participating . unless we are determined to be the primary beneficiary in a vie , these participating rights preclude us from consolidating these vie entities . these investments are recorded initially at cost , as investments in unconsolidated joint ventures , and subsequently adjusted for equity in net income ( loss ) and cash contributions and distributions . equity in net income ( loss ) from unconsolidated joint ventures is allocated based on our ownership or economic interest in each joint venture and includes adjustments related to basis differences in accounting for the investment . when a capital event ( as defined in each joint venture agreement ) such as a refinancing occurs , if return thresholds are met , future equity income will be allocated at our increased economic interest . we recognize incentive income from unconsolidated real estate joint ventures as income to the extent it is earned and not subject to a clawback feature . distributions we receive from unconsolidated real estate joint ventures in excess of our basis in the investment are recorded as offsets to our investment balance if we remain liable for future obligations of the joint venture or may otherwise be committed to provide future additional financial support . we generally finance our joint ventures with non-recourse debt . in certain cases we may provide guarantees or master leases for tenant space , which terminate upon the satisfaction of specified circumstances or repayment of the underlying loans . we assess our investments in unconsolidated joint ventures for recoverability , and if it is determined that a loss in value of the investment is other than temporary , we write down the investment to its fair value . we evaluate our equity investments for impairment based on each joint ventures ' actual and projected cash flows . we do not believe that the values of any of our equity investments were impaired at december 31 , 2020. we may originate loans for real estate acquisition , development and construction ( `` adc loans '' ) where we expect to receive some of the residual profit from such projects . when the risk and rewards of these arrangements are essentially the same as an investor or joint venture partner , we account for these arrangements as real estate investments under the equity method of accounting for investments . otherwise , we account for these arrangements consistent with the accounting for our debt and preferred equity investments . lease classification lease classification for leases under which the company is the lessor is evaluated at lease commencement and leases not classified as sales-type leases or direct financing leases are classified as operating leases . leases qualify as sales-type leases if the contract includes either transfer of ownership clauses , certain purchase options , a lease term representing a major part of the economic life of the asset , or the present value of the lease payments and residual guarantees provided by the lessee exceeds substantially all of the fair value of the asset . additionally , leasing an asset so specialized that it is not deemed to have any value to the company at the end of the lease term may also result in classification as a sales-type lease . leases qualify as direct financing leases when the present value of the lease payments and residual value guarantees provided by the lessee and unrelated third parties exceeds substantially all of the fair value of the asset and collection of the payments is probable . revenue recognition rental revenue for operating leases is recognized on a straight-line basis over the term of the lease . rental revenue recognition commences when the leased space is available for its intended use by the lessee . to determine whether the leased space is available for its intended use by the lessee , management evaluates whether we are or the tenant is the owner of tenant improvements for accounting purposes . when management concludes that we are the owner of tenant improvements , rental revenue recognition begins when the tenant takes possession of the finished space , which is when such tenant improvements are substantially complete . in certain instances , when management concludes that we are not the owner of tenant improvements , rental revenue recognition begins when the tenant takes possession of or controls the space . 36 when management concludes that we are the owner of tenant improvements for accounting purposes , we record amounts funded to construct the tenant improvements as a capital asset . for these tenant improvements , we record amounts reimbursed by tenants as a reduction of the capital asset . when management concludes that the tenant is the owner of tenant improvements for accounting purposes , we record our contribution towards those improvements as a lease incentive , which is included in deferred costs , net on our consolidated balance sheets and amortized as a reduction to rental revenue on a straight-line basis over the term of the lease . the excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rents receivable on the consolidated balance sheets .
| ( 2 ) escalated rent includes base rent plus all additional amounts paid by the tenant in the form of real estate taxes , operating expenses , porters wage or a consumer price index ( cpi ) adjustment . ( 3 ) includes expiring space , relocating tenants and move-outs where tenants vacated . excludes lease expirations where tenants held over . ( 4 ) average starting office rent excluding new tenants replacing vacancies was $ 66.50 per rentable square feet for 672,280 rentable square feet . average starting office rent for office space ( leased and early renewals , excluding new tenants replacing vacancies ) was $ 67.09 per rentable square feet for 1,185,290 rentable square feet . investment income investment income decreased primarily as a result of a decrease in the weighted average balance and weighted average yield of our debt and preferred equity investment portfolio . for the years ended december 31 , 2020 and 2019 , the weighted average balance of our debt and preferred equity investment portfolio and the weighted average yield were $ 1.4 billion and 7.7 % , respectively , compared to $ 2.1 billion and 8.8 % , respectively . as of december 31 , 2020 , the debt and preferred equity investment portfolio had a weighted average term to maturity of 2.3 years excluding extension options . other income other income increased primarily due a ) to higher lease termination income in 2020 as compared with 2019 ( $ 48.6 million ) , b ) a settlement fee related to a previous real estate transaction ( $ 20.2 million ) , and c ) development fee income of ( $ 7.3 million ) in 2020 , offset by d ) a decrease in leasing commission income in 2020 as compared to 2019 ( $ 7.0 million ) . 40 property operating expenses property operating expenses decreased primarily due to a ) a reduction in variable operating expenses , such as utilities , cleaning , and security , at our same-store properties ( $ 24.3 million ) as a result of lower physical occupancy at the properties during the year related to covid-19 and b ) decreased operating expenses and
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the edge to cloud business segment , formerly and separately reported as professional engineering services and proprietary software , generates revenue from the sale and delivery of professional services as well as licensed proprietary software components . we also announced that we were closing our taiwan offices effective at the end of 2019. during the year we made a number of changes to our leadership team , mary haggard joined in may as vp of strategic partnerships , chris wheaton joined as cfo and steven gottlieb joined as vp of marketing . in november 2019 we promoted matthew inglis to vp of engineering and john luethe to vp of product management . also , in november 2019 , we announced that we would be adopting the iso-compliant engineering and project management processes developed in our uk operation . by year end our results showed that the one bsquare initiatives were working and our concerted focus on operational excellence was having a sustained impact . the fourth quarter of 2019 saw our third sequential quarter of continued improvement in the business . revenue was up in the partner solutions segment , margins were steady as a result of continued strength in the edge to cloud segment , and operating losses , net of restructuring were at their lowest levels since the fourth quarter of 2016. while we have not yet returned to profitability , we have stabilized the business and are reversing the trends . we are actively setting a foundation that will allow bsquare to more readily take advantage of growth opportunities as they become apparent . critical accounting judgments revenue recognition we recognize revenue when control of the promised goods or services is transferred to our customers , in an amount that reflects the consideration that we expect to receive in exchange for those goods or services . we generate all of our revenue from contracts with customers . embedded operating system software we sell embedded operating system software licenses based upon a customer purchase order , shipping a certificate of authenticity ( “ coa ” ) to satisfy this single performance obligation . these shipments are also subject to limited return rights ; historically , returns have averaged less than one-quarter of one percent . we recognize revenue from third-party products at the time of shipment when the customer accepts control of the coa . proprietary software we sell our proprietary software products to customers under a contract or by purchase order . our edge to cloud software contracts generally include professional services , a perpetual or term license and support and maintenance . in contracts with multiple performance obligations , we identify each performance obligation and evaluate whether the performance obligations are distinct within the context of the contract at contract inception . performance obligations that are not distinct at contract inception are combined . contracts that include software customization may result in the combination of the customization services with the software license as one distinct performance obligation . the transaction price is generally in the form of a fixed fee at contract inception . certain edge to cloud contracts also include variable consideration in the form of royalties earned when customers meet contractual volume thresholds . we allocate the transaction price to each distinct performance obligation based on the estimated standalone selling price for each performance obligation . we then look to how control of the software transfers to the customer in order to determine the timing of revenue recognition . in contracts that include customer acceptance , we recognize revenue when we have delivered the software and received customer acceptance . we recognize revenue from support and maintenance over the service delivery period . we recognize revenue from royalties in the period of usage . our software products generally do not include customization or modification services and are sold in the form of term licenses . these software licenses represent one distinct performance obligation . revenue is recognized when the software is delivered to the customer . 20 professional services we enter into contracts for professional services , including for our iot-related service offerings , that include software development and customization . we identify each performance obligation in our professional services contracts at contract inception . the contracts generally include project deliverables specified by each customer . the performance obligations in the contracts are generally combined into one deliverable . the contract pricing is either at stated billing rates per service hour and material costs or at a fixed amount . services provided under professional engineering contracts generally result in the transfer of control of the applicable deliverable over time . we recognize revenue on service contracts based on time and materials as we have the right to invoice . we recognize revenue on fixed fee contracts on the proportion of labor hours expended to the total hours expected to complete the contract performance obligation . certain professional service contracts include substantive customer acceptance provisions , in which case , we recognize revenue upon customer acceptance . the determination of the total labor hours expected to complete the performance obligations on fixed fee contracts involves significant judgment . we incorporate revisions to hour and cost estimates when the causal facts become known . in certain situations , when it is impractical for us to reasonably measure the outcome of a performance obligation , and where we anticipate that we will not incur a loss , an adjusted cost-based input method is used for revenue recognition . equal amounts of revenue and cost are recognized during the contract period , and profit is recognized when the project is completed and accepted . we measure our estimate of completion on fixed-price contracts , which in turn determines the amount of revenue we recognize , based primarily on actual hours incurred to date and our estimate of remaining hours necessary to complete the contract . story_separator_special_tag these estimates factor in such variables as the remaining tasks , the complexity of the tasks , the contracted quality of the software to be provided , the customer 's estimated delivery date , integration of third-party software and quality thereof and other factors . every fixed-price contract requires various approvals within our company , including by our chief executive officer if significant . this approval process takes into consideration several factors , including the complexity of engineering required . historically , our estimation processes related to fixed-price contracts have been accurate based on the information known at the time of the reporting of our results . however , percentage-of-completion estimates require significant judgment . during the year ended december 31 , 2019 , we delivered professional engineering services under three fixed-price service contracts . the estimated remaining labor hours and costs to complete these contracts represent management 's best estimates based on the facts and circumstances as of the filing of this report . if there are changes to the underlying facts and circumstances , we record the revisions to our calculations in the period the changes are noted . leases we lease office facilities , primarily under operating leases , which expire at various dates through 2027. these leases generally contain renewal options for a defined number of years at the then-fair market rental rate or rate stipulated in the lease agreement ; which the company has an option to exercise at the end of the initial lease term . we determine if an arrangement is a lease at inception . on our balance sheet , our office facility leases , with a lease term greater than 12-months , are included in right-of-use ( “ rou ” ) assets and related lease liabilities are included in the operating leases and operating leases , long-term statement line items . rou assets represent our right to use the underlying assets for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease agreements . operating lease rou assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the term of the lease . for leases that do not provide an implicit rate , we use an incremental borrowing rate based on information available at the commencement date to determine the present value of lease payments . we will use the implicit rate in the lease when readily determinable . the company accounts for its lease expense with free rent periods and step-rent provisions on a straight-line basis over the original term of the lease and any extension options that the company more likely than not expects to exercise , from the date the company has control of the property . certain leases provide for periodic rental increases based on price indices . lease expense for lease payments is recognized on a straight-line basis over the lease term . intangible assets and goodwill we evaluate our intangible assets for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable . our intangible assets consist of customer relationships arising from business acquisitions . we periodically assess the value of our intangible assets . factors that could trigger an impairment analysis include significant under-performance relative to historical or projected future operating results , significant changes in the manner of our use of the acquired assets or the strategy for our overall business or significant negative industry or economic trends . if this evaluation indicates that the value of the intangible asset may be impaired , we assess the likelihood of recoverability of the net carrying value of the asset over its remaining useful life . if this assessment indicates that the intangible asset is not recoverable , based on the estimated undiscounted future cash flows of the technology over the remaining useful life , we reduce the net carrying value of the related intangible asset to fair value . 21 we evaluate goodwill for impairment annually during the fourth quarter or more frequently when an event occurs , or circumstances change that indicate that the carrying value may not be recovera ble . we have three reporting units for the purpose of evaluating goodwill for impairment—third-party software , proprietary software and professional engineering service s . see note . 1 5 , information about operating segments and geographic areas in the notes to our consolidated financial statements in item 8 . for reporting units that carry goodwill , we test for impairment by performing an optional qualitative assessment to determine whether the fair value of the reporting unit is more likely than not less than the carrying amount . alternatively , at our option , we can forego performing the qualitative assessment and proceed directly to perform the quantitative impairment test by comparing the fair value of the reporting unit with its carrying amount , including goodwill , and recording a goodwill impairment charge for the excess . any such impairment charges could be significant and have a material adverse effect on our reported financial results . taxes as part of the process of preparing our consolidated financial statements , we are required to estimate income taxes in each of the countries and other jurisdictions in which we operate . this process involves estimating our current tax expense together with assessing temporary differences resulting from the differing treatment of items for tax and accounting purposes . these differences result in deferred tax assets and liabilities . net operating losses and tax credits , to the extent not already utilized to offset taxable income or income taxes , also give rise to deferred tax assets . we must then assess the likelihood that any deferred tax assets will be realized from future taxable income , and , to the extent we believe that recovery is not likely , we must establish a valuation allowance .
| sales of microsoft operating systems represented approximately 84 % and 81 % of our total revenue and 70 % and 57 % of our total gross profit for 2019 and 2018 , respectively . edge to cloud revenue decreased in 2019 compared to 2018 , due to declines in service revenue generated in north america , asia and europe with the completion in 2018 of several datav software projects . we expect edge to cloud service revenue to grow over time as we focus our strategic focus toward cloud-based and other iot-related service offerings . we expect edge to cloud revenue will continue to vary in timing and amounts . gross profit and gross margin cost of partner solutions revenue consists primarily of the cost of embedded operating system software product costs payable to third-party vendors and support costs associated with our proprietary software products . cost of edge to cloud revenue consists primarily of salaries and benefits , contractor costs and re-billable expenses , related facilities and depreciation costs , and amortization of certain intangible assets related to acquisitions . gross profit and gross margin were as follows : year ended december 31 , ( in thousands , except percentages ) 2019 2018 $ change % change ( 1 ) partner solutions gross profit $ 7,430 $ 9,751 $ ( 2,321 ) ( 24 ) % partner solutions gross margin 15 % 16 % - ( 1 ) % edge to cloud gross profit $ 2,666 $ 5,759 $ ( 3,093 < p
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if quoted market prices are not available , investment valuation is based on pricing models , quotes for similar investment securities , and observable yield curves and spreads . in addition to valuation , management must assess whether there are any declines in value below the carrying value of the investments that should be considered other than temporary or otherwise require an adjustment in carrying value and recognition of the loss in the consolidated statement of income . accounting standards codification ( asc ) topic 350 , intangibles-goodwill and other , requires that goodwill is not amortized to expense , but rather that it be tested for impairment at least annually . impairment write-downs are charged to results of operations in the period in which the impairment is determined . the corporation did not identify any impairment on its outstanding goodwill from its most recent testing , which was performed as of december 31 , 2012. if certain events occur which might indicate goodwill has been impaired , the goodwill is tested when such events occur . story_separator_special_tag conditions experienced by the banking industry as a whole . the bank 's tier one capital ( to risk weighted assets ) of $ 48,764,000 , or 10.0 % , and total capital ( to risk weighted assets ) of $ 54,363,000 , or 11.1 % , at december 31 , 2012 , are above the regulatory requirements . tier one capital consists primarily of the bank 's shareholders ' equity and any qualifying preferred stock . total capital also includes qualifying subordinated debt , if any , and the allowance for loan and lease losses , within permitted limits . risk-weighted assets are determined by assigning various levels of risk to different categories of assets and off-balance sheet activities . 2011 versus 2010 mid penn recorded net income available to common shareholders of $ 4,029,000 for the year 2011 , compared to $ 2,234,000 in 2010 , which was an increase of $ 1,795,000 or 80.3 % . this represents net income in 2011 of $ 1.16 per common share compared to $ 0.64 per common share in 2010. total assets of mid penn continued to grow in 2011 , reaching $ 715,383,000 , an increase of $ 77,926,000 , or 12.2 % over $ 637,457,000 at year-end 2010. the majority of growth in assets came from increases in investments , which increased to $ 159,043,000 or 124.9 % over $ 70,702,000 at the end of 2010. this growth was funded primarily through growth in deposits , which increased 14.2 % to $ 634,055,000 from $ 554,982,000 at year-end 2010. the continued soft economy was the major contributor to modest loan growth during 2011. loan balances increased 3.2 % to $ 482,717,000 from $ 467,735,000 in 2010. the modest growth numbers were a welcome improvement over the loan balance contraction experienced in 2010 from the end of 2009. mid penn experienced weak loan demand during 2011 despite a desire to sensibly lend to support creditworthy existing and new customers in the marketplace . mid penn 's return on average shareholders ' equity , ( roe ) , a widely recognized performance indicator in the financial industry , was 8.96 % in 2011 and 5.71 % in 2010. return on average assets ( roa ) , another performance indicator , was 0.66 % in 2011 and 0.44 % in 2010. mid penn 's performance during 2011 was a dramatic improvement over the results reported in 2010. this improvement was the result of reduced loan charge-offs and provision for loan and lease losses , improving cost of funds , consistent management of controllable expenses , and positive loan growth throughout 2011. net charge-offs decreased from $ 3,260,000 in 2010 to $ 1,494,000 during 2011. the reduction from 2010 allowed for a reduced provision for loan and lease losses from $ 2,635,000 in 2010 to $ 1,205,000 in 2011. the recession and problems in the commercial real estate sector of the economy continued to negatively impact a number of loans in the portfolio , causing continued elevation in the level of nonperforming loans from those experienced prior to 2009. further discussion of these issues can be found in the provision for loan and lease losses section below . net interest margin improved to 3.52 % in 2011 from 3.47 % in 2010. this improvement was driven by a 40 basis point improvement in the rate on supporting liabilities from 2.08 % in 2010 to 1.68 % in 2011. this improvement allowed average interest spread to increase to 3.29 % from 3.20 % in 2010 and net interest income on a tax equivalent basis to increase from $ 20,468,000 in 2010 to $ 23,094,000 in 2011. this increase was achieved in spite of the substantial pool of nonperforming loans being carried on the balance sheet . the amount of interest income lost on this pool of troubled loans in 2011 amounted to $ 1,942,000. further discussion of net interest margin can be found in the net interest income section below . fdic insurance premiums increased in 2011 from 2010 and this expense remains at historically high levels as the fdic continues its efforts to restore the deposit insurance fund and keep it solvent to handle future bank failures should they occur . in addition to high deposit insurance premiums , the increasing regulatory and compliance burden necessitated the hiring of a dedicated compliance officer in 2010 to ensure mid penn 's continued compliance with current and anticipated future regulatory changes . this hiring was followed in 2011 with the addition of three additional positions dedicated to compliance with the bank secrecy act , u.s. patriot act , and general regulatory compliance . mid penn was negatively impacted by recent regulatory changes governing overdraft charges , which has resulted in a reduction in nsf revenue of $ 435,000 during 2011. in addition to the interest lost on nonperforming loans , this pool of troubled assets increases mid penn 's costs associated with the management and collection of this pool of assets . story_separator_special_tag during 2011 , the expenses associated with the increased collection and management efforts on troubled assets were $ 299,000 as compared to $ 307,000 in 2010. these expenses remain at historically high levels as mid penn resolves problems associated with the pool of troubled assets . mid penn 's fundamental operating performance in 2011 was sound despite these issues and the general economic conditions and credit crisis issues experienced by the banking industry as a whole . 23 mid penn bancorp , inc. management ' s discussion and analysis the bank 's tier one capital ( to risk weighted assets ) of $ 50,265,000 or 10.4 % and total capital ( to risk weighted assets ) of $ 56,327,000 or 11.6 % at december 31 , 2011 , are above the regulatory requirements . tier one capital consists primarily of the bank 's shareholders ' equity and any qualifying preferred stock . total capital also includes qualifying subordinated debt , if any , and the allowance for loan and lease losses , within permitted limits . risk-weighted assets are determined by assigning various levels of risk to different categories of assets and off-balance sheet activities . net interest income net interest income , mid penn 's primary source of revenue , represents the difference between interest income and interest expense . net interest income is affected by changes in interest rates and changes in average balances ( volume ) in the various interest-sensitive assets and liabilities . 24 mid penn bancorp , inc. management ' s discussion and analysis table 1 : average balances , effective interest differential and interest yields replace_table_token_5_th interest and average rates are presented on a fully taxable equivalent basis , using an effective tax rate of 34 % . for purposes of calculating loan yields , average loan balances include nonaccrual loans . loan fees of $ 1,148,000 , $ 635,000 , and $ 710,000 are included with interest income in table 1 for the years 2012 , 2011 and 2010 , respectively . 25 mid penn bancorp , inc. management ' s discussion and analysis table 2 : volume analysis of changes in net interest income replace_table_token_6_th the effect of changing volume and rate has been allocated entirely to the rate column . tax-exempt income is shown on a tax equivalent basis assuming a federal income tax rate of 34 % . during 2012 , net interest income increased $ 1,400,000 , or 6.1 % , as compared to an increase of $ 2,626,000 , or 12.8 % , in 2011. the average balances , effective interest differential , and interest yields for the years ended december 31 , 2012 , 2011 , and 2010 and the components of net interest income , are presented in table 1. a comparative presentation of the changes in net interest income for 2012 compared to 2011 , and 2011 compared to 2010 , is provided in table 2. this analysis indicates the changes in interest income and interest expense caused by the volume and rate components of interest earning assets and interest bearing liabilities . the yield on earning assets decreased to 4.69 % in 2012 from 4.97 % in 2011. the yield on earning assets for 2010 was 5.28 % . the change in the yield on earning assets was due primarily to changes in market interest rates and extreme rate competition within our market . the average “ prime rate ” for 2012 , 2011 , and 2010 was 3.25 % . the yield on earning assets is also negatively impacted by the loss of interest on nonperforming loans . during 2012 , this loss of interest amounted to $ 2,974,000. had this interest been included in mid penn 's earnings , the yield on earning assets would have increased by 44 basis points . interest expense decreased by $ 2,397,000 , or 25.2 % , in 2012 as compared to a decrease of $ 1,120,000 , or 10.5 % , in 2011. the cost of interest bearing liabilities decreased to 1.20 % in 2012 from 1.68 % in 2011. the cost of interest bearing liabilities for 2010 was 2.08 % . the reduction in cost of interest bearing liabilities was due to changes in market interest rates and mid penn 's ability to reduce the rates on money market accounts and certificates of deposit . net interest margin , on a tax equivalent basis was 3.63 % in 2012 compared to 3.52 % in 2011 and 3.47 % in 2010. t he interest rate impact of earning assets and funding sources due to changes in interest rates can be reasonably estimated at current interest rate levels , the options selected by customers , and the future mix of the loan , investment , and deposit products in the bank 's portfolios , may significantly change the estimates used in the simulation models . in addition , our net interest income may be impacted by further interest rate actions of the federal reserve bank . management continues to monitor the net interest margin closely . 26 mid penn bancorp , inc. management ' s discussion and analysis provision for loan and lease losses the provision for loan and lease losses is the expense necessary to maintain the allowance for loan and lease losses at a level adequate to absorb management 's estimate of probable losses in the loan and lease portfolio . mid penn 's provision for loan and lease losses is based upon management 's monthly review of the loan portfolio . the purpose of the review is to assess loan quality , identify impaired loans and leases , analyze delinquencies , ascertain loan and lease growth , evaluate potential charge-offs and recoveries , and assess general economic conditions in the markets we serve . during 2012 , mid penn continued to experience a challenging economic and operating environment .
| mid penn 's return on average shareholders ' equity , ( roe ) , a widely recognized performance indicator in the financial industry , was 8 . 78 % in 2012 and 8.96 % in 2011. return on average assets ( roa ) , another performance indicator , was 0.69 % in 2012 and 0.66 % in 2011. mid penn 's performance during 2012 was a solid improvement over the results reported in 2011. this improvement was the result of reduced provision for loan and lease losses , improving cost of funds , consistent management of controllable expenses , and growth in noninterest income sources throughout 2012. net charge-offs increased from $ 1,494,000 in 2011 to $ 2,299,000 during 2012. despite the increase in net charge-offs from 2011 , mid penn was able to reduce provision for loan and lease losses from $ 1,205,000 in 2011 to $ 1,036,000 in 2012. this stemmed from the fact that $ 1,499,000 of the net charge-offs during 2012 had a previously recorded balance included in the allowance for loan and lease losses . as mid penn continues to work to resolve the elevated levels of nonperforming loans , the relationship between net charge-offs and provision for loan and lease losses may continue to have a more tenuous link . further discussion of these issues can be found in the provision for loan and lease losses section below . net interest margin improved to 3.63 % in 2012 from 3.52 % in 2011. this improvement was driven by a 48 basis point improvement in the rate on supporting liabilities from 1.68 % in 2011 to 1.20 % in 2012. this improvement allowed average interest spread to increase to 3.49 % from 3.29 % in 2011 and net interest income on a tax equivalent basis to increase from $ 23,094,000 in 2011 to $ 24,494,000 in 2012. this increase was achieved in spite of the substantial pool of nonperforming loans being carried on the balance sheet .
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the corporate segment includes our unconsolidated affiliate investments in the cedar cove joint venture ( “ cedar cove jv ” ) in oklahoma , our contractual right to the economic benefits and burdens associated with devon energy corporation 's ( “ devon ” ) ownership interest in gulf coast fractionators ( “ gcf ” ) in south texas and our general corporate property and expenses . until march 2017 , the corporate segment included our unconsolidated affiliate investment in howard energy partners ( “ hep ” ) , which we divested in march 2017. we manage our operations by focusing on gross operating margin because our business is generally to gather , process , transport or market natural gas , ngls , crude oil and condensate using our assets for a fee . we earn our fees through various fee-based contractual arrangements , which include stated fee-only contract arrangements or arrangements with fee-based components where we purchase and resell commodities in connection with providing the related service and earn a net margin as our fee . we earn our net margin under our purchase and resell contract arrangements primarily as a result of stated service-related fees that are deducted from the price of the commodity purchase . while our transactions vary in form , the essential element of each transaction is the use of our assets to transport a product or provide a processed product to an end-user or other marketer or pipeline at the tailgate of the plant , barge terminal or pipeline . we define gross operating margin as operating revenue minus cost of sales . gross operating margin is a non-gaap financial measure and is explained in greater detail under “ non-gaap financial measures ” below . approximately 94 % of our gross operating margin was derived from fee-based contractual arrangements with minimal direct commodity price exposure for the year ended december 31 , 2017. we reflect revenue as “ product sales ” and “ midstream services ” on the consolidated statements of operations . we generate revenues from eight primary sources : gathering and transporting natural gas , ngls and crude oil on the pipeline systems we own ; processing natural gas at our processing plants ; fractionating and marketing recovered ngls ; providing compression services ; providing crude oil and condensate transportation and terminal services ; providing condensate stabilization services ; providing brine disposal services ; and providing natural gas , crude oil and ngl storage . our gross operating margins are determined primarily by the volumes of : natural gas gathered , transported , purchased and sold through our pipeline systems ; natural gas processed at our processing facilities ; ngls handled at our fractionation facilities or transported through our pipeline systems ; crude oil and condensate handled at our crude terminals ; crude oil and condensate gathered , transported , purchased and sold ; condensate stabilized ; brine disposed ; and natural gas , crude oil and ngls stored . 62 we gather , transport or store gas owned by others under fee-only contract arrangements based either on the volume of gas gathered , transported or stored or , for firm transportation arrangements , a stated monthly fee for a maximum monthly quantity with an additional fee based on actual volumes . we also buy natural gas from producers or shippers at a market index less a fee-based deduction subtracted from the purchase price of the natural gas . we then gather or transport the natural gas and sell the natural gas at a market index , thereby earning a margin through the fee-based deduction . we attempt to execute substantially all purchases and sales concurrently , or we enter into a future delivery obligation , thereby establishing the basis for the fee we will receive for each natural gas transaction . we are also party to certain long-term gas sales commitments that we satisfy through supplies purchased under long-term gas purchase agreements . when we enter into those arrangements , our sales obligations generally match our purchase obligations . however , over time , the supplies that we have under contract may decline due to reduced drilling or other causes , and we may be required to satisfy the sales obligations by buying additional gas at prices that may exceed the prices received under the sales commitments . in our purchase/sale transactions , the resale price is generally based on the same index at which the gas was purchased . on occasion , we have entered into certain purchase/sale transactions in which the purchase price is based on a production-area index and the sales price is based on a market-area index , and we capture the difference in the indices ( also referred to as “ basis spread ” ) , less the transportation expenses from the two areas , as our fee . changes in the basis spread can increase or decrease our margins or potentially result in losses . for example , we are a party to one contract associated with our north texas operations with a term to july 2019 to supply approximately 150,000 mmbtu/d of gas . we buy gas for this contract on several different production-area indices and sell the gas into a different market area index . we realize a cash loss on the delivery of gas under this contract each month based on current prices . the fair value of this performance obligation was recorded based on forecasted discounted cash obligations in excess of market prices under this gas delivery contract . as of december 31 , 2017 , the balance sheet reflects a liability of $ 26.9 million related to this performance obligation . narrower basis spreads in recent periods have increased the losses on this contract , and greater losses on this contract could occur in future periods if these conditions persist or become worse . we typically buy mixed ngls from our suppliers on our gas processing plants at a fixed discount to market indices for the component ngls with a deduction for our fractionation fee . we subsequently sell the fractionated ngl products based on the same index-based prices . story_separator_special_tag to a lesser extent , we transport and fractionate or store ngls owned by others for a fee based on the volume of ngls transported and fractionated or stored . the operating results of our ngl fractionation business are largely dependent upon the volume of mixed ngls fractionated and the level of fractionation fees charged . with our fractionation business , we also have the opportunity for product upgrades for each of the discrete ngl products . we realize higher gross operating margins from product upgrades during periods with higher ngl prices . we gather or transport crude oil and condensate owned by others by rail , truck , pipeline and barge facilities under fee-only contract arrangements based on volumes gathered or transported . we also buy crude oil and condensate from producers at a market index less a stated deduction , then transport and resell the crude oil and condensate at the same market index . we execute substantially all purchases and sales concurrently , thereby establishing the net margin we will receive for each crude oil and condensate transaction . we realize gross operating margins from our gathering and processing services primarily through different contractual arrangements : processing margin ( “ margin ” ) contracts , percentage of liquids ( “ pol ” ) contracts , percentage of proceeds ( “ pop ” ) contracts , fixed-fee component contracts , or a combination of these contractual arrangements . see “ item 7a . quantitative and qualitative disclosures about market risk—commodity price risk ” for a detailed description of these contractual arrangements . under any of these gathering and processing arrangements , we may only earn a fee for the services performed , or we may buy and resell the gas and or ngls as part of the processing arrangement and realize a net margin as our fee . under margin contract arrangements , our gross operating margins are higher during periods of high ngl prices relative to natural gas prices . gross operating margin results under pol contracts are impacted only by the value of the liquids produced with margins higher during periods of higher liquids prices . gross operating margin results under pop contracts are impacted only by the value of the natural gas and liquids produced with margins higher during periods of higher natural gas and liquids prices . under fixed-fee based contracts , our gross operating margins are driven by throughput volume . operating expenses are costs directly associated with the operations of a particular asset . among the most significant of these costs are those associated with direct labor and supervision , property insurance , property taxes , repair and maintenance expenses , contract services and utilities . these costs are normally fairly stable across broad volume ranges and therefore do not normally increase or decrease significantly in the short term with increases or decreases in the volume of gas , liquids , crude oil and condensate moved through or by the asset . 63 recent growth developments organic growth central oklahoma plants . in 2017 , we completed construction of two new cryogenic gas processing plants , which included the chisholm ii plant completed in april 2017 and the chisholm iii plant completed in december 2017. each plant provides 200 mmcf/d of processing capacity and is connected to new and existing gathering pipeline and compression assets in the stack play in oklahoma . the new capacity is supported by new and existing long-term contracts . in addition , we are constructing an additional 200 mmcf/d gas processing plant , referred to as the “ thunderbird plant ” to expand our central oklahoma processing capacity . we expect to begin operations on the thunderbird plant during the first quarter of 2019. in june 2017 , we entered into a long-term , fee-based arrangement with oneok partners ( “ oneok ” ) under which oneok transports ngls from our chisholm processing facility to the gulf coast and our cajun-sibon system . the agreement allows us to retain control of volumes and preferentially fill our cajun-sibon system . black coyote crude oil gathering system . in the fourth quarter of 2017 , we began construction of a new crude oil gathering system that we refer to as “ black coyote , ” which will expand our operations in the core of the stack play in central oklahoma . black coyote is being built primarily on acreage dedicated from devon , which will be the main shipper on the system . the system is expected to be operational in the first quarter of 2018. lobo natural gas gathering and processing facilities . the lobo facilities are part of our joint venture ( the “ delaware basin jv ” ) with an affiliate of ngp natural resources xi , lp ( “ ngp ” ) and are supported by long-term contracts . in the first quarter of 2017 , we completed the expansion of a 75-mile gathering system for our lobo ii processing facility . in the second quarter of 2017 , we completed the construction of an expansion of the lobo ii processing facility , which provided an additional 60 mmcf/d of processing capacity to the existing 95 mmcf/d provided by the lobo processing facilities . furthermore , we are constructing an additional expansion of the lobo ii processing facility , which will increase capacity by 15 mmcf/d and is expected to be completed during the first half of 2018. in 2018 , we will also expand our gas processing capacity at our lobo facilities by 200 mmcf/d through the construction of the lobo iii cryogenic gas processing plant , which is expected to be operational around the second half of 2018. greater chickadee crude oil gathering system . in march 2017 , we completed construction and began operations of a crude oil gathering system in upton and midland counties , texas in the permian basin , which we refer to as “ greater chickadee.
| million increase in gross operating margin from our ngl transmission and fractionation assets and a $ 6.8 million increase in gross operating margin from our louisiana gathering and transmission assets . the increase from our ngl business was primarily due to additional ngl volumes fractionated , including volumes received from our oklahoma and permian basin assets , together with a $ 9.3 million gross operating margin contribution from fees earned on our ascension jv assets , which commenced operations in april 2017. the increase from our transmission assets was primarily due to volume increases on our louisiana intrastate gas and gulf coast pipeline systems . oklahoma segment . gross operating margin in the oklahoma segment increased $ 99.8 million , which was primarily driven by a $ 104.8 million increase from our central oklahoma assets as a result of higher volumes due to continued producer development in oklahoma . this increase was partially offset by a $ 5.1 million decrease in gross operating margin from our northridge gathering and processing assets due to price and volume reductions under a third-party contract . crude and condensate segment . gross operating margin in the crude and condensate segment decreased $ 15.2 million , which was primarily due to a $ 12.8 million decrease as a result of condensate stabilization volume declines and transportation rate decreases on our orv assets and a decrease of $ 8.4 million as a result of volume declines in our midland basin trucking business . the volume and rate declines throughout our crude and condensate segment were primarily attributable to increased competition due to lower crude prices . these declines were partially offset by a $ 4.8 million increase due to the greater chickadee gathering system , which became fully operational in the first quarter of 2017. corporate segment . gross operating margin in the corporate segment increased $ 6.9 million , which was due to the changes in
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we expect our research and development expense to increase significantly over the next several years as we increase personnel costs , including stock-based compensation , conduct our later-stage clinical trials for pb2452 and pb1046 and conduct other preclinical studies and clinical trials and prepare regulatory filings for our product candidates . the successful development of our product candidates is highly uncertain . at this time , we can not reasonably estimate or know the nature , timing and costs of the efforts that will be necessary to complete the remainder of the development of , or when , if ever , material net cash inflows may commence from our product candidates . this uncertainty 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 many factors , including : delays in regulators or institutional review boards authorizing us or our investigators to commence our clinical trials or in our ability to negotiate agreements with clinical trial sites or contract research organizations ; our ability to secure adequate supply of product candidates for our trials ; the number of clinical sites included in the trials ; the length of time required to enroll suitable patients ; the number of patients that ultimately participate in the trials ; the number of doses patients receive ; 78 any side effects associated with our product candidates ; the duration of patient follow-up ; and the results of our clinical trials . our expenditures are subject to additional uncertainties , including the terms and timing of regulatory approvals , and the expense of filing , prosecuting , defending and enforcing any patent claims or other intellectual property rights . we may never succeed in achieving regulatory approval for our product candidates . we may obtain unexpected results from our clinical trials . we may elect to discontinue , delay or modify clinical trials of our product candidates . a change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate . for example , if the food and drug administration , or the fda , or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate , or if we experience significant delays in enrollment in any of our clinical trials , we could be required to expend significant additional financial resources and time on the completion of clinical development . product commercialization will take several years and millions of dollars in development costs . general and administrative expense general and administrative expense consists principally of salaries and related costs for personnel in executive and administrative functions , including stock-based compensation , travel expenses and recruiting expenses . other general and administrative expense includes professional fees for legal , accounting and tax-related services and insurance costs . we anticipate that our general and administrative expense will increase as a result of increased payroll , expanded infrastructure and higher consulting , legal and tax-related services associated with maintaining compliance with stock exchange listing and sec requirements , accounting and investor relations costs , and director and officer insurance premiums associated with being a public company . we anticipate the additional costs for these services will increase our general and administrative expense . interest expense interest expense consists of interest expense on our convertible promissory notes and term loan . change in fair value of warrant and derivative liabilities change in fair value of warrant and derivative liabilities reflects the revaluation at each reporting date of our redeemable convertible preferred stock warrants and the conversion option on our convertible promissory notes , respectively . subsequent to the conversion of all outstanding shares of our preferred stock into common stock in connection with the closing of our initial public offering in october 2018 , we are no longer required to remeasure the warrant liability for periods following the closing of the initial public offering . additionally , in august 2018 all of our previously outstanding convertible promissory notes converted with the sale and issuance of the series d redeemable preferred stock . as such , we will no longer be required to remeasure the conversion option for the periods following the closing of that financing . license agreements medimmune limited in november 2017 , we entered into an exclusive license agreement , or the medimmune license , with medimmune limited , or medimmune , a wholly owned subsidiary of astrazeneca plc . pursuant to the medimmune license , medimmune granted us an exclusive , worldwide license under certain patent rights owned or controlled by medimmune to develop and commercialize any products covered by the medimmune license , or the medimmune licensed products , for the treatment , palliation , diagnosis or prevention of any human disorder or condition . under the medimmune license , we paid medimmune an upfront fee of $ 0.1 million . we are also required to pay medimmune : quarterly fees relating to technical services provided by medimmune ; up to $ 18.0 million in clinical 79 and regulatory milestone fees ; up to $ 50.0 million in commer cial milestone fees ; and mid-single digit to low-teen royalty percentages on net sales of medimmune licensed products , subject to reduction in specified circumstances . in addition , the medimmune license offers an option for third - party product storage cost s. as of december 31 , 201 8 , we have paid $ 0.5 million under the medimmune license . story_separator_special_tag duke university in october 2006 , we entered into an exclusive license agreement , or the duke license , with duke university , or duke , which we most recently amended in may 2017. pursuant to the duke license , duke granted us an exclusive , worldwide license under certain patent rights owned or controlled by duke , and a non-exclusive , worldwide license under certain know-how of duke , to develop and commercialize any products covered by the duke license , or duke licensed products , relating to elps . under the duke license , we paid duke an upfront fee of $ 37,000 , additional fees in connection with amendments to the duke license of $ 0.2 million and other additional licensing fees of $ 0.2 million . in consideration for license rights granted to us , we initially issued duke 24,493 shares of our common stock . until we reached a certain stipulated equity milestone , which we reached in october 2007 , we were obligated to issue additional shares of common stock to duke from time to time so that its aggregate ownership represented 7.5 % of our issued and outstanding capital stock . we are also required to pay duke : up to $ 2.2 million in regulatory and clinical milestone fees ; up to $ 0.4 million in commercial milestone fees ; low single-digit royalty percentages on net sales of duke licensed products , with minimum aggregate royalty payments of $ 0.2 million payable following our achievement of certain commercial milestones ; and up to the greater of $ 0.3 million or a low double-digit percentage of the fees we receive from a third party in consideration of forming a strategic alliance with respect to certain patent rights covered under the duke license . we also must pay duke the first $ 1.0 million of non-royalty payments we receive from a sublicensee , and thereafter a low double-digit percentage of any additional nonroyalty payments we receive . as of december 31 , 2018 , we have not paid any amounts under the duke license . we are also required to apply for , prosecute and maintain all u.s. and foreign patent rights under the duke license . story_separator_special_tag 2018 and august 2018 , respectively . the maturity date of the svb loan was june 1 , 2020 , which was extended to december 31 , 2020 when we drew on the third tranche . the svb loan was interest-only through july 31 , 2018 , which was extended to december 31 , 2018 when we drew on the third tranche . in addition to interest and principal payments , we were required to make a final payment equal to 7 % of the original aggregate principal amount of the growth capital advances . we had the option to prepay all , but not less than all , of the borrowed amounts , provided that we would be obligated to pay a prepayment fee equal to ( a ) 3.0 % of the outstanding principal balance of the applicable growth capital advances if prepayment was made prior to the first anniversary of the effective date of the svb loan , ( b ) 2.0 % of the outstanding principal balance of the applicable growth capital advances if prepayment was made by the second anniversary of the effective date of the svb loan or ( c ) 1.0 % of the outstanding principal balance of the applicable growth capital advances if prepayment was made after the second anniversary of the effective date of the svb loan . on march 25 , 2019 , we repaid the outstanding principal balance and accrued portion of the final payment under the svb loan in full using tranche a from the 2019 loan described below . 82 march 2019 loan agreement with svb and westriver on march 25 , 2019 , we entered into a term loan agreement , or the 2019 loan , with svb and westriver , pursuant to which we may borrow up to $ 15.0 million , issuable in three separate tranches , or advances , of $ 7.5 million , or tranche a , which was issued upon execution of the 2019 loan , $ 2.5 million , or tranche b , available to be issued until may 31 , 2019 and $ 5.0 million , or tranche c , which we will draw upon the achievement of certain regulatory milestones , or the tranche c milestones . the maturity date of the 2019 loan is march 1 , 2023. under the terms of the 2019 loan , we are to make interest-only payments through december 31 , 2019 on tranche a and tranche b at a rate equal to the greater of the prime rate plus 1.00 % , as defined in the 2019 loan , or 6.5 % , followed by an amortization period of 39 months of equal monthly payments of principal plus interest amounts until paid in full . the interest-only period will automatically be extended to june 30 , 2020 if we achieve the tranche c milestones , followed by an amortization period of 33 months of equal monthly payments of principal plus interest amounts until paid in full . in addition to and not in substitution for our regular monthly payments of principal plus accrued interest , we are required to make a final payment equal to 6 % of the aggregate principal amount of the advances on the maturity date . we have agreed to issue to svb and westriver warrants to purchase an aggregate of 37,606 shares of our common stock when we draw on tranche a , an aggregate of 12,131 shares of our common stock on when we draw on tranche b and an aggregate of 24,462 shares of our common stock when we draw on tranche c , each with an exercise price of the lower of the average closing price of our common stock for the previous ten days of trading or the closing price on the day prior to funding .
| the increase of $ 1.2 million was partially attributable to an additional $ 8.1 million in borrowings pursuant to our convertible promissory notes entered into in october 2017. additionally , we entered into our term loan in october 2017 , pursuant to which we borrowed $ 3.5 million in november 2017 , $ 2.0 million in april 2018 and $ 2.0 million in august 2018 , which also contributed to the increase in interest expense year over year . change in fair value of warrant liability change in fair value of warrant liability resulted in other income of $ 11,000 for the year ended december 31 , 2018 , compared to other income of $ 1.0 million for the year ended december 31 , 2017. the preferred stock warrants were subject to remeasurement at each reporting period , with changes in fair value recorded in the statement of operations . the outstanding preferred stock warrants converted into common stock warrants upon the completion of our initial public offering . change in fair value of derivative liability change in fair value of derivative liability was $ 0.7 million of expense for the year ended december 31 , 2018 , compared to $ 0.1 million of expense for the year ended december 31 , 2017. the conversion option related to our convertible promissory notes was subject to remeasurement at each reporting period , with changes in fair value recorded in the statement of operations . the convertible promissory notes converted into redeemable convertible preferred stock in august 2018 upon the sale of the series d redeemable convertible preferred stock . liquidity and capital resources since our inception , we have not generated any revenue from product sales and have incurred net losses and negative cash flows from our operations . we have financed our operations since our inception primarily through the sales of equity and debt securities and borrowings under our term loans with svb and westriver .
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a summary of our critical accounting policies is intended to enhance the reader 's ability to assess our financial condition and results of operations and the potential volatility due to changes in estimates and changes in guidance . the identification , selection and disclosure of critical accounting estimates and policies have been discussed with the audit committee of the board of directors . valuation and impairment of fixed income investments fixed maturities . fixed maturities include bonds , redeemable preferred stock and certain non-redeemable preferred stock . we classify our fixed maturities as either available-for-sale or trading and , accordingly , carry them at fair value in the consolidated statements of financial position . the fair values of our public fixed maturities are primarily based on market prices from independent pricing services . we have regular interactions with these vendors to ensure we understand their pricing methodologies and to confirm they are utilizing observable market information . in addition , 22 % of our invested asset portfolio is invested in fixed maturities that are private placement assets , where there are no readily available market quotes to determine the fair market value . the majority of these assets are valued using a spread pricing matrix that utilizes observable market inputs . securities are grouped into pricing categories that vary by asset class , sector , rating and average life . each pricing category is assigned a risk spread based on studies of observable public market data or market clearing data from the investment professionals assigned to specific security classes . the expected cash flows of the security are then discounted back at the current treasury curve plus the appropriate risk spread . certain market events that could impact the valuation of securities include issuer credit ratings , business climate , management changes , litigation and government actions among others . see item 8 . `` financial statements and supplementary data , notes to consolidated financial statements , note 14 , fair value measurements '' for further discussion . if we are unable to price a fixed maturity security from third party pricing vendors we may obtain a broker quote or utilize an internal pricing model specific to the asset utilizing relevant market information to the extent available . less than 1 % of our fixed maturities were valued using internal models . a rate increase based on the combined movement of interest rates and credit spreads of 100 basis points would produce a total value of approximately $ 40.3 billion , as compared to the recorded amount of $ 42.2 billion related to our fixed maturity , available-for-sale assets held by the principal life general account as of december 31 , 2011. given the recent unprecedented market disruption , a 100 basis point movement in the combined portfolio rate is reasonably likely . we had a $ 741.5 million increase in net unrealized gains within the u.s. fixed maturities , available-for-sale portfolio for the year ended december 31 , 2011 , of which an approximate $ 2.2 billion net unrealized gain can be attributed to an approximate 98 basis points decrease in interest rates offset in part by net unrealized losses related to other market factors . we had a $ 2,154.6 million increase in net unrealized gains for the year ended december 31 , 2010 , of which an approximate $ 1.0 billion net unrealized gain can be attributed to an approximate 57 basis points decrease in interest rates and the remaining net unrealized gains related to other market factors . fixed maturities classified as available-for-sale are subject to impairment reviews . when evaluating fixed maturities for impairment , we consider relevant facts and circumstances in evaluating whether a credit or interest-related 34 impairment is other than temporary . relevant facts and circumstances considered include : ( 1 ) the extent and length of time the fair value has been below cost ; ( 2 ) the reasons for the decline in value ; ( 3 ) the financial position and access to capital of the issuer , including the current and future impact of any specific events ; ( 4 ) for structured securities , the adequacy of the expected cash flows and ( 5 ) our intent to sell a security or whether it is more likely than not we will be required to sell the security before recovery of its amortized cost which , in some cases , may extend to maturity . when it is determined that the decline in value is other than temporary the carrying value of the security is reduced to its fair value , and a corresponding impairment loss is reported primarily in net income , with noncredit impairment losses for certain fixed maturities we do not intend to sell reported in other comprehensive income . there are a number of significant risks and uncertainties inherent in the process of monitoring impairments and determining if an impairment is other than temporary . these risks and uncertainties include : ( 1 ) the risk that our assessment of an issuer 's ability to meet all of its contractual obligations will change based on changes in the credit characteristics of that issuer ; ( 2 ) the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated ; ( 3 ) the risk that our investment professionals are making decisions based on fraudulent or misstated information in the financial statements provided by issuers and ( 4 ) the risk that new information obtained by us or changes in other facts and circumstances lead us to change our intent to hold the security until it recovers in value . any of these situations could result in a charge to net income in a future period . at december 31 , 2011 , we had $ 9,052.3 million in available-for-sale fixed maturities with gross unrealized losses totaling $ 1,523.9 million . included in the gross unrealized losses are losses attributable to both movements in market interest rates as well as movement in credit spreads . story_separator_special_tag net income would be reduced by approximately $ 1,523.9 million , on a pre-tax basis , if all the securities in an unrealized loss position were deemed to be other than temporarily impaired and our intent was to sell all such securities . mortgage loans . mortgage loans consist primarily of commercial mortgage loans . at december 31 , 2011 , the carrying value of our commercial mortgage loans was $ 9,396.6 million . commercial mortgage loans are generally reported at cost adjusted for amortization of premiums and accrual of discounts , computed using the interest method and net of valuation allowances . commercial mortgage loans are considered impaired when , based on current information and events , it is probable that we will be unable to collect all amounts due according to contractual terms of the loan agreement . when we determine that a loan is impaired , a valuation allowance is created for the difference between the carrying amount of the mortgage loan and the estimated value less cost to sell . estimated value is based on either the present value of the expected future cash flows discounted at the loan 's effective interest rate , the loan 's observable market price or the fair value of the collateral . the determination of the calculation and the adequacy of the mortgage loan valuation allowance and mortgage impairments are subjective . our periodic evaluation and assessment of the adequacy of the mortgage loan valuation allowance and the need for mortgage impairments is based on known and inherent risks in the portfolio , adverse situations that may affect the borrower 's ability to repay , the estimated value of the underlying collateral , composition of the loan portfolio , current economic conditions , loss experience and other relevant factors . the calculation for determining mortgage impairment amounts requires estimating the amounts and timing of future cash flows expected to be received on specific loans , estimating the value of the collateral and gauging changes in the economic environment in general . the total valuation allowance can be expected to increase when economic conditions worsen and decrease when economic conditions improve . for more detailed information concerning mortgage loan valuation allowances and impairments , see `` investments u.s. investment operations mortgage loans , '' and item 8 . `` financial statements and supplementary data , notes to consolidated financial statements , note 4 , investments mortgage loan valuation allowance . '' we have a large experienced commercial real estate staff centrally located in des moines , which includes commercial mortgage underwriters , loan closers , loan servicers , engineers , appraisers , credit analysts , research staff , legal staff , information technology personnel and portfolio managers . experienced commercial real estate senior management adheres to a disciplined process in reviewing all transactions for approval on a consistent basis . the typical commercial mortgage loan for us averages in the mid 40 % percent loan-to-value range at origination with a net operating income coverage ratio of 3.3 times the annual debt service and is internally rated aa- on a bond equivalent basis . based on the most recent analysis , our commercial mortgage loan portfolio , excluding mortgage loans held in our principal global investors segment , has an overall loan-to-value ratio of 60 % with a 2.0 times debt service coverage . the large equity cushion and strong debt service coverage in our commercial mortgage investments will help insulate us from stress during times of weak commercial real estate fundamentals . derivatives we primarily use derivatives to hedge or reduce exposure to market risks . the fair values of exchange-traded derivatives are determined through quoted market prices . the fair values of over-the-counter derivative instruments are determined using either pricing valuation models that utilize market observable inputs or broker quotes . on an absolute fair value basis , 91.2 % of our over-the-counter derivative assets and liabilities are valued using pricing valuation models , while the remaining 8.8 % are valued using broker quotes . see item 8 . `` financial statements and supplementary data , notes to consolidated financial statements , note 14 , fair value measurements '' for further discussion . the fair values 35 of our derivative instruments can be impacted by changes in interest rates , foreign exchange rates , credit spreads , equity indices , and volatility , as well as other contributing factors . we also issue certain annuity contracts and other insurance contracts that include embedded derivatives that have been bifurcated from the host contract . they are valued using a combination of historical data and actuarial judgment . see item 8 . `` financial statements and supplementary data , notes to consolidated financial statements , note 14 , fair value measurements '' for further discussion . we include our assumption for own non-performance risk in the valuation of these embedded derivatives . as our credit spreads widen or tighten , the fair value of the embedded derivative liabilities decrease or increase , leading to an increase or decrease in net income . if the current market credit spreads reflecting our own creditworthiness move to zero ( tighten ) , the reduction to net income would be approximately $ 21.6 million , net of dpac and income taxes , based on december 31 , 2011 , reported amounts . the use of risk margins for the valuation of embedded derivatives increases the fair value of the embedded derivative liabilities . the accounting for derivatives is complex and interpretations of the applicable accounting standards continue to evolve . judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment . judgment and estimates are used to determine the fair value of some of our derivatives . volatility in net income can result from changes in fair value of derivatives that do not qualify or are not designated for hedge accounting and changes in fair value of embedded derivatives .
| effective january 1 , 2009 , we sold certain fixed income asset management contracts within our post advisory group , llc subsidiary , at which time we realized benefits from the cancellation of deferred compensation agreements . the aum associated with this sale totaled $ 3.8 billion . the total cash proceeds totaled $ 48.4 million and were received over a three year time period . the transaction does not qualify for discontinued operations treatment under u.s. gaap . the realized capital gain from the sale , which is reflected in our principal global investors segment , is not material . other individual life insurance model and assumption changes . during the second quarter of 2011 , our individual life insurance business made routine model and assumption changes ( collectively referred to as `` integrated model changes '' ) that resulted in a net loss of $ 3.9 million after-tax for the second quarter . the integrated model changes altered the future estimated gross profit patterns that impact actuarial balances associated with our universal life and variable universal life insurance products . these balances are all part of an integrated model and , therefore , although the impact to earnings was not material , the integrated model changes created volatility within certain income statement line items that are impacted by the same future estimated gross profit patterns . specifically , fee revenues increased $ 48.5 million ; benefits , claims and settlement expenses decreased $ 131.1 million ; and operating expenses increased $ 185.6 million due to the unlocking of actuarial balances resulting from the integrated model changes . catalyst health solutions , inc. in early april 2011 , we sold a portion of our interest in catalyst health solutions , inc. , which is accounted for on the equity method . the approximate $ 46.0 million after-tax gain was reported as a net realized capital gain in the second quarter of 2011 within the corporate segment and was , therefore , excluded from operating earnings . the remaining portion of the investment will continue to be accounted for as an equity method investment . group medical insurance business . on september 30 , 2010 ,
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a summary of operating income is shown below : replace_table_token_5_th operating income for 2013 declined to $ 613 million from $ 668 million in 2012. operating income for 2012 included $ 20 million of charges for impaired assets and restructuring costs in kenya , $ 11 million of restructuring charges to reduce the carrying value of certain equipment associated with our manufacturing optimization plan in north america , 27 $ 5 million of charges for impaired assets in china and colombia , and $ 4 million of costs pertaining to the integration of national starch . additionally , operating income for 2012 included the $ 5 million gain from the benefit plan change in north america and a $ 2 million gain from the sale of land . without the impairment/restructuring charges , integration costs , the gain from the benefit plan change , and the gain from the land sale , operating income for 2013 would have decreased 13 percent , primarily reflecting reduced operating income in south america . unfavorable currency translation associated with weaker foreign currencies caused operating income to decline by approximately $ 21 million from 2012. north america operating income decreased 2 percent to $ 401 million from $ 408 million in 2012. lower volumes due to reduced customer demand drove the operating income decline . improved product selling prices and manufacturing cost saving initiatives limited the unfavorable impact of the reduced sales volume . currency translation associated with a weaker canadian dollar caused operating income to decrease by approximately $ 3 million in north america . south america operating income decreased 41 percent to $ 116 million from $ 198 million in 2012. the decrease was driven by significantly weaker results in the southern cone of south america and in brazil . our inability to increase selling prices to a level sufficient to recover higher corn , energy and labor costs , primarily in argentina , and the reduced absorption of fixed manufacturing costs as a result of lower sales volumes due to soft demand from a weaker economy , drove the earnings decline . translation effects associated with weaker south american currencies ( particularly the argentine peso and brazilian real ) caused operating income to decrease by approximately $ 14 million . we anticipate that our business in south america will continue to be challenged with high production costs , local currency devaluation , product pricing limitations and volume pressures in 2014. asia pacific operating income rose 2 percent to $ 97 million from $ 95 million in 2012. this increase primarily reflects organic volume growth and slightly higher product selling prices , which more than offset higher local production costs and the impact of weaker foreign currencies . unfavorable translation effects associated with weaker foreign currencies caused asia pacific operating income to decrease by approximately $ 1 million . emea operating income decreased 6 percent to $ 74 million from $ 78 million in 2012. the decrease primarily reflects the impacts of weaker foreign currencies and higher local production and energy costs , which more than offset improved product price/mix and volume growth . translation effects associated with weaker foreign currencies ( particularly the pakistan rupee ) caused emea operating income to decrease by approximately $ 3 million . energy infrastructure in pakistan remains problematic and we continue to face challenges resulting from related power shortages and higher energy costs in that country . financing costs-net . financing costs-net decreased slightly to $ 66 million in 2013 from $ 67 million in 2012. the decrease primarily reflects reduced interest expense driven by lower average borrowings and interest rates and an increase in interest income attributable to our higher cash balances , partially offset by an increase in foreign currency transaction losses . provision for income taxes . our effective tax rate was 26.3 percent in 2013 , as compared to 27.8 percent in 2012. our effective tax rate for 2013 includes approximately $ 2 million of tax benefits related to the january 2 , 2013 enactment of the us american taxpayer relief act of 2012. the company also received a favorable tax determination from the canadian courts during 2013 that resulted in approximately $ 4 million of tax benefits related to prior years , and an additional $ 2 million related to the current year . in addition , the company recognized approximately $ 11 million of tax favorability related to net changes in previously unrecognized tax benefits and global provision to return adjustments . our effective income tax rate for 2012 includes the effects of the discrete reversal of a $ 13 million valuation allowance that had been recorded against net deferred tax assets of our korean subsidiary , the recognition of an income tax benefit of $ 8 million related to our $ 20 million restructuring charge in kenya and the associated tax write-off of the investment . additionally , in 2012 we recorded a $ 4 million pre-tax charge related to the disposition of gfems , which is not expected to produce a realizable tax benefit . without the impact of the items described above , our effective tax rates for 2013 and 2012 would have been approximately 30 percent in both periods . see also note 7 of the notes to the consolidated financial statements . net income attributable to non-controlling interests . net income attributable to non-controlling interests was $ 7 million in 2013 , up from $ 6 million in 2012. the increase reflects the impact of our 2012 sale of gfems and improved net income at our non-wholly-owned operation in pakistan . 28 comprehensive income . story_separator_special_tag we recorded comprehensive income of $ 288 million in 2013 , as compared with $ 366 million in 2012. the decrease in comprehensive income primarily reflects a $ 125 million unfavorable variance in the cumulative translation adjustment , a $ 41 million unfavorable variance associated with our cash-flow hedging activity and our lower net income of $ 31 million , partially offset by a $ 119 million favorable variance relating mainly to the improved funded status of our pension and postretirement benefit plans . the unfavorable variance in the cumulative translation adjustment reflects a greater weakening in end of period foreign currencies relative to the us dollar , as compared to a year ago . 2012 compared to 2011 net income attributable to ingredion . net income attributable to ingredion for 2012 increased to $ 428 million , or $ 5.47 per diluted common share , from 2011 net income of $ 416 million , or $ 5.32 per diluted common share . our results for 2012 included after-tax charges of $ 16 million ( $ 0.20 per diluted common share ) for impaired assets and restructuring costs in kenya , china and colombia ( see note 3 of the notes to the consolidated financial statements for additional information ) , after-tax restructuring charges of $ 7 million ( $ 0.09 per diluted common share ) relating to our manufacturing optimization plan in north america , and after-tax costs of $ 3 million ( $ 0.03 per diluted common share ) associated with our integration of national starch . additionally , our 2012 results included the reversal of a $ 13 million valuation allowance that had been recorded against net deferred tax assets of our korean subsidiary ( $ 0.16 per diluted common share ) , an after-tax gain from a change in a benefit plan of $ 3 million ( $ 0.04 per diluted common share ) and an after-tax gain from the sale of land of $ 2 million ( $ 0.02 per diluted common share ) . our results for 2011 included a $ 58 million nafta award ( $ 0.75 per diluted common share ) received from the government of the united mexican states ( see note 11 of the notes to the consolidated financial statements for additional information ) and an after-tax gain of $ 18 million ( $ 0.23 per diluted common share ) pertaining to a change in a postretirement plan ( see note 8 of the notes to the consolidated financial statements for additional information ) . additionally , our 2011 results included after-tax costs of $ 21 million ( $ 0.26 per diluted common share ) relating to the integration of national starch and after-tax restructuring charges of $ 7 million ( $ 0.08 per diluted common share ) associated with our manufacturing optimization plan in north america . without the impairment/restructuring charges , the reversal of the korean deferred tax asset valuation allowance , the gain from the benefit plan change , the gain from the land sale and the integration costs in 2012 and the integration costs , restructuring charges , nafta award and gain from the postretirement plan change in 2011 , net income and diluted earnings per common share for 2012 would have grown 19 percent from 2011. this net income growth primarily reflects an increase in operating income in north america and , to a lesser extent , in asia pacific . reduced financing costs and a lower effective income tax rate also contributed to the improved earnings . net sales . net sales for 2012 increased to $ 6.53 billion from $ 6.22 billion in 2011 , as sales growth in north america and asia pacific more than offset declines in south america and emea . a summary of net sales by reportable business segment is shown below : replace_table_token_6_th the increase in net sales primarily reflects improved price/product mix of 6 percent and volume growth of 2 percent driven by stronger demand from our beverage , brewing and food customers , which more than offset unfavorable currency translation of 3 percent attributable to weaker foreign currencies relative to the us dollar . 29 net sales in north america increased 11 percent reflecting improved price/product mix of 7 percent and volume growth of 4 percent driven by stronger demand from our beverage , brewing and food customers . improved selling prices helped to offset higher corn costs . net sales in south america decreased 7 percent , as a 9 percent decline attributable to weaker foreign currencies and a 3 percent volume reduction , more than offset a 5 percent price/product mix improvement . the volume decline primarily reflects a combination of weaker economic activity in the segment and a transportation strike and labor issues that impacted our customers in argentina earlier in the year . asia pacific net sales grew 7 percent , as volume growth of 5 percent and price/product mix improvement of 3 percent , more than offset unfavorable currency translation of 1 percent . emea net sales decreased 3 percent , as unfavorable currency translation of 6 percent and a 1 percent volume reduction resulting primarily from the closure of our manufacturing plant in kenya , more than offset a 4 percent price/product mix improvement . cost of sales . cost of sales for 2012 increased 4 percent to $ 5.29 billion from $ 5.09 billion in 2011. the increase primarily reflects higher corn costs and volume growth . currency translation caused cost of sales for 2012 to decrease approximately 3 percent from 2011 , reflecting the impact of weaker foreign currencies . gross corn costs per ton for 2012 increased approximately 4 percent from 2011 , driven by higher market prices for corn . additionally , energy costs increased approximately 2 percent from 2011 ; primarily reflecting higher costs in pakistan , where power shortages due to energy infrastructure problems in that country drove costs higher .
| without the impairment/restructuring charges , the reversal of the korean deferred tax asset valuation allowance , the gain from the benefit plan change , the gain from the land sale and the integration costs in 2012 , net income and diluted earnings per common share for 2013 would have declined 9 percent from 2012. this decline in net income primarily reflects lower operating income driven principally by significantly reduced operating income in south america . net sales . net sales for 2013 decreased to $ 6.33 billion from $ 6.53 billion in 2012 , primarily reflecting reduced sales in south america and north america . a summary of net sales by reportable business segment is shown below : replace_table_token_4_th the decrease in net sales primarily reflects a 3 percent volume reduction and unfavorable currency translation of 3 percent attributable to weaker foreign currencies relative to the us dollar , which more than offset improved price/product mix of 3 percent . 26 net sales in north america decreased 3 percent , as a 4 percent volume decline and slightly unfavorable currency translation attributable to a weaker canadian dollar , more than offset improved price/product mix of 2 percent . increased selling prices helped to offset higher corn costs . net sales in south america decreased 9 percent , as a 10 percent decline attributable to weaker foreign currencies and a 2 percent volume reduction , more than offset a 3 percent price/product mix improvement . the volume reduction primarily reflects weaker economic conditions , particularly in the southern cone of south america and in brazil , and reduced sales to the brewing industry where excess industry capacity resulted in weaker brewery demand for high maltose in brazil . asia pacific net sales declined 1 percent , as a volume decline of 2 percent and slightly unfavorable currency translation effects more than offset a 1 percent price/product mix improvement . the volume reduction reflects the effect of the fourth quarter 2012 sale of our investment in
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we had selected a lead candidate , og253 , and we had a pre ind meeting with the fda in november of 2015 regarding the pursuit of an ind on og253 . following additional research and development on second generation lantibiotics , in august of 2016 , we selected a second generation lantibiotic , og716 , for treatment of c. diff . 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 c. diff spores when compared to a vancomycin positive control . the timing of the filing of an ind regarding og716 is subject to our having sufficient available capital given all of our anticipated needs and expected requirements in connection with our ongoing research and development initiatives . while we were able to raise additional capital during the quarter ended june 30 , 2016 , we currently expect the ind for a first-in-human clinical study of og716 to occur in 2017 as we continue to assess the promising properties of the homologs we have identified . our probiotic products on june 27 , 2016 , we completed the sale of our consumer probiotics business to probiora health , llc , ( probiora health ) an entity owned by ms. christine l. koski , a director at the time of the transaction . other product candidates and technologies . in addition to our lantibiotics and oral mucositis product candidates , we also have other candidates and technologies in the oral care and weight loss areas . we do not intend to continue to develop these potential product candidates and technologies without partnering with a third party . we out-licensed the continued research and development of our weight loss product candidate in december 2013 to , lpthera llc , and lpthera llc continues to work to develop a product for commercial use . our oral care product candidate smart replacement therapy is positioned for out-licensing opportunities . 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 as well as to the commercialization of our consumer probiora3 products . we have generated limited revenues from grants and from our recently disposed of consumer probiora3 product business through june 30 , 2016 , and have principally funded our operations through the sale of debt and equity securities , including the exercise of warrants issued in connection with these financing transactions . prior to 2008 , our revenues were derived solely from research grants . since 2008 , our revenues have also included sales from our recently disposed of consumer probiotics business , which we initiated in late 2008. our net revenues were $ 464,048 and $ 1,175,841 , for the years ended december 31 , 2016 and 2015 , respectively . in june of 2016 , we completed the sale of our consumer probiotics business to probiora health , llc and as a result , we will no longer generate revenue from sales of consumer probiotic products . as of december 31 , 2016 we had an accumulated deficit of $ 94,669,272 and we have yet to achieve profitability . we incurred net losses of $ 7,013,304 and $ 11,711,333 for the years ended december 31 , 2016 and 2015 , respectively . we expect to incur significant and increasing operating losses for the foreseeable future as we seek to advance our product candidates through nonclinical testing and clinical trials to ultimately obtain regulatory approval and eventual commercialization . we need to raise additional capital . the report of our independent registered public accounting firm with respect to our financial statements appearing in our form 10-k contains an explanatory paragraph stating that our operating losses and negative cash flows from operations , and our need to raise additional financing and or financial support prior to may , 2017 in order to continue to fund our operations , raise substantial doubt about our ability to continue as a going concern . there can be no assurance that additional capital will be available to us on acceptable terms , if at all . adequate additional funding may not be available to us on acceptable terms , or at all . we expect that research and development expenses will increase along with general and administrative costs , as we grow and operate our business . 56 financial overview net revenues our revenues were historically derived from sales of our probiora3 products and were $ 464,048 and $ 1,175,841 for the years ended december 31 , 2016 and 2015 , respectively . in june of 2016 , we completed the sale of our consumer probiotics business to probiora health , llc and as a result we do not expect to generate any future revenue from sales of consumer probiotic products . these revenues are not included in net revenue but rather are reflected as part of discontinued operations for the periods presented . research and development expenses research and development consists of expenses incurred in connection with the discovery and development of our product candidates . story_separator_special_tag these expenses consist primarily of employee-related expenses , which include salaries and benefits and attending science conferences ; expenses incurred under our ecc agreements with intrexon and under other agreements with contract research organizations , investigative sites and consultants that conduct our clinical trials and a substantial portion of our nonclinical studies ; the cost of acquiring and manufacturing clinical trial materials ; facilities , depreciation and other allocated expenses , which include direct and allocated expenses for rent and maintenance of facilities and equipment , and depreciation of fixed assets ; license fees , for and milestone payments related to , in-licensed products and technology ; stock-based compensation expense ; and costs associated with nonclinical activities and regulatory approvals . we expense research and development costs as incurred . our research and development expenses can be divided into ( i ) clinical research , and ( ii ) nonclinical research and development activities . clinical research costs consist of clinical trials , manufacturing services , regulatory activities and related personnel costs , and other costs such as rent , utilities , depreciation and stock-based compensation . nonclinical research and development costs consist of our research activities , nonclinical studies , related personnel costs and laboratory supplies , and other costs such as rent , utilities , depreciation and stock-based compensation and research expenses we incur associated with our ecc agreements with intrexon . while we are currently focused on advancing our product development programs , our future research and development expenses will depend on the clinical success of our product candidates , as well as ongoing assessments of each product candidate 's commercial potential . in addition , we can not forecast with any degree of certainty which product candidates may be subject to future collaborations , when such arrangements will be secured , if at all , and to what degree such arrangements would affect our development plans , research expenses and capital requirements . our research and development expenses were $ 4,754,650 and $ 8,733,510 for the years ended december 31 , 2016 and 2015 , respectively . included in research and development expense for 2015 is the non-cash expense of $ 5,000,000 associated with an up-front payment of a technology access fee , consisting of the issuance of a convertible note to intrexon for $ 5,000,000 in connection with the establishment of the oral mucositis ecc with intrexon . the convertible note , including accrued interest , was repaid in december 2015 through the issuance of 3,381,004 shares of our common stock . our current strategy is to increase our research and development expenses in the future as we continue the advancement of our clinical trials and nonclinical product development programs for our mu1140 product candidate and with respect to our oral mucositis product candidate . the lengthy process of completing clinical trials ; seeking regulatory approval for our product candidates ; and expanding the claims we are able to make , requires expenditure of substantial resources . any failure or delay in completing clinical trials , or in obtaining regulatory approvals , could cause a delay in generating product revenues and cause our research and development expenses to increase and , in turn , have a material adverse effect on our operations . our current antibiotic product development candidate is not expected to be commercially available until we are able to obtain regulatory approval from the fda . our plan is to budget and manage expenditures in research and development such that they are undertaken in a cost-effective manner yet still advance the research and development efforts . while we have some control under our lantibiotic ecc and oral mucositis ecc as to the planning and timing of the research and development and therefore the timing of when expenditures may be incurred for various phases of agreed upon projects , actual expenditures can vary from period to period . subject to available capital , we expect overall research and development expenses to fluctuate as our financial resources permit . our research and development projects are currently expected to be taken to the point where they can be licensed or partnered with larger pharmaceutical companies . general and administrative expenses general and administrative expenses consist principally of salaries and related costs for personnel in executive , finance , business development , marketing , information technology , legal and human resources functions . other general and administrative expenses include facility costs not otherwise included in research and development expenses , patent filing , and professional fees for legal , consulting , auditing and tax services . 57 we anticipate that our general and administrative expenses may continue to increase for , among others , the following reasons : to support our research and development activities , which , subject to available capital , we expect to expand as we continue the development of our product candidates ; the efforts we undertake from , time to time , to raise additional capital ; and the increased payroll , and stock based compensation , expanded infrastructure and higher consulting , legal , accounting and investor relations costs associated with being a public company . other income ( expense ) other income ( expense ) includes local business taxes , as well as interest income and expense . interest income consists of interest earned on our cash and cash equivalents , and interest on the stock subscription receivable . the primary objective of our investment policy is capital preservation . interest expense consists primarily of interest and costs associated with our indebtedness . income taxes as of december 31 , 2016 and 2015 , we have net operating loss carryforwards of approximately $ 87,663,000 and $ 81,059,000 , respectively , to offset future federal and state income taxes . we also have research and development tax credit carryforwards of approximately $ 1,875,000 and $ 1,708,000 as of december 31 , 2016 and 2015 , respectively , to offset future federal and state income taxes .
| profit ( loss ) from discontinued operations was $ 9,386 for the three months ended december 31 , 2016 compared to $ ( 174 ) for the three months ended december 31 , 2015 , resulting in a net change of $ 9,560. the net change was primarily attributable to decreases in net revenues and cost of sales of $ 229,131 and $ 92,369 respectively and decreases in salary and salary related costs , selling expense costs , contract manufacturing costs , advertising and promotion costs , supplies and equipment costs , bank fees , and patents costs of $ 72,607 , $ 18,451 , $ 18,240 , $ 11,372 , $ 10,432 , $ 8,872 , and $ 2,745 , respectively . 61 for the years ended december 31 , 2016 and 2015 research and development . research and development expenses were $ 4,754,650 for the year ended december 31 , 2016 compared to $ 8,733,510 for the year ended december 31 , 2015 ; a decrease of $ 3,978,860 , or 45.6 % . this decrease was primarily due to the payment of a $ 5.0 million technology access fee through the issuance of a convertible note payable to intrexon pursuant to the terms of the our new oral mucositis ecc during the twelve months ended december 31 , 2015. there was no such payment of a technology access fee to intrexon during the twelve month period ending december 31 , 2016. in addition , there was an increase costs associated with work under the ecc 's of $ 1,513,218. this increase was partially offset by decreases in stock based compensation costs and salary and salary related costs of $ 434,865 and $ 46,873 respectively . general and administrative . general and administrative expenses were $ 3,787,855 for the year ended december 31 , 2016 compared to $ 3,047,354 for the year ended december 31 , 2015 ; an increase of $ 740,501 or 24.3 % . this increase is due to increases in salary and salary related costs , legal fees , bonus costs , filing fees , non-employee stock option expense , and
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performance overview for the year ended december 31 , 2020 , net income was $ 35.3 million , or $ 0.59 per average diluted common share , compared to $ 40.5 million , or $ 0.84 per average diluted common share , for the year ended december 31 , 2019 , and $ 35.3 million , or $ 0.84 per average diluted common share for the year ended december 31 , 2018. the company 's annualized return on average tangible assets was 0.83 % and annualized return on average tangible equity was 9.04 % for the year ended december 31 , 2020 , compared to 1.25 % and 13.09 % , respectively , for the year ended december 31 , 2019 , and 1.19 % and 14.41 % , respectively , for the year ended december 31 , 2018. earnings for the year ended december 31 , 2020 were impacted by the effect of our $ 13.3 million pre-tax cecl related provision for credit losses on loans for the first quarter of 2020 , driven by forecasted effects on economic activity from the covid-19 pandemic , and $ 2.6 million of pre-tax merger-related costs resulting from the merger with presidio . earnings for the year ended december 31 , 2019 were reduced by pre-tax merger-related costs of $ 11.1 million , related to the merger with presidio . pre-tax earnings for the year ended december 31 , 2019 were further reduced by an additional $ 2.0 million of provision for loan losses for certain non-impaired loans acquired at a premium from presidio . earnings for the years ended december 31 , 2018 were reduced by pre-tax merger-related costs of $ 9.2 million , for the mergers with tri-valley and united american . coronavirus ( covid-19 ) in response to two economic stimulus laws passed by congress in the first half of the 2020 , the bank funded 1,105 u.s. small business administration ( “ sba ” ) paycheck protection program ( “ ppp ” ) loans , with total principal balances of $ 333.4 million . through 2020 , ppp loan payoffs totaled $ 9.1 million while sba loan forgiveness totaled $ 33.7 million and the bank ended the fourth quarter of 2020 with $ 290.7 million in outstanding ppp loan balances . these loans generated $ 2.2 million in interest income and $ 3.9 million in net deferred fee revenue during 2020. at december 31 , 2020 , total loans included remaining deferred fees on ppp loans of ( $ 6.8 ) million and deferred costs of $ 783,000 . on april 7 , 2020 , the u.s. banking agencies issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by the coronavirus . the statement describes accounting for covid-19-related loan modifications , including clarifying the interaction between current accounting rules and the temporary relief provided by the coronavirus aid , relief , and economic security ( “ cares act ” ) . the bank made accommodations for initial payment deferrals for a number of customers of up to 90 days , generally , with the 66 potential , upon application , of an additional 90 days of payment deferral ( 180 days maximum ) . the bank also waived all normal applicable fees . most of the deferrals we originally granted have returned to regular payments . the following table shows the deferments at december 31 , 2020 by category : underlying collateral business real assets estate total ( dollar in thousands ) initial deferments ( 1 ) $ - $ 1,573 $ 1,573 2nd deferments ( 2 ) 295 684 979 total $ 295 $ 2,257 $ 2,552 ( 1 ) initial deferments were generally for 3 months ( 2 ) 2nd deferments were for an additional 3 months in addition to its portfolio of sba ppp loans , the bank also has a portfolio of sba 7 ( a ) loans totaling $ 50.3 million as of february 28 , 2021 ( the most recent available data ) . as part of the sba 's coronavirus debt relief efforts , beginning in april of 2020 , the sba commenced a program to cover payments of principal , interest and any associated fees for these borrowers . the following table reflects the status of these sba 7 ( a ) loans as of february 28 , 2021 : replace_table_token_4_th the cares act was recently amended to include $ 3.5 billion of extended debt relief payments for sba borrowers . the program will initially provide for 3 payments of principal and interest to a maximum of $ 9,000 per month under various criteria and then an additional 5 payments for borrowers considered “ underserved ” as defined in the amended legislation . credit quality and performance at december 31 , 2020 , nonperforming assets ( “ npas ” ) declined by ( $ 1.9 ) million , or ( 20 % ) , to $ 7.9 million , compared to $ 9.8 million at december 31 , 2019. classified assets increased to $ 34.0 million , or 0.73 % of total assets , at december 31 , 2020 , compared to $ 32.6 million , or 0.79 % of total assets , at december 31 , 2019 . story_separator_special_tag there was a $ 13.2 million provision for credit losses on loans for the year ended december 31 , 2020 , compared to an $ 846,000 provision for loan losses for the year ended december 31 , 2019. the increase in the provision for credit losses on loans for the year ended december 31 , 2020 , compared to the year ended december 31 , 2019 , was driven primarily by a deteriorated economic outlook resulting from the covid-19 pandemic . the three loan classes where the largest increases in reserves were recorded under the cecl loss rate methodology were investor-owned cre , land and construction , and commercial and industrial ( “ c & i ” ) . ongoing impacts of the cecl methodology will be dependent upon changes in economic conditions and forecasts , originated and acquired loan portfolio composition , portfolio duration , and other factors . 67 the company continues to monitor portfolio loans made to commercial customers with businesses in higher risk sectors due to the covid-19 pandemic . the following table provides a breakdown of such loans as a percentage of total loans at december 31 , 2020 , september 30 , 2020 , june 30 , 2020 , and march 31 , 2020 : replace_table_token_5_th 68 presidio merger the company completed its merger of its wholly-owned bank subsidiary heritage bank of commerce with presidio effective october 11 , 2019 ( the “ merger date ” ) . presidio 's results of operations were included in the company 's results of operations beginning october 12 , 2019. the presidio systems and integration conversion was successfully completed in the first quarter of 2020. merger-related costs reduced pre-tax earnings by $ 2.6 million for the year ended december 31 , 2020 , compared to $ 11.1 million for year ended december 31 , 2019 . presidio was a full-service california state-chartered commercial bank headquartered in san francisco with branches in palo alto , san francisco , san mateo , san rafael , and walnut creek , california . tri-valley and united american mergers the company completed the merger of its wholly-owned bank subsidiary heritage bank of commerce with tri-valley effective as of april 6 , 2018. tri-valley 's results of operations have been included in the company 's results of operations beginning april 7 , 2018. tri-valley was a full-service california state-chartered commercial bank with branches in san ramon and livermore , california and served businesses and individuals primarily in contra costa and alameda counties in northern california . the company closed the san ramon office on july 13 , 2018. the company completed the merger of its wholly-owned bank subsidiary heritage bank of commerce with united american effective as of may 4 , 2018. united american 's results of operations have been included in the company 's results of operations beginning may 5 , 2018. united american was a full-service commercial bank located in san mateo county with full-service branches located in san mateo , redwood city and half moon bay , california and serviced businesses , professionals and individuals . the company closed the half moon bay office on august 10 , 2018 . 69 factoring activities - bay view funding replace_table_token_6_th story_separator_special_tag billion at december 31 , 2020 , compared to $ 2.53 billion at december 31 , 2019. total loans at december 31 , 2020 , included $ 290.7 million in ppp loans . ● npas were $ 7.9 million , or 0.17 % of total assets at december 31 , 2020 , compared to $ 9.8 million , or 0.24 % of total assets at december 31 , 2019 . ● classified assets were $ 34.0 million at december 31 , 2020 , compared to $ 32.6 million at december 31 , 2019. there were no foreclosed assets at december 31 , 2020 and december 31 , 2019 . ● net charge-offs totaled $ 688,000 for the year ended december 31 , 2020 , compared to $ 5.4 million for the year ended december 31 , 2019. net charge-offs of $ 5.4 million for the year ended december 31 , 2019 primarily consisted of three lending relationships totaling $ 5.5 million in net charge-offs during the fourth quarter of 2019 , including one large relationship which was previously disclosed and specifically reserved for during the second and third quarters of 2018. the three lending relationships totaling $ 5.5 million in net charge-offs had a total of $ 4.7 million in specific reserves . ● the acll at december 31 , 2020 , was $ 44.4 million , or 1.70 % of total loans , representing 564.24 % of nonperforming loans . the allowance for loan losses ( “ alll ” ) at december 31 , 2019 , was $ 23.3 million , or 0.92 % of total loans , representing 236.93 % of nonperforming loans . ● total deposits increased $ 499.7 million , or 15 % , to $ 3.91 billion at december 31 , 2020 , compared to $ 3.41 billion at december 31 , 2019 . ● deposits , excluding all time deposits and cdars deposits , increased $ 510.1 million , or 16 % , to $ 3.74 billion at december 31 , 2020 , compared to $ 3.23 billion at december 31 , 2019 . ● the ratio of noncore funding ( which consists of time deposits of $ 250,000 and over , cdars deposits , brokered deposits , securities under agreement to repurchase , subordinated debt and short-term borrowings ) to total assets was 3.61 % at december 31 , 2020 , compared to 4.10 % at december 31 , 2019 . ● the loan to deposit ratio was 66.91 % at december 31 , 2020 , compared to 74.20 % at december 31 , 2019 .
| ● the average cost of deposits was 0.17 % for the year ended december 31 , 2020 , compared to 0.29 % for the year ended december 31 , 2019 . ● there was a $ 13.2 million provision for credit losses on loans for the year ended december 31 , 2020 , compared to an $ 846,000 provision for loan losses for the year ended december 31 , 2019. the increase in the provision for credit losses on loans for the year ended december 31 , 2020 , compared to the year ended december 31 , 2019 , was driven primarily by a significantly deteriorated economic outlook resulting from the coronavirus pandemic . ● noninterest income was $ 9.9 million for the year ended december 31 , 2020 , compared to $ 10.2 million for the year ended december 31 , 2019 , primarily due to lower service charges and fees on deposit accounts , partially offset by an increase in the cash surrender value of life insurance , a gain realized on a warrant exercised , and a gain on the disposition of foreclosed assets during the first quarter of 2020 . ● noninterest expense for the year ended december 31 , 2020 increased to $ 89.5 million , compared to $ 84.9 million for the year ended december 31 , 2019 , primarily due to higher salaries and employee benefits as a result of annual salary increases , and additional employees and operating costs added as a result of the presidio merger , partially offset by lower merger-related costs . ● the following table reflects pre-tax merger-related costs resulting from the mergers for the periods indicated : 70 replace_table_token_7_th ● the efficiency ratio for the year ended december 31 , 2020 decreased to 58.96 % , compared to 59.76 % for the year ended december 31 , 2019 . ● income tax expense for the year ended december 31 , 2020 was $ 13.8 million , compared to $ 15.9 million for
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ordinary repairs and maintenance are expensed as incurred ; major replacements and betterments , which improve or extend the life of the asset , are capitalized and depreciated over their estimated useful lives . we recognize the assets acquired , liabilities assumed ( including contingencies ) and any noncontrolling interests in an acquired entity at their respective fair values on the acquisition date . we incur a variety of costs in the development and leasing of our properties . after the determination is made to capitalize a cost , it is allocated to the specific component of a project that is benefited . determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment . the costs of land and building under development include specifically identifiable costs . the capitalized costs include , but are not limited to , pre-construction costs essential to the development of the property , development costs , construction costs , interest costs , real estate taxes , salaries and related costs and other costs incurred during the period of development . we consider a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements , but no later than one year after major construction activity ceases . we cease capitalization on the portions substantially completed and occupied or held available for occupancy , and capitalize only those costs associated with the portions under construction . on a periodic basis , we assess whether there are any indications that the value of our real estate properties may be other than temporarily impaired or that their carrying value may not be recoverable . a property 's value is considered impaired if management 's estimate of the aggregate future cash flows ( undiscounted ) to be generated by the property is less than the carrying value of the property . to the extent impairment has occurred , the loss will be measured as the excess of the carrying amount of the property over the calculated fair value of the property . we also evaluate our real estate properties for impairment when a property has been classified as held for sale . real estate assets held for sale are valued at the lower of their carrying value or fair value less costs to sell and depreciation expense is no longer recorded . see note 4 , `` properties held for sale and dispositions . '' investments in unconsolidated joint ventures we account for our investments in unconsolidated joint ventures under the equity method of accounting in cases where we exercise significant influence over , but do not control , these entities and are not considered to be the primary beneficiary . we consolidate those joint ventures that we control or which are variable interest entities ( each , a `` vie '' ) and where we are considered to be the primary beneficiary . in all these joint ventures , the rights of the joint venture partner are both protective as well as participating . unless we are determined to be the primary beneficiary in a vie , these participating rights preclude us from consolidating these vie entities . these investments are recorded initially at cost , as investments in unconsolidated joint ventures , and subsequently adjusted for equity in net income ( loss ) and cash contributions and distributions . equity in net income ( loss ) from unconsolidated joint ventures is allocated based on our ownership or economic interest in each joint venture . when a capital event ( as defined in each joint venture agreement ) such as a refinancing occurs , if return thresholds are met , future equity income will be allocated at our increased economic interest . we recognize incentive income from unconsolidated real estate joint ventures as income to the extent it is earned and not subject to a clawback feature . distributions we receive from unconsolidated real estate joint ventures in excess of our basis in the investment are recorded as offsets to our investment balance if we remain liable for future obligations of the joint venture or may otherwise be committed to provide future additional financial support . none of the joint venture debt is recourse to us . the company has performance guarantees under master leases at two joint ventures . see note 6 , `` investments in unconsolidated joint ventures . '' we assess our investments in unconsolidated joint ventures for recoverability , and if it is determined that a loss in value of the investment is other than temporary , we write down the investment to its fair value . we evaluate our equity investments for impairment based on the joint ventures ' projected discounted cash flows . we do not believe that the values of any of our equity investments were impaired at december 31 , 2017 . 41 we may originate loans for real estate acquisition , development and construction , where we expect to receive some of the residual profit from such projects . when the risk and rewards of these arrangements are essentially the same as an investor or joint venture partner , we account for these arrangements as real estate investments under the equity method of accounting for investments . otherwise , we account for these arrangements consistent with the accounting for our debt and preferred equity investments . revenue recognition rental revenue is recognized on a straight-line basis over the term of the lease . the excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rents receivable on the consolidated balance sheets . we establish , on a current basis , an allowance for future potential tenant credit losses , which may occur against this account . the balance reflected on the consolidated balance sheets is net of such allowance . story_separator_special_tag we record a gain on sale of real estate when title is conveyed to the buyer , subject to the buyer 's financial commitment being sufficient to provide economic substance to the sale and provided that we have no substantial economic involvement with the buyer . interest income on debt and preferred equity investments is accrued based on the contractual terms of the instruments and when , in the opinion of management , it is deemed collectible . some debt and preferred equity investments provide for accrual of interest at specified rates , which differ from current payment terms . interest is recognized on such loans at the accrual rate subject to management 's determination that accrued interest is ultimately collectible , based on the underlying collateral and operations of the borrower . if management can not make this determination , interest income above the current pay rate is recognized only upon actual receipt . deferred origination fees , original issue discounts and loan origination costs , if any , are recognized as an adjustment to the interest income over the terms of the related investments using the effective interest method . fees received in connection with loan commitments are also deferred until the loan is funded and are then recognized over the term of the loan as an adjustment to yield . debt and preferred equity investments are placed on a non-accrual status at the earlier of the date at which payments become 90 days past due or when , in the opinion of management , a full recovery of interest income becomes doubtful . interest income recognition on any non-accrual debt or preferred equity investment is resumed when such non-accrual debt or preferred equity investment becomes contractually current and performance is demonstrated to be resumed . interest is recorded as income on impaired loans only to the extent cash is received . we may syndicate a portion of the loans that we originate or sell the loans individually . when a transaction meets the criteria for sale accounting , we derecognize the loan sold and recognize gain or loss based on the difference between the sales price and the carrying value of the loan sold . any related unamortized deferred origination fees , original issue discounts , loan origination costs , discounts or premiums at the time of sale are recognized as an adjustment to the gain or loss on sale , which is included in investment income on the consolidated statement of operations . any fees received at the time of sale or syndication are recognized as part of investment income . asset management fees are recognized on a straight-line basis over the term of the asset management agreement . allowance for doubtful accounts we maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our tenants to make required payments . if the financial condition of a specific tenant were to deteriorate , resulting in an impairment of its ability to make payments , additional allowances may be required . reserve for possible credit losses the expense for possible credit losses in connection with debt and preferred equity investments is the charge to earnings to increase the allowance for possible credit losses to the level that we estimate to be adequate , based on level 3 data , considering delinquencies , loss experience and collateral quality . other factors considered include geographic trends , product diversification , the size of the portfolio and current economic conditions . based upon these factors , we establish a provision for possible credit loss on each individual investment . when it is probable that we will be unable to collect all amounts contractually due , the investment is considered impaired . where impairment is indicated on an investment that is held to maturity , a valuation allowance is measured based upon the excess of the recorded investment amount over the net fair value of the collateral . any deficiency between the carrying amount of an asset and the calculated value of the collateral is charged to expense . we continue to assess or adjust our estimates based on circumstances of a loan and the underlying collateral . if additional information reflects increased recovery of our investment , we will adjust our reserves accordingly . there were no loan reserves recorded during the years ended december 31 , 2017 , 2016 , and 2015 . 42 debt and preferred equity investments held for sale are carried at the lower of cost or fair market value using available market information obtained through consultation with dealers or other originators of such investments as well as discounted cash flow models based on level 3 data pursuant to asc 820-10. as circumstances change , management may conclude not to sell an investment designated as held for sale . in such situations , the investment will be reclassified at its net carrying value to debt and preferred equity investments held to maturity . for these reclassified investments , the difference between the current carrying value and the expected cash to be collected at maturity will be accreted into income over the remaining term of the investment . derivative instruments in the normal course of business , we use a variety of commonly used derivative instruments , such as interest rate swaps , caps , collars and floors , to manage , or hedge , interest rate risk . effectiveness is essential for those derivatives that we intend to qualify for hedge accounting . some derivative instruments are associated with an anticipated transaction . in those cases , hedge effectiveness criteria also require that it be probable that the underlying transaction occurs . instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract . to determine the fair values of derivative instruments , we use a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date .
| the following table presents a summary of the commenced leasing activity for the year ended december 31 , 2017 in our manhattan and suburban portfolio : replace_table_token_27_th 46 replace_table_token_28_th ( 1 ) annual initial base rent . ( 2 ) escalated rent is calculated as total annual income less electric charges . ( 3 ) includes expiring space , relocating tenants and move-outs where tenants vacated . excludes lease expirations where tenants held over . ( 4 ) average starting office rent excluding new tenants replacing vacancies was $ 70.21 per rentable square feet for 120,566 rentable square feet . average starting office rent for office space ( leased and early renewals , excluding new tenants replacing vacancies ) was $ 72.83 per rentable square feet for 217,384 rentable square feet . ( 5 ) average starting office rent excluding new tenants replacing vacancies was $ 37.88 per rentable square feet for 25,866 rentable square feet . average starting office rent for office space ( leased and early renewals , excluding new tenants replacing vacancies ) was $ 35.19 per rentable square feet for 96,688 rentable square feet . investment income investment income decreased primarily as a result of additional income recognized from the recapitalization of a debt investment ( $ 41.0 million ) in the third quarter of 2016 , partially offset by income related to our preferred equity investment in 885 third avenue ( $ 16.9 million ) and a larger weighted average book balance . for the twelve months ended december 31 , 2017 , the weighted average debt and preferred equity investment balance outstanding and weighted average yield were $ 1.9 billion and 9.3 % excluding our investment in two herald square which was put on non-accrual in august 2017 , respectively , compared to $ 1.5 billion and 9.7 % , respectively , for the same period in 2016 . as of december 31 , 2017 , the debt and preferred equity investments had a weighted average term to maturity of 2.2 years excluding extension options and our investment in two herald square . other income other income decreased primarily as a result of the termination fee earned in connection with the termination of the lease with citigroup , inc. at
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trimble 's focus on these growth drivers has led over time to growth in revenue and profitability as well as an increasingly diversified business model . software and subscription growth is driving increased recurring revenue , leading to improved visibility in some of our businesses . as our solutions have expanded , our go-to-market model has also evolved , with a balanced mix between direct , distribution , and oem customers , and an increasing number of enterprise level customer relationships . during fiscal 2019 , the company acquired four businesses with total purchase consideration of $ 247.0 million . the largest acquisition was cityworks , which we acquired in the fourth quarter of 2019. cityworks is a provider of enterprise asset management ( eam ) software for utilities and local government . during fiscal 2018 , we acquired six businesses with total cash consideration of $ 1.8 billion . the largest acquisition was viewpoint , which we acquired in the third quarter of 2018 with total cash consideration of $ 1.2 billion . viewpoint is a provider of construction management software , which integrates a contractor 's financial and resource management to their project operations in the field . the acquisition is highly complementary to our construction technology portfolio and positions us to further our strategy to lead the industry 's transformation . with viewpoint , we offer customers a central workflow platform for delivering integrated end-to-end construction management , while further enabling connectivity across the complete construction life cycle . in january 2020 , a novel strain of coronavirus was identified in china , resulting in shutdowns of manufacturing and commerce , as well as global travel restrictions to contain the virus . the impact has extended to other regions . we have suppliers and employees in china , and the region represents an end market for our products . our customers and suppliers within china and other impacted countries are also affected by the coronavirus related restrictions and closures . the coronavirus is expected to have a negative effect on our financial results for fiscal 2020. the full extent and duration are uncertain and could be material . critical accounting policies and estimates the preparation of financial statements and related disclosures in conformity with u.s. generally accepted accounting principles ( `` gaap '' ) requires us to make judgments , assumptions , and estimates that affect the reported amounts of assets , liabilities , revenue , costs of sales , operating expenses , and related disclosures . we consider the accounting polices described below to be our critical accounting policies . these critical accounting policies are impacted significantly by judgments , assumptions , and estimates used in the preparation of the consolidated financial statements , and actual results could differ materially from the amounts reported based on these policies . our accounting policies are more fully described in note 2 of our accompanying notes to consolidated financial statements included in part ii , item 8 , `` financial statements and supplementary data '' of this annual report on form 10-k. revenue recognition revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration that we expect to receive in exchange for those products or services . revenue is recognized net of allowance for returns and any taxes collected from customers . we enter into contracts that can include various combinations of products and services , which are generally capable of being distinct and accounted for as separate performance obligations ; however , determining whether products or services are considered distinct performance obligations that should be accounted for separately versus together may sometimes require significant judgment . judgment is required to determine stand-alone selling price ( `` ssp '' ) for each distinct performance obligation . we use a range of amounts to estimate ssp when products and services are sold separately and determine whether there is a discount to be allocated based on the relative ssp of the various products and services . in instances where ssp is not directly observable , we determine ssp using information that may include market conditions and other observable inputs . income taxes we are a u.s. based multinational company operating in multiple u.s. and foreign jurisdictions . judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes . we consider many factors when evaluating and estimating our tax positions and tax benefits , which may require periodic adjustments and may not accurately forecast actual tax audit outcomes . determining whether an uncertain tax position is effectively settled requires judgment . changes in recognition 31 or measurement of our uncertain tax positions would result in the recognition of a tax benefit or an additional charge to the tax provision . income taxes are accounted for under the liability method , whereby deferred tax assets or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income . a valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if we believe it is more likely than not such assets will not be realized . we are subject to the periodic examination of our domestic and foreign tax returns by the irs , state , local , and foreign tax authorities who may challenge our tax positions . we regularly assess the likelihood of adverse outcomes from these examinations in determining the adequacy of our provision for income taxes . business combinations and valuation of goodwill and purchased intangible assets we allocate the fair value of purchase consideration to the assets acquired , liabilities assumed , and non-controlling interests in the acquiree based on their fair values at the acquisition date . the excess of the fair value of purchase consideration over the fair value of these assets acquired , liabilities assumed , and non-controlling interests in the acquiree is recorded as goodwill . story_separator_special_tag when determining the fair values of assets acquired , liabilities assumed , and non-controlling interests in the acquiree , management makes significant estimates and assumptions , especially with respect to intangible assets . critical estimates in valuing intangible assets include , but are not limited to , expected future cash flows , which includes consideration of future growth rates and margins , customer attrition rates , future changes in technology and brand awareness , loyalty and position , and discount rates . identifiable intangible assets are comprised of distribution channels and distribution rights , patents , licenses , technology , acquired backlog , trademarks , and in-process research and development . we evaluate goodwill at the reporting unit level in the fourth quarter of each fiscal year or more frequently if indicators of potential impairment exist . we utilize either a qualitative assessment or a quantitative test to assess the likelihood of an impairment . in performing the qualitative assessment , we consider macroeconomic conditions , industry and market considerations , overall financial performance , and other relevant events and factors that may impact the reporting units . when we perform a quantitative test , the estimation of the fair value of a reporting unit involves the use of certain estimates and assumptions including expected future operating performance using risk-adjusted discount rates . we amortize identifiable intangible assets over their estimated useful lives on a straight-line basis . changes in circumstances such as technological advances , changes to its business model , or changes in the capital strategy could result in a revised useful life . if the useful life of an asset is revised , the net book value of the estimated residual value is amortized over its revised remaining useful life . intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable based on their future cash flows . the estimated future cash flows are primarily based upon assumptions about expected future operating performance . 32 story_separator_special_tag > replace_table_token_4_th total amortization expense of purchased intangibles decreased $ 11.8 million as compared to fiscal 2018 . the decrease was primarily due to the expiration of prior acquisitions ' amortization . non-operating income ( expense ) , net the following table shows non-operating income ( expense ) , net for the periods indicated and should be read in conjunction with the narrative descriptions below : replace_table_token_5_th total non-operating expense , net decreased by $ 11.6 million during fiscal 2019 compared with fiscal 2018 . the decrease was due to increased joint venture profitability and a gain from the sale of an equity investment included in other income , net , partially offset by higher interest costs due to viewpoint acquisition debt being outstanding for a full year in fiscal 2019. income tax provision the 2017 tax cuts and jobs act ( the `` tax act '' ) reduced the u.s. federal tax rate from 35 % to 21 % , imposed a one-time transition tax on accumulated foreign earnings and created new taxes on certain foreign-sourced earnings referred to as global intangible low-taxed income ( `` gilti '' ) . as a result , we recorded a provisional net income tax expense of $ 80.2 million in fiscal 2017. in fiscal 2018 , we completed the accounting for the tax effects of the tax act and made immaterial adjustments to the provisional amounts recorded previously . additionally , in fiscal 2018 , we finalized our accounting policy election to recognize deferred taxes in relation to gilti . to align with our international business operations , in the fourth quarter of 2019 , we completed a non-u.s. intercompany transfer of our intellectual property to a subsidiary in the netherlands . the transaction resulted in deferred tax assets in the netherlands and gilti deferred tax liabilities in the u.s. , recorded at the applicable statutory tax rates , resulting in a one-time income tax benefit of approximately $ 206.3 million . our effective income tax rates for fiscal 2019 and 2018 were -49 % and -2 % , respectively . the fiscal 2019 rate was lower than the u.s. federal statutory rate of 21 % , primarily due to a one-time tax benefit from a non-u.s. intercompany transfer of intellectual property , and benefits from reserve release due to expiration of the u.s. federal statute of limitations for certain tax years . the fiscal 2018 rate was lower than the u.s. federal statutory rate of 21 % , primarily due to benefits from reserve release due to expiration of the u.s. federal statute of limitations for certain tax years , a one-time benefit from deferred taxes in relation to gilti , and benefits from stock based compensation . results by segment we report our financial performance , including revenue and operating income , based on four reportable segments : buildings and infrastructure , geospatial , resources and utilities , and transportation . our chief executive officer ( chief operating decision maker ) views and evaluates operations based on the results of our reportable operating segments under our management reporting system . these results are not necessarily in conformance with u.s. gaap . for additional discussion of our segments , see note 6 of the notes to the consolidated financial statements . 35 the following table is a breakdown of revenue and operating income by segment for the periods indicated and should be read in conjunction with the narrative descriptions below : replace_table_token_6_th a reconciliation of our consolidated segment operating income to consolidated income before income taxes follows : replace_table_token_7_th buildings and infrastructure buildings and infrastructure revenue increased by $ 170.5 million , or 16 % , and segment operating income increased by $ 63.2 million , or 25 % , for fiscal 2019 as compared to fiscal 2018 . revenue increased due to the impact of the viewpoint acquisition , as well as strong organic growth .
| by segment , buildings and infrastructure revenue increased $ 170.5 million , or 16 % , transportation increased $ 39.2 million , or 5 % , resources and utilities revenue increased $ 3.3 million or 1 % , and geospatial revenue decreased $ 73.7 million , or 10 % , as compared to fiscal 2018 . buildings and infrastructure revenue increased due to the viewpoint acquisition , which was acquired in the third quarter of fiscal 2018 , and organic growth . transportation revenue increased due to increased organic growth and acquisition revenue . resources and utilities was up slightly due to organic and acquisition growth . geospatial revenue decreased mainly due to market softness . during fiscal 2019 , sales to customers in north america represented 55 % , europe represented 28 % , asia pacific represented 11 % , and the rest of world represented 6 % of our total revenue . we anticipate that sales to international customers will continue to account for a significant portion of our revenue . 33 no single customer accounted for 10 % or more of our total revenue in fiscal 2019 or 2018 . no single customer accounted for 10 % or more of our accounts receivable as of fiscal years ended 2019 and 2018 . gross margin our gross margin varies due to a number of factors including product mix , pricing , distribution channel , production volumes , new product start-up costs , and foreign currency translations . in fiscal 2019 , our gross margin increased by $ 99.9 million as compared to fiscal 2018 , primarily due to increased organic service and subscription revenue growth in buildings and infrastructure , as well as the viewpoint acquisition , partially offset by a decrease in geospatial due to revenue declines . gross margin as a percentage of total revenue was relatively flat at 54.6 % in fiscal 2019 and 54.1 % in fiscal 2018 due to buildings and infrastructure improved product mix , largely offset by geospatial revenue decline and transportation product mix and pricing pressures . operating income operating income increased by $ 55.2 million for fiscal 2019 as
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in addition to providing guidance to financial institutions who are working with borrowers affected by the coronavirus , the federal reserve board decreased the federal funds benchmark rate by 100 basis points to 0.00 % -0.25 % , in mid-march 2020. although the impact to the company from this rate decrease is minimal for the three and twelve months ended june 30 , 2020 , it is anticipated that it will have a negative impact on the company 's interest rate spread and margin during the fiscal year ended june 30 , 2021. overview of the company 's activities and risks greene county bancorp , inc. 's results of operations depend primarily on its net interest income , which is the difference between the income earned on greene county bancorp , inc. 's loan and securities portfolios and its cost of funds , consisting of the interest paid on deposits and borrowings . results of operations are also affected by greene county bancorp , inc. 's provision for loan losses , noninterest income and noninterest expense . noninterest income consists primarily of fees and service charges . greene county bancorp , inc. 's noninterest expense consists principally of compensation and employee benefits , occupancy , equipment and data processing , and other operating expenses . results of operations are also significantly affected by general economic and competitive conditions , changes in interest rates , as well as government policies and actions of regulatory authorities . additionally , future changes in applicable law , regulations or government policies may materially affect greene county bancorp , inc. 26 index critical accounting policies greene county bancorp , inc. 's critical accounting policies relate to the allowance for loan losses and the evaluation of securities for other-than-temporary impairment . the allowance for loan losses is based on management 's estimation of an amount that is intended to absorb losses in the existing portfolio . the allowance for loan losses is established through a provision for loan losses based on management 's evaluation of the risk inherent in the loan portfolio , the composition of the portfolio , specific impaired loans and current economic conditions . such evaluation , which includes a review of all loans for which full collectability may not be reasonably assured , considers among other matters , the estimated net realizable value or the fair value of the underlying collateral , economic conditions , historical loan loss experience , management 's estimate of probable credit losses and other factors that warrant recognition in providing for the allowance of loan losses . however , this evaluation involves a high degree of complexity and requires management to make subjective judgments that often require assumptions or estimates about highly uncertain matters . this critical accounting policy and its application are periodically reviewed with the audit committee and the board of directors . securities are evaluated for other-than-temporary impairment by performing periodic reviews of individual securities in the investment portfolio . greene county bancorp , inc. makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security , on which there is an unrealized loss , is impaired on an other-than-temporary basis . the company considers many factors , including the severity and duration of the impairment ; the intent and ability of the company to hold the equity security for a period of time sufficient for a recovery in value ; recent events specific to the issuer or industry ; and for debt securities , the intent to sell the security , the likelihood to be required to sell the security before it recovers the entire amortized cost , external credit ratings and recent downgrades . the company is required to record other-than-temporary impairment charges through earnings , if it has the intent to sell , or will more likely than not be required to sell an impaired debt security before a recovery of its amortized cost basis . in addition , the company is required to record other-than-temporary impairment charges through earnings for the amount of credit losses , regardless of the intent or requirement to sell . credit loss is measured as the difference between the present value of an impaired debt security 's cash flows and its amortized cost basis . non-credit related write-downs to fair value must be recorded as decreases to accumulated other comprehensive income as long as the company has no intent or requirement to sell an impaired security before a recovery of amortized cost basis . management of credit risk management considers credit risk to be an important risk factor affecting the financial condition and operating results of greene county bancorp , inc. the potential for loss associated with this risk factor is managed through a combination of policies approved by greene county bancorp , inc. 's board of directors , the monitoring of compliance with these policies , and the periodic reporting and evaluation of loans with problem characteristics . policies relate to the maximum amount that can be granted to a single borrower and such borrower 's related interests , the aggregate amount of loans outstanding by type in relation to total assets and capital , loan concentrations , loan-to-collateral value ratios , approval limits and other underwriting criteria . policies also exist with respect to the rating of loans , determination of when loans should be placed on a nonperforming status and the factors to be considered in establishing greene county bancorp , inc. 's allowance for loan losses . management also considers credit risk when evaluating potential and current holdings of securities . credit risk is a critical component in evaluating corporate debt securities . greene county bancorp , inc. has purchased municipal securities as part of its strategy based on the fact that such securities can offer a higher tax-equivalent yield than other similar investments . story_separator_special_tag management is working with borrowers to determine best strategies to help mitigate the impact of the temporary business closures , decline in business , and loss of employment , including payment deferrals , debt consolidations and or loan restructurings due to covid-19 . the company has instituted a loan deferment program whereby short-term ( 3-6 months ) deferral of principal and or interest payments will be provided . as of june 30 , 2020 , the bank has received requests to defer 706 loans aggregating $ 193.5 million . based on guidance provided by bank regulators on march 22 , 2020 regarding deferrals granted due to covid-19 , the company will not report these loans as delinquent and will continue to recognize interest income during the deferral period . these loans will be closely monitored to determine collectability and accrual and delinquency status will be updated as deemed appropriate . the company expects covid-19 to have a negative impact on credit risk . for further discussion regarding loan deferrals see part ii , item 8 financial statements and supplemental data , note 4 , loans of this report . financial overview net income for the year ended june 30 , 2020 amounted to $ 18.7 million , or $ 2.20 per basic and diluted share , as compared to $ 17.5 million , or $ 2.05 per basic and diluted share , for the year ended june 30 , 2019 , an increase of $ 1.2 million , or 7.1 % . the increase in net income was primarily the result of increases of $ 4.8 million in net interest income , $ 289,000 in noninterest income , and $ 513,000 decrease in provision for income taxes which was partially offset by an increase of $ 2.1 million in noninterest expense and $ 2.2 million in provision for loan losses . the change in net interest income resulted from growth in interest-earning assets when comparing the years ended june 30 , 2020 and 2019. growth in interest-earning assets was within both investment securities and loans . growth in loans was primarily in commercial real estate mortgages and commercial loans which are generally higher yielding assets . however , included in this growth were $ 99.8 million of sba ppp loans , which were originated at a rate of 1.00 % . 27 index net interest spread and margin decreased 30 basis points when comparing the years ended june 30 , 2020 and 2019. net interest spread decreased to 2.98 % for the year ended june 30 , 2020 compared to 3.28 % for the year ended june 30 , 2019. net interest margin decreased to 3.09 % for the year ended june 30 , 2020 compared to 3.39 % for the year ended june 30 , 2019. changes in noninterest income and noninterest expense are more fully explained within the comparison of operating results for the years ended june 30 , 2020 and 2019 contained herein . total assets grew $ 407.3 million , or 32.1 % , to $ 1.7 billion at june 30 , 2020 as compared to $ 1.3 billion at june 30 , 2019. net loans increased $ 207.8 million , or 26.4 % , to $ 993.5 million at june 30 , 2020 as compared to $ 785.7 million at june 30 , 2019. included in net loans at june 30 , 2020 , are $ 99.8 million of loan growth from sba paycheck protection program loans partially offset by deferred sba fees related to these loans of $ 3.9 million . securities classified as available-for-sale and held-to-maturity increased $ 183.5 million , or 43.0 % , to $ 610.4 million at june 30 , 2020 as compared to $ 426.9 million at june 30 , 2019. deposits grew $ 380.5 million , or 34.0 % , to $ 1.5 billion at june 30 , 2020 as compared to $ 1.1 billion at june 30 , 2019. total shareholders ' equity amounted to $ 128.8 million and $ 112.4 million at june 30 , 2020 and 2019 , respectively , or 7.7 % and 8.9 % of total assets , respectively . comparison of financial condition as of june 30 , 2020 and 2019 securities securities available-for-sale and held-to-maturity increased $ 183.5 million , or 43.0 % , to $ 610.4 million at june 30 , 2020 as compared to $ 426.9 million at june 30 , 2019. securities purchases totaled $ 391.5 million during the year ended june 30 , 2020 and consisted of $ 283.0 million of state and political subdivision securities , $ 100.6 million of mortgage-backed securities , $ 3.8 million of other securities , and $ 4.1 million of corporate debt securities . principal pay-downs and maturities during the year amounted to $ 208.1 million , of which $ 48.1 million consisted of mortgage-backed securities , $ 144.4 million consisted of state and political subdivision securities , $ 12.3 million consisted of us government agency securities , and $ 3.3 million were other securities . greene county bancorp , inc. holds 63.5 % of its securities portfolio at june 30 , 2020 in state and political subdivision securities to take advantage of tax savings and to promote greene county bancorp , inc. 's participation in the communities in which it operates . mortgage-backed securities and asset-backed securities held within the portfolio do not contain sub-prime loans and are not exposed to the credit risk associated with such lending . replace_table_token_3_th 28 index investment maturity schedule the estimated fair value of debt securities at june 30 , 2020 by contractual maturity are shown below . mortgage-backed securities balances are presented based on final maturity date and do not reflect the expected cash flows from monthly principal repayments . expected maturities may differ from contractual maturities , because issuers may have the right to call or prepay obligations with or without call or prepayment penalties . no tax-equivalent adjustments were made in calculating the weighted average yield .
| summary of significant accounting policies of this report . unaudited quarterly financial data the following table sets forth a summary of selected financial data at and for the years ended june 30 , 2020 and 2019 and quarter ends within those years . replace_table_token_21_th 44 index item
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48 allowance for loan losses the allowance for loan losses is an estimate of the losses that exist in the loan portfolio . the allowance is based on two principles of accounting : ( 1 ) financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) topic 450 “ contingencies , ” which requires that losses be accrued when they are probable of occurring and are estimable and ( 2 ) fasb asc 310 “ receivables , ” which requires that losses be accrued when it is probable that the company will not collect all principal and interest payments according to the contractual terms of the loan . the loss , if any , is determined by the difference between the loan balance and the value of collateral , the present value of expected future cash flows and values observable in the secondary markets . the allowance for loan losses balance is an estimate based upon management 's evaluation of the loan portfolio . the allowance includes a specific and a general component . the specific component consists of management 's evaluation of certain classified and non-accrual loans and their underlying collateral . management assesses the ability of the borrower to repay the loan based upon all information available . loans are examined to determine a specific allowance based upon the borrower 's payment history , economic conditions specific to the loan or borrower and other factors that would impact the borrower 's ability to repay the loan on its contractual basis . depending on the assessment of the borrower 's ability to pay and the type , condition and value of collateral , management will establish an allowance amount specific to the loan . management uses a risk scale to assign grades to commercial relationships , which include commercial real estate , residential rentals , construction and land development , commercial loans and commercial equipment loans . commercial loan relationships with an aggregate exposure to the bank of $ 1,000,000 or greater are risk rated . residential first mortgages , home equity and second mortgages and consumer loans are monitored on an ongoing basis based on borrower payment history . consumer loans and residential real estate loans are classified as unrated unless they are part of a larger commercial relationship that requires grading or are troubled debt restructures or nonperforming loans with an other assets especially mentioned or higher risk rating due to a delinquent payment history . the company 's commercial loan portfolio is periodically reviewed by regulators and independent consultants engaged by management . in establishing the general component of the allowance , management analyzes non-impaired loans in the portfolio including changes in the amount and type of loans . this analysis reviews trends by portfolio segment in charge-offs , delinquency , classified loans , loan concentrations and the rate of portfolio segment growth . qualitative factors also include an assessment of the current regulatory environment , the quality of credit administration and loan portfolio management and national and local economic trends . based upon this analysis a loss factor is applied to each loan category and the bank adjusts the loan loss allowance by increasing or decreasing the provision for loan losses . management has significant discretion in making the judgments inherent in the determination of the allowance for loan losses , including the valuation of collateral , assessing a borrower 's prospects of repayment and in establishing loss factors on the general component of the allowance . changes in loss factors have a direct impact on the amount of the provision and on net income . errors in management 's assessment of the global factors and their impact on the portfolio could result in the allowance not being adequate to cover losses in the portfolio , and may result in additional provisions . at december 31 , 2018 and 2017 , the allowance for loan losses was $ 11.0 million and $ 10.5 million , respectively , or 0.81 % and 0.91 % , respectively , of total loans . allowance for loan loss as a percentage of loans decreased in 2018 , primarily due to the addition of county first loans , after consummation of the legal merger on january 1 , 2018 , for which no allowance was provided for in accordance with purchase accounting standards . an increase or decrease in the allowance could result in a charge or credit to income before income taxes that materially impacts earnings . for additional information regarding the allowance for loan losses , refer to notes 1 and 7 of the consolidated financial statements and the discussion the discussion in this md & a . other real estate owned ( “ oreo ” ) the company maintains a valuation allowance on its other real estate owned . as with the allowance for loan losses , the valuation allowance on oreo is based on fasb asc 450 “ contingencies , ” as well as the accounting guidance on impairment of long-lived assets . these statements require the company to establish a valuation allowance when it has determined that the carrying amount of a foreclosed asset exceeds its fair value . fair value of a foreclosed asset is measured by the cash flows expected to be realized from its subsequent disposition . these cash flows include the costs of selling or otherwise disposing of the asset . 49 in estimating the fair value of oreo , management must make significant assumptions regarding the timing and amount of cash flows . for example , in cases where the real estate acquired is undeveloped land , management must gather the best available evidence regarding the market value of the property , including appraisals , cost estimates of development and broker opinions . due to the highly subjective nature of this evidence , as well as the limited market , long time periods involved and substantial risks , cash flow estimates are highly subjective and subject to change . story_separator_special_tag errors regarding any aspect of the costs or proceeds of developing , selling or otherwise disposing of foreclosed real estate could result in the allowance being inadequate to reduce carrying costs to fair value and may require an additional provision for valuation allowances . for additional information regarding oreo , refer to notes 1 and 9 of the consolidated financial statements . deferred tax assets the company accounts for income taxes in accordance with fasb asc 740 , “ income taxes , ” which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities . fasb asc 740 requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or the entire deferred tax asset will not be realized . management periodically evaluates the ability of the company to realize the value of its deferred tax assets . if management were to determine that it would not be more likely than not that the company would realize the full amount of the deferred tax assets , it would establish a valuation allowance to reduce the carrying value of the deferred tax asset to the amount it believes would be realized . the factors used to assess the likelihood of realization are the company 's forecast of future taxable income and available tax-planning strategies that could be implemented to realize the net deferred tax assets . failure to achieve forecasted taxable income might affect the ultimate realization of the net deferred tax assets . factors that may affect the company 's ability to achieve sufficient forecasted taxable income include , but are not limited to , the following : increased competition , a decline in net interest margin , a loss of market share , decreased demand for financial services and national and regional economic conditions . the company 's provision for income taxes and the determination of the resulting deferred tax assets and liabilities involve a significant amount of management judgment and are based on the best information available at the time . the company operates within federal and state taxing jurisdictions and is subject to audit in these jurisdictions . for additional information regarding income taxes and deferred tax assets , refer to notes 1 and 13 of the consolidated financial statements . overview community bank of the chesapeake ( the “ bank ” ) is headquartered in southern maryland with 12 branches located in maryland and virginia . the bank is a wholly owned subsidiary of the community financial corporation ( the “ company ” ) . the bank 's branches are located in waldorf ( two branches ) , bryans road , dunkirk , leonardtown , la plata ( two branches ) , charlotte hall , prince frederick , lusby , california , maryland ; and fredericksburg , virginia . the bank has two operation centers located at the main office in waldorf , maryland and in fredericksburg , virginia . the company maintains five loan production offices ( “ lpos ” ) in annapolis , la plata , prince frederick and leonardtown , maryland ; and fredericksburg , virginia . the leonardtown lpo is co-located with the branch and the fredericksburg lpo is co-located with the operation center . the bank has increased assets primarily with organic loan growth until its first acquisition of county first bank in january 2018. the bank believes that its ability to offer fast , flexible , local decision-making will continue to attract significant new business relationships . the bank focuses its business generation efforts on targeting small and medium sized commercial businesses with revenues between $ 5.0 million and $ 35.0 million as well as local municipal agencies and not-for-profits . our business model is customer-focused , utilizing relationship teams to provide customers with specific banker contacts and a support team to address product and service demands . our structure provides a consistent and superior level of professional service . being a community bank gives us the competitive advantage . excelling at customer service is a critical part of our culture . the bank 's marketing is also directed towards increasing its balances of transactional deposit accounts , which are all deposit accounts other than certificates of deposit . the bank believes that increases in these account types will lessen the bank 's dependence on higher-cost funding , such as certificates of deposit and borrowings . although management believes that this strategy will increase financial performance over time , increasing the balances of certain products , such as commercial lending and transaction accounts , may also increase the bank 's noninterest expense . management recognizes that certain lending and deposit products increase the possibility of losses from credit and other risks . 50 the company 's income is primarily earned from interest received on our loans and investments . our primary source of funds for making these loans and investments is our deposits , on which we pay interest . consequently , one of the key measures of our success is our net interest income , or the difference between the income on our interest-earning assets , such as loans and investments , and the expense on our interest-bearing liabilities , such as deposits and borrowings . another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities , which is called our net interest spread . in addition to earning interest on our loans and investments , we earn income through fees and other charges to our clients . on january 1 , 2018 , the company completed its merger of county first with and into the bank , with the bank as the surviving bank ( the “ merger ” ) pursuant to the agreement and plan of merger , dated as of july 31 , 2017 , by and among the company , the bank and county first .
| additionally , the year ended december 31 , 2017 results included $ 2.7 million in additional income tax expense from the revaluation of deferred tax assets because of the reduction in the corporate income tax rates under the tax cuts and jobs act of 2017. the impact of merger and acquisition costs and the adjustments to deferred tax assets in 2017 resulted in a reduction to earnings per share of $ 0.49 for the year ended december 31 , 2018 and $ 0.75 for the year ended december 31 , 2017. the company 's roaa and roace were 0.70 % and 7.53 % in the year ended december 31 , 2018 compared to 0.52 % and 6.55 % in the year ended december 31 , 2017. pretax net income decreased $ 964,000 or 5.9 % to $ 15.4 million for the year ended december 31 , 2018 compared to $ 16.4 million for the year ended december 31 , 2017. the company 's pretax returns on average assets and common stockholders ' equity for 2017 were 0.96 % and 10.33 % , respectively , compared to 1.19 % and 14.88 % , respectively , for 2017. the decrease in pretax income was due to increases in noninterest expense of $ 8.1 million and the provision for loan losses of $ 395,000 partially offset increases in net interest income of $ 7.5 million . net interest margin increased for the year ended december 31 , 2018 six basis points from 3.37 % for the year ended december 31 , 2017 to 3.43 % for the year ended december 31 , 2018. this year over year stability in margins was primarily due to the acquisition of lower cost county first transaction deposits as well as the acquisition of additional transaction deposits which changed the overall funding mix of the bank 's interest-bearing liabilities . if the impacts of $ 742,000 of accretion interest were excluded , net interest margin for 2018 would have reduced five basis points to 3.38 % . the company was successful at controlling its overall deposit and funding costs . cumulative deposit and funding betas between december 31 , 2016-2018 were less than 30 % . the company reported operating net income 2 of $ 13.9 million , or $ 2.51 per share in the year ended december 31 , 2018. this compares to operating net income of $ 10.7 million , or $ 2.31 per share in the year ended december 31 , 2017. the $ 3.2 million or 30.4 % increase in operating net income was due to increased net interest income and
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on a constant currency basis , operating and administrative expenses increased 5 % . the increase was primarily due to increased investment in growth initiatives , including incremental costs associated with the acquisitions in the year ended april 30 , 2020 , and to a lesser extent , investments in additional resources in editorial and content support , and higher technology related costs . impairment of goodwill and intangible assets : goodwill impairment for the year ended april 30 , 2020 , we recorded a non-cash impairment of goodwill of $ 110.0 million related to our education services reporting unit . this charge is reflected in impairment of goodwill and intangible assets in the consolidated statements of ( loss ) income . the impairment charge is not deductible for federal or state tax purposes and therefore there is no tax benefit related to the impairment charge . during our annual goodwill impairment test initiated on february 1 , 2020 we identified indicators that the goodwill of the education services business was impaired due to underperformance as compared with our acquisition case projections for revenue growth and operating cash flow . subsequently , during the fourth quarter of fiscal year 2020 , we determined that our updated revenue and operating cash flow projections would be further impacted by anticipated near-term headwinds due to covid-19 , including adverse impacts on new student starts and student re-enrollment . therefore , we updated the impairment test as of march 31 , 2020 to reflect this change in circumstances . as a result , we concluded that the carrying value was above the fair value , resulting in a non-cash goodwill impairment of $ 110.0 million . we remain confident in the education services unit 's strong growth and profit potential , which is expected over time to be enhanced by the current accelerated shift to online learning . intangible asset impairment for the year ended april 30 , 2020 , we recorded a pre-tax non-cash impairment charge of $ 89.5 million for our blackwell trademark , which was acquired in 2007 and carried as an indefinite-lived intangible asset primarily related to our research publishing & platforms segment . the impairment reflects our decision to simplify wiley 's brand portfolio and unify our research journal content under one wiley brand , which will sharply limit the use of the blackwell trade name . this impairment resulted in writing off substantially all of the carrying value of the intangible trademark asset . this charge is reflected in impairment of goodwill and intangible assets in the consolidated statements of ( loss ) income . the resulting non-cash impairment charge is entirely unrelated to covid-19 or the expected future financial performance of the research publishing & platforms segment . 26 index in addition , as a result of our decision to discontinue the use of certain technology offerings within the research publishing & platforms segment , we recorded a pre-tax non-cash impairment charge of $ 2.8 million related to a certain developed technology intangible . this charge is reflected in impairment of goodwill and intangible assets in the consolidated statements of ( loss ) income . see note 11 , “ goodwill and intangible assets ” for further information related to goodwill and intangible assets . restructuring and related charges : business optimization program for the year ended april 30 , 2020 , we recorded pre-tax restructuring charges of $ 32.8 million . we originally anticipated approximately $ 15 million to $ 20 million of restructuring charges , of which approximately $ 10 million to $ 15 million was expected to be severance-related costs and the remainder to be other related costs . however , in the fourth quarter of 2020 , we recorded $ 15.0 million of pre-tax restructuring charges due to additional actions to mitigate the impact of covid-19 . these charges are reflected in restructuring and related charges in the consolidated statements of ( loss ) income . see note 7 , “ restructuring and related charges ” for more details on these charges . these fourth quarter actions are expected to generate $ 30 million of estimated gross annual savings , which is incremental to the original $ 100 million of estimated gross savings anticipated over the three-year period . most of those savings to be reinvested in the company to drive and sustain profitable revenue growth . restructuring and reinvestment program for the years ended april 30 , 2020 and 2019 , we recorded pre-tax restructuring credits of $ 0.2 million and charges of $ 3.1 million , respectively , related to this program . these credits and charges are reflected in restructuring and related charges in the consolidated statements of ( loss ) income . see note 7 , “ restructuring and related charges ” for more details on these credits and charges . for the impact of both of our restructuring programs on diluted earnings per share , see the section below , “ diluted earnings per share ( “ eps ” ) . ” amortization of intangibles : amortization of intangibles was $ 62.4 million for the year ended april 30 , 2020 , an increase of $ 7.8 million , or 14 % as compared with the prior year . on a constant currency basis , amortization of intangibles increased 15 % as compared with the prior year . the increase in amortization was due to the intangibles acquired as part of the acquisitions completed in fiscal year 2020 and , to a lesser extent , intangibles acquired as part of the acquisition of learning house in november 2018 , partially offset by a decrease due to the completion of amortization of certain acquired intangible assets . see note 4 , “ acquisitions ” for more details on these transactions . operating ( loss ) income : operating loss was $ 54.3 million for the year ended april 30 , 2020 compared with the prior year income of $ 224.0 million . story_separator_special_tag on a constant currency basis and excluding the impairment of goodwill and intangible assets and restructuring charges , adjusted ebitda decreased 8 % primarily due to investment in growth initiatives and the impact of covid-19 . interest expense : interest expense for the year ended april 30 , 2020 was $ 25.0 million compared with the prior year of $ 16.1 million . this increase was due to higher average debt balances outstanding , which included borrowings for the funding of acquisitions and a higher weighted average effective borrowing rate . foreign exchange transaction gains ( losses ) : foreign exchange transaction gains were $ 2.8 million for the year ended april 30 , 2020 and were primarily due to the net impact of the change in average foreign exchange rates as compared to the u.s. dollar on our third-party accounts receivable and payable balances . foreign exchange transaction losses were $ 6.0 million for the year ended april 30 , 2019 and were primarily due to the net impact of the change in average foreign exchange rates as compared to the u.s. dollar on our intercompany accounts receivable and payable balances . 27 index provision for income taxes : the following table summarizes the effective tax rate for the years ended april 30 , 2020 and 2019 : replace_table_token_4_th the effective tax rate for the year ended april 30 , 2020 was less than the year ended april 30 , 2019 due to the impairment of goodwill and intangible assets , with respect to which we obtained a relatively small tax benefit . excluding the effect of the impairment charges partially offset by the tax effect on other unusual items , the rate was 21.5 % for the year ended april 30 , 2020 , compared to 22.2 % for the year ended april 30 , 2019 , primarily due to lower taxes on income outside the u.s. as well as increased tax credits and related benefits . diluted ( loss ) earnings per share ( “ eps ” ) : diluted loss per share for the year ended april 30 , 2020 was $ 1.32 per share compared with earnings per share of $ 2.91 in the prior year . below is a reconciliation of our u.s. gaap ( loss ) earnings per share to non-gaap adjusted eps : replace_table_token_5_th ( 1 ) represents the impact of using diluted weighted-average number of common shares outstanding ( 56.7 million shares for the year ended april 30 , 2020 ) included in the non-u.s. gaap adjusted eps calculation in order to apply the dilutive impact on adjusted net income due to the effect of unvested restricted stock units and other stock awards . this impact occurs when a u.s. gaap net loss is reported and the effect of using dilutive shares is antidilutive . excluding the impact of the items included in the table above , adjusted eps for the year ended april 30 , 2020 decreased 19 % to $ 2.40 per share compared with $ 2.96 per share for the year april 30 , 2019. on a constant currency basis , adjusted eps decreased 21 % due to investment in growth initiatives , including acquisitions , the impact of covid-19 , and higher interest expense . the inorganic earnings impact of acquisitions was $ 0.33 per share of dilution for fiscal year 2020 , including interest expense . 28 index story_separator_special_tag restructuring and reinvestment program for the years ended april 30 , 2019 and 2018 , we recorded pre-tax restructuring charges of $ 3.1 million and $ 28.6 million , respectively , related to this program . these charges are reflected in restructuring and related charges in the consolidated statements of ( loss ) income . see note 7 , “ restructuring and related charges ” for more details on these charges . for the impact of this restructuring program on diluted earnings per share , see the section below , “ diluted earnings per share ( “ eps ” ) . ” amortization of intangibles : amortization of intangibles was $ 54.7 million for the year ended april 30 , 2019 , an increase of $ 6.4 million as compared with prior year . on a constant currency basis , amortization of intangibles increased 14 % . the increase in amortization was primarily due to the acquisition of intangibles as part of the acquisition of learning house and , to a lesser extent , in the research publishing & platforms segment due to the timing of the acquisitions of publishing rights in the second half of 2018 . 32 index operating income : operating income was $ 224.0 million for the year ended april 30 , 2019 , a decrease of $ 7.5 million , or 3 % , as compared with prior year . on a constant currency basis , excluding the impact from learning house , which reported an operating loss of $ 8.0 million , and restructuring charges and the brand impairment charge in the prior year , operating income decreased 6 % , due to higher expenses , partially offset by higher revenue . interest expense : interest expense for the year ended april 30 , 2019 increased $ 2.8 million to $ 16.1 million on a reported basis . this increase was due to a higher average debt balances outstanding , which included borrowings for the funding of the acquisition of learning house , and a higher weighted average effective borrowing rate . foreign exchange transaction gains ( losses ) : foreign exchange transaction losses were $ 6.0 million for the year ended april 30 , 2019 and were primarily due to the net impact of the change in average foreign exchange rates as compared to the u.s. dollar on our intercompany accounts receivable and payable balances . for the year ended april 30 , 2018 , foreign exchange transaction losses were $ 12.8 million which were primarily due to the impact of changes in average foreign exchange rates as compared to the u.s. dollar on our intercompany and third-party accounts receivable and payable balances .
| this decrease was primarily due to the continued decline in book publishing reflecting market conditions , and to a lesser extent , a decrease in test preparation and certification offerings . during the fourth quarter of april 30 , 2020 , due to the impact of covid-19 , there was a further decrease in revenue for print books due to retail closures , reprioritization of online retailer shipments toward “ essential goods ” only , test preparation offerings due to cancelled exams , and classroom-dependent corporate training due to office closures . adjusted ebitda : on a constant currency basis , adjusted ebitda decreased 28 % as compared with the prior year . this decrease was primarily due to the decline in revenue . also contributing to lower adjusted ebitda , but to a lesser extent , was increased investment in growth initiatives including the acquisitions of zybooks and knewton , and an increase in reserves for accounts receivable primarily due to the impact of covid-19 . these factors were partially offset by lower inventory and royalty costs as a result of lower revenue . 30 index replace_table_token_8_th # not meaningful revenue : education services revenue increased 47 % to $ 231.9 million on a reported basis and 48 % on a constant currency basis as compared with the prior year . excluding revenue from acquisitions , organic revenue increased 11 % on a constant currency basis . the increase was mainly driven by an increase in fee-based online program management revenue . adjusted ebitda : on a constant currency basis , adjusted ebitda increased by $ 15.1 million as compared with the prior year . this was due to higher revenue , partially offset by higher costs of sales from employment related costs , and to a lesser extent , higher marketing costs . education services partners and programs : as of april 30 , 2020 , wiley had 69 university partners under contract . corporate expenses : corporate expenses for the year ended april 30 , 2020 in creased 7 % to $ 180.1 million as compared with the prior year . on a constant currency basis and excluding restructuring charges , these expenses
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business environment against a backdrop of global declines in trading volumes , we maintained our position as the largest u.s. electronic broker as measured by the number of customer revenue trades , which increased 2 % from the prior year . new customer account growth remained robust as total customer accounts increased 16 % to 385 thousand from 2015. institutional customers , such as hedge funds , mutual funds , introducing brokers , proprietary trading groups and financial advisors , comprised approximately 44 % of total accounts and approximately 63 % of total customer equity at the end of 2016. our customer base continues to be geographically diverse , with customers residing in over 190 countries and over 50 % of new customers coming from outside the u.s. average equity per account increased by 9 % , to $ 222 thousand compared to the prior year . 46 electronic brokerage net interest income grew 25 % , compared to 2015. our low margin lending rates are tied to benchmark rates , such as the federal funds rate in the u.s. in 2016 , our customers paid 0.5 % to 2.2 % for their u.s. dollar margin loans with us . customer margin loans increased by 14 % from 2015 , due to customers ' appetite for increased risk , along with expanded prime broker financing and average customer credit balances rose 16 % in 2016. market making segment results decreased in 2016 , as trading gains were dampened by lower trading volumes and decreases in volatility and in the actual-to-implied volatility ratio as compared to 2015. the following is a summary of the key profit drivers that affect our business and how they compared to the prior year : global trading volumes . according to data received from exchanges worldwide , volumes in exchange-listed equity-based options decreased by approximately 12 % globally and 2 % in the u.s. for the year ended december 31 , 2016 , compared to 2015. during 2016 we accounted for approximately 7.9 % ( 7.8 % in 2015 ) of the exchange-listed equity-based options volume traded worldwide ( including options on etfs and stock index products ) , and approximately 10.9 % ( 11.3 % in 2015 ) of exchange-listed equity-based options volume traded in the u.s. it is important to note that this metric is not directly correlated with our profits . see tables on pages 61-63 of this annual report on form 10-k for additional details regarding our trade volumes , contract and share volumes and brokerage statistics . volatility . since we typically maintain an overall long volatility position , our market making profits are generally correlated with market volatility , protecting us against a severe market dislocation in either direction . based on the chicago board options exchange volatility index ( `` vix® '' ) , the average volatility decreased to 15.9 in 2016 , down 5 % from the average of 16.7 in 2015. the ratio of actual to implied volatility is also meaningful to our results . because the cost of hedging our positions is based on implied volatility , while our trading profits are , in part , based on actual market volatility , a higher ratio has a generally favorable impact on our trading gains and a lower ratio generally has a negative effect . this ratio averaged approximately 83 % during 2016 , compared to an average of approximately 88 % in 2015. currency fluctuations . as a global electronic broker and market maker trading on exchanges around the world in multiple currencies , we are exposed to foreign currency risk . we actively manage this exposure by keeping our net worth in proportion to a defined basket of 15 currencies we call the `` global '' in order to diversify our risk and to align our hedging strategy with the currencies that we use in our business . because we report our financial results in u.s. dollars , the change in the value of the global versus the u.s. dollar affects our earnings . during 2016 the value of the global , as measured in u.s. dollars , decreased 0.93 % compared to its value as of december 31 , 2015 , which had a negative impact on our comprehensive earnings for 2016. a discussion of our approach for managing foreign currency exposure is contained in part ii , item 7a of this annual report on form 10-k entitled `` quantitative and qualitative disclosures about market risk . '' financial overview diluted earnings per share were $ 1.25 for the year ended december 31 , 2016 ( `` current year '' ) , compared to diluted earnings per share of $ 0.78 for the year ended december 31 , 2015 ( `` prior year '' ) . the calculation of diluted earnings per share is detailed in note 4 to the audited consolidated financial statements , in part ii , item 8 of this annual report on form 10-k. on a comprehensive basis , which includes other comprehensive income ( `` oci '' ) , diluted earnings per share were $ 1.19 for the current year , compared to diluted earnings per share of $ 0.62 for the prior year . 47 in connection with our currency diversification strategy , we determine our net worth in globals , a basket of 15 major currencies in which we hold our equity . as a result , as of december 31 , 2016 , approximately 53 % of our equity was denominated in currencies other than the u.s. dollar . in the current year , our currency diversification strategy decreased our comprehensive earnings by $ 65 million ( versus a decrease of $ 269 million in the prior year ) , as the u.s. dollar value of the global decreased by approximately 0.93 % . the effects of our currency diversification strategy are reported as ( 1 ) a component of other income in the consolidated statement of comprehensive income and ( 2 ) oci in the consolidated statement of financial condition and the consolidated statement of comprehensive income . story_separator_special_tag the full effect of the global is captured in comprehensive income . as a result of a periodic assessment , and in light of the increasing importance of china to our business , we changed the composition of the global by adding the chinese renminbi ( specifically , the offshore currency known by the symbol cnh ) , removing the south korean won ( krw ) and brazilian real ( brl ) components , and realigning the relative weights of the u.s. dollar ( usd ) and japanese yen ( jpy ) components to better reflect the global diversification of our businesses . the new composition of the global went into effect as of the close of business on june 30 , 2016. consolidated : for the current year , our net revenues were $ 1,396 million and income before income taxes was $ 761 million , compared to net revenues of $ 1,189 million and income before income taxes of $ 458 million in the prior year . the increase in income before income taxes in the current year was mainly driven by a 24 % increase in net interest income and the non-recurrence of customer debt expenses resulting from the swiss franc event in january 2015 , as further described below , partially offset by a 39 % decrease in trading gains . our pre-tax profit margin was 55 % , compared to 39 % for the prior year . electronic brokerage : for the current year , income before income taxes in our electronic brokerage segment increased $ 220 million , or 41 % , compared to the prior year , mainly driven by higher net interest income and the non-recurrence of $ 137 million in customer bad debt expenses in the prior year due to the swiss franc event described below . net revenues increased 13 % , mainly from a 25 % increase in net interest income , due to higher customer cash balances , the majority of which were invested in interest-bearing u.s. government securities during the current year , and from a 62 % increase in other income , driven by higher net mark-to-market gains on our u.s. government securities portfolio . pre-tax profit margin was 61 % for the current year and 49 % for the prior year . customer accounts grew 16 % and customer equity increased 27 % from the prior year . for the current year , total daily average revenue trades ( `` darts '' ) for cleared and execution-only customers increased 2 % to 660 thousand , compared to 647 thousand in the prior year . sudden move in the value of the swiss franc on january 15 , 2015 , in an unprecedented action , the swiss national bank removed a previously instituted and repeatedly confirmed cap of the currency relative to the euro , causing a sudden move in the value of the swiss franc . several of our customers holding currency futures and spot positions suffered losses in excess of their deposits with us . we took immediate action to hedge our exposure to the foreign currency receivables from these customers . since january 2015 , we have incurred cumulative losses , net of hedging activity and debt collection efforts , of $ 118 million . we continue to actively pursue collection of the debts . the ultimate effect of this incident on our results will depend upon the outcome of our debt collection efforts . 48 market making : for the current year , income before income taxes in our market making segment decreased $ 86 million , or 66 % , compared to the prior year . trading gains decreased 39 % on lower trading volumes , a divergence in price behavior among a significant number of individual stocks during the first quarter of 2016 , and decreases in volatility and in the actual-to-implied volatility ratio compared to the prior year . pre-tax profit margin was 23 % for the current year and 44 % for the prior year . market making , by its nature , does not produce predictable earnings . our results in any given period may be materially affected by volumes in the global financial markets , the level of competition and other factors . electronic brokerage is more predictable , but it is dependent on customer activity , growth in customer accounts and assets , interest rates and other factors . for a further discussion of the factors , that may affect our future operating results , please see the description of risk factors in part i , item 1a of this annual report on form 10-k. the following two tables present net revenues and income before income taxes for each of our business segments for the periods indicated . net revenues of each of our segments and our total net revenues are summarized below : replace_table_token_8_th ( 1 ) the corporate segment includes corporate related activities , inter-segment eliminations , and gains and losses on positions held as part of our overall currency diversification strategy . income before income taxes of each of our segments and our total income before income taxes are summarized below : replace_table_token_9_th ( 1 ) the corporate segment includes corporate related activities , inter-segment eliminations , and gains and losses on positions held as part of our overall currency diversification strategy . 49 net revenues trading gains trading gains are generated in the normal course of our market making business . trading revenues are , in general , proportional to the trading activity in the markets . our revenue base is highly diversified and comprised of millions of relatively small individual trades of various financial products traded on electronic exchanges , primarily in stocks , options and futures . trading gains accounted for approximately 12 % , 23 % , and 25 % of our total net revenues for the years ended december 31 , 2016 , 2015 , and 2014 , respectively . trading gains also include revenues from net dividends . market making activities require us to hold a substantial inventory of equity securities .
| 54 trading gains were unfavorably impacted by lower trading volumes , a divergence in price behavior among a significant number of individual stocks during the first quarter of 2016 , and decreases in volatility and in the actual-to-implied volatility ratio as compared to the prior year . the vix® , which measures perceived u.s. equity market volatility , decreased 5 % to an average of 15.9 for the current year , compared to an average of 16.7 for the prior year . the ratio of actual to implied volatility decreased to an average of 83 % for the current year , compared to an average of 88 % for the prior year . included in trading gains are net dividends . dividend income and expense arise from holding market making positions over dates on which dividends are paid to shareholders of record . when a stock pays a dividend , its market price is generally adjusted downward to reflect the value paid , which will not be received by those who purchase stock on or after the ex-dividend date . hence , the apparent gains and losses due to these price changes , reflecting the value of dividends paid to shareholders , must be taken together with the dividends paid and received , respectively , to accurately reflect the results of our market making operations . commissions and execution fees commissions and execution fees , for the current year , decreased $ 5 million , or 1 % , compared to the prior year , to $ 612 million , driven by mixed customer trading volumes and lower average commission per customer order , but moderated by continued customer account growth . cleared customer options contract and stock share volumes decreased 7 % and 10 % , respectively , while futures contract volume increased 3 % , compared to the prior year . total darts for cleared and execution-only customers , for the current year , increased 2 % to 660 thousand , compared to 647 thousand during the prior year . darts for cleared customers , i.e. , customers for whom we execute trades , as well as , clear and carry positions , for the current year , increased 3 % to 609 thousand , compared to 589 thousand for the prior
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32 form 10-k part ii cincinnati bell inc. $ change % change $ change % change ( dollars in millions ) 2015 2014 2015 vs. 2014 2015 vs. 2014 2013 2014 vs. 2013 2014 vs. 2013 revenue $ 743.7 $ 740.7 $ 3.0 0 % $ 724.8 $ 15.9 2 % operating costs and expenses : cost of services and products 331.5 306.2 25.3 8 % 286.3 19.9 7 % selling , general and administrative 150.9 136.2 14.7 11 % 132.7 3.5 3 % depreciation and amortization 129.2 115.7 13.5 12 % 112.2 3.5 3 % restructuring charges ( reversals ) 1.6 ( 0.5 ) 2.1 n/m 9.1 ( 9.6 ) n/m curtailment loss ( gain ) 0.3 — 0.3 n/m ( 0.6 ) 0.6 n/m loss ( gain ) on sale or disposal of assets 0.3 ( 0.4 ) 0.7 n/m ( 1.1 ) 0.7 64 % impairments of assets — 4.6 ( 4.6 ) n/m — 4.6 n/m total operating costs and expenses 613.8 561.8 52.0 9 % 538.6 23.2 4 % operating income $ 129.9 $ 178.9 $ ( 49.0 ) ( 27 ) % $ 186.2 $ ( 7.3 ) ( 4 ) % operating margin 17.5 % 24.2 % ( 6.7 ) 25.7 % ( 1.5 ) capital expenditures $ 269.5 $ 163.7 $ 105.8 65 % $ 162.6 $ 1.1 1 % metrics ( in thousands ) : fioptics units passed 432.0 335.0 97.0 29 % 276.0 59.0 21 % internet subscribers : dsl 133.7 156.2 ( 22.5 ) ( 14 ) % 188.5 ( 32.3 ) ( 17 ) % fioptics 153.7 113.7 40.0 35 % 79.9 33.8 42 % total internet subscribers 287.4 269.9 17.5 6 % 268.4 1.5 1 % fioptics video subscribers 114.4 91.4 23.0 25 % 74.2 17.2 23 % residential voice lines : legacy 146.4 181.6 ( 35.2 ) ( 19 ) % 223.5 ( 41.9 ) ( 19 ) % fioptics 71.4 56.7 14.7 26 % 47.9 8.8 18 % total residential voice lines 217.8 238.3 ( 20.5 ) ( 9 ) % 271.4 ( 33.1 ) ( 12 ) % business voice lines : legacy 215.4 238.0 ( 22.6 ) ( 9 ) % 253.9 ( 15.9 ) ( 6 ) % voip * 89.5 70.0 19.5 28 % 54.0 16.0 30 % total business voice lines 304.9 308.0 ( 3.1 ) ( 1 ) % 307.9 0.1 0 % total voice lines 522.7 546.3 ( 23.6 ) ( 4 ) % 579.3 ( 33.0 ) ( 6 ) % long distance lines : residential 199.4 212.5 ( 13.1 ) ( 6 ) % 236.2 ( 23.7 ) ( 10 ) % business 140.3 150.3 ( 10.0 ) ( 7 ) % 157.9 ( 7.6 ) ( 5 ) % total long distance lines : 339.7 362.8 ( 23.1 ) ( 6 ) % 394.1 ( 31.3 ) ( 8 ) % * voip lines include fioptics voice lines 33 form 10-k part ii cincinnati bell inc. revenue the following table illustrates our revenue by market : consumer , business and carrier . our products within each market have been classified as either strategic , legacy or integration . replace_table_token_15_th 34 form 10-k part ii cincinnati bell inc. consumer consumer market revenue has increased each of the previous two years due to fioptics growth offsetting legacy access line and dsl subscriber loss . our fioptics internet subscriber base increased 35 % and average revenue per user ( `` arpu '' ) was up 14 % in 2015. during 2014 , the fioptics internet subscriber base increased 33 % with arpu growing 19 % . fioptics video subscribers increased 27 % and 25 % in 2015 and 2014 , respectively , in addition to a 1 % and 7 % increase in arpu . video arpu growth rates decelerated in 2015 as a result of increased promotional pricing due to increased competition . the company continues to lose access and long distance lines as a result of , among other factors , customers electing to solely use wireless service in lieu of traditional local wireline service and customers electing other service providers . the company also continues to experience dsl subscriber loss as a result of customers migrating to fioptics or an alternative internet provider , particularly in areas that have not been upgraded to fioptics . integration revenue increased in 2014 primarily due to $ 5.7 million of revenue generated through an agreement to sell verizon wireless product and services at our retail locations . revenue from selling these products totaled $ 3.1 million in 2015. we discontinued the sale of verizon handsets at our retail locations effective january 31 , 2016. business data revenue from our business customers has increased as customers migrate from our legacy product offerings . voice revenue declined $ 6.4 million in 2014 and $ 4.0 million in 2015 as the growth in voip lines continues to mitigate legacy voice line loss and the migration of certain customers to national providers . in total , business voice lines were consistent during 2014 and decreased 1 % in 2015. in addition , service and other revenue has declined each year primarily due to lower maintenance and service center revenue . carrier carrier revenue declined in 2015 primarily due to no longer providing backhaul services to our discontinued wireless operations . the declines were partially offset by $ 4.7 million of one-time revenue associated with the construction of small cell site locations completed in 2015. in addition , switched access revenue decreased in 2015 and 2014 in part due to fcc mandated reductions of terminating switched access rates . these declines are expected to continue in 2016. operating costs and expenses cost of services and products has increased primarily due to higher programming costs of $ 17.4 million and $ 14.1 million in 2015 and 2014 , respectively . these increases are the result of the growing number of fioptics video subscribers combined with higher programming rates . story_separator_special_tag costs associated with selling verizon handsets and accessories totaled $ 2.8 million in 2015 and $ 4.3 million in 2014. in 2014 , operating tax expenses increased by $ 6.6 million due to an increase in universal service fund ( `` usf '' ) taxes and property taxes . these increases were partially offset by a decline in payroll related costs due to lower pension and post-retirement expense . in 2015 , rent expense increased $ 2.7 million as a result of signing a new lease in the second half of 2014 for additional floor space at our corporate headquarters . network and materials costs increased in 2014 and 2015 as we continue to accelerate our fiber investment . sg & a expenses were up in 2015 primarily as a result of increased costs absorbed from shutting down our wireless operations and accelerating the build-out of fioptics . retail center costs and the additions to our sales force increased costs $ 7.1 million in 2015. in addition , marketing and advertising costs increased $ 1.6 million compared to 2014 as we increased our fioptics promotional efforts . during the second quarter of 2015 , we incurred a one-time charge related to our excess pension benefit plan totaling $ 3.8 million . the remaining increase was primarily due to increased payroll benefits . sg & a expenses increased in 2014 compared to 2013 due to software development costs and consulting fees totaling $ 3.8 million associated with outsourcing certain it functions . payroll related costs were up $ 1.8 million in 2014 as we prepared for the acceleration of our fiber investments . these increases were offset by lower advertising , bad debt and other miscellaneous expenses . restructuring charges in 2015 were primarily related to employee severance as we continue to identify opportunities to integrate the business markets within each of our segments . the reversal of restructuring charges in 2014 was due to re-occupying certain office space previously vacated . in 2013 , restructuring charges included employee separation costs of $ 4.6 million , lease abandonment charges of $ 3.9 million and contract termination charges of $ 0.6 million . impairment charges totaling $ 4.6 million in 2014 were recorded for the abandonment of an internal use software project . 35 form 10-k part ii cincinnati bell inc. capital expenditures replace_table_token_16_th capital expenditures are incurred to expand our fioptics product suite , upgrade and increase capacity for our networks , and to maintain our fiber and copper networks . during 2015 , 2014 and 2013 , we passed 97,000 , 59,000 and 71,000 addresses with fioptics , respectively . as of december 31 , 2015 , the company is able to provide its fioptics services to 432,000 residential and business addresses , or 53 % of our operating territory . fioptics installation costs increased in 2015 due to increased fioptics internet and video activations combined with upgrading set-top boxes and wireless modems . other fioptics related costs include costs to expand core network capacity and for enhancements to the customer experience . other strategic capital expenditures are for success-based fiber builds for business and carrier projects . 36 form 10-k part ii cincinnati bell inc. it services and hardware the it services and hardware segment provides a full range of managed it solutions , including managed infrastructure services , telephony and it equipment sales , and professional it staffing services . these services and products are provided through the company 's subsidiaries in various geographic areas throughout the united states , canada and united kingdom . by offering a full range of equipment and outsourced services in conjunction with the company 's fiber and copper networks , the it services and hardware segment provides end-to-end it and telecommunications infrastructure management designed to reduce cost and mitigate risk while optimizing performance for its customers . replace_table_token_17_th revenue the following it services and hardware products have either been classified as strategic or integration : replace_table_token_18_th we continue to generate revenue growth across all of our strategic products . during 2015 and 2014 , our professional services group increased billable headcount and utilization with our existing customer base . in 2013 , our professional service group began designing an infrastructure that enables secure , efficient access to data , internet , and shared and cloud applications of our customers ' intellectual property . this new service generated an additional $ 6.3 million in 2015 and $ 2.5 million of revenue in 2014. professional services revenue totaling $ 3.4 million in 2015 also includes one-time charges for the design and build of a new customer 's managed service infrastructure . 37 form 10-k part ii cincinnati bell inc. the growth in management and monitoring , unified communications and cloud services has primarily been driven by the increase in devices monitored , voice profiles and virtual machines within our current customer base . additionally , there were new significant contracts signed in 2015 and 2014 with enterprise customers and revenue growth from an existing statewide unified communications engagement with a government entity . integration revenue is primarily driven by the volume of telecom and it hardware sales reflecting the cyclical fluctuation in capital spending by our enterprise customers , which may be influenced by many factors , including the timing of customers ' capital spend , the size of their capital budgets , and general economic conditions . operating costs and expenses cost of services and products is primarily impacted by changes in telecom and it hardware sales and headcount related costs . in 2015 , costs of telecom and it hardware sales decreased $ 32.0 million compared to 2014. these costs increased $ 52.6 million in 2014 as related to 2013. in both periods , payroll and contractor costs increased to support the growth of our strategic products . selling , general and administrative expenses also increased during both periods due to increased payroll and headcount related costs to support strategic revenue growth .
| therefore , the $ 112.6 million gain on the sale of the wireless spectrum licenses , which had been previously deferred , was recognized in our financial results during the first quarter of 2015. in addition , on april 1 , 2015 , we transferred certain other assets related to our wireless business to the purchaser , including leases to certain wireless towers and related equipment and other assets , which resulted in a gain of $ 15.9 million in the second quarter of 2015. the company sold a combined 21.7 million cyrusone partnership units and common shares for cash totaling $ 643.9 million during 2015. the cash generated from these transactions was primarily used to manage our debt . in total , during 2015 , we repaid $ 531.7 million of debt , reducing interest payments by approximately $ 42 million annually . as a result , our consolidated debt leverage as defined by our corporate credit agreement was 4.3x as of december 31 , 2015. if our leverage was further adjusted for our remaining 9.5 % ownership in cyrusone , which was valued at $ 257.9 million , as of december 31 , 2015 , our leverage would be 3.4x . see “ management 's discussion and analysis of financial condition and results of operations ” in the company 's annual report on form 10-k for further details on the company 's 2015 financial results . 26 form 10-k part ii cincinnati bell inc. consolidated results of operations revenue replace_table_token_7_th entertainment and communications revenue increased as the growth in fioptics and other strategic services offset the combined impact from no longer providing backhaul services to our former wireless segment and legacy and integration declines . it service and hardware increased primarily due to growth from all of our strategic services . replace_table_token_8_th product revenue is primarily driven by the volume of telecom and it hardware sales reflecting the cyclical fluctuation in capital spending by our enterprise customers in our it services and hardware segment . in 2014 , we entered into agreements to sell verizon wireless handsets and accessories at our retail locations generating revenue of $ 3.1 million and $ 5.7 million in 2015 and 2014 , respectively . operating costs replace_table_token_9_th cost of services increased in both periods due to growth in our strategic products . entertainment and communications costs also increased due to programming costs associated with our growing fioptics video subscriber base and higher programming rates . 27 form 10-k part ii cincinnati bell inc. replace_table_token_10_th cost of products are primarily impacted by changes in telecom
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accounts payable days 5 were 74 , 72 , and 68 for 2011 , 2010 , and 2009. we expect some variability in accounts payable days over time since they are affected by several factors , including the mix of product sales , the mix of sales by other sellers , the mix of suppliers , seasonality , and changes in payment terms over time , including the effect of balancing pricing and timing of payment terms with suppliers . we expect spending in technology and content will increase over time as we add computer scientists , software engineers , and merchandising employees . we seek to efficiently invest in several areas of technology and content , including seller platforms , digital initiatives , and expansion of new and existing physical and digital product categories , as well as in technology infrastructure to enhance the customer experience , improve our process efficiencies , and support aws . we believe that advances in technology , specifically the speed and reduced cost of processing power , the improved consumer experience of the internet outside of the workplace through lower-cost broadband service to the home , and the advances of wireless connectivity , will continue to improve the consumer experience on the internet and increase its ubiquity in people 's lives . to best take advantage of these continued advances in technology , we are investing in initiatives to build and deploy innovative and efficient software and devices . we are also investing in aws , which provides technology services that give developers and enterprises of all sizes access to technology infrastructure that enables virtually any type of business . our financial reporting currency is the u.s. dollar and changes in exchange rates significantly affect our reported results and consolidated trends . for example , if the u.s. dollar weakens year-over-year relative to currencies in our international locations , our consolidated net sales , and operating expenses will be higher than if currencies had remained constant . likewise , if the u.s. dollar strengthens year-over-year relative to currencies in our international locations , our consolidated net sales , and operating expenses will be lower than if currencies had remained constant . we believe that our increasing diversification beyond the u.s. economy through our growing international businesses benefits our shareholders over the long term . we also believe it is useful to evaluate our operating results and growth rates before and after the effect of currency changes . in addition , the remeasurement of our intercompany balances can result in significant gains and charges associated with the effect of movements in currency exchange rates . currency volatilities may continue , which may significantly impact ( either positively or negatively ) our reported results and consolidated trends and comparisons . 3 the operating cycle is number of days of sales in inventory plus number of days of sales in accounts receivable minus accounts payable days . 4 inventory turnover is the quotient of trailing-twelve-month cost of sales to average inventory over five quarter-ends . 5 accounts payable days , calculated as the quotient of accounts payable to current quarter cost of sales , multiplied by the number of days in the current quarter . 19 for additional information about each line item summarized above , refer to item 8 of part ii , financial statements and supplementary datanote 1description of business and accounting policies. critical accounting judgments the preparation of financial statements in conformity with generally accepted accounting principles of the united states ( gaap ) requires estimates and assumptions that affect the reported amounts of assets and liabilities , revenues and expenses , and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes . the sec has defined a company 's critical accounting policies as the ones that are most important to the portrayal of the company 's financial condition and results of operations , and which require the company to make its most difficult and subjective judgments , often as a result of the need to make estimates of matters that are inherently uncertain . based on this definition , we have identified the critical accounting policies and judgments addressed below . we also have other key accounting policies , which involve the use of estimates , judgments , and assumptions that are significant to understanding our results . for additional information , see item 8 of part ii , financial statements and supplementary datanote 1description of business and accounting policies. although we believe that our estimates , assumptions , and judgments are reasonable , they are based upon information presently available . actual results may differ significantly from these estimates under different assumptions , judgments , or conditions . inventories inventories , consisting of products available for sale , are primarily accounted for using the first-in first-out ( fifo ) method , and are valued at the lower of cost or market value . this valuation requires us to make judgments , based on currently-available information , about the likely method of disposition , such as through sales to individual customers , returns to product vendors , or liquidations , and expected recoverable values of each disposition category . these assumptions about future disposition of inventory are inherently uncertain . as a measure of sensitivity , for every 1 % of additional inventory valuation allowance at december 31 , 2011 we would have recorded an additional cost of sales of approximately $ 50 million . goodwill we evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable . our annual testing date is october 1. we test goodwill for impairment by first comparing the book value of net assets to the fair value of the reporting units . story_separator_special_tag if the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired , a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value . we estimate the fair value of the reporting units using discounted cash flows . forecasts of future cash flow are based on our best estimate of future net sales and operating expenses , based primarily on expected category expansion , pricing , market segment share , and general economic conditions . certain estimates of discounted cash flows involve businesses and geographies with limited financial history and developing revenue models . changes in these forecasts could significantly change the amount of impairment recorded , if any . during the year , management monitored the actual performance of the business relative to the fair value assumptions used during our annual goodwill impairment test . for the periods presented , no triggering events were identified that required an update to our annual impairment test . as a measure of sensitivity , a 10 % decrease in the fair value of any of our reporting units as of december 31 , 2011 would have had no impact on the carrying value of our goodwill . financial and credit market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine our discount rate and through our stock price that we use to determine our market capitalization . during times of volatility , significant judgment must be applied to determine 20 whether credit or stock price changes are a short-term swing or a longer-term trend . as a measure of sensitivity , a prolonged 20 % decrease from our december 31 , 2011 , closing stock price would not be an indicator of possible impairment . stock-based compensation we measure compensation cost for stock awards at fair value and recognize it as compensation expense over the service period for awards expected to vest . the fair value of restricted stock units is determined based on the number of shares granted and the quoted price of our common stock . the estimation of stock awards that will ultimately vest requires judgment for the amount that will be forfeited , and to the extent actual results or updated estimates differ from our current estimates , such amounts will be recorded as a cumulative adjustment in the period estimates are revised . we consider many factors when estimating expected forfeitures , including employee class , economic environment , and historical experience . we update our estimated forfeiture rate quarterly . a 1 % change to our estimated forfeiture rate would have had an approximately $ 24 million impact on our 2011 operating income . our estimated forfeiture rates at december 31 , 2011 and 2010 , were 28 % and 30 % . we utilize the accelerated method , rather than the straight-line method , for recognizing compensation expense . under this method , over 50 % of the compensation cost is expensed in the first year of a four year vesting term . if forfeited early in the life of an award , the forfeited amount is much greater under an accelerated method than under a straight-line method . income taxes we are subject to income taxes in both the u.s. and numerous foreign jurisdictions . significant judgment is required in evaluating and estimating our tax positions and determining our provision and accruals for these taxes . during the ordinary course of business , there are many transactions and calculations for which the ultimate tax determination is uncertain . for example , our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates , by losses incurred in jurisdictions for which we are not able to realize the related tax benefit , by changes in foreign currency exchange rates , entry into new businesses and geographies and changes to our existing businesses , acquisitions , by changes in the valuation of our deferred tax assets and liabilities , or by changes in the relevant tax , accounting and other laws , regulations , principles and interpretations . we are subject to audit in various jurisdictions , and such jurisdictions may assess additional income tax against us . although we believe our tax estimates are reasonable , the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals . the results of an audit or litigation could have a material effect on our operating results or cash flows in the period or periods for which that determination is made , as well as prior and subsequent periods . if we determine that additional portions of our deferred tax assets are realizable , the majority of the benefit will come from the assets associated with the stock-based compensation that was not recognized in the financial statements , but was claimed on the tax return . since this compensation did not originally run through our consolidated statements of operations , the benefit generated will be recorded to stockholders ' equity . recent accounting pronouncements see item 8 of part ii , financial statements and supplementary datanote 1description of business and accounting policiesrecent accounting pronouncements. 21 liquidity and capital resources cash flow information is as follows : replace_table_token_5_th our financial focus is on long-term , sustainable growth in free cash flow . free cash flow , a non-gaap financial measure , was $ 2.09 billion for 2011 , compared to $ 2.52 billion and $ 2.92 billion for 2010 and 2009. see results of operationsnon-gaap financial measures below for a reconciliation of free cash flow to cash provided by operating activities .
| increased unit sales were driven largely by our continued efforts to reduce prices for our customers , including from our shipping offers , by a larger base of sales in faster growing categories such as electronics and other general merchandise , by increased in-stock inventory availability , and by increased selection of product offerings . additionally , changes in currency exchange rates positively ( negatively ) affected international net sales by $ 1.1 billion , $ ( 107 ) million , and $ ( 174 ) million in 2011 , 2010 , and 2009. we expect that , over time , our international segment will represent 50 % or more of our consolidated net sales . supplemental information supplemental information about shipping results is as follows : replace_table_token_7_th ( 1 ) excludes amounts earned on shipping activities by third-party sellers where we do not provide the fulfillment service . ( 2 ) includes a portion of amounts earned from amazon prime memberships . we expect our net cost of shipping to continue to increase to the extent our customers accept and use our shipping offers at an increasing rate ; to the extent our product mix shifts to the electronics and other general merchandise category ; to the extent we reduce shipping rates ; to the extent we use more expensive shipping methods ; and to the extent we offer additional services . we seek to mitigate costs of shipping over time in part through achieving higher sales volumes , negotiating better terms with our suppliers , and achieving better operating efficiencies . we believe that offering low prices to our customers is fundamental to our future success , and one way we offer lower prices is through shipping offers . 25 net sales by similar products and services were as follows : replace_table_token_8_th ( 1 ) includes non-retail activities , such as aws , miscellaneous marketing and promotional activities , other seller sites , and our co-branded credit card agreements . 26 operating expenses information about operating expenses with and without stock-based compensation is as follows ( in millions ) : replace_table_token_9_th operating expenses without stock-based compensation are non-gaap financial measures . see non-gaap financial measures and item 8 of part i , financial statements and supplementary datanote 1description of business and accounting policiesstock-based
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a calendar year loss and lae ratio is calculated by dividing the losses and lae incurred during the calendar year , regardless of when the underlying insured event occurred , by the net premiums earned during that calendar year . the calendar year loss and lae ratio includes changes made during the calendar year in reserves for losses and lae established for insured events occurring in the current and prior years . a calendar year loss and lae ratio is calculated using premiums and losses and lae that are net of amounts ceded to reinsurers . the calendar year loss and lae ratio for a particular year will not change in future periods . the accident year loss and lae ratio is calculated by dividing the losses and lae , regardless of when such loss and lae are incurred , for insured events that occurred during a particular year by the net premiums earned for that year . the accident year losses and lae ratio is calculated using premiums and losses and lae that are net of amounts ceded to reinsurers . the accident year loss and lae ratio for a particular year can decrease or increase when recalculated in subsequent periods as the reserves established for insured events occurring during that year develop favorably or unfavorably , and is an operating ratio based on our statutory financial statements and is not derived from our gaap financial information . we analyze our calendar year loss and lae ratio to measure our profitability in a particular year and to evaluate the adequacy of our premium rates charged in a particular year to cover expected losses and lae from all periods , including development ( whether favorable or unfavorable ) of reserves established in prior periods . in contrast , we analyze our accident year loss and lae ratios to evaluate our underwriting performance and the adequacy of the premium rates we charged in a particular year in relation to ultimate losses and lae from insured events occurring during that year . the loss and lae ratios provided in this report are calendar year basis , except where they are expressly identified as accident year loss and lae ratios . losses and lae represents our largest expense item and includes claim payments made , amortization of the deferred gain , estimates for future claim payments and changes in those estimates for current and prior periods , and costs associated with investigating , defending , and adjusting claims . the quality of our financial reporting depends in large part on accurately predicting our losses and lae , which are inherently uncertain as they are estimates of the ultimate cost of individual claims based on actuarial estimation techniques . our indemnity claims frequency ( the number of claims expressed as a percentage of payroll ) has decreased year-over-year ; however , our loss experience indicates an upward trend in medical and indemnity costs per claim that are reflected in our current accident year loss estimate . specifically , we experienced increased costs associated with an increase in the number of cumulative trauma claims filed in california during 2014 , compared to 2013. in 2013 , we experienced increased costs associated with claims litigation , driven by a nearly eight percentage point increase in the number of claims that were litigated in our southern california operations during the fourth quarter of 2013 , compared to a six percentage point increase during the first three quarters of the year . in 2014 , the rate of increase in the number of litigated claims in california moderated . we believe our current accident year loss estimate is adequate ; however , ultimate losses will not be known with any certainty for many years . we assume that increasing medical and indemnity cost trends will continue to impact our long-term claims costs and current accident year loss estimate , which may be offset by rate increases . additional information regarding our reserves for losses and lae is set forth under “ –critical accounting policies–reserves for losses and lae. ” 30 overall , losses and lae were $ 453.4 million , $ 463.6 million , and $ 287.9 million for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . the decrease from 2013 to 2014 was primarily due to a decrease in the current accident year loss estimate , partially offset by higher net premiums earned . the increase from 2012 to 2013 was primarily due to higher net premiums earned in 2013. additionally , there were favorable lpt reserve adjustments of $ 31.1 million , $ 19.0 million , and $ 73.3 million that decreased losses and lae by those amounts for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . unfavorable prior accident year development in 2013 included $ 5.0 million related to california loss reserves for the 2009 through 2011 accident years and $ 1.9 million related to our assigned risk business . prior accident year loss development in 2014 and 2012 was primarily related to our assigned risk business . there was no material unfavorable loss development related to our voluntary business in 2014 or 2012. our current accident year loss estimates were 73.6 % , 77.0 % , and 77.0 % for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . story_separator_special_tag the trend in the current accident year loss estimates reflects the impact of higher net rate , which is a function of a variety of factors , including rate changes , underwriting risk profiles and pricing , and changes in business mix related to economic and competitive pressures , particularly in california , which was offset by increasing loss costs in 2013. excluding the impact from the lpt agreement , losses and lae would have been $ 508.4 million , $ 501.5 million , and $ 387.8 million , or 74.3 % , 78.1 % , and 77.3 % of net premiums earned , for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . the table below reflects losses and lae reserve adjustments and the impact of the the lpt on net income before taxes . replace_table_token_17_th underwriting and other operating expenses ratio . the underwriting and other operating expenses ratio is the ratio of underwriting and other operating expenses to net premiums earned and measures an insurance company 's operational efficiency in producing , underwriting , and administering its insurance business . underwriting and other operating expenses are those costs that we incur to underwrite and maintain the insurance policies we issue , excluding commission . these expenses include premium taxes and certain other general expenses that vary with , and are primarily related to , producing new or renewal business . other underwriting expenses include policyholder dividends , changes in estimates of future write-offs of premiums receivable , general administrative expenses such as salaries and benefits , rent , office supplies , depreciation , and all other operating expenses not otherwise classified separately . policy acquisition costs are variable based on premiums earned ; however , other operating costs are more fixed in nature and become a smaller percentage of net premiums earned as premiums increase . our underwriting and other operating expenses ratio was 18.9 % , 19.5 % , and 24.8 % , and our underwriting and other operating expenses were $ 129.2 million , $ 125.3 million , and $ 124.6 million for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . during the year ended december 31 , 2014 , premium taxes and assessments increased $ 1.6 million as net premiums earned increased , professional fees increased $ 1.0 million , and policyholder dividends increased $ 0.8 million , compared to 2013. during the year ended december 31 , 2013 , premium taxes and assessments increased $ 4.2 million and information technology expenses increased $ 2.3 million , compared to 2012. additionally , implementation of the accounting guidance for deferred policy acquisition costs ( dac ) resulted in a $ 7.1 million increase in our underwriting and other operating expenses , partially offset by a $ 1.4 million change in estimate for guaranty fund assessments for the year ended december 31 , 2012. excluding the impact of the dac guidance and the change in estimate for guaranty fund assessments , underwriting and other operating expenses would have increased $ 6.4 million for the year ended december 31 , 2013 compared to 2012. commission expense ratio . the commission expense ratio is the ratio of commission expense to net premiums earned and measures the cost of compensating agents and brokers for the business we have underwritten . commission expense includes direct commissions to our agents and brokers for the premiums that they produce for us , as well as incentive payments , other marketing costs , and fees . our commission expense ratio was 11.9 % , 12.2 % , and 13.1 % , while our commission expense was $ 81.4 million , $ 78.3 million , and $ 65.6 million for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . while our commission expense is up 31 over the past three years , primarily due to higher net premiums earned , our commission expense ratio has decreased over the past three years , primarily due to lower base commissions and agency incentives as a percentage of premiums earned . interest expense we incur interest expenses on notes payable . interest expense was $ 3.0 million , $ 3.2 million , and $ 3.5 million for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . the decrease in interest expense from 2012 to 2014 was primarily due to the reduction in principal balance on our credit facility with wells fargo by $ 10.0 million in the fourth quarters of each of 2013 and 2014. income tax expense ( benefit ) income tax expense ( benefit ) was $ 5.9 million , $ ( 10.7 ) million , and $ ( 9.3 ) million for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . the effective tax rate was 5.5 % , ( 20.0 ) % , and ( 9.6 ) % for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . the increased income tax expense for the year ended december 31 , 2014 , compared to 2013 , was primarily due to the the increase in underwriting income to $ 20.6 million in 2014 , compared to an underwriting loss of $ 24.8 million in 2013. the increased tax benefit for the year ended december 31 , 2013 , compared to 2012 , was primarily due to the reallocation of $ 27.2 million in reserves from non-taxable periods prior to january 1 , 2000 , during 2013 , which reduced our effective tax rate by 13.9 percentage points for the year ended december 31 , 2013. for additional information regarding our income tax expense ( benefit ) see note 8 in the notes to our consolidated financial statements . liquidity and capital resources parent company liquidity we are a holding company and our ability to fund our operations is contingent upon existing capital and the ability of our insurance subsidiaries ' to pay dividends up to the holding company .
| the following items were included in our 2014 results of operations : ( 1 ) favorable development in the estimated reserves ceded under the lpt agreement that resulted in a $ 31.1 million cumulative adjustment to the deferred reinsurance gain–lpt agreement ( deferred gain ) and reduced our losses and lae by the same amount ( lpt reserve adjustment ) ; ( 2 ) an increase in the contingent commission receivable under the lpt agreement that resulted in a $ 10.8 million cumulative adjustment , which reduced our losses and lae by the same amount ( lpt contingent commission adjustment ) ; and ( 3 ) a reallocation of $ 13.1 million of reserves from non-taxable periods prior to january 1 , 2000 , which reduced our effective tax rate by 3.4 percentage points , or $ 3.6 million . collectively , these items increased net income by $ 45.5 million for the year ended december 31 , 2014. the following items were included in our 2013 results of operations : ( 1 ) unfavorable prior accident year loss development of $ 6.9 million , including $ 5.0 million related to california loss reserves for the 2009 through 2011 accident years and $ 1.9 million related to our assigned risk business , which increased our losses and lae by the same amount during 2013 ; ( 2 ) favorable development in the estimated reserves ceded under the lpt agreement during 2013 , which resulted in a $ 19.0 million cumulative adjustment to the deferred gain ( lpt reserve adjustment ) ; ( 3 ) an increase in the contingent commission receivable under the lpt agreement that resulted in a $ 4.3 million cumulative adjustment , which reduced our losses and lae by the same amount ( lpt contingent commission adjustment ) ; and ( 4 ) a reallocation of reserves from non-taxable periods prior to january 1 , 2000 , which reduced 27 our effective tax rate by 13.9 percentage points , or $ 7.4 million , in 2013. collectively , these items increased net income by $ 23.8 million for the year ended december 31 , 2013. the following items were included in our 2012 results of operations : ( 1 ) favorable development in the estimated reserves ceded under the lpt agreement , which resulted in a $ 73.3 million lpt reserve adjustment ; ( 2 ) an increase in the contingent
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16 article galaxy researchers and regulatory personnel in life science and other research intensive organizations generally require single copies of published stm journal articles for use in their research activities . they place orders with us for the articles they need and we source and electronically deliver the requested content to them generally in under an hour . this service is known in the industry as single article delivery or document delivery . we also obtain the necessary permissions from the content publisher so that our customer 's use complies with applicable copyright laws . we have arrangements with numerous content publishers that allow us to distribute their content . the majority of these publishers provide us with electronic access to their content , which allows us to electronically deliver single articles to our customers often in a matter of minutes . even though single article delivery services are charged on a transactional basis , customer order volume tends to be consistent from month to month in part due to consistent orders of larger customers that require the implementation of our services into their work flow , subject to fluctuations due to the addition or loss of customers . we deliver research solutions through our article galaxy journal article platform ( “ article galaxy ” ) . we have developed proprietary software and internet-based interfaces that allow customers to initiate orders , manage transactions , obtain reporting , automate authentication , improve seamless connectivity to corporate intranets , and enhance the information resources they already own , or have access to via subscriptions or internal libraries , as well as organize workgroups to collaborate around scientific information . as a cloud-based software-as-a-service ( saas ) solution , article galaxy is deployed as a single system across our entire customer base . customers access article galaxy securely through online web interfaces and via web service apis , which enable customers to leverage article galaxy features and functionality from within proprietary and other 3rd party software systems . article galaxy can also be configured to satisfy a customer 's individual preferences in areas such as user experience , business processes , and spend management . as a saas solution , article galaxy benefits from efficiencies in scalability , stability and development costs , resulting in significant advantages versus multiple instance or installed desktop software alternatives . we leverage these technical efficiencies to fuel rapid innovation and competitive advantage . reprints and eprints marketing departments in life science and other research intensive organizations generally require large quantities of printed copies of published stm journal articles called “ reprints. ” they generally supply reprints to doctors who may prescribe their products and at conferences . we obtain the necessary permissions from the content publisher so that our customer 's use complies with applicable copyright laws . the majority of content publishers print their content in-house and prohibit others from printing their content ; however , when not prohibited by the content publisher , we use third parties to print reprint orders delivered to north american customers , and taag or third parties to print reprint orders delivered to european customers . electronic copies , called “ eprints , ” are also used for distribution through the internet and other electronic mechanisms . we have developed proprietary eprint software that increase the efficiency of our customers ' content purchases by transitioning from paper reprints to electronic eprints , and by improving compliance with applicable copyright laws and promotional regulations within the life science industry . reprints and eprints are charged on a transactional basis and order volume typically fluctuates from month to month based on customer marketing budgets and the existence of stm journal articles that fit customer requirements . printing and logistics at june 30 , 2014 , our printing and logistics services , performed by taag , include a variety of hard copy , professionally printed materials that are used for retail and marketing purposes , including reprints , as well as regulatory sensitive marketing materials and clinical trial kits . the majority of taag 's customers are in france . only a small percentage of the printing work performed by taag is for reprint orders for our north american operations delivered to mostly european customers . on august 18 , 2014 the board of directors of the company authorized management to commit to a plan to sell taag immediately at a reasonable price in relation to its current fair value , and in the event such sale is not consummated by september 10 , 2014 , that management proceed with an insolvency filing by taag under french law . accordingly effective august 18 , 2014 the operations of taag will be classified as discontinued operations . on september 15 , 2014 , the french tribunal de commerce appointed an administrator for taag following a declaration of insolvency by our legal representative . as a result , effective september 15 , 2014 , the company relinquished control of taag to the tribunal and taag ceased to be our subsidiary , and printing and logistics services ceased . critical accounting policies and estimates the preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the united states , or gaap , requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenue and expenses , and related disclosure of contingent assets and liabilities . when making these estimates and assumptions , we consider our historical experience , our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances . actual results may differ under different estimates and assumptions . the accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties . story_separator_special_tag 17 revenue recognition our policy is to recognize revenue when services have been performed , risk of loss and title to the product transfers to the customer , the selling price is fixed or determinable , and collectability is reasonably assured . at june 30 , 2014 , we generate revenue by providing three types of services to our customers : article galaxy , reprints and eprints , and printing and logistics . article galaxy we charge a transactional service fee for the electronic delivery of single articles , and a corresponding copyright fee for the permitted use of the content . this service , known in the industry as single article delivery or document delivery , generates nearly all of the revenue attributable to the article galaxy journal article platform . we recognize revenue from single article delivery services upon delivery to the customer only when the selling price is fixed or determinable , and collectability is reasonably assured . reprints and eprints we charge a transactional fee for each reprint or eprint order and are responsible for printing and delivery of reprint orders , and the electronic delivery and , in some cases , the electronic delivery mechanism of eprint orders . the majority of content publishers print their content in-house and prohibit others from printing their content ; however , when not prohibited by the content publisher , we use third parties to print reprint orders delivered to north american customers , and taag or third parties to print reprint orders delivered to european customers . we recognize revenue from reprints and eprints services upon shipment or electronic delivery to the customer only when the selling price is fixed or determinable , and collectability is reasonably assured . printing and logistics we charge a transactional fee for each order of hard copy printed material . we are responsible for printing and delivering the order . printing and logistics services are performed by taag . the majority of taag 's customers are in france . only a small percentage of the printing work performed by taag is for reprint orders for north american operations delivered to mostly european customers . we recognize revenue from printing services when the selling price is fixed or determinable , the printed materials have been shipped to the customer , and collectability is reasonably assured . stock-based compensation we periodically issue stock options and warrants to employees and non-employees in capital raising transactions , for services and for financing costs . we account for share-based payments under the guidance as set forth in the share-based payment topic 718 of the financial accounting standards board ( the `` fasb '' ) accounting standards codification , which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees , officers , directors , and consultants , including employee stock options based on estimated fair values . we estimate the fair value of share-based payment awards to employees and directors on the date of grant using an option-pricing model , and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our statements of operations . we account for stock option and warrant grants issued and vesting to non-employees in accordance with topic 505 of the fasb accounting standards codification , whereby the value of the stock compensation is based upon the measurement date as determined at either a ) the date at which a performance commitment is reached , or b ) the date at which the necessary performance to earn the equity instruments is complete . stock-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures . forfeitures are estimated at the time of grant and revised , as necessary , in subsequent periods if actual forfeitures differ from those estimates . allowance for doubtful accounts we evaluate the collectability of our trade accounts receivable based on a number of factors . in circumstances where we become aware of a specific customer 's inability to meet its financial obligations to us , we estimate and record a specific reserve for bad debts , which reduces the recognized receivable to the estimated amount we believe will ultimately be collected . in addition to specific customer identification of potential bad debts , bad debt charges are recorded based on our historical losses and an overall assessment of past due trade accounts receivable outstanding . we established an allowance for doubtful accounts of $ 321,698 and $ 211,743 as of june 30 , 2014 and 2013 , respectively . foreign currency translation the accompanying consolidated financial statements are presented in united states dollars , the functional currency of our company . capital accounts of foreign subsidiaries are translated into us dollars from foreign currencies at their historical exchange rates when the capital transactions occurred . assets and liabilities are translated at the exchange rate as of the balance sheet date . income and expenditures are translated at the average exchange rate of the period . although the majority of our revenue and costs are in us dollars , the revenue and costs of taag are in euros , and the costs of reprints desk latin america are in mexican pesos . as a result , currency exchange fluctuations may impact our revenue and the costs of our operations . we currently do not engage in any currency hedging activities . 18 the following table summarizes the exchange rates used : replace_table_token_2_th comparison of the years ended june 30 , 2014 and 2013 story_separator_special_tag taxes were delinquent . in january 2014 , the french tax authorities agreed to a repayment plan for the entire balance of delinquent payroll and vat taxes consisting of 24 monthly payments of approximately $ 35,000 beginning in february 2014. effective june 30 , 2013 , we forgave a loan receivable from taag totaling $ 1,009,115 to improve taag 's liquidity .
| on august 18 , 2014 taag will become a discontinued operation , and on september 15 , 2014 taag ceased to be our subsidiary and will be deconsolidated from our financial statements . accordingly , revenue from taag will be classified as discontinued operations from july 1 , 2014 to september 14 , 2014 , and will cease on september 15 , 2014. cost of revenue replace_table_token_5_th 20 replace_table_token_6_th * the difference between current and prior period cost of revenue as a percentage of revenue cost of revenue as a percentage of revenue from article galaxy decreased to 75.9 % , for the year ended june 30 , 2014 compared to 76.8 % , for the prior year , primarily due to slightly reduced production expenses and decreased payments to publishers . cost of revenue as a percentage of revenue from reprints and eprints decreased to 90.3 % , for the year ended june 30 , 2014 compared to 91.8 % , for the prior year , primarily due to decreased payments to publishers . total cost of revenue as a percentage of revenue from north american operations decreased to 80.9 % , for the year ended june 30 , 2014 compared to 84.7 % , for the prior year . cost of revenue as a percentage of revenue from taag increased to 64.1 % , for the year ended june 30 , 2014 compared to 59.6 % , for the prior year , primarily due to greater production expenses . on august 18 , 2014 taag will become a discontinued operation , and on september 15 , 2014 taag ceased to be our subsidiary and will be deconsolidated from our financial statements . accordingly , cost of revenue from taag will be classified as discontinued operations from july 1 , 2014 to september 14 , 2014 , and will cease on september 15 , 2014. gross profit replace_table_token_7_th replace_table_token_8_th * the difference between current and prior period gross profit as a percentage of revenue 21 operating expenses replace_table_token_9_th selling , general and administrative selling , general and administrative expenses from north american operations increased $ 1,390,210 or 30.7 % ,
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as a result , the adoption of e-commerce was accelerated , which allows opportunity for us to provide valuable solutions to manufacturers looking to build resiliency in their supply chains through fast , on-demand manufacturers . while our business may be positively affected by these trends , our results may also be favorably or unfavorably impacted by other trends that affect product developer and engineer orders for custom parts in low volumes , including , among others , economic conditions , changes in product developer and engineer preferences or needs , developments in our industry and among our competitors , and developments in our customers ' industries . for a more complete discussion of the risks facing our business , see part i , item 1a . “ risk factors ” of this annual report on form 10-k. 33 key financial measures and trends revenue our operations are comprised of three geographic operating segments in the united states , europe and japan . revenue is derived from our injection molding , cnc machining , 3d printing and sheet metal product lines . injection molding revenue consists of sales of custom injection molds and injection-molded parts . cnc machining revenue consists of sales of cnc-machined custom parts . 3d printing revenue consists of sales of custom 3d-printed parts . sheet metal revenue consists of sales of fabricated sheet metal custom parts . our revenue is generated from a diverse customer base , with no single customer company representing more than 2 % of our total revenue in 2020. our historical and current efforts to increase revenue have been directed at gaining new customers and selling to our existing customer base by increasing marketing and selling activities , including : the introduction of our 3d printing product line through our acquisition of fineline in 2014 ; expanding 3d printing to europe through our acquisition of alphaform in october 2015 ; the introduction of our sheet metal product line through our acquisition of rapid in 2017 ; continuously improving the usability of our product lines such as our web-centric applications ; and expanding the breadth and scope of our products by adding more sizes and materials to our offerings . during 2020 , we served 40,267 unique product developers and engineers who purchased our products through our web-based customer interface , a decrease of 15.7 % over the same period in 2019. the economic uncertainty arising from the covid-19 pandemic has impacted the number of product developers and engineers who purchase our products . while we expect the number of product developers and engineers served to grow in the long-term , challenges posed by the covid-19 pandemic on the global economy have continued through the date of this report . steps taken by national and local governments to slow the spread of the virus , including business shutdowns and shelter in place orders , have hindered the ability and willingness of project developers and engineers to proceed with development and commercialization projects on the same scale as they have historically . at this time , it is difficult to predict the future given the current economic uncertainty and evolving market conditions . during 2019 , we served 47,774 unique product developers and engineers who purchased our products through our web-based customer interface , an increase of 3.9 % over the same period in 2018. cost of revenue , gross profit and gross margin cost of revenue consists primarily of raw materials , equipment depreciation , employee compensation including benefits and stock-based compensation , facilities costs and overhead allocations associated with the manufacturing process for molds and custom parts . we expect our personnel-related costs to increase in order to retain and attract top talent and remain competitive in the market . overall , we expect cost of revenue to increase in absolute dollars , but remain relatively constant as a percentage of total revenue . our business model requires that we invest in our capacity well in advance of demand to ensure we can fulfill the expectations for quick delivery of our products to our customers . therefore , during each of 2020 , 2019 and 2018 we made significant investments in additional factory space , equipment , and infrastructure in the united states . we also made significant investments in infrastructure in europe in 2020 and 2017 and significant investments in additional factory space in japan in 2019 and 2016. we expect to continue to grow in future periods , which will result in the need for additional investments in factory space and equipment . we expect that these additional costs for factory and equipment expansion can be absorbed by revenue growth , and allow gross margins by product line to remain relatively consistent over time . we define gross profit as our revenue less our cost of revenue , and we define gross margin as gross profit expressed as a percentage of revenue . our gross profit and gross margin are affected by many factors , including our mix of revenue by product line , pricing , sales volume , manufacturing costs , the costs associated with increasing production capacity , the mix between domestic and foreign revenue sources and foreign exchange rates . 34 operating expenses operating expenses consist of marketing and sales , research and development and general and administrative expenses . personnel-related costs are the most significant component in each of these categories . our recent growth in operating expenses is mainly due to the launch of our protolabs 2.0 project in the fourth quarter of 2020. expenses that were previously capitalizable as part of the project were expensed after the system was placed in service in november 2020. our business strategy is to continue to be a leading online and technology-enabled manufacturer of quick-turn , on-demand injection-molded , cnc-machined , cnc-turned , 3d-printed and sheet metal custom parts for prototyping and low-volume production . in order to achieve our goals , we anticipate continued substantial investments in technology and personnel , resulting in increased operating expenses . marketing and sales . story_separator_special_tag marketing and sales expense consists primarily of employee compensation , benefits , commissions , stock-based compensation , marketing programs such as electronic , print and pay-per-click advertising , trade shows and other related overhead . we expect sales and marketing expense to increase in the future as we increase the number of marketing and sales professionals and marketing programs targeted to increase our customer base and grow revenue . research and development . research and development expense consists primarily of personnel and outside service costs related to the development of new processes and product lines , enhancement of existing product lines , software developed for internal use , maintenance of internally developed software , quality assurance and testing . costs for internal use software are evaluated by project and capitalized where appropriate under accounting standards codification ( asc ) 350-40 , intangibles — goodwill and other , internal-use software . we expect research and development expense to increase in the future as we seek to enhance our e-commerce interface technology , internal software and supporting business systems , and continue to expand our product lines . general and administrative . general and administrative expense consists primarily of employee compensation , benefits , stock-based compensation , professional service fees related to accounting , tax and legal and other related overhead . we expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization . other income , net other income , net primarily consists of foreign currency-related gains and losses and interest income on cash balances and investments . our foreign currency-related gains and losses will vary depending upon movements in underlying exchange rates . our interest income will vary each reporting period depending on our average cash balances during the period , composition of our marketable security portfolio and the current level of interest rates . provision for income taxes provision for income taxes is comprised of federal , state , local and foreign taxes based on pre-tax income . on december 22 , 2017 , the tax cuts and jobs act was signed into law in the united states . as a result , many provisions will affect our tax rate in future years . some provisions , such as the reduction to the u.s. corporate tax rate from 35 % to 21 % , which began in 2018 , reduced our effective tax rate in 2018 and subsequent years . overall , our effective tax rate for 2020 and beyond will remain consistent with the current tax laws . 35 story_separator_special_tag costs of $ 0.6 million . research and development . our research and development expense increased $ 4.2 million , or 13.0 % , for 2020 compared to 2019 due to personnel and related cost increases of $ 4.3 million driven by the launch of our protolabs 2.0 system . these costs were partially offset by a decrease in administrative and depreciation costs of $ 0.1 million . general and administrative . our general and administrative expense increased $ 2.0 million , or 4.0 % , for 2020 compared to 2019 due to stock-based compensation cost increases of $ 2.4 million , amortization cost increases of $ 0.3 million , personnel and related cost increases of $ 0.5 million and professional service cost increases of $ 0.3 million , which were partially offset by administrative cost decreases of $ 1.5 million . 37 income from operations income from operations decreased $ 20.0 million , or 25.1 % , for 2020 compared with 2019. by reportable segment , income from operations for the united states and europe decreased 9.1 % and 22.4 % , respectively , and loss from operations and expenses included in corporate unallocated and japan increased 15.6 % for 2020 compared with 2019. the decrease in income from operations is primarily driven by the reduction in volume and an increase in operating expenses related to the protolabs 2.0 launch in the fourth quarter of 2020. other income , net and provision for income taxes other income , net . we recognized other income , net of $ 3.1 million in 2020 , an increase of $ 1.8 million compared to other income , net of $ 1.3 million for 2019. other income , net for 2020 primarily consisted of $ 1.4 million in interest income on investments and a $ 1.5 million gain on foreign currency . other income , net for 2019 primarily consisted of $ 2.1 million in interest income on investments , which was partially offset by a $ 0.8 million loss on foreign currency . provision for income taxes . our income tax provision decreased by $ 5.5 million for 2020 compared to 2019. the decrease in the provision is primarily due to lower taxable income and an increase in tax benefits from the vesting of restricted stock and exercise of stock options . this decrease was coupled with an increase in the research and development tax credit . our effective tax rate of 19.2 % for 2020 decreased 2.4 % compared to 21.6 % for the same period in 2019. comparison of years ended december 31 , 2019 and 2018 for a comparison of our results of operations for 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 form 10-k for the fiscal year ended december 31 , 2019 , filed with the sec on february 26 , 2020. selected quarterly results of operations data the following tables set forth selected unaudited quarterly results of operations data for 2020 and 2019. this unaudited quarterly information has been prepared on the same basis as our annual audited consolidated financial statements appearing elsewhere in this annual report on form 10-k and includes all adjustments , consisting only of normal recurring adjustments , that we consider necessary to present fairly the financial information for the fiscal quarters presented .
| the decrease in product developers served led to a reduction in overall order activity as a result of the economic uncertainty created by the covid-19 pandemic , which in turn resulted in a decrease in revenue . international revenue was positively impacted by $ 1.0 million in 2020 compared to 2019 as a result of foreign currency movements , primarily the strengthening of the euro relative to the united states dollar . revenue by product line and the related changes for 2020 and 2019 is summarized as follows : replace_table_token_8_th by product line , our revenue decline was driven by a 15.4 % decrease in cnc machining revenue , a 10.3 % decrease in sheet metal revenue , and a 0.3 % decrease in other revenue , which was partially offset by a 0.3 % increase in injection molding revenue and a 1.9 % increase in 3d printing revenue in each case for 2020 compared with 2019. cost of revenue , gross profit and gross margin cost of revenue . cost of revenue decreased $ 6.9 million , or 3.1 % , for 2020 compared to 2019 , which was less than the rate of revenue decrease of 5.3 % for 2020 compared to 2019. the decreases were driven by raw material and production cost decreases of $ 7.1 million and personnel and related cost decreases of $ 3.3 million , which were partially offset by equipment and facility-related cost increases of $ 3.5 million . the increases in equipment and facility-related costs are primarily driven by past investments which will support increased sales volumes in certain product lines and future growth of the business . gross profit and gross margin . gross profit decreased from $ 235.3 million in 2019 to $ 217.8 million in 2020 primarily due to a decrease in revenue . gross margin decreased from 51.3 % of revenue in 2019 to 50.1 % of revenue in 2020 due to the fixed cost structure of our facilities and
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the increase in sg & a expenses resulted from higher selling and marketing expenses due to a 57 % increase in home sales revenue and increased g & a related to higher personnel and professional fees to support our growth and costs associated with being a new public company . as a percentage of home sales revenue , sg & a for the year ended december 31 , 2014 was 27.8 % versus 24.9 % in the prior year period . equity in net income of unconsolidated joint ventures as of december 31 , 2015 and 2014 , we had ownership interests in 14 and 12 , respectively , unconsolidated joint ventures . we own economic interests in our unconsolidated joint ventures , which include our capital interests that generally range from 5 % to 35 % plus , in each case , a share of the distributions from the joint ventures in excess of our capital interest . these economic interests vary among our different unconsolidated joint ventures . for the year ended december 31 , 2015 , the unconsolidated joint ventures produced $ 65.2 million in net income compared to $ 41.2 million for the same period in 2014 . our equity in net income from unconsolidated joint ventures was $ 13.8 million for the year ended december 31 , 2015 , compared to equity in net income of $ 8.4 million for 2014 . during the second quarter of 2015 , we formed a new unconsolidated joint venture and received capital credit and a cash distribution in excess of the book value of our land basis . as a result , we recognized $ 1.6 million in equity in net income of unconsolidated joint ventures related to this transaction . this transaction , combined with the increase in total revenues and net income of our 40 unconsolidated joint ventures , were the primary drivers of the increase in our equity in net income from unconsolidated joint ventures for the year ended december 31 , 2015. the unconsolidated joint ventures produced $ 41.2 million and $ 35.4 million in net income during the years ended december 31 , 2014 and 2013 , respectively . the net income of our unconsolidated joint ventures increased primarily due to land sales revenue recognized by one joint venture during the fourth quarter of 2014. our equity in net income from unconsolidated joint ventures was $ 8.4 million for the year ended december 31 , 2014 , compared to $ 4.7 million for the same period in 2013 . the following sets forth supplemental operational and financial information about our unconsolidated joint ventures . such information is not included in our financial data for gaap purposes , but is recognized in our results as a component of equity in net income of unconsolidated joint ventures . this data is included for informational purposes only . replace_table_token_13_th net new home orders from unconsolidated joint ventures for the year ended december 31 , 2015 increased 4 % compared to the same period in 2014 , primarily due to an increase in the number of average selling communities offset partially by a slight decrease in the monthly absorption rate . the monthly sales absorption rate from unconsolidated joint venture communities for the year ended december 31 , 2015 was 2.6 compared to 2.8 for the same period in 2014 . the decline in the sales absorption ratio from 2014 to 2015 was primarily the result of having fewer homes available to sell per active community in 2015 at many of our joint ventures , which generally results in slower sales rates . the number of homes in backlog from unconsolidated joint ventures as of december 31 , 2015 increased 45 % to 109 homes compared to december 31 , 2014 , primarily due to a 4 % increase in net new home orders and a slight decrease in the number of deliveries for the year ended december 31 , 2015 . the dollar value of backlog as of december 31 , 2015 compared to december 31 , 2014 increased 3 % due to the increase in the number of homes in backlog , offset partially by a reduction in the average sales price of backlog . the average sales price of backlog decreased primarily due to a change in product mix . home sales revenue from unconsolidated joint ventures increased 49 % during the year ended december 31 , 2015 compared to the same period in 2014 , primarily due to a 55 % increase in the average sales price of homes delivered . the slight decrease in new home deliveries from unconsolidated joint ventures for the year ended december 31 , 2015 as compared to the same period in 2014 was primarily due to a decrease in the monthly sales absorption pace as discussed above . net new home orders from unconsolidated joint ventures for the year ended december 31 , 2014 increased 85 % compared to the same period in 2013 , primarily due to an increase in the number of average selling communities . the monthly sales absorption rate from unconsolidated joint venture communities for the year ended december 31 , 2014 was 2.8 compared to 3.6 for the same period in 2013 . the number of homes in backlog from unconsolidated joint ventures as of december 31 , 2014 increased 21 % to 75 homes compared to december 31 , 2013 , primarily due to a 85 % increase in net new home orders , offset partially by an increase in new home deliveries for the year ended december 31 , 2014 . the dollar value of backlog as of december 31 , 2014 compared 41 to december 31 , 2013 increased 170 % due to the increase in the number of homes in backlog and the average sales price of backlog . the average sales price of backlog increased by $ 0.8 million primarily due to a change in product mix . story_separator_special_tag home sales revenue from unconsolidated joint ventures increased 23 % during the year ended december 31 , 2014 compared to the same period in 2013 , primarily due to a 86 % increase in homes delivered , offset partially by a 34 % decrease in its average selling price resulting from a change in community mix . the increase in new home deliveries from unconsolidated joint ventures for the year ended december 31 , 2014 as compared to the same period in 2013 was primarily due to an increase in community count . for the year ended december 31 , 2015 , unconsolidated joint venture homebuilding gross margin percentage was up 40 basis points to 22.8 % . the improvement in our unconsolidated joint venture gross margins was largely due to a higher number of deliveries from our highly successful newport beach luxury condominium community and to a lesser extent , increased pricing at our san jose orchard park community . excluding interest in cost of home sales , adjusted unconsolidated joint ventures homebuilding gross margin percentage for the years ended december 31 , 2015 , 2014 and 2013 were 24.0 % , 23.6 % and 29.0 % , respectively . see the table below reconciling this non-gaap financial measure to unconsolidated joint venture homebuilding gross margin , the nearest gaap equivalent . replace_table_token_14_th ( 1 ) adjusted unconsolidated joint ventures homebuilding gross margin is a non-gaap financial measure . we believe that by adding interest in cost of unconsolidated joint venture home sales back to unconsolidated joint ventures homebuilding gross margin , investors are able to assess the performance of our unconsolidated joint ventures excluding interest cost . we believe this information is meaningful as it isolates the impact that leverage has on unconsolidated joint venture homebuilding gross margin and permits investors to make better comparisons with our competitors who adjust gross margins in a similar fashion . replace_table_token_15_th ( 1 ) amount includes $ 33.9 million of backlog dollar value related to purchase contracts between an unconsolidated joint venture and the company . land sales for the year ended december 31 , 2015 represented residential lot sales to merchant homebuilders from our unconsolidated joint ventures in davis ( cannery park ) and foster city , california . during the year ended december 31 , 2014 , our foster city and cannery park joint ventures began selling lots and the foster city joint venture also began delivering lots . no such activity occurred during the year ended december 31 , 2013 . 42 excluding interest in cost of land sales , adjusted unconsolidated joint ventures land gross margin percentage for the years ended december 31 , 2015 and 2014 were 21.0 % and 25.8 % , respectively . see the table below reconciling this non-gaap financial measure to unconsolidated joint venture land gross margin , the nearest gaap equivalent . replace_table_token_16_th ( 1 ) adjusted unconsolidated joint ventures land gross margin is a non-gaap financial measure . we believe that by adding interest in cost of unconsolidated joint ventures land sales back to unconsolidated joint ventures land gross margin , investors are able to assess the performance of our unconsolidated joint ventures excluding interest cost . we believe this information is meaningful as it isolates the impact that leverage has on unconsolidated joint ventures land gross margin and permits investors to make better comparisons with our competitors who adjust gross margins in a similar fashion . the tables below summarizes lots owned and controlled by our unconsolidated joint ventures as of the dates presented : replace_table_token_17_th ( 1 ) consists of lots that are under purchase contracts . provision for taxes for the year ended december 31 , 2015 , we recorded a provision for income taxes of $ 12.5 million . the effective tax rate for the year ended december 31 , 2015 differs from the 35 % statutory tax rate due to the tax benefit of production activities and energy efficient credits , partially offset by state income taxes . during 2013 and for the first 30 calendar days of 2014 , we were a delaware llc , which was treated as a partnership for income tax purposes and was subject to certain minimal taxes and fees ; however , income taxes on taxable income or losses realized by us were the obligation of the members . federal and state taxes provided during 2013 and the first 30 calendar days of 2014 relate to a subsidiary that is treated as a c corporation . on january 30 , 2014 , we completed our ipo and reorganized from a delaware llc into a delaware corporation . for the year ended december 31 , 2014 , we recorded a tax provision of $ 0.2 million . the effective tax rate for the year ended december 31 , 2014 differs from the 35 % statutory tax rate primarily due to the differences between the financial statement 43 basis and tax basis of certain assets upon conversion to a taxable entity at the time of our ipo , resulting in a net deferred tax asset . additionally , the effective tax rate was reduced by the exclusion of pre-conversion earnings from taxable income for the three months ended march 31 , 2014 , and the tax benefit of production activities , partially offset by state income taxes . lots owned and controlled replace_table_token_18_th ( 1 ) includes lots that we control under purchase contracts or non-binding letters of intent that are subject to customary conditions and have not yet closed . there can be no assurance that such acquisitions will occur . ( 2 ) subject to agreements with property owners . liquidity and capital resources overview our principal uses of capital for the year ended december 31 , 2015 were land purchases , land development , home construction , repayments of our senior unsecured revolving credit facility , operating expenses and the payment of routine liabilities .
| the dollar value of backlog increased $ 74.8 million , or 631 % , as of december 31 , 2014 compared to december 31 , 2013 primarily due to the opening of two new communities in irvine , california with average sales prices of $ 2.0 million and $ 2.8 million . home sales revenue and new homes delivered replace_table_token_9_th new home deliveries increased 179 % to 148 for the year ended december 31 , 2015 compared to 2014 , primarily due to the increase in net new home orders and the number of actively selling communities . for the year ended december 31 , 2015 , home sales revenue increased 400 % compared to the prior year , primarily due to an increase in the number of homes delivered and a 79 % increase in the average sales price of homes delivered . the year-over-year increase in average sales price was due primarily to a shift to higher-priced homes in coastal southern california where prices exceeded $ 2.7 million per delivery . 38 new home deliveries decreased by 35 % during the year ended december 31 , 2014 compared to 2013 primarily due to the closeout of one community in sacramento , california , coupled with the mid-year opening of three new communities . during the year ended december 31 , 2014 , home sales revenue increased 57 % compared to 2013 due to an increase in the average sales price of homes delivered , offset partially by a decrease in the number of new homes delivered . the increase in average sales price of homes delivered was primarily due to the opening of two new communities in irvine , california as noted above . homebuilding homebuilding gross margin percentage for the year ended december 31 , 2015 declined 70 basis points to 14.3 % as compared to 15.0 % for the same period in 2014 . the year-over-year decrease was largely due to lower margins generated from sacramento close-out
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if the market value less costs to sell ( “ market value ” ) of the impaired loan is less than the recorded investment in the loan , impairment is recognized by establishing a specific reserve in the alll for the loan or by adjusting an existing reserve amount . the amount of the specific reserve is computed using current appraisals , listed sales prices , and other available information 57 less costs to complete , if any , and costs to sell the property . this evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events differ from predictions . in addition , specific reserves may be created upon a loan 's restructuring , based on a discounted cash flow analysis , comparing the present value of the anticipated repayments under the restructured terms to the outstanding principal balance of the loan . our board of directors ' internal asset review committee reviews and recommends for approval the allowance for loan losses on a quarterly basis , and any related provision or recapture of provision for loan losses , and the full board of directors approves the provision or recapture after considering the committee 's recommendations . the allowance is increased by the provision for loan losses which is charged against current period earnings . when analysis of the loan portfolio warrants , the allowance is decreased and a recapture of provision of loan losses is included in current period earnings . we believe that the alll is a critical accounting estimate because it is highly susceptible to change from period‑to‑period requiring management to make assumptions about probable losses inherent in the loan portfolio . the impact of an unexpected large loss could deplete the allowance and potentially require increased provisions to replenish the allowance , thereby reducing earnings . for additional information see item 1a . “ risk factors – our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio , ” in this form 10-k. valuation of oreo . real estate properties acquired through foreclosure or by deed-in-lieu of foreclosure are recorded at fair value less estimated costs to sell . fair value is generally determined by management based on a number of factors , including third-party appraisals of fair value in an orderly sale . accordingly , the valuation of oreo is subject to significant external and internal judgment . if the carrying value of the loan at the date a property is transferred into oreo exceeds the fair value less estimated costs to sell , the excess is charged to the alll . management periodically reviews oreo values to determine whether the property continues to be carried at the lower of its recorded book value or fair value , net of estimated costs to sell . any further decreases in the value of oreo are considered valuation adjustments and are charged to noninterest expense in the consolidated income statements . expenses and income from the maintenance and operations and any gains or losses from the sales of oreo are included in noninterest expense . deferred taxes . deferred tax assets arise from a variety of sources , the most significant being expenses recognized in our financial statements but disallowed in the tax return until the associated cash flow occurs , and write-downs in the value of assets for financial statement purposes that are not deductible for tax purposes until the asset is sold or deemed worthless . when warranted , we record a valuation allowance to reduce our deferred tax assets to the amount that can be recognized in line with the relevant accounting standards . the level of deferred tax asset recognition is influenced by management 's assessment of our historic and future profitability profile . at each balance sheet date , existing assessments are reviewed and , if necessary , revised to reflect changed circumstances . in a situation where income is less than projected or recent losses have been incurred , the relevant accounting standards require convincing evidence that there will be sufficient future tax capacity . for additional information regarding our deferred taxes , see note 12 of the notes to consolidated financial statements contained in item 8. other-than-temporary impairments on the market value of investments . declines in the fair value of available‑for‑sale or held-to-maturity investments below their cost that is deemed to be other-than-temporary results in a reduction in the carrying amount of such investments to their fair value . a charge to earnings and an establishment of a new cost basis for the investment is made . unrealized investment losses are evaluated at least quarterly to determine whether such declines should be considered other-than-temporary and therefore be subject to immediate loss recognition . although these evaluations involve significant judgment , an unrealized loss in the fair value of a debt security is generally deemed to be temporary when the fair value of the investment security is below the carrying value primarily due to changes in interest rates and there has not been significant deterioration in the financial condition of the issuer . other factors that may be considered in determining whether a decline in the value of a debt security is other-than-temporary include ratings by recognized rating agencies ; the extent and duration of an unrealized loss position ; actions of commercial banks or other lenders relative to the continued extension of credit facilities to the issuer of the security ; the financial condition , capital strength and near-term prospects of the issuer and recommendations of investment advisers or market analysts . therefore , deterioration of market conditions could result in impairment losses recognized within the investment portfolio . fair value . fasb asc 820 , fair value measurements and disclosures , establishes a hierarchical disclosure framework associated with the level of pricing observability utilized in measuring financial instruments at fair value . the degree of judgment utilized in measuring the fair value of financial instruments generally correlates to the level of pricing observability . story_separator_special_tag financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value . conversely , financial instruments rarely traded or not quoted will generally have little or no pricing observability and a higher degree of judgment utilized in measuring fair value . pricing observability is impacted by a number of factors , including the type of financial 58 instrument , whether the financial instrument is new to the market and not yet established and the characteristics specific to the transaction . see note 6 of the notes to consolidated financial statements contained in item 8 for additional information about the level of pricing transparency associated with financial instruments carried at fair value . derivatives and hedge accounting . the bank recognizes its interest rate swaps as cash flow hedge derivative instruments , and as such , reports the net fair value as an asset or liability . fair value is based on dealer quotes , pricing models , discounted cash flow methodologies or similar techniques for which the determination of fair value may require significant management judgment or estimation . the derivatives are marked to their fair value through other comprehensive income . the net gain or loss on derivatives is reclassified into earnings in the same income statement line item that is used to present the earnings effect of hedged items . intangible assets . the company incurred goodwill and a core deposit intangible asset through the branch acquisition during 2017. these assets were booked at fair value at the time of the acquisition . goodwill is evaluated annually for impairment , with any impairment recognized as noninterest expense . the core deposit intangible is amortized into noninterest expense . comparison of financial condition at december 31 , 2019 and december 31 , 2018 assets . the following table details the changes in the composition of our assets at december 31 , 2019 from december 31 , 2018 . replace_table_token_28_th the $ 89.5 million increase in total assets during 2019 was primarily a result of our deploying the funds available from $ 94.5 million of deposit growth after repayment of $ 8.8 million of fhlb advances , to increase our loan portfolio by $ 85.6 million . additional factors in our asset growth are described below . interest-earning deposits with banks . our interest-earning deposits with banks , consisting primarily of funds held at the federal reserve bank of san francisco , increased by $ 4.0 million to $ 12.9 million at december 31 , 2019 from december 31 , 2018. we monitor the balance of these funds daily in relation to our expected funding needs and adjust accordingly . excess funds are generally used to pay down overnight funding at the fhlb . investments available-for-sale . our investments available-for-sale decreased by $ 5.6 million , or 3.9 % , during 2019. to enhance the income from our investment portfolio , we had sales , maturities , and calls on $ 14.3 million of our securities , with an average yield of 2.08 % . the sales of investments available-for-sale generated a net gain of $ 151,000 for the year ended december 31 , 2019. the proceeds were partially reinvested in $ 14.4 million of investments with an expected yield of 2.79 % . continued restructuring of our available-for-sale investments in 2019 combined with increases in the target federal funds rate throughout 2018 that outpaced decreases in the targeted federal funds rate in the second half of 2019 contributed to an increase in the average yield on investment securities to 3.11 % for 2019 from 2.92 % in 2018. securities purchased in 2019 included 59 $ 7.6 million in fixed rate and $ 6.5 million in variable rate securities . in addition to the purchase and redemption activity , we received principal repayments of $ 7.4 million on our investments available-for-sale during 2019. the effective duration of our securities portfolio decreased t o 2.54 % a t december 31 , 2019 as compared to 3.00 % at december 31 , 2018. effective duration is a measure that attempts to quantify the anticipated percentage change in the value of an investment ( or portfolio ) in the event of a 100 basis point change in market yields . since the bank 's portfolio includes securities with embedded options ( including call options on bonds and prepayment options on mortgage-backed securities ) , management believes that effective duration is an appropriate metric to use as a tool when analyzing the bank 's investment securities portfolio , as effective duration incorporates assumptions relating to such embedded options , including changes in cash flow assumptions as interest rates change . loans receivable . net loans receivable increased by $ 85.6 million during 2019 to $ 1.11 billion . the most significant increase occurred in one-to-four family residential loans , with a $ 30.6 million , or 8.9 % increase . in addition , commercial real estate loans increased by $ 21.4 million , or 5.7 % . commercial real estate and one‑to‑four family residential loans continue to be the largest concentrations in our loan portfolio at 35.2 % and 33.2 % , respectively , of total loans . growth occurred in all of our loan types , with a $ 17.2 million increase in consumer loans , a $ 7.3 million increase in business loans , a $ 4.8 million increase in construction/land loans , and a $ 3.6 million increase in multifamily loans . during 2019 , we supplemented our loan originations and participations by purchasing $ 38.0 million in loans , which primarily included performing commercial real estate loans , classic or collectible car and construction/land loans .
| during 2019 , originations of new loans and refinances modestly outpaced repayments , resulting in net loans receivable of $ 1.11 billion at december 31 , 2019 , as compared to $ 1.02 billion at december 31 , 2018. originations and purchases of construction/land loans were $ 110.0 million in 2019 as compared to $ 118.2 million in 2018. however , payoffs were higher in 2018 than in 2019 , resulting in this portfolio increasing modestly to $ 113.7 million at december 31 , 2019 as compared to $ 108.9 million at december 31 , 2018. we anticipate that construction/land lending will continue to be a strong element of our total loan portfolio in future periods . we will continue to take a disciplined approach in our construction/land lending by concentrating our efforts on residential loans to builders known to us , including multifamily loans to developers with proven success in this type of construction . these loans typically mature in six to eighteen months and funding is usually not fully disbursed at origination , therefore the impact to net loans receivable is generally minimal in the short term . we have also geographically expanded our loan portfolio through loan purchases or loan participations of commercial and multifamily real estate loans that are outside of our primary market area . through our efforts to geographically diversify our loan portfolio with direct loan originations , loan participations , or loan purchases , our portfolio includes $ 160.2 million of loans to borrowers or secured by properties located in 40 other states , including concentrations in california , utah , oregon and georgia of $ 48.3 million , $ 16.1 million , $ 12.2 million and $ 8.2 million , respectively at december 31 , 2019. net income for the year ended december 31 , 2019 , was $ 10.4 million , or $ 1.03 per diluted share , compared to $ 14.9 million , or $ 1.43 per diluted share , for the year ended december 31 , 2018. the most significant contributor to this decrease was a $ 3.7 million decrease in the recapture of provision for loan losses in 2019 , primarily as a result of net recoveries in 2018 of $ 4.5 million on
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as an integral part of their examination process , regulatory agencies 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 loans over $ 1.0 million that are criticized are evaluated individually to determine the required allowance for loan losses and to evaluate the potential impairment . 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 . for further information related to our allowance for loan losses , see note 1 ( f ) of the notes to the consolidated financial statements on page 69. valuation of investment securities . our investment securities are classified as either held-to-maturity or available-for-sale . held-to-maturity securities are carried at amortized cost , while available-for-sale securities are carried at fair value . unrealized gains or losses on available-for-sale securities , net of deferred taxes , are reported in other comprehensive income . fair values are determined as described in note 15 of the notes to the consolidated financial statements on page 110. semi-annually ( at may 31 and november 30 ) , we validate the prices received from these third parties by comparing them to prices provided by a different independent pricing service . we have reviewed the detailed valuation methodologies provided to us by our pricing services . additional information related to our investment securities can be found in note 1 ( d ) of the notes to the consolidated financial statements on page 68. we conduct a quarterly review and evaluation of all 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 have been in an unrealized 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 evaluated 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 , net of income taxes . any future deterioration in the fair value of an investment security , or the determination that the existing unrealized loss of an investment security is other-than-temporary , may have a material adverse affect on future earnings . goodwill . goodwill is not subject to amortization but must be tested for impairment at least annually , and possibly more frequently if certain events or changes in circumstances arise . impairment testing requires that the fair value of each reporting unit be compared to its carrying amount , including goodwill . reporting units are identified based upon analyzing each of our individual operating segments . a reporting unit is defined as any distinct , separately identifiable component of an operating segment for which complete , discrete financial information is available that management regularly reviews . goodwill is allocated to the carrying value of each reporting unit based on its relative fair value at the time it is acquired . determining the fair value of a reporting unit requires a high degree of subjective management judgment . with the assistance of an independent third party , we evaluate goodwill for possible impairment using four valuation methodologies including a public market peers 31 approach , a comparable transactions approach , a control premium approach and a discounted cash flow approach . future changes in the economic environment or the operations of the reporting units could cause changes to these variables , which could give rise to declines in the estimated fair value of the reporting unit . declines in fair value could result in impairment being identified . we have established june 30 of each year as the date for conducting our annual goodwill impairment assessment . quarterly , we evaluate if there are any triggering events that would require an update to our previous assessment . the variables are selected as of june 30th and the valuation model is run to determine the fair value of each reporting unit . we did not identify any individual reporting unit where the fair value was less than the carrying value . deferred income taxes . we use the asset and liability method of accounting for 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 . story_separator_special_tag 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 . 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 . pension benefits . pension expense and obligations are dependent on assumptions used in calculating such amounts . these assumptions include discount rates , anticipated salary increases , interest costs , expected return on plan assets , mortality rates , and other factors . in accordance with u.s. generally accepted accounting principles , actual results that differ from the assumptions are amortized over average future service and , therefore , generally affect recognized expense . while management believes that the assumptions used are appropriate , differences in actual experience or changes in assumptions may affect our pension obligations and future expense . in determining the projected benefit obligations for pension benefits at december 31 , 2013 and 2012 , we used a discount rate of 4.86 % and 4.06 % , respectively . we use the citigroup pension liability index rates matching the duration of our benefit payments as of the measurement date to determine the discount rate . our measurement date is december 31 . 32 balance sheet analysis assets . total assets at december 31 , 2013 were $ 7.881 billion , a decrease of $ 61.1 million , or 0.8 % , from $ 7.943 billion at december 31 , 2012. this decrease in assets was primarily caused by a decrease in our marketable securities portfolio of $ 96.0 million , or 7.8 % , to $ 1.138 billion at december 31 , 2013 from $ 1.234 billion at december 31 , 2012. cash . total cash decreased by $ 59.8 million , or 13.2 % , to $ 391.9 million at december 31 , 2013 , from $ 451.7 million at december 31 , 2012. this decrease was a result of using cash to fund an increase in net loans receivable of $ 105.7 million and a net deposit decrease of $ 95.7 million . investment securities . investment securities decreased by $ 96.0 million , or 7.8 % , to $ 1.138 billion at december 31 , 2013 from $ 1.234 billion at december 31 , 2012. this decrease was a result of using the cash flow generated from these portfolios to fund loan growth and deposit outflow instead of reinvesting in investment securities . during the year ended december 31 , 2013 , we recognized other-than-temporary credit related impairment charges of $ 713,000 on two pooled trust preferred securities . the following table sets forth certain information regarding the amortized cost and fair value of our available-for-sale investment securities portfolio and mortgage-backed securities portfolio at the dates indicated . replace_table_token_7_th 33 the following table sets forth certain information regarding the amortized cost and fair value of our held-to-maturity investment securities portfolio and mortgage-backed securities portfolio at the dates indicated . replace_table_token_8_th the following table sets forth information regarding the issuers and the carrying value of our mortgage-backed securities at the dates indicated . replace_table_token_9_th further information and analysis of our investment portfolio , including tables with information related to gross unrealized gains and losses on available-for sale and held-to-maturity investment securities and tables showing the fair value and gross unrealized losses on investment securities aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position are located in note 3 of the notes to the consolidated financial statements on page 75 . 34 investment portfolio maturities and yields . the following table sets forth the scheduled maturities , carrying values , amortized cost , market values and weighted average yields for our investment securities and mortgage-backed securities portfolios at december 31 , 2013. adjustable-rate mortgage-backed securities are included in the period in which interest rates are next scheduled to adjust . at december 31 , 2013 one year or less more than one year to five years more than five years to ten years more than ten years total amortized cost annualized weighted average yield amortized cost annualized weighted average yield amortized cost annualized weighted average yield amortized cost annualized weighted average yield amortized cost fair value annualized weighted average yield ( dollars in thousands ) investment securities available for sale : government sponsored entities $ 227,945 0.91 % 94,777 1.27 % 322,722 316,057 1.02 % u.s. government and agency obligations 32 1.23 % 32 32 1.23 % municipal securities 710 3.57 % 8,443 4.05 % 11,228 4.18 % 71,068 4.27 % 91,449 92,578 4.23 % corporate debt issues 21,150 2.62 % 21,150 21,176 2.62 % equity securities and mutual funds 5,298 2.47 % 5,298 9,850 2.47 % total investment securities available for sale 742 3.47 % 236,388 1.03 % 106,005 1.58 % 97,516 3.81 % 440,651 439,693 1.78 % residential mortgage-backed securities available for sale : pass through certificates 78,894 2.38 % 1,422 4.70 % 44,971 1.92 % 38,909 4.79 % 164,196 169,671 2.84 % cmos 147,568 0.66 % 8,877 3.50 % 74,397 1.48 % 186,389 1.55 % 417,231 407,403 1.27 % total residential mortgage-backed securities available for sale 226,462 1.26 % 10,299 3.67 % 119,368 1.71 % 225,298 2.11 % 581,427 577,074 1.71 % investment securities held-to-maturity : municipal securities 8,002 3.78 % 61,314 4.15 % 69,316 70,639 4.11 % total investment securities held-to-maturity
| interest income on loans receivable decreased by $ 21.0 million , or 6.8 % , to $ 287.3 million for the year ended december 31 , 2013 from $ 308.3 million for the year ended december 31 , 2012. this decrease was attributable to a decrease in the average yield , which was partially offset by an increase in the average balance of loans receivable . the average yield on loans receivable decreased by 39 basis points , to 5.06 % for the year ended 42 december 31 , 2013 , from 5.45 % for the year ended december 31 , 2012. this decrease is primarily due to the re-pricing of variable rate loans , the refinancing of existing loans to lower market interest rates and the origination of new loans in the continued low and highly competitive interest rate environment . average loans receivable increased by $ 27.3 million , or 0.5 % , to $ 5.682 billion for the year ended december 31 , 2013 from $ 5.655 billion for the year ended december 31 , 2012. this increase was primarily attributable to our efforts in attracting and maintaining quality business loan relationships , as well as our decision not to sell residential mortgage loans originated through our wholesale lending division into the secondary markets . interest income on mortgage-backed securities decreased by $ 3.9 million , or 23.4 % , to $ 12.8 million for the year ended december 31 , 2013 from $ 16.7 million for the year ended december 31 , 2012. this decrease was attributable to decreases in both the average yield and the average balance of mortgage-backed securities . the average yield on mortgage-backed securities decreased by 44 basis points , to 1.83 % for the year ended december 31 , 2013 , from 2.27 % for the year ended december 31 , 2012. this decrease in yield resulted from the continuation of historically low market interest rates which caused a decrease in the rates on our variable rate securities and lower relative yields on
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effective september 1 , 2014 , we began operating as three distinct business units : openedge , data connectivity and integration , and application development and deployment , each with dedicated sales , product management and product marketing functions . as a result of these changes , we began segment reporting for our three business units beginning in the fourth fiscal quarter of 2014. the segment information for the prior periods presented has been restated to reflect the change in our reportable segments . in january 2014 , our board of directors authorized a new $ 100.0 million share repurchase program . under this authorization , we have repurchased 2.3 million shares for $ 52.6 million during fiscal year 2014. we derive a significant portion of our revenue from international operations , which are primarily conducted in foreign currencies . as a result , changes in the value of these foreign currencies relative to the u.s. dollar have significantly impacted our results of operations and may impact our future results of operations . during the fourth quarter of 2014 and early 2015 , the value of the u.s. dollar strengthened in comparison to certain foreign currencies , including in europe , brazil and australia . as more than 50 % of our revenue comes from sales outside of the u.s. , our revenue results have been impacted , and we expect will continue to be impacted , by fluctuations in foreign currency exchange rates we have evaluated , and expect to continue to evaluate , possible acquisitions and other strategic transactions designed to expand our business and or add complementary products and technologies to our existing product sets . as a result , our expected uses of cash could change , our cash position could be reduced and we may incur additional debt obligations to the extent we complete additional acquisitions . 19 we believe that existing cash balances , together with funds generated from operations and amounts available under our credit facility will be sufficient to finance our operations and meet our foreseeable cash requirements through at least the next twelve months . story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > cost of software licenses consists primarily of costs of royalties , electronic software distribution costs , duplication and packaging . cost of software licenses decreased $ 0.5 million in fiscal year 2014 as compared to fiscal year 2013 , and decreased as a percentage of software license revenue from 6 % to 5 % , due to lower royalties . cost of software licenses as a percentage of software license revenue varies from period to period depending upon the relative product mix . cost of maintenance and services replace_table_token_10_th cost of maintenance and services consists primarily of costs of providing customer support , education and consulting . cost of maintenance and services decreased $ 1.9 million in fiscal year 2014 as compared to fiscal year 2013 , and decreased as a percentage of maintenance and services revenue from 13 % to 12 % . the decrease in cost of maintenance and services in fiscal year 2014 is primarily due to lower compensation-related costs as a result of the significant decrease in headcount within our customer support organization compared to fiscal year 2013 , which more than offset the increase in costs of services due to the acquisition of bravepoint during the fourth quarter of fiscal year 2014 . 22 amortization of acquired intangibles fiscal year ended ( in thousands ) november 30 , 2014 november 30 , 2013 percentage change amortization of acquired intangibles $ 2,999 $ 1,340 124 % as a percentage of total revenue 1 % — % amortization of acquired intangibles included in costs of revenue primarily represents the amortization of the value assigned to intangible assets for technology obtained in business combinations . amortization of acquired intangibles increased $ 1.7 million in fiscal year 2014 as compared to fiscal year 2013. the increase was due to amortization of intangible assets acquired as a result of the rollbase and modulus acquisitions , which were completed at the end of the second quarter of fiscal year 2013 and 2014 , respectively , and the bravepoint acquisition completed during the fourth quarter of fiscal year 2014 , partially offset by decreases due to the completion of amortization of certain intangible assets acquired in prior years . gross profit fiscal year ended ( in thousands ) november 30 , 2014 november 30 , 2013 percentage change gross profit $ 298,274 $ 299,014 — % as a percentage of total revenue 90 % 90 % our gross profit decreased $ 0.7 million in fiscal year 2014 as compared to fiscal year 2013 , and our gross profit as a percentage of total revenue was 90 % for both periods . the dollar decrease in our gross profit was primarily due to lower license revenue offset by lower cost of maintenance and services . sales and marketing fiscal year ended ( in thousands ) november 30 , 2014 november 30 , 2013 percentage change sales and marketing $ 101,496 $ 105,997 ( 4 ) % as a percentage of total revenue 31 % 32 % sales and marketing expenses decreased $ 4.5 million in fiscal year 2014 as compared to fiscal year 2013 , and decreased as a percentage of total revenue from 32 % to 31 % . the decrease was primarily due to lower compensation-related and travel costs in the sales function , as well as lower commission expense due to the lower level of license bookings as compared to fiscal year 2013. the decrease in costs in these areas was slightly offset by an increase in stock based compensation expense during the third quarter of fiscal year 2014 due to accelerated vesting of restricted stock units in connection with the termination of employment of our senior vice president of global field operations . marketing expenses were relatively consistent between the periods . story_separator_special_tag product development replace_table_token_11_th 23 product development expenses increased $ 1.6 million in fiscal year 2014 as compared to fiscal year 2013 , and increased as a percentage of revenue from 17 % to 18 % . the increase was primarily due to higher costs related to building our progress pacific platform . the increase was partially offset by the deferral of capitalized product development costs related to certain development activities with respect to our cloud and mobile platforms beginning in the fourth quarter of fiscal year 2013 , as well as lower incentive compensation costs . general and administrative fiscal year ended ( in thousands ) november 30 , 2014 november 30 , 2013 percentage change general and administrative $ 48,292 $ 55,994 ( 14 ) % as a percentage of total revenue 15 % 17 % general and administrative expenses include the costs of our finance , human resources , legal , information systems and administrative departments . general and administrative expenses decreased $ 7.7 million in fiscal year 2014 as compared to fiscal year 2013 , and decreased as a percentage of revenue from 17 % to 15 % . the decrease is primarily related to lower compensation-related costs as a result of headcount reduction actions occurring subsequent to the third quarter of fiscal year 2013 , as well as lower incentive compensation and professional services costs . the decrease in costs in these areas was slightly offset by an increase in stock based compensation expense during the third quarter of fiscal year 2014 due in part to accelerated vesting of restricted stock units in connection with the termination of employment of our senior vice president of human resources . amortization of acquired intangibles fiscal year ended ( in thousands ) november 30 , 2014 november 30 , 2013 percentage change amortization of acquired intangibles $ 653 $ 760 ( 14 ) % as a percentage of total revenue — % — % amortization of acquired intangibles included in operating expenses primarily represents the amortization of value assigned to intangible assets obtained in business combinations other than assets identified as purchased technology . amortization of these acquired intangibles decreased 14 % in fiscal year 2014 as compared to fiscal year 2013 due to the completion of amortization of certain intangible assets acquired in prior years , offset by the amortization of intangible assets associated with the rollbase and modulus acquisitions , which were completed during the second quarter of fiscal years 2013 and 2014 , respectively , and the bravepoint acquisition , which was completed in the fourth quarter of fiscal year 2014. restructuring expenses fiscal year ended ( in thousands ) november 30 , 2014 november 30 , 2013 percentage change restructuring expenses $ 2,266 $ 11,983 ( 81 ) % as a percentage of total revenue 1 % 4 % we incurred restructuring expenses of $ 2.3 million in fiscal year 2014 as compared to $ 12.0 million in fiscal year 2013. restructuring expenses in fiscal year 2014 relate to the restructuring actions occurring in fiscal years 2014 , 2013 and 2012. see note 14 to the consolidated financial statements in item 8 of this form 10-k for additional details , including types of expenses incurred and the timing of future expenses and cash payments . see also `` liquidity and capital resources '' . 24 acquisition-related expenses fiscal year ended ( in thousands ) november 30 , 2014 november 30 , 2013 percentage change acquisition-related expenses $ 5,862 $ 3,204 83 % as a percentage of total revenue 2 % 1 % acquisition-related expenses increased in fiscal year 2014 compared to fiscal year 2013 due to expenses related to earn-out provisions that were part of the rollbase acquisition completed in the second quarter of fiscal year 2013 , as well as transaction-related costs , primarily professional services fees , associated with the acquisition of modulus , which was acquired in the second quarter of fiscal year 2014 , bravepoint , which was acquired in the fourth quarter of fiscal year 2014 , and telerik , which was acquired in the first quarter of fiscal year 2015. income from operations fiscal year ended ( in thousands ) november 30 , 2014 november 30 , 2013 percentage change income from operations $ 80,740 $ 63,740 27 % as a percentage of total revenue 24 % 19 % income from operations increased $ 17.0 million in fiscal year 2014 as compared to fiscal year 2013 , and increased as a percentage of total revenue from 19 % to 24 % . as discussed above , the increase was primarily the result of lower operating expenses in fiscal year 2014. income from operations by segment replace_table_token_12_th note that the following expenses are not allocated to our segments as we manage and report our business in these functional areas on a consolidated basis only : product development , corporate marketing , general and administration , amortization of acquired intangibles , stock-based compensation , restructuring , and acquisition-related expenses . 25 other ( expense ) income replace_table_token_13_th other ( expense ) income decreased $ 2.0 million in fiscal year 2014 as compared to fiscal year 2013. the decrease is primarily related to the realized loss incurred of $ 2.6 million resulting from the sale of our remaining auction rate securities , which is included in interest income and other for fiscal year 2014. the change in foreign currency losses is a result of movements in exchange rates and the impact on our intercompany receivables and payables denominated in currencies other than local currencies .
| the decrease in datadirect sales was primarily due to the upfront revenue recognition in fiscal year 2013 on several large multi-year oem renewals , as well as the weakness in our pipeline from earlier in the year , which impacted our revenue growth in the first three quarters of fiscal year 2014. maintenance and services revenue replace_table_token_6_th maintenance and services revenue increased $ 3.0 million in fiscal year 2014 as compared to fiscal year 2013 . maintenance revenue remained essentially flat and professional services revenue increased 39 % compared to the prior year . the increase in professional services revenue in fiscal year 2014 was primarily due to the impact of the bravepoint acquisition during the fourth quarter of fiscal year 2014. revenue by region replace_table_token_7_th total revenue generated in north america decreased $ 3.6 million , and total revenue generated outside north america increased $ 2.1 million , in fiscal year 2014 as compared to fiscal year 2013 . total revenue generated in markets outside north america 21 represented 55 % of total revenue in fiscal year 2014 compared to 54 % of total revenue in fiscal year 2013 . total revenue generated in markets outside north america would have represented 55 % of total revenue if exchange rates had been constant in fiscal year 2014 as compared to the exchange rates in effect in fiscal year 2013 . the increase in the asia pacific region was due to a large multi-year deal with two openedge end users . revenue by segment replace_table_token_8_th revenue in the openedge segment increased $ 3.2 million , or 1 % , due to growth in the asia pacific and latin america regions , as well as incremental services revenues as a result of the bravepoint acquisition during the fourth quarter of fiscal year 2014. data connectivity and integration revenue decreased $ 5.3 million , or 13 % , year over year , primarily in north america . the decrease in data connectivity and integration revenue was primarily due to the upfront revenue recognition in fiscal year 2013 on several large multi-year oem renewals , as well as the weakness in our pipeline from earlier in the year , which impacted our revenue growth in the first
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amortization amortization increased by $ 14.0 million , or 6.4 % , primarily the result of increased gold production at kensington , partially offset by lower silver production at palmarejo . costs and expenses general and administrative expenses increased $ 22.4 million or 67.8 % , primarily due to higher business development expenses and related legal costs , and one-time expenditures associated with the corporate office relocation . exploration expenses decreased by $ 3.9 million or 14.9 % primarily as a result of lower exploration activity near the company 's existing properties . litigation settlement of $ 32.0 million relates to the settlement of the rochester claims dispute in 2013 described above . write-downs totaled $ 773.0 million compared to $ 5.8 million . the 2013 write-down was primarily due to an impairment of the palmarejo and kensington mines due to a decrease in the company 's long-term silver and gold price assumptions . the decrease in silver and gold price assumptions represented significant changes in the business , requiring the company to evaluate for impairment . for purposes of this evaluation , estimates of future cash flows of the individual reporting units were used to determine fair value . pre-development , care and maintenance and other expenses were $ 11.9 million , an increase of $ 10.6 million over 2012 , primarily due to feasibility expenditures at la preciosa and settlement of a royalty dispute at san bartolomé . other income and expenses non-cash fair value adjustments , net were a gain of $ 82.8 million compared to a loss of $ 23.5 million , primarily due to the impact of changing gold prices on the palmarejo gold production royalty obligation . interest income and other , net decreased by $ 1.7 million to $ 13.3 million , compared to $ 15.0 million , primarily due to lower foreign currency gains and a business interruption insurance recovery at san bartolomé in 2012 , partially offset by gains on the substitution of certain reclamation bonds for restricted cash . interest expense , net of capitalized interest , increased to $ 41.3 million from $ 26.2 million due to interest paid on the senior notes . income and mining taxes the company reported an income tax benefit of approximately $ 158.1 million compared to a provision of $ 70.8 million . the following table summarizes the components of the company 's income tax provision : 36 replace_table_token_17_th in 2013 , the company recognized a current provision in the u.s. and certain foreign jurisdictions primarily related to inflationary adjustments on non-monetary assets and the company being subject to the state mining tax and mexico ietu tax , which is a form of alternative minimum tax . the company has recognized $ 3.0 million of expenses , including interest and penalties , for uncertain tax positions for the years ended 2008 , 2009 , 2010 , 2011 , and 2012 and an additional $ 2.2 million of expense for the year ended 2013. finally , the company recognized a deferred tax benefit of $ 177.2 million in 2013. the significant components of this benefit include the impacts of the impairment of mineral interests in mexico , the change in the company 's permanent reinvestment assertion related to mexico , and the recognition of deferred taxes on current year temporary differences , partially offset by tax rate changes in mexico and an increase in the company 's valuation allowance . in the fourth quarter of 2013 , the company changed its position regarding the accumulated earnings and basis difference with respect to its investment in its coeur mexicana mining operations , concluding they were permanently reinvested . the company continues to maintain this position . in periods prior to the quarter ended december 31 , 2013 , it was the company 's position that such earnings were not permanently reinvested . for the year ended december 31 , 2013 , the impact of the tax benefit attributable to the reversal of the provision for this item of $ 81.0 million is reflected . results of operations palmarejo replace_table_token_18_th ( 1 ) see non-gaap financial performance measures 2014 compared to 2013 silver equivalent production decreased due primarily to lower ore grades and mill throughput . metal sales were $ 244.0 million , or 39 % of metal sales , compared with $ 324.0 million , or 43 % of metal sales . costs applicable to sales per ounce increased due to lower production , higher underground mining and maintenance costs , an $ 11.3 million inventory adjustment , and the new 0.5 % revenue mining duty . amortization decreased to $ 69.4 million compared to $ 133.5 million due to lower amortizable mineral interests and mining equipment , and lower production . capital expenditures decreased to $ 26.1 million compared to $ 33.7 million . 2013 compared to 2012 silver equivalent production was generally consistent . metal sales were $ 324.0 million , or 43 % of metal sales , compared with $ 442.1 million , or 49 % of metal sales . costs applicable to sales per ounce were mostly unchanged . amortization decreased to $ 134.2 million compared to $ 146.6 million due to lower production . capital expenditures were $ 33.7 million compared to $ 38.5 million . 37 rochester replace_table_token_19_th ( 1 ) see non-gaap financial performance measures 2014 compared to 2013 silver equivalent production increased substantially as a result of higher tons placed and higher gold grade . metal sales were $ 123.8 million , or 20 % of coeur 's metal sales , compared with $ 119.3 million , or 16 % of metal sales . costs applicable to sales per ounce decreased 7 % due to higher production and lower mining costs , partially offset by higher leaching and maintenance costs . amortization was $ 20.8 million compared to $ 8.9 million due to higher production . capital expenditures decreased to $ 11.9 million compared to $ 29.4 million as the stage iii leach pad expansion was completed in 2013 . story_separator_special_tag 2013 compared to 2012 silver equivalent production decreased due to the stage iii leach pad expansion and related timing of leach recoveries . a significant amount of crushed ore was stacked on the expanded leach pad during the construction phase while leaching commenced upon completion of the project late in the year . metal sales were $ 119.3 million , or 16 % of coeur 's metal sales , compared with $ 132.4 million , or 15 % of metal sales . costs applicable to sales per ounce decreased due to timing of recoveries as a result of the stage iii leach pad expansion . amortization was $ 10.6 million compared to $ 8.1 million , due to the completion of capital projects . capital expenditures were $ 29.4 million compared to $ 11.8 million . kensington replace_table_token_20_th ( 1 ) see non-gaap financial performance measures 2014 compared to 2013 gold production increased due to higher mill throughput , partially offset by lower grade . metal sales were $ 137.0 million , or 22 % of metal sales , compared to $ 148.8 million , which represented 20 % of coeur 's metal sales . metal sales were negatively impacted by delayed gold shipments from the mine due to a labor dispute affecting ports on the west coast of the u.s. , resulting in approximately 10,000 ounces of finished goods inventory unable to be shipped in 2014. costs applicable to sales per ounce increased due to higher mining and water treatment costs . amortization was $ 43.6 million compared to $ 62.8 million due to lower amortizable mineral interests and mining equipment . capital expenditures were $ 16.2 million compared to $ 21.4 million . 2013 compared to 2012 gold production increased due to higher mill throughput and the mill achieving a nearly 97 % recovery rate . metal sales were $ 148.8 million , or 20 % of coeur 's metal sales , compared with $ 111.0 million , or 12 % of metal sales . costs applicable to sales per ounce decreased due to higher production and lower overhead and support costs , partially offset by higher mining costs . amortization was $ 63.2 million compared to $ 41.6 million , due to higher production . capital expenditures were $ 21.4 million compared to $ 37.0 million . 38 san bartolomé replace_table_token_21_th ( 1 ) see non-gaap financial performance measures 2014 compared to 2013 silver production decreased slightly due to lower grade , partly offset by higher mill throughput . silver sales were $ 117.7 million , or 19 % of metal sales , compared with $ 141.7 million , or 19 % of metal sales . costs applicable to sales per ounce were mostly unchanged . amortization was $ 19.4 million compared to $ 19.1 million . capital expenditures were $ 7.9 million compared to $ 11.6 million . 2013 compared to 2012 silver production increased due to higher mill throughput , mostly offset by lower grade . silver sales were $ 141.7 million , or 19 % of metal sales , compared with $ 178.0 million , or 20 % of metal sales . costs applicable to sales per ounce increased due to higher mining and milling costs . amortization was $ 19.6 million compared to $ 16.7 million , primarily due to completion of capital projects and higher production . capital expenditures were $ 11.6 million compared to $ 25.7 million . coeur capital replace_table_token_22_th ( 1 ) see non-gaap financial performance measures 2014 compared to 2013 metal sales were $ 10.0 million compared to $ 12.9 million . silver production decreased due to lower grade . royalty revenue was $ 3.2 million compared to nil , primarily due to the acquisition of global royalty corp. in december 2013. costs applicable to sales per ounce decreased due to the impact of lower silver prices on the endeavor silver stream 's price sharing agreement . amortization increased to $ 7.0 million compared to $ 3.8 million due to depletion of royalty interests in 2014 . 2013 compared to 2012 silver production decreased slightly due to lower ore grade , partially offset by higher recovery . metal sales were $ 12.9 million compared to $ 18.8 million . costs applicable to sales per ounce decreased due to lower silver prices . amortization decreased to $ 3.8 million from $ 4.6 million due to lower production . 39 liquidity and capital resources cash provided by operating activities net cash provided by operating activities was $ 52.9 million , $ 113.5 million , and $ 271.6 million in 2014 , 2013 , and 2012 , respectively , and was impacted by the following key factors : replace_table_token_23_th ( 1 ) see non-gaap financial performance measures replace_table_token_24_th cash provided by operating activities decreased $ 60.5 million in 2014 compared to 2013 primarily due to lower average realized silver and gold prices and lower gold ounces sold , partially offset by higher silver ounces sold , lower costs applicable to sales per gold ounce and a decrease in working capital . 2014 metal sales were $ 92.1 million lower due to lower average realized price per silver equivalent ounce and $ 18.2 million lower due to lower silver equivalent ounces sold . the decrease in silver equivalent ounces sold was primarily due to delayed gold shipments from the kensington mine as a result of a labor dispute affecting ports on the west coast of the u.s. cash provided by operating activities decreased $ 158.2 million in 2013 compared to 2012 primarily due to lower average realized silver and gold prices and lower silver ounces sold , partially offset by higher gold ounces sold , lower costs applicable to sales per gold ounce , and a smaller increase to working capital . 2013 metal sales were $ 200.4 million lower due to lower average realized price per silver equivalent ounce , partially offset by $ 50.9 million due to higher silver equivalent ounces sold .
| silver production increased in 2014 due to higher recoveries and tons placed at rochester , partly offset by lower grade and mill throughput at palmarejo . gold production decreased in 2014 due to lower grade and mill throughput at palmarejo , partly offset by higher mill throughput at kensington and higher recoveries at rochester . costs applicable to sales were $ 14.71 per silver equivalent ounce and $ 951 per gold ounce in 2014 , compared to $ 13.85 per silver equivalent ounce and $ 901 per gold ounce in 2013 . costs applicable to sales per silver equivalent ounce increased in 2014 due to higher unit costs at palmarejo , partly offset by lower unit costs at rochester . costs applicable to sales per gold ounce increased in 2014 due to higher unit costs at kensington . 33 replace_table_token_15_th ( 1 ) silver equivalent ounces calculated using a 60:1 silver to gold ratio . ( 2 ) payable basis . production before smelter losses was 17,267,419 , 17,011,193 , and 18,025,206 silver ounces and 252,187 , 262,217 , and 226,486 gold ounces in 2014 , 2013 , and 2012 , respectively . sales before smelter losses were 17,501,617 , 17,188,539 , and 17,965,383 silver ounces and 245,280 , 264,493 , and 213,185 gold ounces in 2014 , 2013 , and 2012 , respectively . ( 3 ) see `` non-gaap financial performance measures . '' looking forward we continue to focus on operational excellence , cost containment and prudent capital deployment to deliver on our plans , resulting in the following expectations for 2015 : silver equivalent production of 31.8 - 34.8 million ounces , consisting of 14.8 - 16.0 million ounces of silver and 284,000 - 313,000 ounces of gold costs applicable to sales per silver equivalent ounce of $ 12.50 - $ 14.00 at rochester , $ 13.50 - $ 15.00 at san bartolomé , and $ 16.25 - $ 17.75 at palmarejo . costs applicable to sales of $ 900 - $ 975 per gold ounce at kensington and $ 750 - $
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we intend to achieve that goal by succeeding at the five key initiatives we have adopted . increase profitability through ongoing diversification of revenue streams : for the twelve months ended december 31 , 2015 , the company generated $ 15.7 million in revenue from “ fee based ” products , or 40.2 percent of total operating revenue . these revenue sources include fees generated from saleable residential mortgage loans , retail deposit products , wealth management division , saleable business-based loans ( small business and farm service ) and fees generated by our wholly-owned item processing subsidiary ( rdsi ) . strengthen our penetration in all markets served : over our 113 year history of continuous operation in northwest ohio , we have established a significant presence in our traditional markets in defiance , fulton , paulding and williams counties in ohio . in our newer markets of columbus , findlay , toledo ( ohio ) and ft. wayne ( indiana ) , our current market penetration is minimal but we believe our potential for growth is significant . during 2015 , we expanded our presence into columbus ( dublin ) , ohio and findlay , ohio with new banking center openings . expand product utilization by new and existing customers : as of december 31 , 2015 , we served 26,076 households and provided 57,118 products to these households . our strategy is to continue to expand the scope of our relationship with each household via our dynamic “ on-boarding ” process . proactively identifying client needs is a key ingredient of our value proposition . deliver gains in operational excellence : our management team believes that becoming and remaining a high-performance financial services company will depend upon seamlessly and consistently delivering operational excellence . this excellence is demonstrated by the company 's leadership in the origination and servicing of residential mortgage loans . as of december 31 , 2015 , the company serviced 5,632 loans with a principal balance of $ 772.5 million . sustain asset quality : as of december 31 , 2015 , the company was near the top quartile of our peer group in asset quality metrics . specifically , total non-performing assets were $ 8.4 million , or 1.15 percent of total assets . total delinquent loans at december 31 , 2015 were 1.09 percent of total loans . critical accounting policies the accounting and reporting policies of sb financial are in accordance with generally accepted accounting principles in the united states and conform to general practices within the banking industry . the company 's significant accounting policies are described in detail in the notes to the company 's consolidated financial statements for the years ended december 31 , 2015 and 2014. the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions . the company 's financial position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of reported results . critical accounting policies are those policies that management believes are the most important to the portrayal of the company 's financial condition and results , and they require management to make estimates that are difficult , subjective or complex . 32 allowance for loan losses : the allowance for loan losses provides coverage for probable losses inherent in the company 's loan portfolio . management evaluates the adequacy of the allowance for loan losses each quarter based on changes , if any , in the nature and amount of problem assets and associated collateral , underwriting activities , loan portfolio composition ( including product mix and geographic , industry or customer-specific concentrations ) , trends in loan performance , regulatory guidance and economic factors . this evaluation is inherently subjective , as it requires the use of significant management estimates . many factors can affect management 's estimates of specific and expected losses , including volatility of default probabilities , rating migrations , loss severity and economic and political conditions . the allowance is increased through provisions charged to operating earnings and reduced by net charge-offs . the company determines the amount of the allowance based on relative risk characteristics of the loan portfolio . the allowance recorded for commercial loans is based on reviews of individual credit relationships and an analysis of the migration of commercial loans and actual loss experience . the allowance recorded for homogeneous consumer loans is based on an analysis of loan mix , risk characteristics of the portfolio , fraud loss and bankruptcy experiences , and historical losses , adjusted for current trends , for each homogeneous category or group of loans . the allowance for credit losses relating to impaired loans is based on each impaired loan 's observable market price , the collateral for certain collateral-dependent loans , or the discounted cash flows using the loan 's effective interest rate . regardless of the extent of the company 's analysis of customer performance , portfolio trends or risk management processes , certain inherent , but undetected , losses are probable within the loan portfolio . this is due to several factors including inherent delays in obtaining information regarding a customer 's financial condition or changes in their unique business conditions , the subjective nature of individual loan valuations , collateral assessments and the interpretation of economic trends . volatility of economic or customer-specific conditions affecting the identification and estimation of losses for larger non-homogeneous credits and the sensitivity of assumptions utilized to establish allowances for homogenous groups of loans are also factors . the company estimates a range of inherent losses related to the existence of these exposures . story_separator_special_tag the estimates are based upon the company 's evaluation of imprecise risk associated with the commercial and consumer allowance levels and the estimated impact of the current economic environment . goodwill and other intangibles : the company records all assets and liabilities acquired in purchase acquisitions , including goodwill and other intangibles , at fair value as required . goodwill is subject , at a minimum , to annual tests for impairment . other intangible assets are amortized over their estimated useful lives using straight-line and accelerated methods , and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying amount . the initial goodwill and other intangibles recorded and subsequent impairment analysis requires management to make subjective judgments concerning estimates of how the acquired asset will perform in the future . events and factors that may significantly affect the estimates include , among others , customer attrition , changes in revenue growth trends , specific industry conditions and changes in competition . story_separator_special_tag impairment . the fair value testing of goodwill and intangibles was conducted pursuant to asc topic 350 and utilized company-prepared projections of cash flows , historical financial results and market based comparisons . these inputs were used to evaluate the expected future cash flows of the business and those results determined the fair value of the goodwill and intangibles . management plans to purchase additional premises and equipment to meet the current and future needs of the company 's customers . these purchases , including buildings and improvements and furniture and equipment ( which includes computer hardware , software , office furniture and license agreements ) , are currently expected to total approximately $ 2.5 million for the company during 2016. these capital expenditures and purchases are expected to be funded by cash on hand and from cash generated from current operations . liquidity liquidity relates primarily to the company 's ability to fund loan demand , meet deposit customers ' withdrawal requirements and provide for operating expenses . sources used to satisfy these needs consist of cash and due from banks , interest bearing deposits in other financial institutions , securities available for sale , loans held for sale , and borrowings from various sources . the assets , excluding the borrowings , are commonly referred to as liquid assets . liquid assets were $ 117.8 million at december 31 , 2015 , compared to $ 118.6 million at december 31 , 2014. the company 's commercial real estate , first mortgage residential , agricultural and multi-family mortgage portfolio of $ 416.8 million at december 31 , 2015 , can and has been readily used to collateralize borrowings , which is an additional source of liquidity . management believes the company 's current liquidity level , without these borrowings , is sufficient to meet its current and anticipated liquidity needs . at december 31 , 2015 , all eligible commercial real estate , residential first , multi-family mortgage and agricultural loans were pledged under an federal home loan bank ( fhlb ) blanket lien . significant additional off-balance-sheet liquidity is available in the form of fhlb advances , unused federal funds lines from correspondent banks and the national certificate of deposit market . management expects the risk of changes in off-balance-sheet arrangements to be immaterial to earnings . based on the current collateralization requirements of the fhlb , approximately $ 31.1 million of additional borrowing capacity existed at december 31 , 2015. at december 31 , 2015 and 2014 , the company had $ 15.0 and $ 14.0 million in federal funds lines available , respectively . the company also had $ 27.7 million in unpledged securities at december 31 , 2015 , that may be used to pledge for additional borrowings . the cash flow statements for the periods presented provide an indication of the company 's sources and uses of cash as well as an indication of the ability of the company to maintain an adequate level of liquidity . a discussion of the cash flow statements for 2015 and 2014 follows : the company experienced positive cash flows from operating activities in 2015 and 2014. net cash from operating activities was $ 8.6 million and $ 5.0 million for the years ended december 31 , 2015 and 2014 , respectively . significant operating items for 2015 included gain on sale of loans ( $ 7.2 million ) and net income ( $ 7.6 million ) . net proceeds from sales of loans held for sale and loans originated and held for sale were a positive $ 16.2 million . 37 the company experienced negative cash flows from investing activities in 2015 and 2014. net cash used in investing activities was $ 54.7 million and $ 36.6 million for the years ended december 31 , 2015 and 2014 , respectively . the changes for 2015 include the purchase of available-for-sale securities of $ 26.3 million , and net increase in loans of $ 42.3 million . the changes for 2014 include the purchase of available-for-sale securities of $ 26.1 million and net increase in loans of $ 40.0 million . the company had proceeds from repayments , maturities , sales and calls of securities of $ 20.3 million and $ 31.0 million in 2015 and 2014 , respectively . the company had proceeds from sales of premises and foreclosed assets of $ 0.8 million and $ 0.3 million in 2015 and 2014 , respectively . the company experienced positive cash flows from financing activities in 2015 and 2014. net cash in financing activities was $ 38.3 million in 2015 and $ 46.7 million in 2014. positive $ 35.5 million $ 32.6 million is attributable to the change in deposits for 2015 and 2014 , respectively . in 2014 , the company provided cash of $ 14.0 million from a preferred capital raise , and repaid trust preferred securities in the amount of $ 10.6 million . the
| net charge-offs for 2015 of $ 0.88 million resulted in a loan loss provision of $ 1.1 million , which was up from the $ 0.64 and $ 0.45 million respectively in 2014. changes in financial condition total assets at december 31 , 2015 , were $ 733.1 million , compared to $ 684.2 million at december 31 , 2014. loans ( excluding loans held for sale ) were $ 557.7 million at december 31 , 2015 , compared to $ 516.3 million at december 31 , 2014. total deposits were $ 586.4 million at december 31 , 2015 , compared to $ 550.9 million at december 31 , 2014. total equity was $ 81.2 million at december 31 , 2015 , up from $ 75.7 million at december 31 , 2014. the $ 5.5 million increase in equity , which reflected a 7.3 percent increase over 2014 was due to net income less shareholder dividends of $ 1.0 million . results of operations replace_table_token_20_th net interest income year ended december 31 , ( $ in thousands ) 2015 2014 % change net interest income $ 23,343 $ 20,928 11.5 % net interest income was $ 23.3 million for 2015 compared to $ 20.9 million for 2014 , an increase of $ 2.4 million or 11.5 percent . average earning assets increased to $ 628.0 million in 2015 , compared to $ 589.3 million in 2014 , an increase of $ 38.7 million or 6.6 percent due to loan volume . the consolidated 2015 full-year net interest margin increased 16 basis points to 3.78 percent compared to 3.62 percent for the full year of 2014. in the third quarter of 2014 , the company redeemed its fixed rate trust preferred securities prior to maturity , which impacted the full year improvement in net interest margin by 14 basis points . 34 provision for loan losses of $ 1.1 million was taken in 2015 compared to $ 0.45 million taken for 2014. the $ 0.65 million increase was due to the higher level of charge-offs and the deterioration in the company 's non-performing asset levels . for 2015 , net charge-offs totaled $
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above are also relevant to the forward-looking statements , and if they prove incorrect , could also cause actual results to differ materially from those projected . all written or oral forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement . our forward-looking statements speak only as of the date made . we assume no obligation to update or to publicly announce the results of any revisions to any of the forward-looking statements to reflect actual results , future events or developments , changes in assumptions or changes in other factors affecting the forward-looking statements . the reporting of rbc measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing , advertising or promotional activities . overview we are a holding company for a group of insurance companies operating throughout the united states that develop , market and administer health insurance , annuity , individual life insurance and other insurance products . we focus on serving the senior and middle-income markets , which we believe are attractive , underserved , high growth markets . we sell our products through three distribution channels : career agents , independent producers ( some of whom sell one or more of our product lines exclusively ) and direct marketing . 48 prior to 2014 , the company managed its business through the following operating segments : bankers life , washington national and colonial penn , which are defined on the basis of product distribution ; other cno business , comprised primarily of products we no longer sell actively ; and corporate operations , comprised of holding company activities and certain noninsurance company businesses . as a result of the sale of clic which was completed on july 1 , 2014 and the coinsurance agreements to cede certain long-term care business effective december 31 , 2013 ( as further described in the note to the consolidated financial statements entitled `` summary of significant accounting policies - reinsurance '' ) , management has changed the manner in which it disaggregates the company 's operations for making operating decisions and assessing performance . in periods prior to 2014 : ( i ) the results in the washington national segment have been adjusted to include the results from the business in the other cno business segment that are being retained ; ( ii ) the other cno business segment included only the long-term care business that was ceded effective december 31 , 2013 and the overhead expense of clic that is expected to continue after the completion of the sale ; and ( iii ) the clic business being sold is excluded from our analysis of business segment results . beginning on january 1 , 2014 : ( i ) the overhead expense of clic that is expected to continue after the completion of the sale has been reallocated primarily to the bankers life and washington national segments ; ( ii ) there is no longer an other cno business segment ; and ( iii ) the clic business being sold continues to be excluded from our analysis of business segment results . after the completion of the sale of clic : ( i ) the bankers life segment includes the results of certain life insurance business that was recaptured from wilton re ; and ( ii ) the revenues and expenses associated with a transition services agreement and a special support services agreement with wilton re are included in our non-operating earnings . under such agreements , we will receive $ 30 million in the year ending june 30 , 2015 and $ 20 million in the year ending june 30 , 2016. in addition , certain services will continue to be provided in the three years ending june 30 , 2019 for an annual fee of $ .2 million . the income we receive from these services agreements will offset certain of our overhead costs . if we are not successful in reducing our overhead costs to the same extent as the reduction in fees to be received from wilton re over the period of the agreements , our results of operations will be adversely affected . our prior period segment disclosures have been revised to reflect management 's current view of the company 's operating segments . the company 's insurance segments are described below : bankers life , which markets and distributes medicare supplement insurance , interest-sensitive life insurance , traditional life insurance , fixed annuities and long-term care insurance products to the middle-income senior market through a dedicated field force of career agents and sales managers supported by a network of community-based sales offices . the bankers life segment includes primarily the business of bankers life and casualty company . bankers life also markets and distributes medicare advantage plans primarily through distribution arrangements with humana , inc. and united healthcare and pdp primarily through a distribution arrangement with coventry . washington national , which markets and distributes supplemental health ( including specified disease , accident and hospital indemnity insurance products ) and life insurance to middle-income consumers at home and at the worksite . these products are marketed through pma and through independent marketing organizations and insurance agencies including worksite marketing . the products being marketed are underwritten by washington national . this segment 's business also includes certain closed blocks of annuities and medicare supplement policies which are no longer being actively marketed by this segment and were primarily issued or acquired by washington national . colonial penn , which markets primarily graded benefit and simplified issue life insurance directly to customers in the senior middle-income market through television advertising , direct mail , the internet and telemarketing . the colonial penn segment includes primarily the business of colonial penn . story_separator_special_tag 49 the following summarizes our earnings for the three years ending december 31 , 2014 ( dollars in millions , except per share data ) : 2014 2013 2012 income before the net loss on the sale of clic and gain on reinsurance transactions , the earnings of clic prior to being sold , net realized investment gains ( losses ) , fair value changes in embedded derivative liabilities , loss on extinguishment or modification of debt , other non-operating items consisting primarily of earnings attributable to variable interests , corporate interest expense and income taxes ( `` ebit '' a non-gaap financial measure ) ( a ) : bankers life $ 386.9 $ 310.5 $ 300.9 washington national 111.2 140.6 148.8 colonial penn .8 ( 12.5 ) ( 8.6 ) other cno business : losses from the long-term care business reinsured effective december 31 , 2013 — ( 8.0 ) ( 9.2 ) overhead expense of clic allocated to other segments effective january 1 , 2014 — ( 19.6 ) ( 20.5 ) ebit from business segments continuing after the clic sale 498.9 411.0 411.4 corporate operations , excluding corporate interest expense ( 54.4 ) 18.6 ( 20.3 ) ebit from operations continuing after the clic sale 444.5 429.6 391.1 corporate interest expense ( 43.9 ) ( 51.3 ) ( 66.2 ) operating earnings before taxes 400.6 378.3 324.9 tax expense on operating income 141.1 129.9 118.0 net operating income 259.5 248.4 206.9 earnings of clic prior to being sold ( net of taxes ) 15.2 25.5 ( 31.1 ) net loss on sale of clic and gain on reinsurance transactions ( including impact of taxes ) ( 269.7 ) ( 63.3 ) — net realized investment gains ( net of related amortization and taxes ) 21.4 16.8 53.0 fair value changes in embedded derivative liabilities ( net of related amortization and taxes ) ( 23.4 ) 23.0 ( 1.8 ) loss on extinguishment or modification of debt ( net of taxes ) ( .4 ) ( 64.0 ) ( 177.5 ) valuation allowance for deferred tax assets and other tax items ( b ) 54.9 301.5 171.5 other ( 6.1 ) ( 9.9 ) — net income $ 51.4 $ 478.0 $ 221.0 per diluted share : net operating income $ 1.19 $ 1.07 $ .78 earnings of clic prior to being sold ( net of taxes ) .07 .11 ( .11 ) net loss on sale of clic and gain on reinsurance transactions ( including impact of taxes ) ( 1.24 ) ( .27 ) — net realized investment gains ( net of related amortization and taxes ) .10 .08 .19 fair value changes in embedded derivative liabilities ( net of related amortization and taxes ) ( .11 ) .10 ( .01 ) loss on extinguishment or modification of debt ( net of taxes ) — ( .28 ) ( .63 ) valuation allowance for deferred tax assets and other tax items ( b ) .25 1.29 .61 other ( .02 ) ( .04 ) — net income $ .24 $ 2.06 $ .83 50 ( a ) management believes that an analysis of ebit provides a clearer comparison of the operating results of the company from period to period because it excludes : ( i ) the net loss on the sale of clic and gain on reinsurance transactions , including impact of taxes ; ( ii ) the earnings of clic prior to being sold , net of taxes ; ( iii ) net realized investment gains or losses , net of related amortization and taxes ; ( iv ) fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities , net of related amortization and taxes ; ( v ) loss on extinguishment or modification of debt , net of taxes ; ( vi ) changes in the valuation allowance for deferred tax assets ; and ( vii ) other non-operating items consisting primarily of equity in earnings of certain non-strategic investments and earnings attributable to variable interest entities . net realized investment gains or losses include : ( i ) gains or losses on the sales of investments ; ( ii ) other-than-temporary impairments recognized through net income ; and ( iii ) changes in fair value of certain fixed maturity investments with embedded derivatives . the table above reconciles the non-gaap measure to the corresponding gaap measure . ( b ) increase in valuation allowance of $ 19.4 million in 2014 , related to the expected change in future taxable income following the sale of clic , is included in the `` net loss on sale of clic and gain on reinsurance transactions ( including impact of taxes ) '' . our mission is to be the recognized market leader in providing financial security for the protection and retirement needs of middle-income american working families and retirees . our strategic plans are focused on continuing to grow and deliver long-term value for all our stakeholders . specifically , we will focus on the following priorities : growth continue to expand our reach to serve middle-income americans capitalize on increased opportunities to grow sales continue to increase the productivity and size of our agent force further enhance the customer experience continue with initiatives that make it easier for our customers to do business with us increase profitability and return on equity maintain our strong capital position maintain favorable financial metrics continue to increase our return on equity effectively manage risk and deploy capital further invest in growing our business organically , while seeking strategic acquisitions continue to cost effectively repurchase our common stock maintain a competitive dividend payout ratio invest in our business and talent improve our business over the long-term through ongoing financial commitments continue to provide our associates with new assignments and developmental opportunities develop future leaders through our leadership development program critical accounting policies the preparation of financial statements in accordance with gaap requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
| our primary investment focus is on investment income to support our liabilities for insurance products as opposed to the generation of realized investment gains ( losses ) , and a long-term focus is necessary to maintain profitability over the life of the business . realized investment gains ( losses ) , fair value changes in embedded derivative liabilities and equity in earnings of certain non-strategic investments and earnings attributable to vies depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our segments . however , `` pre-tax operating earnings '' does not replace `` income ( loss ) before income taxes '' as a measure of overall profitability . we may experience realized investment gains ( losses ) , which will affect future earnings levels since our underlying business is long-term in nature and we need to earn the assumed interest rates on the investments backing our liabilities for insurance products to maintain the profitability of our business . in addition , management uses this non-gaap financial measure in its budgeting process , financial analysis of segment performance and in assessing the allocation of resources . we believe these non-gaap financial measures enhance an investor 's understanding of our financial performance and allows them to make more informed judgments about the company as a whole . these measures also highlight operating trends that might not otherwise be transparent . the table above reconciles the non-gaap measure to the corresponding gaap measure . general : cno is the top tier holding company for a group of insurance companies operating throughout the united states that develop , market and administer health insurance , annuity , individual life insurance and other insurance products . we distribute these products through our bankers life segment , which utilizes a career agency force , through our washington national segment , which utilizes independent producers and through our colonial penn segment , which utilizes direct response marketing . 64 bankers life ( dollars in millions ) replace_table_token_18_th 65 replace_table_token_19_th ( a ) we calculate benefit ratios by dividing the related product 's insurance policy benefits by insurance policy
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in the first quarter of 2018 , we announced an agreement with janssen research & development , llc ( janssen ) , under which they have agreed to supply us with the parp inhibitor niraparib , facilitating the potential initiation of a parp inhibitor combination trial with sra737 for the treatment of prostate cancer . we are currently evaluating the optimal timing to commence this trial within the context of our recently expanded portfolio . our pipeline also includes sra141 , a potent , selective , orally bioavailable small molecule inhibitor of cell division cycle 7 kinase ( cdc7 ) . cdc7 is a key regulator of dna replication and is involved in the ddr network , making it a compelling emerging target for the potential treatment of a broad range of tumor types . during the third quarter of 2018 , we successfully completed the ind filing process with the fda for sra141 and we have prepared for a potential phase 1/2 trial with this drug candidate in patients with advanced colorectal cancer . we are currently evaluating the optimal timing to commence this trial within the context of our recently expanded portfolio . we retain the global commercialization rights to momelotinib , sra737 and sra141 . since inception , we have devoted substantially all of our resources to research and development activities , including the clinical development of our current product candidates , momelotinib , sra141 and sra737 , and our former lead product candidate pnt2258 , and to providing general and administrative support for these operations . we have never generated revenue and have incurred significant net losses since inception . our net losses were $ 53.3 million , $ 42.0 million and $ 47.9 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . as of december 31 , 2018 , we had an accumulated deficit of $ 677.4 million . we expect to incur significant expenses and increasing operating losses for the foreseeable future . we anticipate that our expenses will increase substantially as we : invest to further develop our product candidates , momelotinib , a small molecule inhibitor targeting jak1 , jak2 and acvr1 ; sra737 , a small molecule inhibitor targeting chk1 ; and sra141 , a small molecule inhibitor targeting cdc7 ; achieve development milestones that trigger payments due under certain agreements , including a milestone payment of $ 5.0 million that would be due to gilead upon the dosing of the first patient in a registrational clinical trial for momelotinib and a milestone payment of $ 4.0 million that would be due to carna biosciences , inc. ( carna ) upon dosing of the first patient in the first phase 1 clinical trial for sra141 ; hire additional clinical , scientific , drug development and management personnel , as well as personnel to support any future commercialization efforts ; 82 invest in scaling our manufacturing capacity to support development and our global commercialization strategy ; seek regulatory and marketing approvals for any product candidates that we may develop ; ultimately establish a sales , marketing and distribution infrastructure to commercialize any drugs for which we may obtain marketing approval ; acquire or in-license additional product candidates and technologies ; develop additional product candidates ; defend against and resolve lawsuits or other legal issues ; maintain , expand and protect our intellectual property portfolio ; and add operational , financial and management information systems and personnel to continue to operate as a public company . we have funded our operations to date primarily from the issuance and sale of our common stock through public offerings , and our convertible and redeemable convertible preferred stock in private financings and , to a lesser extent , through debt financings and exercises of our preferred stock warrants . as of december 31 , 2018 , we had cash and cash equivalents of $ 106.0 million . components of statements of operations operating expenses research and development research and development expenses consist primarily of the following : fees or milestone payments incurred in connection with license and asset purchase agreements ; personnel-related costs , which include salaries , benefits , stock-based compensation , recruitment fees and travel costs ; costs associated with research and preclinical studies , clinical trials , regulatory activities and manufacturing activities to support clinical activities ; fees paid to external service providers that conduct certain research and development , clinical and manufacturing activities on our behalf ; and facility-related costs , which include direct and allocated expenses for rent and maintenance of facilities , depreciation and amortization expenses and other supplies . the largest recurring component of our total operating expenses has historically been our investment in research and development activities , including the clinical development of our product candidates sra737 and sra141 . we expect our research and development expenses will increase over the next few years as we advance our development programs , including our recently acquired product candidate momelotinib , achieve development milestones that trigger payments due under certain agreements , pursue regulatory approval of our product candidates in the united states and other jurisdictions , expand our portfolio of product candidates and prepare for potential commercialization , which will require a significant investment in areas related to contract manufacturing and inventory buildup . the process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming . we may never succeed in achieving marketing approval for momelotinib , sra737 , sra141 or any future product candidates . the probability of success of our product candidates may be affected by numerous factors , including clinical data , regulatory developments , competition , manufacturing capability and commercial 83 viability . 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 of momelotinib , sra737 , sra141 or any future product candidates . story_separator_special_tag general and administrative general and administrative expenses consist of personnel-related costs , facility-related costs , allocated expenses and professional fees for services , including legal , patent prosecution and maintenance , human resources , audit and accounting services . personnel-related costs consist of salaries , benefits , stock-based compensation , recruitment fees , severance costs and travel costs . we expect to incur additional expenses associated with supporting our growing research and development activities , continuing to operate as a public company and other administration and professional services . other income , net other income , net primarily consists of ( i ) interest and dividends earned on our cash and cash equivalents , ( ii ) interest expense associated with our term loan and non-cash interest costs associated with the amortization of the debt discount and accrual of the final payment fee , and ( iii ) foreign currency exchange gains and losses related to transactions and monetary asset and liability balances denominated in currencies other than the u.s. dollar . foreign currency exchange gains and losses may also fluctuate in the future due to changes in foreign currency exchange rates . provision for ( benefit from ) income taxes , net provision for ( benefit from ) income taxes , net consists of federal and state income taxes in the united states , income tax benefit resulting from research and development tax credits in canada , income taxes in canada and australia , as well as deferred income taxes reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes , and changes in related valuation allowance . we did not record a provision for u.s. federal income taxes because we generated a loss for the year ended december 31 , 2018. our tax benefit relates to research and development tax credits in canada and our income tax provision relates to income taxes in canada and australia . our net u.s. deferred tax assets continue to be offset by a full valuation allowance . on december 22 , 2017 , the u.s. government enacted comprehensive tax legislation commonly referred to as the tax cuts and jobs act ( tax act ) . the tax act significantly revised u.s. tax law by , among other provisions , lowering the u.s. federal statutory income tax rate from 35 % to 21 % , changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after december 31 , 2017 and eliminating or reducing certain income tax deductions . the effects of changes in tax laws are required to be recognized in the period in which the legislation is enacted . however , due to the complexity and significance of the tax act 's provisions , the financial accounting standards board ( fasb ) issued fasb accounting standards update ( asu ) no . 2018-06 , income taxes ( topic 740 ) pursuant to the sec staff issued staff accounting bulletin no . 118 ( sab 118 ) , which allowed companies to record the tax effects of the tax act on a provisional basis based on a reasonable estimate , and then , if necessary , subsequently adjust such amounts during a limited measurement period as more information becomes available . the measurement period ends when a company has obtained , prepared , and analyzed the information necessary to finalize its accounting , but can not extend beyond one year from enactment . in connection with our initial analysis of the tax act , we recorded a decrease to our net deferred tax assets of $ 7.2 million for the period ended december 31 , 2017 , to account for the rate reduction . this did not have an 84 impact on the consolidated financial statements since our u.s. deferred tax assets are fully offset by a valuation allowance . we finalized the analysis during the third quarter of 2018 with no material changes to the initial estimated decrease to our net deferred tax assets . story_separator_special_tag font-family : times new roman ; font-size:10pt '' > achieve development milestones that trigger payments due under certain agreements , including a milestone payment of $ 5.0 million that would be due to gilead upon the dosing of the first patient in a registrational clinical trial for momelotinib and a milestone payment of $ 4.0 million that would be due to carna upon dosing of the first patient in the first phase 1 clinical trial for sra141 ; hire additional clinical , scientific , drug development and management personnel , as well as personnel to support any future commercialization efforts ; invest in scaling our manufacturing capacity to support development and our global commercialization strategy ; seek regulatory and marketing approvals for any product candidates that we may develop ; ultimately establish a sales , marketing and distribution infrastructure to commercialize any drugs for which we may obtain marketing approval ; acquire or in-license additional product candidates and technologies ; develop additional product candidates ; defend against and resolve lawsuits or other legal issues ; maintain , expand and protect our intellectual property portfolio ; and add operational , financial and management information systems and personnel to continue to operate as a public company . to fund our current operating plans , we will need to raise additional capital . our existing cash and cash equivalents will not be sufficient for us to complete development of our product candidates and , if applicable , to prepare for commercializing any product candidate that may receive approval . accordingly , we will continue to require substantial additional capital to continue our clinical development and potential commercialization activities ; however , we believe that our existing cash and cash equivalents will be sufficient to fund our current operating plans through at least the next twelve months . we can not assure you that we will ever be profitable or generate positive cash flow from operating activities .
| 85 year ended december 31 , 2017 compared to year ended december 31 , 2016 replace_table_token_7_th research and development research and development expenses decreased $ 3.7 million , from $ 33.9 million in 2016 to $ 30.2 million in 2017. the decrease was primarily due to items incurred in the year ended december 31 , 2016 , including , a $ 7.0 million upfront fee for the exclusive license of sra737 and a $ 2.0 million fee that was due upon the successful transfer of the two ongoing clinical trials to us in accordance with the license agreement , a $ 2.3 million restructuring charge related to the halt in investment in pnt2258 , and a $ 0.9 million upfront payment for the exclusive license of sra141 . these decreased costs were partially offset by a $ 4.6 million increase in third-party manufacturing costs , a $ 2.6 million increase in research and support costs related to sra737 and sra141 , a $ 1.0 million increase in clinical trial costs and a $ 0.3 million increase in personnel-related and allocated overhead costs . general and administrative general and administrative expenses decreased $ 1.7 million , from $ 14.2 million in 2016 to $ 12.5 million in 2017. the decrease was attributable to a $ 1.1 million decrease in business development costs , and a $ 0.5 million decrease in restructuring costs related to the halt in investment in pnt2258 . liquidity and capital resources capital resources since our inception , we have never generated revenue and have incurred significant net losses . we have funded our operations to date primarily from the issuance and sale of our common stock through public offerings , and our convertible and redeemable convertible preferred stock in private financings and , to a lesser extent , through debt financings and exercises of our preferred stock warrants . our net losses were $ 53.3 million , $ 42.0
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accordingly , we focus significant efforts on research and development . we focus our research and development efforts on enhancing existing products and developing new products that incorporate appropriate features and functionality to be competitive with respect to technology , price and performance . our success also depends on our ability to obtain and maintain patents and other proprietary rights related to technologies used in our products . we have engaged in litigation and where necessary , will likely engage in future litigation to protect our intellectual property rights . in monitoring and policing our intellectual property rights , we have been and may be required to spend significant resources . our operating results fluctuate from period to period due to changes in global economic conditions and a number of other factors . as a result , we believe our historical results of operations should not be relied upon as indications of future performance . there can be no assurance that our net sales will grow or that we will remain profitable in future periods . current business outlook many of the industries we serve have historically been cyclical and have experienced periodic downturns . in assessing our business , we consider the trends in the global purchasing managers ' index ( “ pmi ” ) , global industrial production as well as industry reports on the specific vertical industries that we target . in the three month period ended december 31 , 2018 , the average of the pmi was 51.8 and the average of the new order element of the pmi was 51.7 , both indicating expansion , but at a slower rate than during the first nine months of 2018. for january 2019 , the most recent pmi reading was 50.7 , below the most recent quarterly average and below the december 2018 reading of 51.4. for january 2019 , the new order element of the pmi was 50.1 , also below the most recent quarterly average . during the three month period ended december 31 , 2018 , the pmi in the u.s. and the eurozone maintained readings above 50. we are unable to predict whether the industrial economy , as measured by the pmi , will remain above the neutral reading of 50 , strengthen or contract during 2019. during 2018 , we continued to see growth in the industrial economy . during most of 2018 , we saw revenue growth across our software-defined automated test and automated measurement platform , and across most geographies where we do business . we also saw a moderate impact on our results of operations from currency fluctuations . we delivered record revenue for 2018 while improving our operating profitability compared to 2017. during 2018 , we took steps to reduce our overall employee headcount by approximately 2 % in an effort to improve efficiencies and rebalance our resources on higher return activities . we incurred $ 11 million in severance and other restructuring-related charges , net of tax . the timing and scope of any future headcount reductions will vary . during december 2018 , we experienced weaker demand for some of our products in the apac region , particularly for adg applications in china . we believe that recent trade tensions coupled with a weakening pmi and disruptions in the mobile device market contributed to the economic uncertainty we experienced in apac . although we remain cautious about certain macroeconomic indicators heading into 2019 , we are optimistic about our long-term position in the industry through the sustained differentiation we deliver to our customers through our platform-based approach . 25 results of operations the following table sets forth , for the periods indicated , the percentage of net sales represented by geographic region and by certain items reflected in our consolidated statements of income : replace_table_token_3_th figures may not sum due to rounding . results of operations for the years ended december 31 , 2018 , 2017 , and 2016 net sales . the following table sets forth our net sales for the years ended december 31 , 2018 , 2017 , and 2016 along with the percent changes between the corresponding periods . replace_table_token_4_th in 2018 and 2017 , product and software maintenance sales increased compared to 2017 and 2016 , respectively . the increases in product sales during these periods are attributable to increased sales volume , particularly for orders greater than $ 20,000 , across all geographic regions . the increases in those orders are discussed in more detail below . the increases in software maintenance sales during 2018 and 2017 can primarily be attributed to increased adoption of our software platform and increased recurring revenues related to software maintenance renewals . we do not typically maintain a large amount of order backlog as orders typically translate to sales quickly . as such , any weakness in orders typically has a pronounced impact on our net sales in the short term . 26 orders with a value greater than $ 20,000 increased by 13 % year over year during 2018 compared to a year over year increase of 8 % in 2017. orders with a value greater than $ 20,000 were 58 % , 56 % , and 54 % of our total orders for the years ended december 31 , 2018 , 2017 , and 2016 , respectively . a significant factor in the continued expansion of these orders in the year ended december 31 , 2018 , compared to 2017 , was strong demand for our system-level offerings . orders with a value greater than $ 20,000 , particularly those orders with a value greater than $ 100,000 , are more volatile , are subject to greater discount variability and may contract at a faster pace during an economic downturn . the following table sets forth our net sales by geographic region for the years ended december 31 , 2018 , 2017 , and 2016 along with the changes between the corresponding periods and the region 's percentage of total net sales . story_separator_special_tag replace_table_token_5_th we expect sales outside of the americas to continue to represent a significant portion of our revenue . we intend to continue to expand our international operations by increasing our presence in existing markets , adding a presence in some new geographical markets and continuing the use of distributors to sell our products in some countries . almost all of the sales made by our direct sales offices in the americas ( excluding the u.s. ) , emeia , and apac are denominated in local currencies , and accordingly , the u.s. dollar equivalent of these sales is affected by changes in foreign currency exchange rates . in order to provide a framework for assessing how our underlying business performed excluding the effects of foreign currency fluctuations between periods , we compare the percentage change in our results from period to period using constant currency calculations . to calculate the change in constant currency , current and comparative prior period results for entities reporting in currencies other than u.s. dollars are converted into u.s. dollars at constant exchange rates ( i.e . the average rates in effect during the years ended december 31 , 2017 and 2016 , respectively ) . the following tables present this information , along with the impact of changes in foreign currency exchange rates on sales denominated in local currencies , for the years ended december 31 , 2018 and 2017 , respectively . replace_table_token_6_th figures may not sum due to rounding . 27 replace_table_token_7_th figures may not sum due to rounding . to help protect against changes in the u.s. dollar equivalent value caused by fluctuations in foreign currency exchange rates of forecasted foreign currency cash flows resulting from international sales , we hedge portions of our forecasted revenue denominated in foreign currencies with average rate forward contracts . ( see note 5 - derivative instruments and hedging activities of notes to consolidated financial statements for further discussion regarding our cash flow hedging program and its related impact on our consolidated sales for 2018 and 2017 ) . gross profit . the following table sets forth our gross profit and gross profit as a percentage of net sales for the years ended december 31 , 2018 , 2017 , and 2016 along with the percentage changes in gross profit for the corresponding periods . we continue to focus on cost control and cost reduction measures throughout our manufacturing cycle . replace_table_token_8_th the improvement in our gross profit as a percentage of sales during the year ended december 31 , 2018 can be attributed to the increase in software maintenance revenues , as discussed above . during the years ended december 31 , 2018 and 2017 , the change in exchange rates had the effect of increasing our cost of sales by $ 3.2 million and decreasing our cost of sales $ 0.8 million , respectively . to help protect against changes in our cost of sales caused by a fluctuation in foreign currency exchange rates of forecasted foreign currency cash flows , we hedge portions of our forecasted costs of sales denominated in foreign currencies with average rate forward contracts . during the years ended december 31 , 2018 and 2017 , these hedges had the effect of decreasing our cost of sales by $ 0.7 million and increasing our cost of sales by $ 1.2 million , respectively . ( see note 5 - derivative instruments and hedging activities of notes to consolidated financial statements for further discussion regarding our cash flow hedging program and its related impacted on our consolidated sales for 2018 and 2017 ) . 28 operating expenses . the following table sets forth our operating expenses for the years ended december 31 , 2018 , 2017 , and 2016 along with the percentage changes between the corresponding periods and the line item as a percentage of total net sales . replace_table_token_9_th the increase in our operating expenses during 2018 was primarily related to the following : a $ 29 million increase in research and development expenses , primarily attributable to a decrease in software development costs eligible for capitalization , as described in more detail below . a $ 10 million increase in higher personnel costs , primarily attributable to an $ 8 million increase related to our equity compensation costs due to higher stock prices . additionally , increases in variable compensation costs to be more competitive with market levels were partially offset by lower salary and benefits costs , primarily related to headcount reductions . a $ 8 million increase related to the year over year impact of changes in foreign currency exchange rates . a $ 7 million decrease related to reductions in travel , outside services , and building and equipment costs . the decrease in cash expenditures related to travel and outside services is consistent with our continued focus on disciplined expense management and cost optimization . the increase in research and development costs during 2018 was primarily related to a $ 28 million decrease in software development costs eligible for capitalization . in the second quarter of 2018 , we began moving toward more frequent releases for many of our software products . specifically , for many of our software development projects we started applying agile development methodologies which are characterized by a more dynamic development process with more frequent and iterative revisions to a product 's features and functions as the software is being developed . due to the shorter development cycle and focus on rapid production associated with agile development , we expect that for a significant majority of our software development projects the costs incurred subsequent to the achievement of technological feasibility will be immaterial in future periods and we expect to record significantly less capitalized software development costs than under our historical software development approaches . consequently , a larger portion of our software development expenditures will be recognized as operating expenses in the future .
| the following table presents the geographic distribution of our cash , cash equivalents , and short-term investments as of december 31 , 2018 ( in millions ) : replace_table_token_17_th we utilize a variety of tax planning and financing strategies with the objective of having our worldwide cash available in the locations in which it is needed . the following table presents our working capital , cash and cash equivalents and short-term investments : replace_table_token_18_th ( 1 ) included in working capital our principal sources of liquidity include cash , cash equivalents , and marketable securities , as well as the cash flows generated from our operations . the primary drivers of the net increase in working capital between december 31 , 2017 and december 31 , 2018 were : cash , cash equivalents , and short-term investments increased by $ 119 million . additional analysis of the changes in our cash flows for the year ended december 31 , 2018 compared to the year ended december 31 , 2017 are discussed below . `` accounts receivable , net '' decreased by $ 6 million . days sales outstanding decreased to 65 days at december 31 , 2018 , compared to 68 days at december 31 , 2017 . inventory increased by $ 10 million to $ 194 million at december 31 , 2018 , from $ 185 million at december 31 , 2017 . inventory turns increased to 1.8 at december 31 , 2018 , compared to 1.7 at december 31 , 2017 . the increase in inventory is primarily attributable to lower than expected demand , primarily in the apac region , during the fourth quarter of 2018. prepaid expenses and other current assets increased by $ 6 million which was primarily related to a $ 3 million increase in the fair value of our foreign currency forward exchange contracts and the timing of prepaid insurance and maintenance . accrued compensation increased by $ 3 million which was primarily related to accruals of
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inflation data continues to indicate smaller increases than the federal reserve 's 2 % inflation target , with core personal consumption expenditures prices having increased 1.4 % year-over-year through november 2014. despite apparent improvement in the domestic economy as described above , longer term u.s. treasury interest rates fell in the fourth quarter of 2014. global concerns seem to lead the list of factors that can explain the drop in market yields quarter- 36 and year-to-date ; namely weaker growth prospects and growing deflationary risks in europe , declining growth in china , and growing concern over the economies of countries reliant on commodity exports and tensions in the middle east . five year government bond yields in some european countries are now negative , which should support the u.s. bond market , keeping yields low . the 10-year u.s. treasury note yield generally fell throughout 2014 having started slightly above 3 % and ending under 2.2 % . the interest rate environment has been supportive for the agency rmbs market despite lower interest rates as the prepayment option embedded in mbs is less onerous given low interest rate volatility . further , mbs investors are much less concerned over the market impact from federal reserve tapering of mbs purchases since that program ended with little noticeable impact . there has been adequate demand from investors and limited supply of new mbs to offset the decline in demand from the federal reserve . agency rmbs outperformed similar term u.s. treasury notes during 2014 and performed in line for the fourth quarter . with respect to credit assets , cmbs and non-agency rmbs spreads over comparable term interest rate swaps narrowed over the year but were little changed in the fourth quarter of 2014. spreads in gse crts issued by fannie mae and freddie mac widened over the second half of the year after tightening markedly during the first half of 2014. this spread widening had a negative impact on the value of our holdings in that sector but had only a modestly negative impact on our book value because they represent a small fraction of our assets . wider spreads offered us the opportunity to reinvest portfolio cash flows at attractive levels . we have reduced the interest rate sensitivity of our investment portfolio , resulting in greater book value stability , but we remain subject to volatility from credit spreads . it is possible that we may realize losses on the sale of assets in future periods and these losses may cause our gaap earnings to be negative . in addition , as of december 31 , 2013 we elected to discontinue hedge accounting for our portfolio of interest rate swaps . as a result of discontinuing hedge accounting , beginning january 1 , 2014 , changes in the fair value of the interest rate swap agreements are recorded in gain ( loss ) on derivative instruments , net in our consolidated statements of operations , rather than in accumulated other comprehensive income ( loss ) ( “ aoci ” ) . this change will cause our net income to be more volatile in future periods and could contribute to us recording a net loss in future periods . refer to note 8 - `` derivatives and hedging activities '' of our consolidated financial statements for further information . the impact of regulatory initiatives on the economy may also affect our business and our financial results . the dodd-frank act , enacted in july 2010 , contains numerous provisions affecting the financial and mortgage industries , many of which may have an impact on our operating environment and the target assets in which we invest . consequently , the dodd-frank act may affect our cost of doing business , may limit our investment opportunities and may affect the competitive balance within our industry and market areas . under the dodd-frank act , new underwriting requirements for residential mortgage loans have been adopted . the ability-to-repay ( “ atr ” ) rule requires lenders to make a reasonable , good-faith determination that the borrower has a reasonable ability to repay the loan , upon its terms . in addition to the atr rule , the consumer financial protection bureau adopted a qualified mortgage ( “ qm ” ) framework that provides certain legal protections to lenders related to residential mortgage loans that meet the qm criteria , which include restrictions on loan features , points and fees and borrower debt-to-income ratios . while we are not directly subject to compliance with the implementation of rules regarding the origination of residential mortgage loans , the impact of these regulations and others could affect our ability to securitize or invest in newly originated loans in the future . there have been a number of pending legislative proposals related to the potential wind down or phaseout of the gses . in the second quarter of 2014 there was a bi-partisan effort in the u.s. senate to bring about mortgage finance reform via the johnson-crapo bill . the bill did not receive enough votes in committee to get to the floor for a vote . at this point it seems unlikely there will be material mortgage finance reform legislation in the near term . moreover , meaningful resurrection of a fully functioning primary market for private label securitizations is unlikely to occur in the near term . we have been successful in participating in securitizations despite the environment , having consolidated in our financial statements five additional prime jumbo securitizations in 2014. we expect to close one additional prime jumbo securitization in the first quarter of 2015. the high credit quality of the loans underlying these securitizations is apparent via strong performance to date . in addition , the regulatory landscape for our repurchase agreement counterparties continues to evolve following the adoption of new capital rules which generally affects the manner in which banks lend . regulators are also focused on liquidity requirements which will likely impact how banks fund themselves . story_separator_special_tag while we are not directly subject to compliance with the implementation of rules regarding financial institutions , the effect of these regulations and others could affect our ability to finance our assets in the future . on september 2 , 2014 , the federal housing finance agency ( `` fhfa '' ) , proposed to revise its regulations governing federal home loan bank membership to , among other things , exclude captive insurance companies . however , the proposed rules would permit existing captive insurers , such as our captive insurance company subsidiary ias services llc , to remain members for a period of five years following the effective date of the final rules . in addition , the federal home loan bank of indianapolis ( `` fhlbi '' ) would be permitted to allow outstanding advances to ias services llc that were made prior to the effective date of the final rules to honor contractual terms to maturity . therefore , under the proposed rules , we do not expect there would be any impact to our existing fhlbi borrowings . the rules are subject to change prior to their final adoption . however , if the fhfa 's rules are adopted substantially as proposed , we do not expect that the rules would have a material effect on our sources or costs of funding or our results of operations . 37 investment activities in 2014 , we continued to position our investment portfolio to take advantage of compelling opportunities in both mortgage-backed securities and newly originated loans against a backdrop of improving housing and commercial real estate markets . during 2013 and 2014 , we purchased subordinate interests in ten residential loan securitizations that are consolidated in our financial statements . we continue to invest in gse crt transactions issued by both fannie mae and freddie mac and hold securities with a fair value of $ 625.4 million as of december 31 . 2014. in addition , we committed to purchase securities in one additional residential loan securitizations and anticipate this securitization will close in the first quarter of 2015. since the inception of our commercial real estate lending program in 2013 , we have invested in a first mortgage loan and six subordinated interests . to provide economic stimulus , the federal reserve had been purchasing agency rmbs through its qe program , which had the effect of holding mortgage interest rates at low levels . in 2014 , the federal reserve ended new purchases under their qe program of u.s. treasuries and agency rmbs , but due to reinvestment of paydowns , they have continued buying a large percentage of issuance , which has also declined . the interest rate and credit spread premium environment and our views on how they will change have a significant impact on our portfolio decisions . we have continued to reduce our lower coupon 30 year agency rmbs positions by nearly 29 % from $ 6.7 billion at december 31 , 2013 to $ 4.8 billion at december 31 , 2014 . we reinvested proceeds of sales and prepayments in part into agency hybrid arm assets . we have also reduced our repurchase agreement debt from 5.8 times equity at december 31 , 2013 to 5.4 times equity at december 31 , 2014 . in addition , we decreased the notional amount of our interest rate swaps from $ 12.8 billion at december 31 , 2013 to $ 10.6 billion at december 31 , 2014 , or by 17.6 % . as a result of all of these actions , we believe we have repositioned us to benefit from an improved residential and commercial real estate market and reduced our overall sensitivity to interest rates . the table below shows the allocation of our equity as of december 31 , 2014 and 2013 : replace_table_token_5_th we have reduced our overall sensitivity to interest rates by reducing the size of our agency mbs portfolio . within the remaining agency mbs portfolio we have continued to hold certain 30 year fixed-rate agency rmbs securities that offer higher coupons and which we expect to prepay relatively slowly based on their seasoning and collateral attributes . our sales of 30 year fixed-rate agency rmbs were primarily in 3 % and 3.5 % coupons or relatively newer vintage that have not experienced a high prepayment environment . therefore , the average coupon of our 30 year fixed-rate agency rmbs continued to increase to 4.29 % at december 31 , 2014 , compared to 4.11 % at december 31 , 2013 . in addition , we hold 15 year fixed-rate agency rmbs securities , agency hybrid arm rmbs and agency arm rmbs that we believe have lower durations and better cash flow certainty relative to current 30 year fixed-rate agency rmbs . further , we own agency collateralized mortgage obligations ( `` cmos '' ) , some of which are interest-only securities . 38 the table below shows the breakdown of our investment portfolio as of december 31 , 2014 and 2013 : replace_table_token_6_th our portfolio of investments that have credit exposure include non-agency rmbs , gse crt , cmbs and residential and commercial real estate loans . we use our proprietary models to perform a detailed review of each investment which often includes loan level analysis of expected performance . we do not place any reliance on ratings by various agencies as we believe our models more accurately evaluate the performance based on our assumptions about market conditions and are updated more frequently than agency ratings . as shown in the table above , we have increased our exposure to credit assets as we believe the improving economy will provide better risk-adjusted returns for this asset class while having lower interest rate exposure relative to agency mbs . with respect to our non-agency rmbs portfolio , we primarily invest in rmbs collateralized by prime and alt-a loans .
| in response to the changing interest rate environment , we sold certain mbs realizing a net loss of $ 199.4 million and invested the proceeds in other target assets . non-gaap financial measures we are presenting the following non-gaap financial measures : core earnings ( and by calculation , core earnings per share ) , effective interest expense ( and by calculation , effective cost of funds ) , effective net interest income ( and by calculation , effective interest rate margin ) and repurchase agreement debt-to-equity ratio . our management uses these non-gaap financial measures in our internal analysis of results and believes these measures are useful to investors for the reasons explained below . the most directly comparable u.s. gaap measures are net income attributable to common stockholders ( and by calculation , basic earnings ( loss ) per common share ) , total interest expense ( and by calculation , cost of funds ) , net interest income ( and by calculation , net interest rate margin ) and total debt-to-equity ratio . these non-gaap financial measures should not be considered as substitutes for any measures derived in accordance with u.s. gaap and may not be comparable to other similarly titled measures of other companies . an analysis of any non-gaap financial measure should be made in conjunction with results presented in accordance with u.s. gaap . additional reconciling items may be added in the future to these non-gaap measures if deemed appropriate . core earnings we calculate core earnings as u.s. gaap net income attributable to common stockholders adjusted for gain ( loss ) on sale of investments , net ; realized gain ( loss ) on derivative instruments , net ( excluding contractual net interest on interest rate swaps ) ; unrealized gain ( loss ) on derivative instruments , net ; gain ( loss ) on foreign currency transactions ; amortization of deferred swap losses from de-designation ; and an adjustment attributable to non-controlling interest . we believe the presentation of core earnings allows investors to evaluate and compare our performance to that of our peers because core earnings measures investment portfolio performance over multiple reporting periods by
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2020 overview net loss was $ 969.9 million for the year ended december 31 , 2020 compared to net loss of $ 11.3 million for 2019. the decrease in results from the prior year was primarily due to a goodwill impairment charge of $ 699.8 million and lower chlor alkali products and vinyls segment results , primarily due to lower pricing and volumes . partially offsetting these declines were higher winchester segment results . chlor alkali products and vinyls generated segment income of $ 3.5 million for 2020 compared to $ 336.7 million for 2019. chlor alkali products and vinyls segment results were lower than in the prior year primarily due to lower pricing , primarily caustic soda and ethylene dichloride ( edc ) , and lower volumes , primarily caustic soda . these decreases were partially offset by lower costs , including raw materials and operating costs . chlor alkali products and vinyls segment results included depreciation and amortization expense of $ 451.4 million and $ 470.4 million in 2020 and 2019 , respectively . epoxy reported segment income of $ 40.8 million for 2020 compared to $ 53.9 million for 2019. epoxy segment results were lower than in the prior year primarily due to lower product prices , partially offset by lower raw material costs . epoxy segment results included depreciation and amortization expense of $ 90.7 million and $ 100.1 million in 2020 and 2019 , respectively . on october 1 , 2020 , winchester assumed full management and operational control of the lake city facility in independence , mo . the u.s. army selected winchester to operate and manage the lake city facility in september 2019. the contract has an initial term of seven years and may be extended by the u.s. army for up to three additional years . winchester reported segment income of $ 92.3 million for 2020 compared to $ 40.1 million for 2019. the increase in segment results was due to increased sales volumes , which includes ammunition produced at lake city , and higher product pricing , partially offset by transition costs relating to the lake city contract and higher operating costs . winchester segment results included depreciation and amortization expense of $ 20.1 million in both 2020 and 2019. on october 15 , 2020 , olin redeemed $ 600.0 million of the outstanding 9.75 % senior notes due 2023 ( 2023 notes ) . the 2023 notes were redeemed at 102.438 % of the principal amount of the 2023 notes , resulting in a redemption premium of $ 14.6 million . the 2023 notes were redeemed by drawing on our $ 500.0 million senior secured delayed-draw term loan facility ( delayed draw term loan facility ) along with utilizing $ 114.6 million of cash on hand . subsequent event on january 15 , 2021 , olin redeemed the remaining $ 120.0 million of the outstanding 2023 notes . the 2023 notes were redeemed at 102.438 % of the principal amount of the 2023 notes , resulting in a redemption premium of $ 2.9 million . the remaining 2023 notes were redeemed by utilizing $ 122.9 million of cash on hand . 27 story_separator_special_tag style= '' text-indent:27pt '' > gross margin decreased $ 453.2 million , or 40 % , from 2018. chlor alkali products and vinyls gross margin decreased by $ 342.1 million , primarily due to lower caustic soda pricing , partially offset by lower raw material and operating costs . epoxy gross margin decreased $ 20.6 million primarily due to lower product prices , partially offset by lower raw material costs , primarily benzene and propylene , and lower maintenance and unabsorbed fixed manufacturing costs associated with maintenance turnarounds . winchester gross margin increased $ 1.2 million primarily due to lower costs , partially offset by lower product prices . gross margin in 2018 was positively impacted by insurance recoveries for environmental costs incurred and expensed in prior periods of $ 111.0 million . gross margin as a percentage of sales decreased to 11 % in 2019 from 16 % in 2018. selling and administration expenses in 2019 decreased $ 13.7 million , or 3 % , from 2018. the years ended december 31 , 2019 and 2018 included costs associated with the information technology project of $ 77.0 million and $ 36.5 million , respectively , an increase of $ 40.5 million . more than offsetting this increase were lower legal and legal-related settlement expenses of $ 19.3 million , primarily due to the legal fees associated with the environmental recovery actions in 2018 , lower consulting and contract services of $ 13.7 million , lower management incentive compensation expense of $ 10.2 million , which includes mark-to-market adjustments on stock-based compensation expense , and a favorable foreign currency impact of $ 8.5 million . selling and administration expenses as a percentage of sales were 7 % in 2019 and 6 % in 2018 . 29 restructuring charges in 2019 included $ 58.9 million of non-cash impairment charges for equipment and facilities associated with the closure of a chlor alkali plant and a vdc production facility , both in freeport , tx . restructuring charges in 2019 and 2018 were also associated with the march 2016 closure of 433,000 tons of chlor alkali capacity across three separate locations and the december 2018 decision to permanently close the ammunition assembly operations at our winchester facility in geelong , australia . other operating income for the year ended december 31 , 2018 included an $ 8.0 million insurance recovery for a second quarter 2017 business interruption at our freeport , tx vinyl chloride monomer facility partially offset by a $ 1.7 million loss on the sale of land . losses of non-consolidated affiliates for the year ended december 31 , 2018 reflect a $ 21.5 million non-cash impairment charge . story_separator_special_tag interest expense for the year ended december 31 , 2019 was impacted by a lower level of average debt outstanding partially offset by higher interest rates compared to the year ended december 31 , 2018. interest expense for the years ended december 31 , 2019 and 2018 included $ 17.0 million and $ 16.0 million , respectively , of accretion expense related to the ethylene payment discount . interest expense was reduced by capitalized interest of $ 10.8 million and $ 6.0 million for 2019 and 2018 , respectively . non-operating pension income includes all components of pension and other postretirement income ( costs ) other than service costs . non-operating pension income was lower for the year ended december 31 , 2019 , primarily due to an increase in pension benefit guaranty corporation fees associated with our domestic qualified defined benefit pension plan . the effective tax rate for 2019 included benefits associated with the finalization of the irs review of years 2013 to 2015 u.s. income tax claims , stock-based compensation , prior year tax positions , foreign tax law changes , a remeasurement of deferred taxes due to a decrease in our state effective tax rates and a change in tax contingencies . the effective tax rate also included expenses associated with a net increase in the valuation allowance primarily related to foreign deferred tax assets and liabilities . these factors resulted in a net $ 19.4 million tax benefit . after giving consideration to these items , the effective tax rate for 2019 of 16.8 % was lower than the 21 % u.s. federal statutory rate primarily due to state taxes and a net increase in the valuation allowance related to losses in foreign jurisdictions , partially offset by foreign income taxes and favorable permanent salt depletion deductions . the effective tax rate for 2018 included benefits associated with the u.s. tax cuts & jobs act ( 2017 tax act ) , stock-based compensation , changes in tax contingencies , a foreign dividend payment , changes associated with prior year tax positions and the remeasurement of deferred taxes due to a decrease in our state effective tax rates . the effective tax rate also included expenses associated with a net increase in the valuation allowance related to deferred tax assets in foreign jurisdictions and the remeasurement of deferred taxes due to changes in our foreign tax rates . these factors resulted in a net $ 2.9 million tax benefit , of which $ 3.8 million related to the increase of the 2017 tax act benefit . after giving consideration to these items , the effective tax rate for 2018 of 25.7 % was higher than the 21 % u.s. federal statutory rate primarily due to state and foreign income taxes , foreign income inclusions and a net increase in the valuation allowance related to current year losses in foreign jurisdictions , partially offset by favorable permanent salt depletion deductions . 30 segment results we define segment results as income ( loss ) before interest expense , interest income , goodwill impairment charges , other operating income ( expense ) , non-operating pension income , other income and income taxes , and includes the operating results of non-consolidated affiliates . consistent with the guidance in asc 280 “ segment reporting , ” we have determined it is appropriate to include the operating results of non-consolidated affiliates in the relevant segment financial results . we have three operating segments : chlor alkali products and vinyls , epoxy and winchester . the three operating segments reflect the organization used by our management for purposes of allocating resources and assessing performance . chlorine used in our epoxy segment is transferred at cost from the chlor alkali products and vinyls segment . sales and profits are recognized in the chlor alkali products and vinyls segment for all caustic soda generated and sold by olin . replace_table_token_2_th ( 1 ) losses of non-consolidated affiliates are included in the chlor alkali products and vinyls segment results consistent with management 's monitoring of the operating segment . the losses of non-consolidated affiliates were $ 19.7 million for the year ended december 31 , 2018 , which reflected a $ 21.5 million non-cash impairment charge . ( 2 ) environmental ( expense ) income for the year ended december 31 , 2019 included $ 4.8 million of an environmental insurance-related settlement gain . environmental ( expense ) income for the year ended december 31 , 2018 included pre-tax insurance recoveries for environmental costs incurred and expensed in prior periods of $ 111.0 million . environmental ( expense ) income is included in cost of goods sold in the consolidated statements of operations . ( 3 ) other corporate and unallocated costs for the years ended december 31 , 2020 , 2019 and 2018 included costs associated with the implementation of the information technology project of $ 73.9 million , $ 77.0 million and $ 36.5 million , respectively . ( 4 ) restructuring charges for the years ended december 31 , 2020 , 2019 and 2018 included costs associated with the march 2016 closure of 433,000 tons of chlor alkali capacity across three separate locations . restructuring charges for the years ended december 31 , 2020 and 2019 were also associated with the closure of a chlor alkali plant and a vdc production facility , both in freeport , tx , and included $ 58.9 million of non-cash impairment charges for equipment and facilities for the year ended december 31 , 2019. restructuring charges for the years ended december 31 , 2019 and 2018 also 31 included costs associated with permanently closing the ammunition assembly operations at our geelong , australia facility in december 2018. restructuring charges for the year ended december 31 , 2018 also included charges associated with permanently closing a portion of the becancour , canada chlor alkali facility in 2014 . ( 5 ) other operating income for the year ended december 31 , 2020 included an $ 0.8 million gain on the sale of land .
| in 2017 , we began a multi-year implementation of new enterprise resource planning , manufacturing and engineering systems , and related infrastructure ( collectively , the information technology project ) . selling and administration expenses for the years ended december 31 , 2020 and 2019 included costs associated with the information technology project of $ 73.9 million and $ 77.0 million , respectively . selling and administration expenses as a percentage of sales were 7 % in both 2020 and 2019. restructuring charges in 2020 and 2019 were primarily associated with the march 2016 closure of 433,000 tons of chlor alkali capacity across three separate locations . restructuring charges for the years ended december 31 , 2020 and 2019 were also associated with the closure of a chlor alkali plant and a vdc production facility , both in freeport , tx , and included $ 58.9 28 million of non-cash impairment charges for equipment and facilities for the year ended december 31 , 2019. restructuring charges for the year ended december 31 , 2019 also included costs associated with permanently closing the ammunition assembly operations at our geelong , australia facility in december 2018. goodwill impairment includes non-cash pretax impairment charges of $ 557.6 million related to the chlor alkali products and vinyls segment and $ 142.2 million related to the epoxy segment . interest expense increased by $ 49.5 million for the year ended december 31 , 2020 , primarily due to a higher level of debt outstanding and higher interest rates . interest expense included $ 14.6 million of expense related to the 2023 notes redemption premium and $ 5.8 million for write-off of deferred debt issuance costs for financing transactions during 2020. interest expense for the years ended december 31 , 2020 and 2019 included $ 4.0 million and $ 17.0 million , respectively , of accretion expense related to the ethylene payment discount . interest expense was reduced by capitalized interest of $ 6.4 million and $ 10.8 million for 2020 and 2019 , respectively . non-operating pension income includes all components of pension and other
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the electric power infrastructure services segment provides comprehensive network solutions to customers in the electric power industry . services performed by the electric power infrastructure services segment generally include the design , installation , upgrade , repair and maintenance of electric power transmission and distribution networks and substation facilities along with other engineering and technical services . this segment also provides emergency restoration services , including the repair of infrastructure damaged by inclement weather , the energized installation , maintenance and upgrade of electric power infrastructure utilizing unique bare hand and hot stick methods and our proprietary robotic arm technologies , and the installation of smart grid technologies on electric power networks . in addition , this segment designs , installs and maintains renewable energy generation facilities , in particular solar and wind , and related switchyards and transmission networks . to a lesser extent , this segment provides services such as the design , installation , maintenance and repair of commercial and industrial wiring , installation of traffic networks and the installation of cable and control systems for light rail lines . the natural gas and pipeline infrastructure services segment provides comprehensive network solutions to customers involved in the transportation of natural gas , oil and other pipeline products . services performed by the natural gas and pipeline infrastructure services segment generally include the design , installation , repair and maintenance of natural gas and oil transmission and distribution systems , compressor and pump stations and gas gathering systems , as well as related trenching , directional boring and automatic welding services . in addition , this segment 's services include pipeline protection , integrity testing , rehabilitation and replacement and fabrication of pipeline support systems and related structures and facilities . to a lesser extent , this segment designs , installs and maintains airport fueling systems as well as water and sewer infrastructure . the telecommunications infrastructure services segment provides comprehensive network solutions to customers in the wireline and wireless telecommunications industry , as well as the cable television industry . services performed by the telecommunications infrastructure services segment generally include the design , installation , repair and maintenance of fiber optic , copper and coaxial cable networks used for video , data and voice transmission , as well as the design , installation and upgrade of wireless communications networks , including towers , switching systems and backhaul links from wireless systems to voice , data and video networks . this segment also provides emergency restoration services , including the repair of telecommunications infrastructure damaged by inclement weather . to a lesser extent , services provided under this segment include cable locating , splicing and testing of fiber optic networks and residential installation of fiber optic cabling . the fiber optic licensing segment designs , procures , constructs , maintains and owns fiber optic telecommunications infrastructure in select markets and licenses the right to use these point-to-point fiber optic telecommunications facilities to our customers pursuant to licensing agreements , typically with terms from five to twenty-five years , inclusive of certain renewal options . under those agreements , customers are provided the right to use a portion of the capacity of a fiber optic network , with the network owned and maintained by us . the fiber optic licensing segment provides services to enterprise , education , carrier , financial services and 37 healthcare customers , as well as other entities with high bandwidth telecommunication needs . the telecommunication services provided through this segment are subject to regulation by the federal communications commission and certain state public utility commissions . recent investments and acquisitions on october 5 , 2011 , we acquired utilimap corporation ( utilimap ) , which provides geographic information system ( gis ) utility asset management and engineering services to the electric utility industry . the aggregate consideration paid for utilimap consisted of approximately $ 24.5 million in cash , 553,526 shares of our common stock valued at approximately $ 9.7 million and the repayment of $ 0.8 million in debt . as this transaction was effective october 5 , 2011 , the results of utilimap have been included in our consolidated financial statements beginning on such date . this acquisition enables us to further enhance our electric power infrastructure service offerings . utilimap 's financial results will generally be included in our electric power infrastructure services segment . on august 11 , 2011 , we acquired coe drilling pty . ltd. ( coe ) , a horizontal directional drilling company based in brisbane , australia . the aggregate consideration paid for coe consisted of approximately $ 10.5 million in cash , 396,643 shares of our common stock valued at approximately $ 6.3 million and the repayment of $ 1.8 million in debt . as this transaction was effective august 11 , 2011 , the results of coe have been included in our consolidated financial statements beginning on such date . this acquisition allows us to further expand our capabilities and scope of services internationally . coe 's financial results will generally be included in our natural gas and pipeline infrastructure services segment . on august 5 , 2011 , we acquired mcgregor construction 2000 ltd. and certain of its affiliated entities ( mcgregor ) , an electric power infrastructure services company based in alberta , canada . the aggregate consideration paid for mcgregor consisted of approximately $ 38.6 million in cash , 898,440 shares of our common stock valued at approximately $ 14.6 million and the repayment of $ 0.8 million in debt . as this transaction was effective august 5 , 2011 , the results of mcgregor have been included in our consolidated financial statements beginning on such date . this acquisition allows us to further expand our capabilities and scope of services in canada . mcgregor 's financial results will generally be included in our electric power infrastructure services segment . story_separator_special_tag also in 2011 , we acquired two other businesses based in british columbia , canada that predominantly provide electric power infrastructure services , which have been reflected in our consolidated financial statements as of their respective acquisition dates . in connection with these acquisitions , we paid the former owners of the businesses an aggregate of approximately $ 7.3 million in cash and issued an aggregate of 91,204 shares of our common stock valued at approximately $ 1.7 million . the results of these businesses are included in our consolidated financial statements beginning on their respective acquisition dates . these acquisitions allow us to further expand our capabilities and scope of services in canada . the financial results for these two businesses will generally be included in our electric power infrastructure services segment . on june 22 , 2011 , we acquired an equity ownership interest of approximately 39 % in howard midstream energy partners , llc ( hep ) for an initial capital contribution of $ 35.0 million . hep is engaged in the business of owning , operating and constructing midstream plant and pipeline assets in the natural gas and oil industry . hep commenced operations in june 2011 with the acquisitions of texas pipeline llc , a pipeline operator in the eagle ford shale region of south texas , and bottom line services , llc , a construction services company . our investment in hep is expected to provide strategic growth opportunities in the ongoing development of the texas eagle ford shale region . we account for this investment using the equity method of accounting . during the third quarter of 2011 , we loaned $ 4.0 million to the indirect parent of nj oak solar , llc ( nj oak solar ) . the loan proceeds , together with nj oak solar 's other financing and equity funds , were used for their construction of a 10 mw solar power generation facility in new jersey . the construction of the facility , which began in the second quarter of 2011 , is being performed by us and was substantially complete at the end of 2011 . 38 on october 25 , 2010 , we acquired valard construction lp and certain of its affiliated entities ( valard ) , an electric power infrastructure services company based in alberta , canada . this acquisition allowed us to further expand our electric power infrastructure capabilities and scope of services in canada . because of the type of work performed by valard , its financial results are generally included in the electric power infrastructure services segment . the results of valard have been included in our consolidated financial statements beginning on october 25 , 2010. seasonality ; fluctuations of results ; economic conditions our revenues and results of operations can be subject to seasonal and other variations . these variations are influenced by weather , customer spending patterns , bidding seasons , project timing and schedules , and holidays . typically , our revenues are lowest in the first quarter of the year because cold , snowy or wet conditions can cause delays on projects . second quarter revenues are typically higher than those in the first quarter , as some projects begin , but continued cold and wet weather can often impact second quarter productivity . third quarter revenues are typically the highest of the year , as a greater number of projects are underway and weather is more accommodating to work on projects . generally , revenues during the fourth quarter of the year are lower than the third quarter but higher than the second quarter . many projects are completed in the fourth quarter , and revenues are often impacted positively by customers seeking to spend their capital budgets before the end of the year ; however , the holiday season and inclement weather can sometimes cause delays , reducing revenues and increasing costs . any quarter may be positively or negatively affected by atypical weather patterns in a given part of the country , such as severe weather , excessive rainfall or warmer winter weather , making it difficult to predict these variations and their effect on particular projects quarter to quarter . additionally , our industry can be highly cyclical . as a result , our volume of business may be adversely affected by declines or delays in new projects in various geographic regions in the united states and canada . project schedules , particularly in connection with larger , longer-term projects , can also create fluctuations in the services provided , which may adversely affect us in a given period . the financial condition of our customers and their access to capital , variations in the margins of projects performed during any particular period , regional , national and global economic and market conditions , timing of acquisitions , the timing and magnitude of acquisition and integration costs associated with acquisitions and interest rate fluctuations are examples of items that may also materially affect quarterly results . accordingly , our operating results in any particular period may not be indicative of the results that can be expected for any other period . we and our customers continue to operate in a challenging business environment , with increasing regulatory and environmental requirements , stringent permitting processes and only gradual recovery in the economy and capital markets from recessionary levels . we are closely monitoring our customers and the effect that changes in economic and market conditions have had or may have on them . certain of our customers have reduced or delayed spending over the past two years , which we attribute primarily to regulatory and permitting hurdles and negative economic and market conditions , and we anticipate that these issues may continue to affect demand for some of our services in the near-term . however , we believe that most of our customers , many of whom are regulated utilities , remain financially stable in general and will be able to continue with their business plans in the long-term .
| gross profit decreased $ 13.8 million , or 2.2 % , to $ 620.6 million for the year ended december 31 , 2011. as a percentage of revenues , gross margin decreased to 13.4 % for the year ended december 31 , 2011 from 16.1 % for the year ended december 31 , 2010. these decreases were primarily due to the impact of lower overall revenues from natural gas and pipeline infrastructure services , which resulted in a lower ability to cover operating overhead costs , as well as the impact of project losses incurred by this segment during 2011 that primarily resulted from increased project costs related to productivity issues caused by adverse weather conditions and more stringent application of regulations . also contributing to these decreases was the impact of a $ 32.6 million charge to the natural gas and pipeline infrastructure services segment 's cost of services in the fourth quarter of 2011 associated with the withdrawal of certain of our subsidiaries from an underfunded multi-employer pension plan . gross margins were also negatively impacted in 2011 as a result of a decrease in margins earned by the electric power infrastructure services segment primarily due to the completion of certain higher margin electric transmission projects during the year ended december 31 , 2010 , as compared to electric transmission projects that were at earlier stages of completion during the year ended december 31 , 2011. the decrease in gross profit was partially offset by the impact of higher overall revenues from the electric power infrastructure services segment and the telecommunications infrastructure services segment as described above . 42 selling , general and administrative expenses . selling , general and administrative expenses increased $ 33.3 million , or 9.8 % , to $ 373.0 million for the year ended december 31 , 2011. this increase was primarily attributable to $ 23.7 million in higher salary and benefits costs from increased personnel and incentive compensation expenses associated with increased levels of operating activity , as well as approximately $ 14.0 million in additional administrative expenses associated with businesses acquired since january 1 , 2010. selling , general and administrative expenses as a percentage of revenues decreased from 8.6 % for the year ended december 31 , 2010 to 8.1 % for the year ended december 31 , 2011 primarily due to the impact of higher overall revenues described above . amortization of intangible assets . amortization of intangible assets decreased $ 8.6 million to $ 30.0 million for the year ended december 31 , 2011. this decrease was primarily due to reduced amortization expense from previously acquired intangible assets as
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phyox is a phase 1 single ascending-dose study of dcr‑phxc in healthy volunteers ( “ hvs ” ) and study participants with ph . the study is divided into two groups : group a is a placebo-controlled , single-blind , single center study which has enrolled 25 hvs . group b is an open-label , multi-center study enrolling up to 18 participants with ph type 1 ( “ ph1 ” ) or ph type 2 ( “ ph2 ” ) . the primary objective of the study is to evaluate the safety and tolerability of single of dcr‑phxc in both groups . the secondary objectives are to evaluate the pharmacodynamic effect of single doses of dcr‑phxc on biochemical markers , and to characterize the pharmacokinetics of single doses of dcr‑phxc in hvs and study participants with ph . in may 2018 , we dosed the first ph study participant with dcr‑phxc in the group b portion of the phase 1 clinical trial and received notice from the united states ( “ u.s. ” ) food and drug administration ( “ fda ” ) granting orphan drug designation to dcr‑phxc for treatment of ph . in august 2018 , the european medicines agency 's committee for orphan medicinal products ( “ comp ” ) designated dcr‑phxc as an orphan medicinal product for the treatment of ph in the european union ( “ eu ” ) . currently , we are in the process of submitting requests for additional regulatory cl earances necessary to commence clinical trials for our phase 2 and phase 3 studies in 2019. key regulatory interactions with the fda and ema , in anticipation of phase 2 and phase 3 studies , are also underway . we have completed the group a portion of the study in hvs and started the group b portion of the study . group b consists of participants with ph1 dosed at 1.5 , 3.0 , and 6.0-mg/kg , and participants with ph2 at a dose level of 1.5 and 3.0-mg/kg . as of january 17 , 2019 , we had dosed all 18 participants ( 15 ph1 participants and three ph2 participants ) . we reported interim results from the phyox trial on september 5 , 2018 and presented updated results ( as of october 1 , 2018 ) at kidney week in san diego on october 25 , 2018. as of november 2018 , three serious adverse events ( “ saes ” ) have occurred in two participants ( one subject experienced two discreet saes ) in the phyox trial ; none of these saes are related to the study intervention . there have been no clinically significant changes in electrocardiography ( “ ecg ” ) , vital signs , laboratory , or hematology values . the 63 investigators have observed in a total of 32 participants dosed ( group a and b together ) mild-to-moderate injection site reactions in nine participants ( 28 % ) , all of which were transient and resolved without intervention within 24 to 72 hours . as of a data cut on october 1 , 2018 , investigators reported that a single 3.0-mg/kg dose of dcr ‑ phxc brought urinary oxalate levels into the normal range ( defined as 24-hour excretion < 0.460 mmol ) at one or more post-dose time points in three out of four ph participants dosed at this level , including a mean maximal reduction in 24-hour urinary oxalate of 65 % for the cohort , and a single 1.5-mg/kg dose led to near-normalization ( defined as 24-hour excretion ≥0.460 to < 0.600 mmol ) in three out of four ph1 participants dosed at this level and led to a mean maximal reduction in urinary oxalate of 50 % in the five ph patients dosed at that level , including one ph2 patient . additionally , we intend to initiate a multi-dose study , which we hope will serve as a registration trial , in the first quarter of 2019 , pending regulatory feedback . chronic hepatitis b virus infection . we have declared a galxc rnai platform-based product candidate for the treatment of chronic hbv , dcr‑hbvs , and have initiated a phase 1 clinical trial . we received cta approval from the new zealand medicines and medical devices safety authority in november 2018 and ethics approval from the health and disability ethics committee in december 2018 for a phase 1 clinical trial in hvs and patients with chronic hbv . the phase 1 study was initiated in december 2018 and the first participants were dosed on january 24 , 2019. we anticipate human poc data to be available in the fourth quarter of 2019. in addition , we filed for regulatory clearance in australia , hong kong , south korea , and thailand in december 2018. current therapies for hbv rarely lead to a long-term immunological cure as measured by the clearance of hbv surface antigen ( “ hbsag ” ) and sustained hbv deoxyribonucleic acid ( “ dna ” ) suppression in patient plasma or blood . dcr‑hbvs targets hbv mrna and leads to greater than 99 % reduction in circulated hbsag in mouse models of hbv infection . dcr‑hbvs is comprised of a single galxc molecule that targets hbv mrnas within the hbsag gene sequence region . in preclinical studies with a standard mouse model of hbv infection , we have found that targeting this region leads to superior hbsag suppression , both in magnitude and duration of suppression , compared to targeting within the x gene sequence region . we believe that this difference in suppression derives from the role of the x gene product in indirectly regulating viral gene transcription such that the lack of x gene product leads to higher levels of viral gene transcription . based on our preclinical studies , we hope to determine the potential of dcr‑hbvs to reduce hbsag and hbv dna levels in the blood of hbv patients in a commercially attractive subcutaneous dosing paradigm . an undisclosed rare disease involving the liver . story_separator_special_tag we are developing a galxc-based therapeutic , targeting a liver-expressed gene involved in a serious rare disease . for competitive reasons , we have not yet publicly disclosed the target gene or disease . the disease is a genetic disorder where mutations in the disease gene lead to the production of an abnormal protein . the protein causes progressive liver damage and fibrosis , in some cases leading to cirrhosis and liver failure , and we believe that silencing of the disease gene will prevent production of the abnormal protein and thereby slow or stop progression of the liver fibrosis . we intend to submit regulatory filings in the second quarter of 2019. additional pipeline programs . we have developed a robust portfolio of additional targets and diseases that we plan to pursue either on our own or in collaboration with partners . we have applied our galxc technology to multiple gene targets across our disease focus areas of rare diseases , chronic liver diseases , and cardiovascular diseases . pursuant to our strategy , we are seeking collaborations with larger and or more experienced pharmaceutical companies to advance our programs in the areas of chronic liver diseases and cardiovascular diseases , as well as select rare diseases that do not fit our criteria for a priority development program . the chronic liver and cardiovascular disease areas represent large and diverse patient populations , requiring complex clinical development and commercialization paths that we believe can be more effectively pursued in collaboration with larger pharmaceutical companies . certain rare diseases require complex clinical development and commercialization paths aligned with existing treatment paradigms that we believe can be more effectively pursued in collaboration with companies possessing certain rare disease expertise . for our additional rare disease opportunities , we are continuing to assess their potential for clinical success and market opportunity while optimizing our galxc molecules . for our additional pipeline programs , we may utilize more advanced versions of our galxc technology that further improve pharmaceutical properties of the galxc molecules , including enhancing the duration of action and potency . we have further optimized our galxc technology platform , enabling the development of next generation galxc molecules . improvements to our galxc compound include modification of the tetraloop end of the molecule , which can be applied to any target gene , resulting in a substantially longer duration of action and higher potency of target gene silencing in animal models across multiple targets . modification of the tetraloop only impacts the sense strand and does not impact the antisense strand . these modifications are unique to our galxc molecules and , we believe , provide a competitive advantage for the company . 64 partner development programs lilly collaboration on october 25 , 2018 , we entered into a collaboration and license agreement with lilly ( the “ lilly collaboration agreement ” ) . the lilly collaboration agreement is for the discovery , development , and commercialization of potential new medicines in the areas of cardiometabolic disease , neurodegeneration , and pain . under the terms of the lilly collaboration agreement , we and lilly will seek to use our proprietary galxc rnai technology platform to progress new drug targets toward clinical development and commercialization . in addition , we will collaborate with lilly to extend the galxc rnai platform technology to non-liver ( i.e. , non-hepatocyte ) tissues , including neural tissues . the lilly collaboration agreement provides that we will work exclusively with lilly in the neurodegeneration and pain fields with the exception of mutually agreed upon orphan indications . additionally , we will work exclusively with lilly on select targets in the cardiometabolic field . under the lilly collaboration agreement , we will provide lilly with exclusive and non-exclusive licenses to support the companies ' activities and to enable lilly to commercialize products derived from or containing compounds developed pursuant to such agreement . the lilly collaboration agreement contemplates in excess of 10 targets . under the terms of the lilly collaboration agreement , lilly paid us a non-refundable , non-creditable upfront payment of $ 100.0 million , and made a concurrent stated $ 100.0 million equity investment in us at a premium pursuant to a share issuance agreement between the parties ( the “ lilly share issuance agreement ” ) . under the lilly collaboration agreement , we are also eligible to potentially receive up to approximately $ 350.0 million per target in development and commercialization milestones , in addition to a $ 5.0 million payment due for each of the non-hepatocyte targets when a product achieves proof of principle in an animal model . in addition , the lilly collaboration agreement also provides that lilly will pay us mid-single to low-double digit royalties on product sales on a country-by-country and product-by-product basis until the later of expiration of patent rights in a country , the expiration of data or regulatory exclusivity in such country , or 10 years after the first product sale in such country , subject to certain royalty step-down provisions set forth in the agreement . through december 31 , 2018 , no revenue has been recognized associated with the lilly collaboration agreement . alexion collaboration on october 22 , 2018 , we and alexion entered into a collaborative research and license agreement ( the “ alexion collaboration agreement ” ) for the joint discovery and development of rnai therapies for complement-mediated diseases . under the terms of the alexion collaboration agreement , we will collaborate with alexion on the discovery and development of subcutaneously delivered galxc candidates , currently in preclinical development , for the treatment of complement-mediated diseases with potential global commercialization by alexion . we will lead the joint discovery and research efforts through the preclinical stage , and alexion will lead development efforts beginning with phase 1 studies . we will be responsible for manufacturing of the galxc candidates through the completion of phase 1 , the costs of which will be paid by alexion .
| 74 research and development expenses the following table summarizes our research and development expenses incurred during the periods indicated ( amounts in thousands , except percentages ) : replace_table_token_5_th research and development expenses increased for the year ended december 31 , 2018 compared to the year ended december 31 , 2017 primarily due to direct research and development expenses . the $ 7.0 million increase in direct research and development expenses is primarily due to increases in clinical development spending of $ 5.2 million for dcr-phxc and $ 1.1 million for dcr-hbvs . in addition , employee-related expenses increased $ 3.0 million during the year ended december 31 , 2018 as a result of increased headcount necessary to support our growth . research and development expenses for the years ended december 31 , 2018 and 2017 were additionally offset by $ 0.7 million and $ 1.1 million of grant income , respectively . we expect our overall research and development expenses to increase in 2019 and for the foreseeable future , primarily as we complete clinical manufacturing activities , advance preclinical toxicology studies , continue clinical activities associated with our lead product candidates , and as our development efforts continue to increase related to progress made in connection with our collaboration agreements . general and administrative expenses general and administrative expenses were $ 21.7 million and $ 16.8 million for the years ended december 31 , 2018 and 2017 , respectively . the increase of $ 4.8 million is primarily due to increases of $ 1.9 million in consulting costs , $ 1.0 million in compensation for our board of directors , and $ 0.8 million in salary and benefits expense . our use of consultants increased largely due to business development consulting services and accounting support for the implementation of new accounting standards and preparation for our planned compliance with sarbanes-oxley section 404 ( b ) in 2019 , as well as to support new product initiatives . the increase in board of directors ' compensation is largely related to stock-based compensation . salaries and benefits expenses increased as a result of increased headcount required to support our growth . we expect general and administrative
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theme parks our theme parks segment consists primarily of our universal theme parks in orlando and hollywood . we also receive fees from intellectual property licenses and other services from third parties that own and operate universal studios japan and universal studios singapore . through june 30 , 2011 , we held a 50 % equity interest in , and received special and other fees from , universal city development partners , ltd. ( universal orlando ) , which owns universal studios florida and universal 's islands of adventure in orlando . on july 1 , 2011 , nbcuniversal completed the acquisition of the remaining 50 % equity interest in universal orlando that it did not already own for $ 1 billion . as a result , universal orlando is now a wholly owned consolidated subsidiary of nbcuniversal , and its operating results have been consolidated with our results following the acquisition . our theme parks segment generates revenue primarily from theme park attendance and per capita spending , as well as from management , licensing and other fees . per capita spending includes ticket price and in-park spending on food , beverage and merchandise . comcast 2011 annual report on form 10-k 44 other our other business interests primarily include comcast spectacor , which owns the philadelphia flyers and the wells fargo center , a large , multipurpose arena in philadelphia . comcast spector also owns global spectrum , which provides facilities management , and ovations food services , which provides food services , for sporting events , concerts and other events . 2011 developments the following are the more significant developments in our businesses during 2011 : the close of the nbcuniversal transaction on january 28 , 2011 ; see nbcuniversal transaction below for additional information an increase in consolidated revenue of 47.2 % to $ 55.8 billion and an increase in consolidated operating income of 34.3 % to $ 10.7 billion ; the nbcuniversal acquired businesses contributed $ 14.5 billion to revenue and $ 1.4 billion to operating income an increase in cable communications segment revenue of 5.3 % to $ 37.2 billion and an increase in cable communications segment operating income before depreciation and amortization of 6.9 % to $ 15.3 billion the entry into an agreement by spectrumco to sell its advanced wireless services spectrum licenses to verizon wireless , subject to regulatory approval , for $ 3.6 billion , of which our portion of the proceeds is expected to be $ 2.3 billion , and the entry into agency agreements with verizon wireless providing , among other things , for verizon wireless ' sale of our cable services and our sale of verizon wireless ' products and services nbcuniversal 's entry into several significant sports broadcast rights agreements , including with the nfl , the international olympic committee , the nhl , fifa and the pga tour nbcuniversal 's acquisition of the 50 % equity interest that it did not already own in universal orlando for $ 1 billion on july 1 , 2011 nbcuniversal transaction on january 28 , 2011 , we closed our transaction with ge to form a new company named nbcuniversal , llc ( nbcuniversal holdings ) . we now control and own 51 % of nbcuniversal holdings , and ge owns the remaining 49 % . as part of the nbcuniversal transaction , ge contributed the businesses of nbcuniversal , which is now a wholly owned subsidiary of nbcuniversal holdings . the nbcuniversal businesses that were contributed included its national cable networks , the nbc and telemundo broadcast networks and its nbc and telemundo owned local television stations , universal pictures , the universal studios hollywood theme park , and other related assets . we contributed our national cable networks , our regional sports and news networks , certain of our internet businesses , including dailycandy and fandango , and other related assets ( the comcast content business ) . in addition to contributing the comcast content business to nbcuniversal , we made a cash payment to ge of $ 6.2 billion , which included transaction-related costs . we expect to receive tax benefits related to the transaction and have agreed to share with ge certain of these future tax benefits as they are realized . we have incurred significant transaction costs directly related to the nbcuniversal transaction . the incremental expenses related to legal , accounting and valuation services and investment banking fees are reflected in operating costs and expenses . we also incurred certain financing costs and other shared costs with ge associated with nbcuniversal debt facilities that were entered into in december 2009 and the issuance of nbcuniversal 's senior notes in 2010 , which are included in other expense and interest expense . in addition , during 2011 , nbcuniversal incurred transaction-related costs associated with severance and other related compensation charges , which are included in operating costs and expenses . 45 comcast 2011 annual report on form 10-k the table below presents the amounts related to these expenses included in our consolidated statement of income . replace_table_token_9_th because we now control nbcuniversal holdings , we have applied acquisition accounting to the nbcuniversal contributed businesses and their results of operations are consolidated with our results following the acquisition . the net assets of the nbcuniversal contributed businesses were recorded at their estimated fair value . in valuing acquired assets and liabilities , fair value estimates are based on , but are not limited to , future expected cash flows , market rate assumptions for contractual obligations , actuarial assumptions for benefit plans and appropriate discount rates . the comcast content business continues at its historical or carry-over basis . consolidated operating results replace_table_token_10_th all percentages are calculated based on actual amounts . minor differences may exist due to rounding . percentage changes that are considered not meaningful are denoted with nm . story_separator_special_tag comcast 2011 annual report on form 10-k 46 the comparability of our consolidated results of operations was impacted by the nbcuniversal transaction , which closed on january 28 , 2011 , and the universal orlando transaction , which closed on july 1 , 2011. nbcuniversal 's and universal orlando 's results of operations are included in our consolidated financial statements following their respective acquisition dates . 2011 consolidated operating results consolidated revenue the increase in consolidated revenue for 2011 was primarily due to the nbcuniversal transaction and an increase in our cable communications segment revenue . the nbcuniversal contributed businesses accounted for $ 14.5 billion of the increase in consolidated revenue . in 2010 , our cable communications segment and our cable networks segment accounted for substantially all of the increase in consolidated revenue . the remaining changes in consolidated revenue for both 2011 and 2010 related to our other business activities , primarily comcast spectacor . revenue for our cable communications and nbcuniversal segments are discussed separately under the heading segment operating results. consolidated operating costs and expenses the increase in consolidated operating costs and expenses for 2011 was primarily due to the nbcuniversal transaction and an increase in our cable communications segment . the nbcuniversal contributed businesses accounted for $ 12.3 billion of the increase in consolidated operating costs and expenses . for 2010 , our cable communications segment and our cable networks segment accounted for substantially all of the increase in consolidated operating costs and expenses . the remaining changes in consolidated operating costs and expenses for both 2011 and 2010 related to our other business activities , primarily comcast spectacor , and costs associated with the nbcuniversal transaction . operating costs and expenses for our cable communications and nbcuniversal segments are discussed separately under the heading segment operating results. consolidated depreciation and amortization consolidated depreciation and amortization increased for 2011 primarily as a result of the nbcuniversal transaction . for 2011 , $ 976 million of the increases in consolidated depreciation and amortization were related to the addition of the nbcuniversal contributed businesses , including the impact of acquisition accounting adjustments , as well as from the addition of universal orlando since july 2011. depreciation expense for 2010 remained relatively stable primarily due to decreases in capital spending in recent years . the increase in amortization expense for 2010 was primarily related to goodwill impairment charges taken in our cable networks segment totaling $ 76 million . 47 comcast 2011 annual report on form 10-k segment operating results beginning in the first quarter of 2011 , we changed our reporting segments as a result of the close of the nbcuniversal transaction . we have recast our segment presentation for 2010 and 2009 to reflect our current operating segments . our segment operating results are presented based on how we assess operating performance and internally report financial information . we use operating income ( loss ) before depreciation and amortization , excluding impairments related to fixed and intangible assets and gains or losses from the sale of assets , if any , as the measure of profit or loss for our operating segments . this measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of certain of our businesses and from intangible assets recognized in business combinations . additionally , it is unaffected by our capital structure or investment activities . we use this measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments . it is also a significant performance measure in our annual incentive compensation programs . we believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries , although our measure may not be directly comparable to similar measures used by other companies . because we use operating income ( loss ) before depreciation and amortization to measure our segment profit or loss , we reconcile it to operating income , the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the united states ( gaap ) in the business segment footnote to our consolidated financial statements ( see note 20 to our consolidated financial statements ) . this measure should not be considered a substitute for operating income ( loss ) , net income ( loss ) attributable to comcast corporation , net cash provided by operating activities , or other measures of performance or liquidity we have reported in accordance with gaap . competition the results of operations of our reporting segments may be affected by competition , as all of our businesses operate in intensely competitive industries and compete with a growing number of companies that provide a broad range of communications products and services and entertainment , news and information content to consumers . technological changes are further intensifying and complicating the competitive landscape , as companies continue to emerge that offer services or devices that enable internet video streaming and downloading of movies , television shows and other video programming and as wireless services and devices continue to evolve . moreover , newer services that distribute video programming are also beginning to produce or acquire their own original content . this competition is further complicated by federal and state legislative bodies and various regulatory agencies , such as the fcc , which can adopt laws and policies that provide a favorable operating environment for some of our existing and potential new competitors . see business competition for additional information . seasonality and cyclicality each of our businesses is subject to seasonal and cyclical variations . in our cable communications segment , our results are impacted by the seasonal nature of customers receiving our cable services in college and vacation markets . this generally results in weaker customer metrics in the second calendar quarter .
| ( c ) pro forma combined amounts represent our pro forma results of operations as if the nbcuniversal and universal orlando transactions had occurred on january 1 , 2010 but are not necessarily indicative of what the results would have been had we operated the businesses since january 1 , 2010 . 53 comcast 2011 annual report on form 10-k cable networks segment results of operations cable networks segment 2011 and 2010 actual and pro forma results of operations replace_table_token_14_th ( a ) actual amounts include the results of operations for the comcast content business for 2011 and 2010 and the results of operations for the nbcuniversal acquired businesses for the period january 29 through december 31 , 2011 . ( b ) pro forma amounts include the results of operations for the nbcuniversal acquired businesses for the period january 1 , 2011 through january 28 , 2011 and for the year ended december 31 , 2010. these amounts also include pro forma adjustments as if the nbcuniversal transaction had occurred on january 1 , 2010 , including the effects of acquisition accounting and the elimination of operating costs and expenses directly related to the transaction , but do not include adjustments for costs related to integration activities , cost savings or synergies that have been or may be achieved by the combined businesses . pro forma amounts are not necessarily indicative of what the results would have been had we operated the businesses since january 1 , 2010 . ( c ) pro forma combined amounts represent our pro forma results of operations as if the nbcuniversal transaction had occurred on january 1 , 2010 but are not necessarily indicative of what the results would have been had we operated the businesses since january 1 , 2010. cable networks segment revenue distribution distribution revenue is generated from distribution agreements with multichannel video providers and is affected by the number of subscribers receiving our cable networks and the fees we charge per subscriber . pro forma combined distribution revenue increased in 2011 primarily due to rate increases and increases in the number of subscribers to our cable networks . in 2011 , 13 %
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customer repurchase agreements increased $ 3.5 million to $ 34.7 million at december 31 , 2015 from $ 31.2 million at december 31 , 2014. a customer repurchase agreement is an agreement by us to sell to and repurchase from the customer an interest in specific securities issued by or guaranteed by the united states government or government-sponsored enterprises . this transaction settles immediately on a same day basis in immediately available funds . interest paid is commensurate with other products of equal interest and credit risk . long-term debt consists of fhlbb advances , securities sold under repurchase agreements and customer repurchase agreements with an original maturity of one year or more . at december 31 , 2015 , we had $ 147.4 million in long-term debt with the fhlbb and $ 5.9 million in customer repurchase agreements . this compares to $ 216.7 million in fhlbb advances , $ 10.0 million in securities sold under repurchase agreements and $ 5.8 million in customer repurchase agreements at december 31 , 2014. the decrease of $ 79.3 million in long-term debt for the year ended december 31 , 2015 was primarily due to maturing fhlbb long-term advances that were repaid and not renewed . in addition , during 2015 , we prepaid $ 29.0 million in fhlbb borrowings with a weighted average rate of 2.87 % and incurred a prepayment expense of $ 707,000. we also prepaid $ 10.0 million in repurchase agreements with a rate of 2.65 % and incurred a prepayment expense of $ 593,000. at december 31 , 2015 and 2014 , we had forward starting interest rate swap contracts with a combined notional value of $ 107.5 million and $ 155.0 million , respectively . the swap contracts have start dates through the third quarter 2016 and have durations ranging from four to six years . this hedge strategy converts the variable rate of interest on certain fhlb advances to fixed interest rates , thereby protecting us from floating interest rate variability . on a stand-alone basis , the interest rate swaps introduce potential future volatility in tangible book value and accumulated other comprehensive income ( “ aoci ” ) ; however , the valuation of the swaps is expected to change in the opposite direction of the valuations on the available-for-sale securities portfolio . this is consistent with our objective to reduce total volatility in tangible book value and aoci . during the second quarter of 2015 , we terminated a forward-starting interest rate swap with a notional amount of $ 35.0 million and incurred a termination fee of $ 1.6 million , and in the fourth quarter of 2015 , we terminated a forward-starting interest rate swap with a notional amount of $ 12.5 million and incurred a termination fee of $ 847,000. both termination fees will be amortized monthly over a five-year period as a component of interest expense and other comprehensive income over the term of the previously hedged borrowing . shareholders ' equity was $ 139.5 million and $ 142.5 million , which represented 10.4 % and 10.8 % of total assets at december 31 , 2015 and december 31 , 2014 , respectively . the decrease in shareholders ' equity reflects the repurchase of 515,604 shares of our common stock at a cost of $ 3.9 million pursuant to our stock repurchase program , a decrease in accumulated other comprehensive income of $ 3.5 million primarily due to the change in market values of securities and interest rate swaps and the payment of regular dividends amounting to $ 2.1 million . this was partially offset by net income of $ 5.7 million for the year ended december 31 , 2015 and an increase of $ 715,000 related to the recognition of share-based compensation . 43 comparison of operating results for years ended december 31 , 2015 and 2014 general . net income for the year ended december 31 , 2015 was $ 5.7 million , or $ 0.33 per diluted share , compared to $ 6.2 million , or $ 0.34 per diluted share , for the same period in 2014. interest and dividend income . total interest and dividend income increased $ 1.5 million to $ 42.5 million for the year ended december 31 , 2015 compared to $ 41.0 million for the same period in 2014. the increase in interest and dividend income was primarily the result of executing on our strategy to improve the balance sheet mix by decreasing securities while increasing loans . at december 31 , 2015 , the average balance of loans increased $ 83.5 million to $ 766.5 million , while the average balance of securities decreased $ 31.9 million to $ 472.6 million . the balance of interest-earning assets increased $ 49.8 million to $ 1.3 billion for the year ended december 31 , 2015 , compared to $ 1.2 billion for the same period in 2014. the average yield on interest-earning assets , on a tax-equivalent basis , decreased 3 basis points to 3.38 % for the year ended december 31 , 2015 from 3.41 % for the same period in 2014. interest income on loans increased $ 2.7 million to $ 30.5 million for the year ended december 31 , 2015 from $ 27.8 million for the year ended december 31 , 2014. the tax-equivalent yield on loans decreased 10 basis points from 4.10 % for the year 2014 to 4.00 % for the same period in 2015. the increase in interest income on loans for the year ended december 31 , 2015 was due to the average balance of loans increasing $ 83.5 million in executing our strategy to improve the balance sheet mix by reinvesting cash flows from securities sales and pay downs into loans . interest income on securities decreased $ 1.4 million to $ 11.5 million for the year ended december 31 , 2015 from $ 12.9 million for the year ended december 31 , 2014. story_separator_special_tag customer repurchase agreements increased $ 3.5 million to $ 34.7 million at december 31 , 2015 from $ 31.2 million at december 31 , 2014. a customer repurchase agreement is an agreement by us to sell to and repurchase from the customer an interest in specific securities issued by or guaranteed by the united states government or government-sponsored enterprises . this transaction settles immediately on a same day basis in immediately available funds . interest paid is commensurate with other products of equal interest and credit risk . long-term debt consists of fhlbb advances , securities sold under repurchase agreements and customer repurchase agreements with an original maturity of one year or more . at december 31 , 2015 , we had $ 147.4 million in long-term debt with the fhlbb and $ 5.9 million in customer repurchase agreements . this compares to $ 216.7 million in fhlbb advances , $ 10.0 million in securities sold under repurchase agreements and $ 5.8 million in customer repurchase agreements at december 31 , 2014. the decrease of $ 79.3 million in long-term debt for the year ended december 31 , 2015 was primarily due to maturing fhlbb long-term advances that were repaid and not renewed . in addition , during 2015 , we prepaid $ 29.0 million in fhlbb borrowings with a weighted average rate of 2.87 % and incurred a prepayment expense of $ 707,000. we also prepaid $ 10.0 million in repurchase agreements with a rate of 2.65 % and incurred a prepayment expense of $ 593,000. at december 31 , 2015 and 2014 , we had forward starting interest rate swap contracts with a combined notional value of $ 107.5 million and $ 155.0 million , respectively . the swap contracts have start dates through the third quarter 2016 and have durations ranging from four to six years . this hedge strategy converts the variable rate of interest on certain fhlb advances to fixed interest rates , thereby protecting us from floating interest rate variability . on a stand-alone basis , the interest rate swaps introduce potential future volatility in tangible book value and accumulated other comprehensive income ( “ aoci ” ) ; however , the valuation of the swaps is expected to change in the opposite direction of the valuations on the available-for-sale securities portfolio . this is consistent with our objective to reduce total volatility in tangible book value and aoci . during the second quarter of 2015 , we terminated a forward-starting interest rate swap with a notional amount of $ 35.0 million and incurred a termination fee of $ 1.6 million , and in the fourth quarter of 2015 , we terminated a forward-starting interest rate swap with a notional amount of $ 12.5 million and incurred a termination fee of $ 847,000. both termination fees will be amortized monthly over a five-year period as a component of interest expense and other comprehensive income over the term of the previously hedged borrowing . shareholders ' equity was $ 139.5 million and $ 142.5 million , which represented 10.4 % and 10.8 % of total assets at december 31 , 2015 and december 31 , 2014 , respectively . the decrease in shareholders ' equity reflects the repurchase of 515,604 shares of our common stock at a cost of $ 3.9 million pursuant to our stock repurchase program , a decrease in accumulated other comprehensive income of $ 3.5 million primarily due to the change in market values of securities and interest rate swaps and the payment of regular dividends amounting to $ 2.1 million . this was partially offset by net income of $ 5.7 million for the year ended december 31 , 2015 and an increase of $ 715,000 related to the recognition of share-based compensation . 43 comparison of operating results for years ended december 31 , 2015 and 2014 general . net income for the year ended december 31 , 2015 was $ 5.7 million , or $ 0.33 per diluted share , compared to $ 6.2 million , or $ 0.34 per diluted share , for the same period in 2014. interest and dividend income . total interest and dividend income increased $ 1.5 million to $ 42.5 million for the year ended december 31 , 2015 compared to $ 41.0 million for the same period in 2014. the increase in interest and dividend income was primarily the result of executing on our strategy to improve the balance sheet mix by decreasing securities while increasing loans . at december 31 , 2015 , the average balance of loans increased $ 83.5 million to $ 766.5 million , while the average balance of securities decreased $ 31.9 million to $ 472.6 million . the balance of interest-earning assets increased $ 49.8 million to $ 1.3 billion for the year ended december 31 , 2015 , compared to $ 1.2 billion for the same period in 2014. the average yield on interest-earning assets , on a tax-equivalent basis , decreased 3 basis points to 3.38 % for the year ended december 31 , 2015 from 3.41 % for the same period in 2014. interest income on loans increased $ 2.7 million to $ 30.5 million for the year ended december 31 , 2015 from $ 27.8 million for the year ended december 31 , 2014. the tax-equivalent yield on loans decreased 10 basis points from 4.10 % for the year 2014 to 4.00 % for the same period in 2015. the increase in interest income on loans for the year ended december 31 , 2015 was due to the average balance of loans increasing $ 83.5 million in executing our strategy to improve the balance sheet mix by reinvesting cash flows from securities sales and pay downs into loans . interest income on securities decreased $ 1.4 million to $ 11.5 million for the year ended december 31 , 2015 from $ 12.9 million for the year ended december 31 , 2014.
| interest income on loans increased $ 2.4 million to $ 27.8 million for the year ended december 31 , 2014 from $ 25.4 million for the year ended december 31 , 2013. the tax-equivalent yield on loans decreased 13 basis points from 4.23 % for the year 2013 to 4.10 % for the same period in 2014. the increase in interest income on loans for the year ended december 31 , 2014 was due to the average balance of loans increasing $ 78.4 million in executing our strategy to improve the balance sheet mix by reinvesting cash flows from securities sales and pay downs into loans . interest expense . interest expense for the year ended december 31 , 2014 decreased $ 367,000 to $ 9.9 million from 2013. this was attributable to a 5 basis point decrease in the average cost of interest-bearing liabilities to 0.99 % for the year ended december 31 , 2014 from 1.04 % in 2013. the decrease in the cost of interest-bearing liabilities was due to decreases in rates on time deposits , savings and checking accounts . net interest and dividend income . net interest and dividend income increased $ 327,000 to $ 31.1 million for the year ended december 31 , 2014 as compared to $ 30.7 million for same period in 2013. the net interest margin , on a tax-equivalent basis , was 2.60 % and 2.58 % for the years ended december 31 , 2014 and 2013 , respectively . the increase in the net interest margin was due to the improvement of our balance sheet mix by reducing securities and reinvesting in loans along with the cost of interest-bearing liabilities decreasing 5 basis points , while the yield on average interest-bearing assets decreased 2 basis points . provision ( credit ) for loan losses . the provision ( credit ) for loan losses is reviewed by management based upon our evaluation of then-existing economic and business conditions affecting our key lending
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epicentral contains both software and hardware that are integrated to deliver the system 's full functionality . these arrangements are accounted for in accordance with asc 605-25 , `` multiple-element arrangements '' . epicentral can also include an additional software offering , mobile host , that allows the customer to access certain applications on mobile devices . mobile host is accounted for in accordance with asc 985-605 , `` software '' as mobile host software does not function together with the hardware device to deliver its essential functionality . revenue , inclusive of software license fees , is generally recognized upon installation and formal acceptance by the customer with the exception of any amount allocated to free maintenance which is deferred and recognized over the initial maintenance period , generally one year . for epicentral tm and other multiple deliverable arrangements , we consider whether the deliverables in an arrangement are within the scope of existing higher-level generally accepted accounting principles ( `` gaap '' ) and apply such literature to the extent that it provides guidance regarding whether to separate multiple-deliverable arrangements and how to allocate value among those separate units of accounting . when we enter into a multiple deliverable arrangement , we also determine whether revenue arrangements consist of more than one unit of accounting . at that time , we allocate arrangement consideration to the separate units of accounting based on a relative selling price hierarchy , except where amounts allocable to the delivered units is limited to that which is contingent upon the delivery of additional deliverables or meeting other specified performance conditions . the relative selling price for each element is based upon the following selling price hierarchy : vendor specific objective evidence ( `` vsoe '' ) if available , third party evidence ( `` tpe '' ) if vsoe is not available , or best estimate of selling price ( `` besp '' ) to the extent that vsoe or tpe are not available . revenue related to extended warranty and product maintenance contracts is recognized pursuant to asc 605-20-25 , `` separately priced extended warranty and product maintenance contracts . '' pursuant to this guidance , revenue related to separately priced product maintenance contracts is deferred and recognized over the term of the maintenance period . we record deferred revenue for advance payments received from customers for maintenance contracts . our customers have the right to return products that do not function properly within a limited time after delivery . we monitor and track product returns and record a provision for the estimated future returns based on historical experience . returns have historically been within expectations and the provisions established , but we can not guarantee that we will continue to experience return rates consistent with historical patterns . we offer some of our customers price protection as an incentive to carry inventory of our product . these price protection plans provide that if we lower prices , we will credit them for the price decrease on inventory they hold . our customers typically carry limited amounts of inventory , and we infrequently lower prices on current products . as a result , the amounts paid under these plans have not been material . however , we can not guarantee that this minimal level will continue . we charge our customers for shipping and handling services . the amounts billed to customers are recorded as revenue when the product ships . any costs incurred related to these services are included in cost of sales . accounts receivable – we have standardized credit granting and review policies and procedures for all customer accounts , including : credit reviews of all new customer accounts ; ongoing credit evaluations of current customers ; credit limits and payment terms based on available credit information ; and adjustments to credit limits based upon payment history and the customer 's current creditworthiness . we also provide an estimate of doubtful accounts based on historical experience and specific customer collection issues . our allowance for doubtful accounts as of december 31 , 2017 was approximately $ 100,000 , or less than 1 % of outstanding accounts receivable , which we feel is appropriate considering the overall quality of our accounts receivable . while credit losses have historically been within expectations and the reserves established , we can not guarantee that our credit loss experience will continue to be consistent with historical experience . inventories – our inventories are stated at the lower of cost ( principally standard cost , which approximates actual cost on a first-in , first-out basis ) or net realizable value . we review net realizable value based on estimated selling prices in the ordinary course of business less estimated costs of completion , disposal and transportation , historical usage and estimates of future demand . assumptions are reviewed at least quarterly and adjustments are made , as necessary , to reflect changing market conditions . based on these reviews , inventory write-downs are recorded , as necessary , to reflect estimated obsolescence , excess quantities and net realizable value . should circumstances change and we determine that additional inventory is subject to obsolescence , additional write-downs of inventory could result in a charge to income . goodwill and intangible assets – we acquire businesses in purchase transactions that result in the recognition of goodwill and intangible assets . the determination of the value of intangible assets requires management to make estimates and assumptions . in accordance with asc 350-20 `` goodwill '' , acquired goodwill is not amortized but is subject to impairment testing at least annually and when an event occurs or circumstances change , that indicate it is more likely than not an impairment exists . factors considered that may trigger an impairment review are : significant underperformance relative to expected historical or projected future operating results ; significant changes in the manner of use of acquired assets or the strategy for the overall business ; significant negative industry or economic trends ; and significant decline in market capitalization relative to net book value . story_separator_special_tag definite lived intangible assets are amortized and are tested for impairment when appropriate . we reported $ 2,621,000 of goodwill and $ 458,000 of unamortized definite-lived intangible assets at december 31 , 2017. we have determined that no goodwill or intangible asset impairment has occurred and the fair value of goodwill was substantially higher than our carrying value based on our assessment as of december 31 , 2017 when the impairment review is performed . 14 income taxes – in preparing our consolidated financial statements , we are required to estimate income taxes in each of the jurisdictions in which we operate . this involves estimating the actual current tax exposure together with assessing temporary differences between the tax basis of certain assets and liabilities and their reported amounts in the financial statements , as well as net operating losses , tax credits and other carryforwards . these differences result in deferred tax assets and liabilities , which are included within our consolidated balance sheets . we then assess the likelihood that the deferred tax assets will be realized from future taxable income , and to the extent that we believe that realization is not likely , we establish a valuation allowance . significant judgment is required in determining the provision for income taxes and , in particular , any valuation allowance or tax reserves with respect to our deferred tax assets and uncertain tax positions . on a quarterly basis , we evaluate the recoverability of our deferred tax assets based upon historical results and forecasted taxable income over future years , and match this forecast against the basis differences , deductions available in future years and the limitations allowed for net operating loss and tax credit carryforwards to ensure that there is adequate support for the realization of the deferred tax assets . while we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance , in the event we were to determine that we would not be able to realize all or part of our deferred tax assets in the future , an adjustment to the valuation allowance or tax reserves would be charged as a reduction to income in the period such determination was made . likewise , should we determine that we would be able to realize future deferred tax assets in excess of its net recorded amount , an adjustment to the valuation allowance would increase net income in the period such determination was made . we account for income taxes in accordance with asc 740 , `` income taxes . '' among other things this provision prescribes a minimum recognition threshold that an income tax position must meet before it is recorded in the reporting entity 's financial statements . it also requires that the effects of such income tax positions be recognized only if , as of the balance sheet reporting date , it is `` more likely than not '' ( i.e. , more than a 50 % likelihood ) that the income tax position will be sustained based solely on its technical merits . when making this assessment , management must assume that the responsible taxing authority will examine the income tax position and have full knowledge of all relevant facts and other pertinent information . the accounting guidance also clarifies the method of accruing for interest and penalties when there is a difference between the amount claimed , or expected to be claimed , on a company 's income tax returns and the benefits recognized in the financial statements . see note 11 to the consolidated financial statements for further details of the impact of the tax reform act . warranty – we generally warrant our products for up to 36 months and record the estimated cost of such product warranties at the time the sale is recorded . estimated warranty costs are based upon actual past experience of product repairs and the related estimated cost of labor and material to make the necessary repairs . if actual future product repair rates or the actual costs of material and labor differ from the estimates , adjustments to the accrued warranty liability and related warranty expense would be made . share-based compensation – we calculate share-based compensation expense in accordance with asc 718 , `` compensation – stock compensation '' using the black-scholes option-pricing model to calculate the fair value of share-based awards . the key assumptions for this valuation method include the expected term of an option grant , stock price volatility , risk-free interest rate , and dividend yield . prior to january 1 , 2017 , stock-based compensation expense included estimated effects of forfeitures . upon adoption of accounting standards update ( `` asu '' ) 2016-09 , `` compensation-stock compensation : improvements to employee share-based payment accounting '' , in 2017 , an accounting policy election was made to account for forfeitures as they occur . the amended guidance requires that all tax effects related to share-based payments are recorded at settlement ( or expiration ) through the income statement , rather than through equity . cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows . the amended guidance also allows for an employer to repurchase additional employee shares for tax withholding purposes without requiring liability accounting and clarifies that all cash payments made to tax authorities on an employee 's behalf for withheld shares should be presented as a financing activity on the consolidated statements of cash flows . the presentation requirements for cash flows related to excess tax benefits and employee taxes paid for withheld shares were applied retrospectively to all periods presented . results of operations : year ended december 31 , 2017 compared to year ended december 31 , 2016 net sales .
| these decreases were partially offset by increased tsg sales due to higher sales of spare parts in the lottery market in 2017 to igt compared to 2016. during 2017 , our total net sales decreased 2 % to approximately $ 56,311,000. see the table below for a breakdown of our sales by market : replace_table_token_5_th sales of our restaurant solutions products decreased 8 % in the year ended december 31 , 2017 compared to the year ended december 31 , 2016. in the restaurant solutions market , our focus lies with providing terminals that print food rotational date and nutritional labels to help restaurants and other food service establishments effectively manage food rotation and safety . the decrease in restaurant solutions sales resulted from lower sales of our accudate 9700 terminal to our u.s. distributor . this decrease was partially offset by increased sales of our accudate pro terminal and the initial sales of our accudate xl terminal in 2017. our focus for 2018 will be to capitalize on the 2017 investments made in creating our direct selling model and in our latest terminal , the accudate xl . 12 sales of our pos automation and banking products decreased 25 % in the year ended december 31 , 2017 compared to the year ended december 31 , 2016. in the pos market , we focus primarily on supplying printers that print receipts or linerless labels for customers in the restaurant and quick serve markets . during 2017 , sales of our pos automation and banking printers declined as sales of our ithaca® 9000 printer to mcdonald 's began to slow compared to the record pace experienced in 2016. we expect sales to continue to decrease in 2018 compared to 2017 as mcdonald 's completes the implementation of their initiatives that use the ithaca® 9000 which began in 2015. pos automation and banking sales also decreased in 2017 due to a 37 % decline in sales of our other legacy pos and banking printers . in the banking market , we focus mainly on supplying printers for use in bank teller stations at banks and financial institutions primarily in the u.s. although we continue to provide printers to our existing banking and pos ( non-mcdonald 's ) customers , we have significantly reduced our focus on this market in order
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to provide these services , we incur expenses in several categories , including direct operating , selling and marketing , research and development , general and administrative , and depreciation and amortization expense . in general , our direct operating expense increases as our volume of work increases , whereas our selling and marketing expense increases in proportion to our intended growth rate of adding new accounts to our network of physician clients . our research and development , general and administrative , and depreciation and amortization expense categories are less directly related to growth of revenues and relate more to our planning for the future , our overall business management activities , and our infrastructure . we manage our cash and our use of credit facilities to ensure adequate liquidity and to ensure adherence to related financial covenants . during 2014 , we began to sell go-live and training support services separately from the required implementation services . fees associated with required implementation services are included in our ongoing monthly rate ; therefore , they are being recognized ratably over the customer life . go-live and training support services can be purchased by the customer from us or third-party vendors , and therefore , are recognized upon delivery of service . previously deferred revenue balances related to implementation services , including go-live and training support services , will continue to be amortized over those remaining customer lives . the effect of this change was not significant , nor do we expect that it will ever be significant , to our consolidated revenue . critical accounting policies our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements , which have been prepared in accordance with generally accepted accounting principles in the united states ( “ gaap ” ) . in connection with the preparation of our consolidated financial statements , we are required to make assumptions and estimates about future events , and apply judgments that affect the reported amounts of assets and liabilities , the disclosures of contingent assets and liabilities as of the date of the financial statements , and the reported amounts of revenues and expenses during the reporting period . we base our assumptions , estimates and judgments on historical experience , current trends , and other factors we believe to be relevant at the time we prepare our consolidated financial statements . the accounting estimates used in the preparation of our consolidated financial statements will change as new events occur , as more experience is acquired , as additional information is obtained , and as our operating environment changes . on a regular basis , we review the accounting policies and assumptions , and update our assumptions , estimates , and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with gaap . however , because future events and their effects can not be determined with certainty , actual results could differ from our assumptions and estimates , and such differences could be material . significant estimates and assumptions are used for , but are not limited to : ( 1 ) revenue recognition , including our estimated expected customer life ; ( 2 ) asset impairments ; ( 3 ) depreciable lives of assets ; ( 4 ) fair value of stock compensation ; ( 5 ) allocation of direct and indirect expenses ; ( 6 ) fair value of acquired intangible assets and long-lived tangible assets in a business combination ; ( 7 ) fair value of the reporting unit for goodwill impairment testing ; and ( 8 ) litigation reserves . future events and their effects can not be predicted with certainty , and accordingly , our accounting estimates require the exercise of judgment . we evaluate and update our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations . our significant accounting policies are discussed in note 1 – nature of operations and summary of significant accounting policies , to our accompanying consolidated financial statements . we believe the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results , as they require management to make difficult , subjective or complex judgments , and to make estimates about the effect of matters that are inherently uncertain . we have reviewed these critical accounting policies and related disclosures with the audit committee of our board of directors . 41 description judgment and uncertainties effect if actual results differ from assumptions revenue recognition all revenue , other than previously deferred implementation revenue , is recognized when the service is performed . we recognize revenue when there is evidence of an arrangement , the service has been provided to the client , the collection of the fees is reasonably assured , and the amount of fees to be paid by the client is fixed or determinable . we derive our revenue from business services associated with our four integrated services and from subscriptions to and sponsored clinical information and decision support services for our point of care medical application . our four integrated services consist of athenacollector for revenue cycle and practice management , athenaclinicals for ehr management , athenacommunicator for patient communication management , and athenacoordinator for care coordination and financial and quality management . our clients typically purchase one-year service contracts related to our integrated services that renew automatically . in most cases , our clients may terminate their agreements with 90 days notice without cause . we typically retain the right to terminate client agreements in a similar timeframe . our clients are billed monthly , in arrears , based either upon a percentage of collections posted to our cloud-based network , athenanet ; minimum fees ; flat fees ; or per-claim fees , where applicable . we do not recognize revenue for business services fees until these collections are made , as the services fees are not fixed and determinable until such time . story_separator_special_tag invoices are generated within the first two weeks of the subsequent month and delivered to clients primarily by e-mail . for most of our clients , amounts due are then deducted from a pre-defined bank account one week after invoice receipt via an auto-debit transaction . unbilled amounts that have been earned are accrued and recorded as revenue or deferred revenue , as appropriate , and are included in our accounts receivable balances . determining whether and when some of our revenue recognition criteria have been satisfied often involves judgments that can have a significant impact on the timing and amount of revenue we report . for example , our assessment of the likelihood of collection is a critical element in determining the timing of revenue recognition . if we do not believe that collection is reasonably assured , revenue is not recognized . multiple element arrangements require judgments as to how to allocate the arrangement consideration to each deliverable when deliverables are not delivered simultaneously . we maintain a standard price list by service ; however , certain incentives , such as discounts , may be offered to clients when they purchase multiple services . such discounting is subject to various levels of management approval and any discount offered is based on the total contract value . due to the specific nature of these agreements and the variability in the amount of discount offered for individual services across multiple contracts , we have not always been able to conclude that a consistent number of standalone sales of a deliverable have been priced within a reasonably narrow range in order to assert that we have established vsoe . when we can not establish vsoe of fair value , we then determine if we can establish tpe of fair value . tpe is determined based on competitor prices for similar deliverables when sold separately . our services differ significantly from that of our peers and our offerings contain a significant level of customization and differentiation such that the comparable pricing of products with similar functionality can not be obtained . furthermore , we are unable to reliably determine what similar competitor products ' selling prices are on a stand-alone basis . therefore , we are typically unable to determine tpe . although we believe that our approach to estimates and judgments as described herein is reasonable , actual results could differ and we may be exposed to increases or decreases in revenue that could be material . our calculation of besp may prove to be inaccurate , in which case we may have understated or overstated the revenue recognized in an accounting period . for example , if our besp is too high or too low for an individual or group of deliverables , the amount of revenue recognized within each reporting period would be inaccurate . the amount of deferred revenue related to separable deliverables with besp is $ 22.6 million and $ 22.4 million as of december 31 , 2014 and 2013 , respectively . our estimate of the expected performance period may prove to be inaccurate , in which case we may have understated or overstated the revenue recognized in an accounting period . for example , if , in the future , we need to increase our estimated expected performance period to a period longer than 12 years , the amount we would recognize in each accounting period would decrease . on the other hand , if , in the future , we need to decrease our estimated expected performance period to a period shorter than 12 years , the amount we would recognize in each accounting period would increase . the amount of deferred revenue related to non-refundable upfront fees is $ 44.4 million and $ 41.3 million as of december 31 , 2014 and 2013 , respectively . 42 description judgment and uncertainties effect if actual results differ from assumptions subscriptions to the epocrates point of care medical application are entered into by a member via an internal or third-party digital distribution platform or through a redeemable license code which expires within six to 12 months of issuance . basic subscriptions are free and do not expire . premium subscription fees are assessed on the length of the subscription period , typically one year , and payment occurs at the time of order , which is in advance of the services being performed , and are recorded as deferred revenue . premium subscriptions are recognized ratably over the contracted term of delivery , typically one year . if a license code expires before it is redeemed , revenue is recognized upon expiration . sponsored clinical information and decision support service clients typically enter into arrangements that contain various combinations of services that are generally fulfilled within one year . the clients are charged a fee for the entire group of services to be provided and are typically billed a portion of the contracted fee upon signing of the agreement with the balance billed upon one or more future milestones . because billings typically occur in advance of services being performed , these amounts are recorded as deferred revenue when billed . each service deliverable within these multiple element arrangements is accounted for as a separate unit if both of the following criteria are met : ( 1 ) the delivered item or items have value to the customer on a standalone basis and ( 2 ) for an arrangement that includes a general right of return relative to the delivered item ( s ) , delivery or performance of the undelivered item ( s ) is considered probable and substantially in our control . further , our revenue arrangements do not include a general right of return , as we deliver services and not products . we consider a deliverable to have standalone value if we sell this item separately or if the item is sold by another vendor or could be resold by the customer .
| direct operating expense increased primarily due to employee-related costs , including stock-based compensation , which increased $ 28.7 million in the year ended december 31 , 2014 , as a result of a 17 % increase in headcount from december 31 , 2013. additionally , costs associated with external consulting services increased $ 6.9 million in the year ended december 31 , 2014 . we increased headcount and the use of consultants due to the increase in number of providers added to the network during the year ended december 31 , 2014. in addition , costs associated with our business partner outsourcing arrangements and clearing house increased $ 12.8 million , as the number of claims that we processed on behalf of our clients increased during the year ended december 31 , 2014 . the total claims submitted on behalf of clients are as follows : replace_table_token_8_th direct operating expense for the year ended december 31 , 2014 also increased $ 2.5 million due to costs associated with third-party tenant revenue . replace_table_token_9_th selling and marketing expense . the increase in selling and marketing expense was in part due to compensation costs , including stock-based compensation expense , internal sales commissions , and external channel partner commissions , which increased approximately $ 17.2 million for the year ended december 31 , 2014 , largely due to a 23 % increase in headcount from december 31 , 2013 . we hired additional sales personnel to focus on adding new customers and increasing penetration within 49 our existing markets . additionally , amortization related to purchased intangible assets allocated to selling and marketing expense increased $ 9.1 million for the year ended december 31 , 2014 , compared to the year ended december 31 , 2013 , primarily due to our acquisition of epocrates during the three months ended march 31 , 2013. also contributing to the increase in selling and marketing expense was a $ 10.7 million increase in our marketing program costs for the year ended december 31 , 2014 , compared to the year ended december 31 , 2013 . research and development expense . the increase in research and development expense was primarily due to higher compensation costs , including stock-based compensation expense , which increased approximately $ 10.3 million
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on october 29 , 2015 , the company entered into a share exchange agreement ( the “ exchange agreement ” ) with the shareholders ( the “ shareholders ” ) of shuhai information skill ( hk ) limited ( “ shuhai skill ( hk ) ” ) , a limited liability company incorporated on may 15 , 2015 under the laws of the hong kong special administrative region of the people 's republic of china ( the “ prc ” ) . pursuant to the terms of the exchange agreement , the shareholders , who together owned 100 % of the ownership rights in shuhai skill ( hk ) , transferred all of the issued and outstanding ordinary shares of shuhai skill ( hk ) to the company in exchange for the issuance of an aggregate of 6,666,667 shares of common stock , thereby causing shuhai skill ( hk ) and its wholly owned subsidiaries , tianjin information sea information technology co. , ltd. ( “ tianjin information ” ) , a limited liability company incorporated under the laws of the prc , and harbin information sea information technology co. , ltd. , a limited liability company incorporated under the laws of the prc , to become wholly-owned subsidiaries of the company , and shuhai information technology co. , ltd. , also a limited liability company incorporated under the laws of the prc ( “ shuhai beijing ” ) , to become a variable interest entity ( “ vie ” ) of the company through a series of contractual agreements between shuhai beijing and tianjin information . the transaction was accounted for as a reverse merger , with shuhai skill ( hk ) and its subsidiaries being the accounting survivor . accordingly , the historical financial statements presented are those of shuhai skill ( hk ) and its consolidated subsidiaries and vie . following the share exchange , the shareholders , being zhixin liu and her father , fu liu , owned approximately 82 % of the outstanding shares of common stock . as of october 29 , 2015 , there were 18,333,333 shares of common stock issued and outstanding , 15,000,000 of which were beneficially owned by zhixin liu and fu liu . - 25 - after the share exchange , the company , through its consolidated subsidiaries and vie , is engaged in the business of providing internet security products and equipment , new media advertising , micro-marketing , and data analysis services in the prcs . on april 12 , 2018 , our board of directors and stockholders approved a one-for-three reverse stock split of our issued and outstanding shares of common stock , which became effective on may 1 , 2018 , decreasing the number of outstanding shares from 57,511,771 to 19,170,827. subsequent to the split , the number of our outstanding shares increased from to 19,170,827 to 19,170,846 to accommodate certain shareholders ' positions due to rounding elections payable at the beneficial owner level . unless otherwise stated , all shares and per share amounts in this form 10k have been retroactively adjusted to give effect to this stock split . on august 22 , 2018 , our board and majority stockholders adopted the company 's 2018 equity incentive plan ( the “ 2018 plan ” ) under which we may award up to a maximum of 4,000,000 shares of common stock to attract and retain personnel , provide additional incentives to employees , directors and consultants and promote the success of our business . no awards have been granted under the 2018 plan as of the date of this report , but our board or a designated committee thereof will have the ability in its discretion from time to time to make awards under the 2018 plan , including to our officers and directors . on december 21 , 2018 , the company successfully completed a registered , underwritten initial public offering and concurrent listing of the company 's common stock on the nasdaq capital market , which offering generated gross proceeds of $ 6.7 million before deducting underwriter 's commissions and other offering costs , resulting in net proceeds of approximately $ 5.7 million , of which $ 1,000,000 was placed in an escrow account . $ 600,000 of the escrow fund was held and disbursed by the escrow agent pursuant to the terms and conditions of a certain indemnification escrow agreement between the company and the underwriter of the offering . $ 400,000 of the escrow fund was disbursed to the company in february 2019 when the underwriter confirmed receipt of a written legal opinion from prc legal counsel in connection with such offering . the company sold 1,667,500 shares of common stock ( including shares issued pursuant to the underwriter 's over-allotment option ) at an offering price of $ 4 per share . in connection with the offering , the company 's common stock began trading on the nasdaq capital market beginning on december 19 , 2018 under the symbol “ dtss. ” in addition , the company has agreed to issue warrants to the representative of the underwriters to purchase 101,500 shares of common stock at an exercise price of $ 6. these warrants may be purchased in cash or via cashless exercise , will be exercisable for five years from december 21 , 2018 through december 17 , 2023. we believe that the increased demand for security equipment and related products in china presents an attractive opportunity for the company to establish and grow its business in the next twelve months . - 26 - story_separator_special_tag ont > net cash used in operating activities was $ 1,484,730 during the year ended june 30 , 2018 , which consisted of our net loss of $ 1,604,141 , offset by depreciation and amortization of $ 32,694 , expenses paid by our president of $ 9,000 , a change of accounts receivable of $ 225 , a change of inventory of story_separator_special_tag on october 29 , 2015 , the company entered into a share exchange agreement ( the “ exchange agreement ” ) with the shareholders ( the “ shareholders ” ) of shuhai information skill ( hk ) limited ( “ shuhai skill ( hk ) ” ) , a limited liability company incorporated on may 15 , 2015 under the laws of the hong kong special administrative region of the people 's republic of china ( the “ prc ” ) . pursuant to the terms of the exchange agreement , the shareholders , who together owned 100 % of the ownership rights in shuhai skill ( hk ) , transferred all of the issued and outstanding ordinary shares of shuhai skill ( hk ) to the company in exchange for the issuance of an aggregate of 6,666,667 shares of common stock , thereby causing shuhai skill ( hk ) and its wholly owned subsidiaries , tianjin information sea information technology co. , ltd. ( “ tianjin information ” ) , a limited liability company incorporated under the laws of the prc , and harbin information sea information technology co. , ltd. , a limited liability company incorporated under the laws of the prc , to become wholly-owned subsidiaries of the company , and shuhai information technology co. , ltd. , also a limited liability company incorporated under the laws of the prc ( “ shuhai beijing ” ) , to become a variable interest entity ( “ vie ” ) of the company through a series of contractual agreements between shuhai beijing and tianjin information . the transaction was accounted for as a reverse merger , with shuhai skill ( hk ) and its subsidiaries being the accounting survivor . accordingly , the historical financial statements presented are those of shuhai skill ( hk ) and its consolidated subsidiaries and vie . following the share exchange , the shareholders , being zhixin liu and her father , fu liu , owned approximately 82 % of the outstanding shares of common stock . as of october 29 , 2015 , there were 18,333,333 shares of common stock issued and outstanding , 15,000,000 of which were beneficially owned by zhixin liu and fu liu . - 25 - after the share exchange , the company , through its consolidated subsidiaries and vie , is engaged in the business of providing internet security products and equipment , new media advertising , micro-marketing , and data analysis services in the prcs . on april 12 , 2018 , our board of directors and stockholders approved a one-for-three reverse stock split of our issued and outstanding shares of common stock , which became effective on may 1 , 2018 , decreasing the number of outstanding shares from 57,511,771 to 19,170,827. subsequent to the split , the number of our outstanding shares increased from to 19,170,827 to 19,170,846 to accommodate certain shareholders ' positions due to rounding elections payable at the beneficial owner level . unless otherwise stated , all shares and per share amounts in this form 10k have been retroactively adjusted to give effect to this stock split . on august 22 , 2018 , our board and majority stockholders adopted the company 's 2018 equity incentive plan ( the “ 2018 plan ” ) under which we may award up to a maximum of 4,000,000 shares of common stock to attract and retain personnel , provide additional incentives to employees , directors and consultants and promote the success of our business . no awards have been granted under the 2018 plan as of the date of this report , but our board or a designated committee thereof will have the ability in its discretion from time to time to make awards under the 2018 plan , including to our officers and directors . on december 21 , 2018 , the company successfully completed a registered , underwritten initial public offering and concurrent listing of the company 's common stock on the nasdaq capital market , which offering generated gross proceeds of $ 6.7 million before deducting underwriter 's commissions and other offering costs , resulting in net proceeds of approximately $ 5.7 million , of which $ 1,000,000 was placed in an escrow account . $ 600,000 of the escrow fund was held and disbursed by the escrow agent pursuant to the terms and conditions of a certain indemnification escrow agreement between the company and the underwriter of the offering . $ 400,000 of the escrow fund was disbursed to the company in february 2019 when the underwriter confirmed receipt of a written legal opinion from prc legal counsel in connection with such offering . the company sold 1,667,500 shares of common stock ( including shares issued pursuant to the underwriter 's over-allotment option ) at an offering price of $ 4 per share . in connection with the offering , the company 's common stock began trading on the nasdaq capital market beginning on december 19 , 2018 under the symbol “ dtss. ” in addition , the company has agreed to issue warrants to the representative of the underwriters to purchase 101,500 shares of common stock at an exercise price of $ 6. these warrants may be purchased in cash or via cashless exercise , will be exercisable for five years from december 21 , 2018 through december 17 , 2023. we believe that the increased demand for security equipment and related products in china presents an attractive opportunity for the company to establish and grow its business in the next twelve months . - 26 - story_separator_special_tag ont > net cash used in operating activities was $ 1,484,730 during the year ended june 30 , 2018 , which consisted of our net loss of $ 1,604,141 , offset by depreciation and amortization of $ 32,694 , expenses paid by our president of $ 9,000 , a change of accounts receivable of $ 225 , a change of inventory of
| liquidity and capital resources we have funded our operations to date primarily through the sale of our common stock and shareholder loans . based on our current cash level and management 's forecast of operating cash flows , we believe we have sufficient resources fund our operations through december 2020. the company 's management recognizes that the company must generate sales and additional cash resources to enable it to continue to develop its operations . based on increased demand for internet services in china , including internet security and big data integration , the company 's management team expects growth in its business . on december 18 , 2018 , the company completed a registered underwritten common stock offering with net proceeds $ 5.7 million after deducting underwriter 's commission and other offering costs , which will help the company 's cash flow during fiscal 2020. the company expects to generate revenue through expansion of the current safe campus business and through product innovation and development , which is expected to lead to the introduction of new products such as the scenic area and public community security products . if revenues are not generated or do not reach the level anticipated in the company 's plan , in order to maintain working capital sufficient to support the company 's operations and finance the future growth of its business , the company expects to fund any cash flow shortfall through financial support from the company 's majority stockholders ( who are also our board members or officers ) and public or private issuance of securities . however , readers are cautioned that additional cash resources may not be available to the company on desirable terms , or at all , if and when needed by the company . as of june 30 , 2019 , we had a working capital of $ 4,568,461. our current assets on june 30 , 2019 were $ 6,251,863 primarily consisting of cash of $ 6,072,637 , inventory of $ 73,294 and prepaid expenses and other current assets of
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sales of our pos printers decreased 20 % in 2012 primarily driven by a decrease in both domestic and international sales of our two pos printer products to mcdonald 's , the ithaca® 8000 and ithaca® 8040 , for its combined beverage initiative and its pos system upgrade which includes grill initiative printer upgrades , as the rollout of printers for these initiatives is substantially complete . however , beginning in the second half of 2012 , we began to ship ithaca 8000® printers to mcdonald 's for a new application that we expect to continue into 2013. we also intend to pursue sales to mcdonald 's and other national restaurant chains for the previously discussed new food safety terminal during 2013. during 2012 , in an effort to address the food safety modernization act , we developed a food safety terminal , the ithaca® 9700 as previously discussed , that prints easy-to-read expiration and `` enjoy by '' date labels to help restaurants effectively manage food spoilage . we received our first revenue contributions from this product in the fourth quarter 2012. sales of our casino and gaming printers increased 17 % in 2012 compared to 2011. in our casino and gaming market , our focus lies primarily in supplying printers for use in slot machines at casinos and racetracks , as well as in other gaming devices that print tickets or receipts , worldwide . additionally , we supplement these printer sales with revenue from the epicentral print system for which we had seven executed contracts as of january 31 , 2013. domestic sales of our casino and gaming printers increased 31 % , mostly due from a combination of new casino openings and continued market share gains in the casino market , as we believe the overall replacement cycle of slot machines was lower in 2012 as compared to 2011. international sales also increased by 6 % , primarily due to a 14 % increase in casino ticket printer sales during 2012 driven by a 100 % increase in sales to a canadian oem which were partially offset by a 10 % decrease in our off-premise thermal gaming printers . our casino and gaming sales for 2012 also included revenue contribution from our first completed installation of the epicentral print system at nisqually red wind casino in olympia , washington . in the lottery market , we continue to hold a leading position based on our long-term exclusive purchase agreement with gtech , our largest customer and the world 's largest provider of lottery terminals . gtech has been our customer since 1995 , and we continue to maintain a good relationship with them . in 2009 we expanded our long-standing relationship with gtech by executing a new exclusive purchase agreement to develop and supply them with their next generation online thermal lottery printer . pursuant to the new agreement , gtech will exclusively purchase all of its requirements for thermal on-line lottery printers from us and we will exclusively sell such printers to gtech through november 2014. currently , we fulfill substantially all of gtech 's printer requirements for lottery terminal installations and upgrades worldwide . during 2012 , total printer sales to gtech decreased approximately 27 % , compared to 2011. our sales to gtech each year are directly dependent on the timing and number of new and upgraded lottery terminal installations gtech performs and are not indicative of gtech 's overall business or revenue . sales in the printrex market include wide format , rack mounted and vehicle mounted thermal printers used by customers to log and plot oil field and down hole well drilling data in the oil and gas exploration industry . during 2012 , we developed the printrex® 920 and printrex® 980 oil and gas color printers , as previously discussed , that we believe will provide customers with more value as data printed in color is easier to read and analyze than the same data printed in black and white . sales in this market also includes wide format printers used to print test results in ophthalmology devices in the medical industry , as well as vehicle mounted printers used to print schematics and certain other critical information in emergency services vehicles . printrex printer sales increased by approximately $ 3,000,000 primarily due to a full twelve months of sales being reported in 2012 as compared to approximately four and one-half months of sales in 2011 as we acquired printrex on august 19 , 2011. our tsg group , which sells service , replacement parts and consumable products , including receipt paper , ribbons and inkjet cartridges , continues to offer a recurring revenue stream for the company . tsg sales decreased 7 % in 2012 from 2011 primarily due to lower sales of consumables compared to 2011 from the effect of a loss of sales to two oem customers partially offset by incremental printrex tsg sales from the full twelve months of sales being reported in 2012 as compared to approximately four and one-half months of sales in 2011 and an increase in service revenue during 2012 from several new contracts for paper testing services that did not occur in 2011. companies who produce and sell paper products that are used in our printers , utilize this new service for a fee to have their product qualified for use in our printers . operationally , our gross margin increased to a record high 38.0 % compared to 37.3 % in 2011. our gross margin increased due primarily to a more favorable sales mix combined with a continued effort of cost control , specifically in lower production costs , in addition to sales of higher margin printrex printers in 2012 compared to 2011 due to the full twelve months of sales being reported in 2012 as compared to approximately four and one-half months of sales in 2011 . story_separator_special_tag our operating margin for 2012 was 8.2 % compared to 10.6 % in 2011. excluding the legal fees incurred in connection with the lawsuit discussed in item 3. legal proceedings and in note 11 to the consolidated financial statements , our operating margin for 2012 was 10.4 % in 2012 , which is relatively consistent with 2011. we reported net income of $ 3,621,000 and net income per diluted share of $ 0.40 for 2012 , compared to net income of $ 4,676,000 and net income per diluted share of $ 0.49 in 2011. in terms of cash flow for 2012 , we generated $ 8,030,000 of cash from operating activities and utilized $ 5,938,000 for treasury share repurchases , $ 1,117,000 for capital expenditures and capitalized software development and $ 526,000 for our first cash dividend payment to shareholders resulting in cash and cash equivalents of $ 7,537,000 and no debt on our consolidated balance sheet at december 31 , 2012. critical accounting policies and estimates the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates , judgments and assumptions that affect both balance sheet items and statement of income categories . such estimates and judgments are based upon historical experience and certain assumptions that are believed to be reasonable in the particular circumstances . we evaluate our assumptions on an ongoing basis by comparing actual results with our estimates . actual results may differ from the original estimates . the following accounting policies are those that we believe to be most critical in the preparation of our financial statements . these items utilize assumptions and estimates about the effect of future events that are inherently uncertain and are therefore based on our judgment . please refer to note 2 – summary of significant accounting policies in the accompanying consolidated financial statements for a complete listing of our accounting policies . revenue recognition – our typical contracts include the sale of printers , which are sometimes accompanied by separately-priced extended warranty contracts . we also sell replacement parts , consumables , and other repair services ( sometimes pursuant to multi-year product maintenance contracts ) , which are not included in the original printer sale and are ordered by the customer as needed . we recognize revenue pursuant to the guidance within accounting standards codification ( “ asc ” ) 605 , “ revenue recognition ” ( asc 605 ) . specifically , revenue is recognized when evidence of an arrangement exists , delivery ( based on shipping terms which are generally fob shipping point ) has occurred , the selling price is fixed and determinable , and collectability is reasonably assured . we recognize revenue from the sale of printers to our distributors and resellers on a sell-in basis and on substantially the same terms as we recognize revenue from all our other customers . we provide for an estimate of product returns and price protection based on historical experience at the time of revenue recognition . we have developed a new software solution , epicentral tm , that enables casino operators to create promotional coupons and marketing messages and to print them in real-time at the slot machine . revenue arrangements for epicentral tm include multiple deliverables and as a result such arrangements are accounted for in accordance with both asc 605-25 , “ multiple-element arrangements ” and asc 985-605 , “ software. ” epicentral tm is primarily comprised of both a software component , which is licensed , and a hardware component , which can either be leased or sold to end users , and both components are integrated to deliver the system 's full functionality . under leasing arrangements , revenue is generally recognized ratably over the lease term , excluding revenue allocated to installation , which is recognized upon completion . in an arrangement where the hardware is purchased , revenue , inclusive of software license fees , is generally recognized upon installation and formal acceptance by the customer . for epicentral tm and other multiple deliverable arrangements , we consider whether the deliverables in an arrangement are within the scope of existing higher-level gaap and apply such literature to the extent that it provides guidance regarding whether to separate multiple-deliverable arrangements and how to allocate value among those separate units of accounting . we also determine whether revenue arrangements consist of more than one unit of accounting at inception of the arrangement and recognize revenue as each item in the arrangement is delivered . we allocate arrangement consideration to the separate units of accounting based on the relative fair value for all units of accounting in the arrangement , except where amounts allocable to the delivered units is limited to that which is contingent upon the delivery of additional deliverables or meeting other specified performance conditions . revenue related to extended warranty and product maintenance contracts is recognized pursuant to asc 605-20-25 , “ separately priced extended warranty and product maintenance contracts. ” pursuant to this provision , revenue related to separately priced product maintenance contracts is deferred and recognized over the term of the maintenance period . we record deferred revenue for advance payments received from customers for maintenance contracts . our customers have the right to return products that do not function properly within a limited time after delivery . we monitor and track product returns and record a provision for the estimated future returns based on historical experience . returns have historically been within expectations and the provisions established , but we can not guarantee that we will continue to experience return rates consistent with historical patterns . we offer some of our customers price protection as an incentive to carry inventory of our product . these price protection plans provide that if we lower prices , we will credit them for the price decrease on inventory they hold . our customers typically carry limited amounts of inventory , and we infrequently lower prices on current products . as a result , the amounts paid under these plans have not been material .
| business consolidation and restructuring information is summarized below ( in thousands , except percentages ) : replace_table_token_16_th as disclosed in note 8 to the consolidated financial statements , in january 2012 , we determined that we no longer needed to maintain the existing printrex manufacturing facility in san jose , california , along with certain redundant headcount . during 2012 , we recorded a restructuring charge of $ 138,000 for employee termination benefits related to these employee reductions as well as moving costs . the closing of the san jose manufacturing operations was completed as of december 31 , 2012. in may 2011 , we undertook a plan to close our new britain , ct service facility . the new britain facility primarily serviced our first generation legacy impact printers for gtech . we no longer needed to maintain this facility since these printers were replaced by our thermal lottery printers . during 2011 , we recorded a restructuring charge of $ 184,000 in connection with this facility closure . as of june 30 , 2011 , all new britain activities ceased . please also refer to note 8 in the consolidated financial statements . operating income . operating income information is summarized below ( in thousands , except percentages ) : replace_table_token_17_th the decrease in our operating income and operating margin was primarily due to the legal fees incurred from the ad lawsuit and higher operating expenses attributable to the printrex acquisition of approximately $ 1,145,000 which were partially offset by higher gross profit as previously discussed . interest . we recorded net interest income of $ 6,000 in 2012 compared to net interest income of $ 18,000 in 2011. the decrease in net interest income is primarily due to lower interest income earned a lower average cash balance , as we used a significant amount of our cash ( approximately $ 6,464,000 ) to repurchase our common stock and pay cash dividends in 2012. interest expense related to the unused revolving credit line fee and amortization of deferred financing costs on our revolving credit facility with td bank remained consistent in 2012 and 2011. see “ liquidity and capital resources ” below for more information . other , net . we recorded other expense of $ 23,000
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utilizing the liberty and cardiosert platforms , microbot is developing the first ever fully disposable robot for various endovascular interventional procedures . in addition , the company is focused on the development of a multi generation pipeline portfolio utilizing all of its proprietary technologies . microbot has a patent portfolio of 37 issued/allowed patents and 15 patent applications pending worldwide . technological platforms virob the virob is an autonomous crawling micro-robot which can be controlled remotely or within the body . its miniature dimensions are expected to allow it to navigate and crawl in different natural spaces within the human body , including blood vessels , the digestive tract and the respiratory system as well as artificial spaces such as shunts , catheters , ports , etc . its unique structure is expected to give it the ability to move in tight spaces and curved passages as well as the ability to remain within the human body for prolonged time . the scs product was developed using the virob technology . cardiosert on may 25 , 2018 , microbot acquired a patent-protected technology from cardiosert ltd. , a privately-held medical device company based in israel . the cardiosert technology contemplates a combination of a guidewire and microcatheter , technologies that are broadly used for surgery within a tubular organ or structure such as a blood vessel or duct . the cardiosert technology features a unique guidewire delivery system with steering and stiffness control capabilities which when developed is expected to give the physician the ability to control the tip curvature , to adjust tip load to varying degrees of stiffness in a gradually continuous manner . the cardiosert technology was originally developed to support interventional cardiologists in crossing chronic total occlusions ( cto ) during percutaneous coronary intervention ( pci ) procedures and has the potential to be used in other spaces and applications , such as peripheral intervention , and neurosurgery . cardiosert was part of a technological incubator supported by the israel innovation authorities ( formerly known as the office of the chief scientist , or ocs ) , and a device based on the technology has successfully completed pre-clinical testing . 45 liberty on january 13 , 2020 , microbot unveiled the world 's first fully disposable robotic system for use in endovascular interventional procedures , such as cardiovascular , peripheral and neurovascular . the liberty robotic system features a unique compact design with the capability to be operated remotely , reduce radiation exposure and physical strain to the physician , as well as the potential to eliminate the use of multiple consumables through its “ one & done ” capabilities , based in part on the cardiosert platform . liberty is designed to maneuver guidewire , microcatheters and over-the-wire devices within the body 's vasculature . it eliminates the need for capital equipment with dedicated cath-lab rooms as well as dedicated staff . in addition , it is preloaded with the “ one & done ” tool that combines guidewire and microcatheter into a single device . with control over tip curvature and stiffness for maneuverability and access – and without the need for constant tool exchanges – the “ one & done ” device is being designed to drastically reduce procedure time and costs while enhancing the operator experience . tipcat the tipcat is a disposable self-propelled locomotive device that is specially designed to advance in tubular anatomies . the tipcat is a mechanism comprising a series of interconnected balloons at the device 's tip that provides the tipcat with its forward locomotion capability . the device can self-propel within natural tubular lumens such as the blood vessels , respiratory and the urinary and gi tracts . a single channel of air/fluid supply sequentially inflates and deflates a series of balloons creating an inchworm like forward motion . the tipcat maintains a standard working channel for treatments . unlike standard access devices such as guidewires , catheters for vascular access and endoscopes , the tipcat does not need to be pushed into the patient 's lumen using external pressure ; rather , it will gently advance itself through the organ 's anatomy . as a result , the tipcat is designed to be able to reach every part of the lumen under examination regardless of the topography , be less operator dependent , and greatly reduce the likelihood of damage to lumen structure . the tipcat thus offers functionality features equivalent to modern tubular access devices , along with advantages associated with its physiologically adapted self-propelling mechanism , flexibility , and design . financial operations overview research and development expenses research and development expenses consist primarily of salaries and related expenses and overhead for microbot 's research , development and engineering personnel , prototype materials and research studies , obtaining and maintaining microbot 's patent portfolio . microbot expenses its research and development costs as incurred . general and administrative expenses general and administrative expenses consist primarily of the costs associated with management costs , professional fees for accounting , auditing , consulting and legal services , and allocated overhead expenses . microbot expects that its general and administrative expenses may increase in the future as it expands its operating activities , maintains and expands its patent portfolio and incurs additional costs associated with the merger , the preparation of becoming a public company and maintaining compliance with exchange listing and sec requirements . microbot expects these potential increases will likely include management costs , legal fees , accounting fees , directors ' and officers ' liability insurance premiums and expenses associated with investor relations . income taxes microbot has incurred net losses and has not recorded any income tax benefits for the losses . story_separator_special_tag it is still in its development stage and has not yet generated revenues , therefore , it is more likely than not that sufficient taxable income will not be available for the tax losses to be fully utilized in the future . 46 critical accounting policies and significant judgments and estimates microbot 's management 's discussion and analysis of its financial condition and results of operations are based on its financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles , or gaap . the preparation of these financial statements requires microbot to make estimates and judgments that affect the reported amounts of assets , liabilities , and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements . on an ongoing basis , microbot evaluates its estimates and judgments , including those related to accrued research and development expenses . microbot bases its 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 value of assets and liabilities that are not readily apparent from other sources . actual results may differ materially from these estimates under different assumptions or conditions . while microbot 's significant accounting policies are described in more detail in the notes to its financial statements , microbot believes the following accounting policies are the most critical for fully understanding and evaluating its financial condition and results of operations . fair value of financial instruments the company measures the fair value of certain of its financial instruments ( such as the derivative warrant liabilities ) on a recurring basis . a fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values . financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories : ● level 1 - quoted prices ( unadjusted ) in active markets for identical assets and liabilities . ● level 2 - inputs other than level 1 that are observable , either directly or indirectly , such as unadjusted quoted prices for similar assets and liabilities , unadjusted quoted prices in the markets that are not active , or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities . ● level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities . foreign currency translation microbot 's functional currency is the u.s. dollars , and its reporting currency is the u.s. dollar . government grant and input tax credit recoveries microbot from time to time has received , and may in the future continue to receive , grants from the israeli innovation authority to cover eligible company expenditures . these are presented as other income in the statement of operations and comprehensive loss as the grant funds are used for or applied towards a number of microbot 's operating expenses , such as salaries and benefits , research and development and professional and consulting fees . the recoveries are recognized in the corresponding period when such expenses are incurred . research and development expenses microbot recognizes research and development expenses as incurred , typically estimated based on an evaluation of the progress to completion of specific tasks using data such as clinical site activations , manufacturing steps completed , or information provided by vendors on their actual costs incurred . microbot determines the estimates by reviewing contracts , vendor agreements and purchase orders , and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services . these estimates are made as of each balance sheet date based on facts and circumstances known to microbot at that time . if the actual timing of the performance of services or the level of effort varies from the estimate , microbot will adjust the estimate accordingly . nonrefundable advance payments for goods and services , including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities , are capitalized as prepaid expenses and recognized as expense in the period that the related goods are consumed or services are performed . 47 microbot may pay fees to third-parties for manufacturing and other services that are based on contractual milestones that may result in uneven payment flows . there may be instances in which payments made to vendors will exceed the level of services provided and result in a prepayment of the research and development expense . story_separator_special_tag style= '' font-family : times new roman , times , serif ; font-size : 10pt '' > microbot believes that its net cash will be sufficient to fund its operations for at least 24 months and fund operations necessary to continue development activities of the scs , liberty and tipcat . however , in the event we are unsuccessful in our current litigation with empery and hudson bay , pursuant to which they are seeking the return of $ 6,750,000 in proceeds we received from them in a 2017 stock offering , we may have funds for less than 24 months . microbot plans to continue to fund its research and development and other operating expenses , other development activities relating to additional product candidates , and the associated losses from operations , through its existing cash and possibly additional grants from the israeli innovation authority . microbot may also raise capital through future issuances of debt and or equity securities . these issuances may be opportunistic and even if the company has enough funds at such time for operations
| capital gain was approximately $ 96,000 for the year ended december 31 , 2019 , compared of approximately $ 0 for the same period in 2018. the increase in capital gain was primarily due to amount received from sales of property and equipment as part of moving to new offices in yokneam , israel . liquidity and capital resources microbot has incurred losses since inception and negative cash flows from operating activities for the years ended december 31 , 2019 and 2018. as of december 31 , 2019 , microbot had a net working capital of approximately $ 31,110,000 , consisting primarily of cash and cash equivalents . microbot anticipates that it will continue to incur net losses for the foreseeable future as it continues research and development efforts of its product candidates , hires additional staff , including clinical , scientific , operational , financial and management personnel , and incurs additional costs associated with being a public company . 48 microbot has funded its operations through the issuance of capital stock , grants from the israeli innovation authority , and convertible debt . since inception ( november 2010 ) through december 31 , 2019 , microbot has raised net cash proceeds of approximately $ 54,770,000 , and incurred a total cumulative loss of approximately $ 35,111,000. microbot recently returned $ 3,375,000 ( before interest ) of such proceeds as a result of an adverse outcome in a litigation that concluded in the first quarter of 2020 , and is now subject to an additional lawsuit seeking the return of an additional $ 6,750,000 of such proceeds . microbot israel obtained from the israeli innovation authority ( “ iia ” ) grants for participation in research and development for the years 2013 through december 31 , 2019 in the total amount of approximately $ 1,500,000 and , in return , microbot israel is obligated to pay royalties amounting to 3 % -3.5 % of its future sales up to the amount of the grant . the grant is linked to the exchange rate of the dollar to the new israeli shekel and bears interest at an annual rate of usd libor . under the terms of the grant and applicable law , microbot is restricted from transferring
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in 2014 , our consulting and technology services revenues increased by approximately 22.1 % and represented approximately 52.8 % of total 2014 revenues , while our outsourcing services revenue increased by approximately 10.0 % and constituted approximately 47.2 % of total revenues . in 2013 , consulting and technology services revenue increased by 18.3 % and represented approximately 50.2 % of total 2013 revenues , while our outsourcing services increased by approximately 22.6 % and constituted approximately 49.8 % of total 2013 revenues . revenues from our top five customers as a percentage of total revenues were 12.2 % , 13.2 % and 14.0 % in 2014 , 2013 and 2012 , respectively . revenues from our top ten customers as a percentage of total revenues were 21.3 % , 22.6 % and 25.0 % in 2014 , 2013 and 2012 , respectively . as we continue to add new customers and increase our penetration at existing customers , we expect the percentage of revenues from our top five and top ten customers to continue to decline over time . 41 revenue - reportable segments . revenues by reportable business segment were as follows : replace_table_token_9_th revenue from our financial services segment grew 15.3 % or $ 568.0 million in 2014 , as compared to 2013 . our banking and insurance customers contributed approximately $ 344.1 million and $ 223.9 million , respectively , to the year-over-year revenue increase . in this segment , revenue from customers added during 2014 was approximately $ 49.6 million and represented 8.7 % of the year-over-year revenue increase in this segment . key areas of focus for our financial services customers included cost optimization , regulatory and compliance driven initiatives , risk management , and the adoption and integration of digital technologies to align with shifts in consumer preferences . revenue from our financial services segment grew 22.5 % or $ 682.1 million in 2013 , as compared to 2012 . this strength was driven by revenue growth of $ 494.1 million from our banking customers who benefited from the improving economy . in 2013 , revenue from customers added during that year was approximately $ 75.3 million and represented 11.0 % of the year-over-year revenue increase in this segment . revenue from our healthcare segment grew 18.7 % or $ 424.6 million in 2014 , as compared to 2013 . during 2014 , revenue growth was stronger among our healthcare customers , where revenue increased by approximately $ 340.3 million as compared to an increase of approximately $ 84.3 million from our life sciences customers . revenue growth among our healthcare customers includes $ 80.6 million from our november 20 , 2014 acquisition of trizetto . revenue from customers added during 2014 , including new customers from our acquisition of trizetto , was approximately $ 158.1 million and represented 37.2 % of the year-over-year revenue increase in this segment . although discretionary spending by our healthcare customers recently has been negatively affected by uncertainty created by regulatory changes , including the affordable care act initiatives in the united states , we believe that the healthcare industry continues to present a growth opportunity in the long term . additionally , in 2014 , it spending by some of our life sciences customers has been and may continue to be adversely impacted by the patent cliff affecting the pharmaceutical industry . revenue from our healthcare segment grew 17.1 % or $ 329.9 million in 2013 , as compared to 2012 . in 2013 , growth within the segment was driven by work related to affordable care act initiatives , including extended support for member enrollment and the implementation of direct to customer programs through mobile platforms . revenue from customers added during 2013 was approximately $ 30.4 million and represented 9.2 % of the year-over-year revenue increase in this segment . revenue from our manufacturing/retail/logistics segment grew 12.1 % or $ 225.3 million in 2014 , as compared to 2013 . during 2014 , growth was stronger among our manufacturing and logistics customers , where revenue increased by approximately $ 124.4 million as compared to approximately $ 100.8 million for our retail and hospitality customers . revenue from customers added during 2014 was approximately $ 59.6 million and represented 26.5 % of the year-over-year revenue increase in this segment . demand within this segment continues to be driven by multichannel commerce implementation and integration efforts , analytics , supply chain consulting and implementation initiatives , and increased adoption of digital technologies to align with shifts in consumer preferences . discretionary spending by our retail customers has been and may continue to be affected by recent weakness in the retail sector . revenue from our manufacturing/retail/logistics segment grew 24.7 % or $ 369.6 million in 2013 , as compared to 2012 . in 2013 , growth within this segment was stronger among our manufacturing and logistics customers , where revenue increased by approximately $ 200.0 million , while revenue for our retail and hospitality customers increased by approximately $ 169.6 million . in 2013 , revenue from customers added during that year was approximately $ 79.9 million and represented 21.6 % of the year-over-year revenue increase in this segment . revenue from our other segment grew 20.3 % or $ 201.6 million in 2014 , as compared to 2013 . in 2014 , growth within other was strong among our telecommunication and high technology customers , where revenue increased by approximately $ 93.3 million and $ 71.0 million , respectively , due to an increase in discretionary spending . revenue from customers added during 2014 was approximately $ 30.8 million and represented 15.3 % of the year-over-year revenue increase in this segment . revenue from our other segment grew 13.1 % or $ 115.0 million in 2013 , as compared to 2012 . in 2013 , growth within other was particularly strong among our high technology customers , where revenue increased by approximately $ 54.0 million due to an increase in discretionary spending . story_separator_special_tag in 2013 , revenue from customers added during that year was approximately $ 57.9 million and represented 50.3 % of the year-over-year revenue increase in this segment . 42 revenue - geographic locations . revenues by geographic market , as determined by customer location , were as follows : replace_table_token_10_th north america continues to be our largest market representing approximately 76.8 % of total revenue in 2014 and accounting for $ 1,019.7 million of the $ 1,419.5 million revenue increase in 2014 . revenue growth among our north america customers includes $ 80.6 million from our november 20 , 2014 acquisition of trizetto . revenue from europe grew 19.3 % in 2014 driven by the increasing acceptance of our global delivery model . revenue growth in 2014 for our rest of europe market includes the full-year benefit of our acquisition of equinox consulting , which closed in the fourth quarter of 2013 . we believe the european market is under-penetrated and represents a significant future growth opportunity for us . in 2013 , revenue in europe grew 32.1 % . excluding approximately $ 93.5 million of revenue from our 2013 acquisitions of the c1 group companies and equinox consulting , revenue from europe grew 24.3 % in 2013 . the 2013 revenue growth in europe was driven by the strength of europe 's economy and the increasing acceptance of our global delivery model . revenue growth from rest of world customers in 2014 was primarily driven by the india , singapore , australia , japan and hong kong markets . in 2013 , the revenue growth for rest of world was driven primarily by the middle east , singapore and india markets . we believe that europe , the middle east , the asia pacific and latin america regions will continue to be areas of significant investment for us as we see these regions as growth opportunities for the long term . in 2015 , we expect the recent strength of the u.s. dollar to negatively impact our revenue from countries outside the united states , primarily eurozone countries and the u.k. cost of revenues ( exclusive of depreciation and amortization expense ) . our cost of revenues consists primarily of salaries , incentive-based compensation , stock-based compensation expense , payroll taxes , employee benefits , immigration and project-related travel for technical personnel , subcontracting and sales commissions related to revenues . our cost of revenues increased by 16.6 % or $ 875.6 million during 2014 as compared to an increase of approximately 23.1 % or $ 987.2 million during 2013 . in both 2014 and 2013 , the increase was due primarily to an increase in compensation and benefits costs . in 2014 , compensation and benefit costs increased by approximately $ 650.6 million as a result of the increase in the number of our technical personnel , partially offset by lower incentive-based compensation costs in 2014 as compared to 2013 . in 2013 , the increase in compensation and benefit costs , including incentive-based compensation , was approximately $ 870.2 million as a result of the increase in the number of our technical personnel and higher accrual of individual bonus payouts as compared to 2012. selling , general and administrative expenses . selling , general and administrative expenses consist primarily of salaries , incentive-based compensation , stock-based compensation expense , payroll taxes , employee benefits , immigration , travel , marketing , communications , management , finance , administrative and occupancy costs . selling , general and administrative expenses , including depreciation and amortization , increased by 17.7 % or $ 336.9 million during 2014 as compared to an increase of approximately 11.3 % or $ 193.1 million during 2013 . selling , general and administrative expenses , including depreciation and amortization , increased as a percentage of revenue to 21.8 % in 2014 as compared to 21.5 % in 2013 and 23.2 % in 2012 . in 2014 , the increase as a percentage of revenue was due primarily to an increase in compensation and benefit costs ( net of the impact of lower incentive-based compensation costs ) , professional services , including acquisition-related costs , and investments to grow our business , partially offset by the favorable impact of the depreciation of the indian rupee versus the u.s. dollar , and lower realized losses on our cash flow hedges in 2014 compared to 2013 . income from operations and operating margin - overall . income from operations increased 12.3 % , or approximately $ 207.0 million in 2014 as compared to an increase of 23.2 % or approximately $ 316.4 million in 2013 . our operating margin decreased to 18.4 % of revenues in 2014 from 19.0 % of revenues in 2013 , due to increases in compensation and benefit costs ( net of the impact of lower incentive-based compensation ) , subcontractor expense , professional fees and investments to grow our business , partially offset by the impact of the depreciation of the indian rupee against the u.s. dollar and lower realized losses on our cash flow hedges in 2014 compared to 2013 . in 2013 , operating margin increased to 19.0 % of revenues from 18.5 % of revenues in 2012 , due to revenue growth outpacing headcount growth and the impact of the depreciation of the indian rupee against the u.s. dollar , net of losses on our cash flow hedges , partially offset by increases in compensation and benefit costs , including incentive-based compensation costs . excluding the impact of applicable designated cash flow hedges , the 43 depreciation of the indian rupee against the u.s. dollar positively impacted our operating margin by approximately 86 basis points or 0.86 percentage points in 2014 and 209 basis points or 2.09 percentage points in 2013 . each additional 1.0 % change in exchange rate between the indian rupee and the u.s. dollar will have the effect of moving our operating margin by approximately 20 basis points or 0.20 percentage points .
| in connection with the acquisition , we entered into a credit agreement ( the `` credit agreement '' ) with a commercial bank syndicate providing for a $ 1,000.0 million unsecured term loan ( the `` term loan '' ) and $ 750.0 million unsecured revolving credit facility ( the `` revolving facility '' ) . we funded the purchase price for the acquisition of trizetto with cash on hand and the $ 1,000.0 million of proceeds of the term loan . in 2014 , our revenue increased to $ 10,262.7 million compared to $ 8,843.2 million in 2013 . net income increased to $ 1,439.3 million or $ 2.35 per diluted share , compared to net income of $ 1,228.6 million or $ 2.02 per diluted share . on a non-gaap basis our 2014 diluted earnings per share increased to $ 2.60 1 compared to $ 2.27 1 during 2013 . the key drivers of our revenue growth in 2014 were as follows : solid performance across all of our business segments with revenue growth ranging from 12.1 % to 20.3 % ; sustained strength in the north american market where revenues grew 14.9 % , inclusive of post-acquisition trizetto revenue of $ 80.6 million , as compared to 2013 ; continued penetration of the european and rest of world ( primarily the asia pacific ) markets where we experienced revenue growth of 19.3 % and 23.6 % , respectively , as compared to 2013 ; increased customer spending on discretionary projects ; expansion of our service offerings , including consulting , it is , and bps services , which enabled us to cross-sell new services to our customers and meet the rapidly growing demand for complex large-scale outsourcing solutions ; increased penetration at existing customers , including strategic clients ; and continued expansion of the market for global delivery of it services and bps . _ 1 non-gaap diluted earnings per share is not a measurement of financial performance prepared in accordance with gaap . see “ non-gaap financial measures ” for more information and a reconciliation to the most directly comparable gaap financial
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our byproduct margins were under pressure in the fourth quarter due to the advanced reformer outage as we sold byproducts at prices below the cost of feedstock . specialty wax operations most wax markets are mature . key applications for our polyethylene waxes are in hot melt adhesives ( `` hma '' ) , plastic processing , pvc lubricants and inks , paints and coatings , where they act as surface or rheology modifiers . the hma market is expected to grow at a higher rate than gdp growth due to growth in the developing markets and increases in packaging requirements due to changes in consumer purchasing ( shift to home deliveries via the internet ) in developed economies . road marking paints are also expected to grow at rates exceeding gdp growth based upon an expectation that there will be infrastructure investment in the u.s. the pvc market is expected to grow at gdp rates ; however , we expect to get more traction of our products within this market with acceptance of our new pvc grade waxes . the global wax market is benefiting from the reduction of paraffin wax availability from large refiners as they move toward more hydrocracking and hydroisomerization to produce group iii lube oils and distillate . our wax sales volume increased approximately 5 % in 2018 from 2017 while revenues increased approximately 13 % . 25 restructuring and severance impact during 2018 , the company incurred restructuring and severance expenses of $ 2.3 million which are included in general and administrative expenses . these expenses are primarily attributable to the termination of certain executives during 2018 as part of the restructuring of executive management and to the reduction in the workforce at our silsbee , texas facility in december 2018. these expenses relate to severance , stock compensation for continued vesting of time-vested shares issued under the company 's long-term incentive plan , and certain employee benefits including medical insurance and vacation . as of december 31 , 2018 , approximately $ 1.1 million had been incurred , and an additional liability of $ 1.2 million was accrued related to future benefits . hurricane harvey impact the financial impact of hurricane harvey to our company was significant . harvey made landfall on the texas gulf coast on august 25 , 2017 , and affected operations at both shr and tc . we estimated the total negative impact to 2017 ebitda ranged from approximately $ 1.5 million to $ 1.8 million . this included expenses related to generator rentals , overtime labor , and maintenance and repairs of approximately $ 0.7 million . this estimate also included lost sales due to outages at customer and supplier facilities . neither of our facilities suffered any significant damage . liquidity and capital resources working capital our approximate working capital days are summarized as follows : replace_table_token_9_th our days sales outstanding in accounts receivable remained steady from 2016 to 2017 but decreased from 2017 to 2018 due to greater increase in sales revenue relative to the increase in receivables . our days sales outstanding in inventory decreased from 2017 to 2018 due to a planned reduction in inventory at tc . our days sales outstanding in accounts payable decreased due to a decrease in payables because of the completion of certain capital construction projects at shr . sources and uses of cash cash and cash equivalents increased by $ 3.7 million during the year ended december 31 , 2018. the change in cash and cash equivalents is summarized as follows : replace_table_token_10_th operating activities operating activities generated cash of $ 19.9 million during fiscal 2018 as compared with $ 30.8 million of cash provided during fiscal 2017. net income decreased by $ 20.3 million and cash provided by operations decreased by $ 10.9 million from 2017 to 2018 due primarily to the following factors : net income for 2018 included a non-cash depreciation and amortization charge of $ 14.4 million as compared to 2017 which included a non-cash depreciation and amortization charge of $ 11.0 million ; net income for 2018 included non-cash deferred income tax liability of $ 1.6 million as compared to non-cash deferred income tax liability of $ 5.8 million in 2017 ; 26 trade receivables decreased $ 1.5 million in 2018 as compared to an decrease of $ 3.6 million in 2017 ; income taxes receivable decreased $ 5.4 million in 2018 ( primarily due to collection of federal and state research and development credits , carryback claims , and refunds of tax payments on deposit ) as compared to an increase of $ 1.6 million in 2017 ( primarily due to federal and state research and development credits and carryback claims ) ; and inventory decreased $ 1.9 million in 2018 as compared to an increase of $ 0.6 million in 2017. these significant sources of cash were partially offset by the following decreases in cash provided by operations : net income for 2018 included a non-cash equity in loss from amak of $ 0.9 million as compared to a non-cash equity in loss from amak of $ 4.3 million in 2017 ; and accounts payable and accrued liabilities decreased $ 2.2 million in 2018 as compared to a decrease of $ 7.0 million in 2017 due to the release of post-retirement obligations to a former director as well as the completion of certain capital projects . story_separator_special_tag operating activities generated cash of $ 30.8 million during fiscal 2017 as compared with $ 28.5 million of cash provided during fiscal 2016. net income decreased by $ 1.4 million from 2016 to 2017 ; however , cash provided by operations increased by $ 2.3 million due primarily to the following factors : net income for 2017 included a non-cash equity in loss from amak of $ 4.3 million as compared to a non-cash equity in loss from amak of $ 1.5 million and a $ 3.2 million gain from additional equity issuance by amak in 2016 ; net income for 2016 included a non-cash bargain purchase gain from the b plant acquisition of $ 11.5 million as compared to 2017 which had no gain ; net income for 2017 included a non-cash depreciation and amortization charge of $ 11.0 million as compared to 2016 which included a non-cash depreciation and amortization charge of $ 9.8 million ; accounts payable and accrued liabilities increased $ 7.0 million in 2017 ( primarily due to increased construction expenditures ) as compared to an increase of $ 3.2 million in 2016 ( also primarily due to construction projects ) ; prepaid expenses and other assets increased $ 0.8 million in 2017 ( primarily due to the inventorying of spares parts ) as compared to an increase of $ 1.0 million in 2016 ( primarily due to license fees for the advanced reformer unit being constructed ) ; and inventory increased $ 0.6 million in 2017 ( primarily due to an increase in deferred sales which increases inventory in transit ) as compared to an increase of $ 2.1 million in 2016 ( due to lower sales volume ) . these significant sources of cash were partially offset by the following decreases in cash provided by operations : net income for 2017 included non-cash deferred income tax liability of $ 5.8 million as compared to non-cash deferred income tax benefit of $ 8.7 million in 2016 ; income taxes receivable increased $ 1.6 million in 2017 ( primarily due to federal and state claims filed for research and development credits and carryback claims ) as compared to an decrease of $ 3.7 million in 2016 ( primarily due to overpayments being applied to 2016 estimated taxes ) ; and trade receivables increased $ 3.6 million in 2017 ( primarily due to an increase in the average selling price ) as compared to an increase of $ 2.8 million in 2016 ( due to an increase in wax sales in december and longer payment terms for some foreign customers because of increased shipping times ) ; investing activities cash used by investing activities during fiscal 2018 was approximately $ 19.9 million , representing a decrease of approximately $ 31.8 million compared to fiscal 2017. the majority of the decrease was due to the completion of construction projects for the advanced reformer unit . during 2018 , major capital expenditures included $ 14.9 million to complete the advanced reformer unit , which includes $ 1 million insurance deductible related to the february 2018 fire and $ 3 million for the catalyst replacement in december 2018 , $ 1.3 million for a rail spur addition at shr and 0.5 million for a loading rack at shr . cash used by investing activities during fiscal 2017 was approximately $ 51.7 million , representing an increase of approximately $ 11.2 million over the corresponding period of 2016. the majority of the increase was due to the construction projects for the hydrogenation/distillation unit and the advanced reformer unit . during 2017 , we expended $ 10.8 million on the hydrogenation/distillation project , $ 0.9 million to upgrade b plant , $ 32.5 million to construct the advanced reformer unit , $ 1.9 million for railspur addition , $ 1.0 million for additional tankage and upgrades to existing tankage , $ 0.9 million for transport trucks , and $ 3.7 million on various plant improvements and equipment . 27 financing activities cash provided by financing activities during fiscal 2018 was approximately $ 3.7 million versus cash provided of $ 15.5 million during fiscal 2017. during 2018 , we increased our line of credit and consolidated our acquisition and term loans . we made principal payments of $ 15.4 million on our term debt . we drew $ 18.2 million on our revolving line of credit , primarily to fund our capital projects . see note 12 for additional discussion on long-term debt . cash provided by financing activities during fiscal 2017 was approximately $ 15.5 million versus cash provided of $ 1.8 million during the corresponding period of 2016. during 2017 we made principal payments of $ 8.7 million on our acquisition loan and $ 1.7 million on our term debt . we drew $ 26.0 million on our line of credit primarily to fund our capital projects . credit agreement in october 2014 , tocco , shr , gspl and tc ( shr , gspl and tc collectively the “ guarantors ” ) entered into an amended and restated credit agreement ( as amended to the date hereof , the “ arc agreement ” ) , which originally provided ( i ) a revolving credit facility ( which we refer to herein as the “ revolving facility ” ) with revolving commitments of $ 40.0 million and ( ii ) term loan borrowings consisting of ( a ) a $ 70.0 million single advance term loan incurred to partially finance the acquisition of tc ( which we refer to as the “ acquisition loan ” ) and ( b ) a $ 25.0 multiple advance term loan facility for which borrowing availability ended on december 31 , 2015 ( which we collectively refer to herein as the “ term loan facility ” and , together with the revolving facility , the “ credit facilities ” ) .
| additionally , prices for byproducts in 2018 were about 24 % higher than in 2017 due to higher prices for the components in our byproducts stream . this also contributed to higher overall selling prices . byproduct prices fell significantly during the fourth quarter due to the advanced reformer outage and inability to upgrade byproducts . additionally , in the fourth quarter byproduct prices fell faster than feedstock prices resulting in negative margins . prime product sales volume ( total specialty petrochemical product sales volume less byproduct sales volume ) increased 8.5 % from 2017 to 2018 as demand was greater in all of our end-use markets and especially in the canadian oil sands market . sales to the canadian oil sands market continues to be volatile . we believe the volatility in demand is primarily based on continued manufacturing efficiencies at customer sites and by the crude oil pricing environment . margins on our specialty petrochemical products continued to be negatively impacted by shortfall fees that we incurred due to feedstock purchases below minimum amounts as prescribed by our agreement with suppliers . however the amount of the penalties in 2018 were significantly less than 2017. foreign sales volume accounted for approximately 25.5 % of volume and 27.6 % of revenue for specialty petrochemical product sales during 2018 as compared to 20.4 % of volume and 23.3 % of revenue during 2017. the increase in foreign sales volume was 30 due to higher demand in the canadian oils sands market . excluding oil sands , foreign sales volumes in 2018 grew by 22 % from 2017 . 2016-2017 specialty petrochemical product sales increased 17.5 % from 2016 to 2017 due to an increase in total sales volume of 9.1 % and an increase in average selling price of 7.7 % . our average selling price increased partly because a large portion of our sales are contracted with pricing formulas which are tied to prior month natural gasoline prices which is our
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we anticipate that our expenses will increase significantly in connection with our ongoing activities , as we : ● continue investing in our gene therapy platform to optimize capsid engineering and payload development , manufacturing , dosing , and delivery techniques ; ● work with our collaboration partner neurocrine to advance vy-aadc ( nbib-1817 ) as a treatment for parkinson 's disease through phase 1 development and the vy-aadc restore-1 phase 2 clinical trial ; ● initiate additional preclinical studies and clinical trials for , and continue research and development of , our other programs ; ● conduct joint research and development under our strategic collaborations for the research , development , and commercialization of certain of our pipeline programs ; ● continue our process research and development activities , as well as establish our research-grade and commercial manufacturing capabilities ; ● identify additional neurological diseases for treatment with our aav gene therapies and develop additional programs or product candidates ; ● work to identify and optimize novel aav capsids ; ● expand our manufacturing capabilities ; ● develop , obtain and maintain regulatory clearances for devices to deliver our aav gene therapies , and to provide financial and operating support to partners manufacturing and supplying these devices for use in our clinical development program ; 127 ● seek marketing and regulatory approvals for vy-aadc ( nbib-1817 ) or other product candidates or devices that arise from our programs that successfully complete clinical development ; ● maintain , expand , protect and enforce our intellectual property portfolio ; ● identify , acquire or in-license other product candidates and technologies ; ● develop a sales , marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval ; ● expand our operational , financial and management systems and personnel , including personnel to support our clinical development , manufacturing and commercialization efforts and our operations as a public company ; ● increase our product liability and clinical trial insurance coverage as we expand our clinical trials and commercialization efforts ; and ● continue to operate as a public company . financial operations overview revenue to date , we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future . for the year ended december 31 , 2019 , we recognized $ 31.8 million of collaboration revenue from the sanofi genzyme collaboration , $ 11.3 million of collaboration revenue from the abbvie tau collaboration , $ 1.3 million of collaboration revenue from the abbvie alpha-synuclein collaboration , and $ 60.0 million of collaboration revenue from the neurocrine collaboration . for additional information about our revenue recognition policy related to the collaborations , see the section titled “ —critical accounting policies and estimates—revenue. ” for the foreseeable future , we expect substantially all of our revenue will be generated from our collaboration agreements with abbvie , neurocrine , and any other strategic relationships we may enter into . if our development efforts are successful , we may also generate revenue from product sales . expenses research and development expenses research and development expenses consist primarily of costs incurred for our research activities , including our program discovery efforts , and the development of our programs and gene therapy platform , which include : ● employee-related expenses including salaries , benefits , and stock-based compensation expense ; ● costs of funding research performed by third parties that conduct research and development , preclinical activities , manufacturing and production design on our behalf ; ● the cost of purchasing lab supplies and non-capital equipment used in designing , developing and manufacturing preclinical study materials ; ● consultant fees ; 128 ● facility costs including rent , depreciation and maintenance expenses ; and ● fees for maintaining licenses under our third-party licensing agreements . research and development costs are expensed as incurred . costs for certain activities , such as manufacturing , preclinical studies , and clinical trials , are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators . 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 our product candidates . we are also unable to predict when , if ever , material net cash inflows will commence from sales of our product candidates . this is due to the numerous risks and uncertainties associated with developing such product candidates , including the uncertainty of : ● successful enrollment in and completion of clinical trials ; ● establishing an appropriate safety profile ; ● establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers ; ● receipt of marketing approvals from applicable regulatory authorities ; ● commercializing the product candidates , if and when approved , whether alone or in collaboration with others ; ● obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates ; ● continued acceptable safety profiles of the products following approval ; and ● retention of key research and development personnel . a change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs , timing and viability associated with the development of that product candidate . research and development activities are central to our business model . we expect research and development costs to increase significantly for the foreseeable future as our development programs progress , including as we continue to support pd-1101 and pd-1102 and continue to enroll the restore-1 phase 2 clinical trial of vy-aadc ( nbib-1817 ) as a treatment for parkinson 's disease , and move our other product candidates into clinical trials . additionally , we expect research and development costs associated with activities under our strategic collaborations to increase . story_separator_special_tag there are numerous factors associated with the successful commercialization of any of our product candidates , including future trial design and various regulatory requirements , many of which can not be determined with accuracy at this time based on our stage of development . additionally , future commercial and regulatory factors beyond our control will impact our clinical development programs and plans . general and administrative expenses general and administrative expenses consist primarily of salaries and other related costs , including stock-based compensation , for personnel in executive , finance , accounting , business development , legal and human resource functions . other significant costs include corporate facility costs not otherwise included in research and development expenses , legal fees related to patent and corporate matters and fees for accounting and consulting services . 129 we anticipate that our general and administrative expenses will increase in the future to support continued research and development activities , including the restore-1 phase 2 clinical trial of vy-aadc ( nbib-1817 ) , the expanded efforts in connection with our strategic collaborations , and the ongoing research and development activities and initiation of clinical trials for our other product candidates . these increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants . we also anticipate increased expenses associated with being a public company , including costs for audit , legal , regulatory , and tax-related services , director and officer insurance premiums , business development activities , and investor relations costs . other income ( expense ) other income ( expense ) consists primarily of the gain ( loss ) on the equity securities investment in clearpoint neuro , inc. ( formerly known as mri interventions , inc ) , or clpt . critical accounting policies and estimates our management 's discussion and analysis of our consolidated financial condition and results of operations are based on our consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . the preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets , liabilities , revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements . we base our estimates on historical experience , known trends and events , and various other factors that are believed to be reasonable under the circumstances . actual results may differ from these estimates under different assumptions or conditions . on an ongoing basis , we evaluate our judgments and estimates in light of changes in circumstances , facts and experience . the effects of material revisions in estimates , if any , will be reflected in the financial statements prospectively from the date of change in estimates . while our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this annual report on form 10-k , we believe the following accounting policies used in the preparation of our financial statements require the most significant judgments and estimates . revenue recognition – asc 606 as of december 31 , 2019 , our revenue was generated from the sanofi genzyme collaboration , the abbvie tau collaboration , the abbvie alpha-synuclein collaboration , and the neurocrine collaboration . we recognize revenue in accordance with financial accounting standards board , or fasb , accounting standards codification , or asc , topic 606 revenue from contracts with customers , or asc 606. effective january 1 , 2018 , we adopted the provisions of asc 606 using the modified retrospective transition method . under this method , we recorded the cumulative effect of initially applying the new standard to all contracts as of the date of adoption . we enter into collaboration agreements which are within the scope of asc 606 , under which we license rights to certain of our product candidates and perform research and development services . the terms of these arrangements typically include payment of one or more of the following : non-refundable , upfront fees ; reimbursement of research and development costs ; development , regulatory and commercial milestone payments ; and royalties on net sales of licensed products . under asc 606 , an entity recognizes revenue when its customer obtains control of promised goods or services , in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services . to determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of asc 606 , we perform the following five steps : ( i ) identification of the promised goods or services in the contract ; ( ii ) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract ; ( iii ) measurement of the transaction price , including the constraint on variable consideration ; ( iv ) allocation of the transaction price to the performance obligations ; and ( v ) recognition of revenue when ( or as ) we satisfy each performance obligation . we only apply the five-step model to contracts when it is probable that we will collect consideration we are entitled to in exchange for the goods or services we transfer to the customer . 130 the promised goods or services in our arrangement typically consist of license rights to our intellectual property or research and development services . we provide options to additional items in the contracts , which are accounted for as separate contracts when the customer elects to exercise such options , unless the option provides a material right to the customer . we evaluate the customer options for material rights , or options to acquire additional goods or services for free or at a discount . if the customer options are determined to represent a material right , the material right is recognized as a separate performance obligation at the outset of the arrangement .
| additionally , we recognized $ 11.3 million , $ 1.3 million , and $ 60.0 million of revenue related to the abbvie tau collaboration , abbvie alpha-synuclein collaboration , and the neurocrine collaboration , respectively , for collaboration-related services provided and expenses reimbursed . research and development expense research and development expense increased by $ 54.8 million from $ 64.9 million for the year ended december 31 , 2018 to $ 119.7 million for the year ended december 31 , 2019. the following table summarizes our research and development expenses for the years ended december 31 , 2019 and 2018 : replace_table_token_5_th 134 the change in research and development expense for the year ended december 31 , 2019 was primarily attributable to the following : ● approximately $ 35.3 million for increased external research and development costs primarily related to clinical and manufacturing activities on for the parkinson 's disease program , which we refer to as the vy-aadc program , and preclinical and manufacturing activities for our vy-htt01 for huntington 's disease , which we refer to as our huntington 's program . ● approximately $ 12.1 million for increased research and development employee-related and consultant compensation costs ( including an increase of $ 2.7 million in stock-based compensation ) as we continue to increase research and development headcount to support our program pipeline ; and ● approximately $ 7.4 million for increased facility and other costs including rent , depreciation , maintenance and other expenses due to the additional space leased at 64 sidney street and 75 sidney street ; general and administrative expense general and administrative expense increased by $ 2.5 million from $ 33.8 million for the year ended december 31 , 2018 to $ 36.3 million for the year ended december 31 , 2019. the change in general and administrative expense was primarily attributable to the following : ● approximately $ 6.4 million for increased employee compensation cost due to increases in headcount and stock-based compensation . the increase is offset by the recognition of $ 5.4 million of stock-based compensation related to the retirement agreement with our former chief executive officer , dr. steven paul for
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the company calculated that europe 's 2015 net sales were negatively affected by approximately $ 16.2 million due to european currencies weakening against the united states dollar . in local currencies , europe 's overall net sales increased in 2015 compared to 2013 , primarily due to increases in unit sales volume , partly offset by a slight decrease in average sales prices . ◦ asia/pacific — net sales decreased to $ 9.4 million in 2015 from $ 14.8 million in 2013 , due to the closing of sales offices in china , thailand and dubai , which accounted for approximately $ 5.8 million of the total decrease in net sales in the region . sales channels and product groups : ◦ net sales to contractor distributors , lumber dealers and dealer distributors increased significantly in 2015 compared to 2013 due to increased construction activity . ◦ wood construction product net sales , including connectors , truss plates , fastening systems , fasteners and shearwalls , increased 13.0 % to $ 674.3 million in 2015 from $ 596.8 million in 2013 , primarily due to increased unit sales volumes on improved economic conditions , partly offset by the negative effects of foreign currency translation . ◦ concrete construction product sales , including adhesives , chemicals , mechanical anchors , powder actuated tools and reinforcing fiber materials , increased 10.3 % to $ 119.5 million in 2015 from $ 108.3 million in 2013 , primarily due to increased unit sales volumes on improved economic conditions , partly offset by the negative effects of foreign currency translation as well as the closure of sales offices located in china , thailand and dubai . gross profit gross profit margin increased to 45.2 % in 2015 from 44.5 % in 2013 . wood construction products represented 85 % of total sales in both 2015 and 2013 . the overall 2015 gross profit margin as a percentage of sales was up due to increased profit margins on the sale of wood construction products . the gross profit margin differential between wood construction products and concrete construction products increased to 16 % in 2015 from 13 % in 2013 . operating expenses operating expenses increased in dollar amounts , but decreased as a percentage of net sales , and were $ 249.9 million , or 31.5 % of net sales , in 2015 , compared to $ 232.1 million , or 32.9 % of net sales , in 2013 . the increase in operating expenses was primarily due to the support of new products lines , which included increased personnel costs , mostly related to the addition of staff , and software development costs , as well as increased cash profit sharing expense related to increased operating profits , partly offset by the effects of foreign currency translation . 28 story_separator_special_tag style= '' width:36px ; '' > product mix - the gross profit margin differential between wood construction products and concrete construction products , which have lower gross profit margins , was 16 % and 12 % in 2015 and 2014 , respectively . the increased gross profit margin differential between the two product groups , coupled with increased concrete construction product sales in 2015 , also negatively affected the company 's overall gross profit margin . the lower gross profit margins on concrete construction products negatively affected gross margins in north america , with concrete construction products representing 13 % of north america net sales in 2015 and 2014 , and in europe , with concrete construction products at 23 % and 20 % of europe net sales in 2015 and 2014 , respectively . steel prices - given current conditions , including low demand , labor union contract negotiations , anti-dumping and countervailing duty trade cases filed by united states steel producers , the company currently expects that the high degree of uncertainty regarding steel prices will continue . research and development and engineering expense research and development and engineering expense increased 18.4 % to $ 46.2 million in 2015 from $ 39.0 million in 2014 , primarily due to $ 5.9 million in write-offs of software development projects , as well as increases of $ 2.0 million in personnel costs related to the addition of staff and pay rate increases instituted in january 2015 and $ 0.6 million in cash profit sharing expense on increased operating profits , partly offset by a decrease of $ 0.7 million in stock-based compensation costs , most of which occurred in the north america segment . selling expense selling expense decreased 1.5 % to $ 90.7 million in 2015 from $ 92.0 million in 2014 , primarily due to decreases of $ 0.9 million in professional fees , $ 0.7 million in stock-based compensation and $ 0.6 million in advertising costs , partly offset by increases of $ 0.5 million in cash profit sharing and commission expense , $ 0.3 million in agent commission expense and $ 0.2 million in personnel costs related to the addition of staff and pay rate increases instituted in january 2015. north america - selling expense increased $ 0.9 million , primarily due to increases of $ 1.5 million in personnel costs and $ 1.1 million in cash profit sharing and commission expense , partly offset by decreases of $ 0.7 million in stock-based compensation , $ 0.7 million in professional fees and $ 0.4 million in advertising costs . europe - selling expense decreased by $ 0.9 million , primarily due to decreases of $ 1.1 million in personnel costs and $ 0.2 million in professional fees , partly offset by a $ 0.4 million increase in agent commission expense , primarily attributable to differences in exchange rates used for translating local currencies into united states dollars . 31 asia/pacific - selling expense decreased $ 1.3 million , primarily due to decreases of $ 0.6 million in personnel costs and $ 0.5 million in cash profit sharing and sales commissions , both related to closing three sales offices and downsizing one sales office . story_separator_special_tag general and administrative expense general and administrative expense increased 1.7 % to $ 113.4 million in 2015 from $ 111.5 million in 2014 , primarily due to increases of $ 2.2 million in personnel costs related to the addition of staff and pay rate increases instituted in january 2015 , $ 0.6 million in stock-based compensation expense , $ 0.4 million in bad debt expense and $ 0.1 million in cash profit sharing , partly offset by a decrease of $ 1.1 million in amortization expense . north america - general and administrative expense increased $ 2.8 million , primarily due to increases of $ 2.4 million in personnel costs , $ 0.3 million in cash profit sharing expense , $ 0.3 million in stock-based compensation costs and $ 0.2 million in bad debt expense , partly offset by a decrease of $ 0.7 million in amortization expense . europe - general and administrative expense decreased by $ 2.1 million , primarily due to decreases of $ 1.1 million in personnel costs , $ 0.5 million in cash profit sharing and $ 0.3 million in intangible amortization expense , primarily attributable to differences in exchange rates used for translating local currencies into united states dollars . asia/pacific - general and administrative expenses increased by $ 0.3 million , primarily due to increases of $ 0.4 million in personnel costs . administrative and other - general and administrative expense increased by $ 0.9 million , primarily due to increases of $ 0.4 million in personnel cost , $ 0.3 million in stock-based compensation expense and $ 0.2 million in cash profit sharing . income taxes the effective income tax rate in 2015 was 37.5 % as compared to 36.0 % in 2014. the 2015 effective income tax rate was higher primarily due to the 2014 release of an uncertain tax position as well as a solar tax credit for installing solar panels at one of the company 's facilities , which were non-reoccurring . based on current information and subject to future events and circumstances , the company estimates that its 2016 effective tax rate will be between 37 % and 39 % . comparison of the years ended december 31 , 2014 and 2013 net sales increased 6.6 % to $ 752.1 million for 2014 from $ 705.3 million for 2013. the company had net income of $ 63.5 million for 2014 , compared to net income of $ 51.0 million for 2013. diluted net income per common share was $ 1.29 for 2014 , compared to diluted net income of $ 1.05 per common share for 2013. income from operations increased 21.8 % to $ 99.3 million in 2014 from $ 81.5 million in 2013 . 32 the following table shows the change in the company 's operations from 2013 to 2014 , and the increases or decreases for each category by segment . replace_table_token_10_th net sales the following table shows net sales by segment for the years ended december 31 , 2013 and 2014 , respectively : replace_table_token_11_th the following table shows segment net sales as percentages of total net sales for the years ended december 31 , 2013 and 2014 , respectively : replace_table_token_12_th segment net sales : north america - net sales increased 7.2 % in 2014 compared to 2013 , primarily due to increased unit sales volumes , while average prices for the year were down 0.6 % . europe - net sales increased 4.6 % in 2014 compared to 2013 , mostly due to increased unit sales volumes and the effects of foreign currency translations , partly offset by slightly lower average selling prices . however , sales growth trended lower in the last two quarters of 2014 , consistent with declining economic activity in the region , and european currencies have weakened against the united states dollar . consolidated net sales channels and product groups : net sales to lumber dealers , contractor distributors , dealer distributors and home centers increased in 2014 compared to 2013 , due to increased building activity . wood construction product net sales represented 85 % of our total net sales in both 2014 and 2013. concrete construction product net sales represented 15 % of our total net sales in both 2014 and 2013 . 33 gross profit the following table shows gross profit by segment for the years ended december 31 , 2013 and 2014 , respectively : replace_table_token_13_th the following table shows gross profit percentages by segment for the years ended december 31 , 2013 and 2014 , respectively : replace_table_token_14_th gross profit increased to $ 342.0 million in 2014 from $ 313.5 million in 2013. gross profit as a percentage of net sales increased to 45.5 % in 2014 from 44.5 % in 2013. north america - gross profit margin increased to 47.4 % in 2014 from 46.7 % in 2013 , as a result of decreases as a percentage of sales in material , labor and warehousing costs . in 2014 , the gross profit margin was also affected by an atypical non-recurring $ 3.3 million pension charge that resulted from the company 's withdrawal from a multi-employer union-based defined-benefit pension plan , partly offset by an atypical non-recurring $ 2.5 million correction to workers ' compensation expense in states where the company is not self-insured . europe - gross profit margin increased to 38.1 % in 2014 from 37.0 % in 2013 , as a result of decreases as a percentage of sales in factory overhead ( caused by increased unit sales volumes ) and material costs , partly offset by increases in shipping and warehouse and labor costs . product mix - the gross profit margin differential between wood construction products and concrete construction products , which have lower gross profit margins , was 12 % and 13 % in 2014 and 2013 , respectively .
| the company calculated that canada 's 2015 net sales were negatively affected by approximately $ 5.6 million due to the canadian dollar weakening against the united states dollar . in canadian dollars , canada 's overall net sales increased slightly in 2015 compared to 2014. europe - net sales decreased 12.3 % in 2015 compared to 2014 , mostly due to the effects of foreign currency translations . the company calculated that europe 's 2015 net sales were negatively affected by approximately $ 17.6 million due to european currencies weakening against the united states dollar . in local currencies , europe 's overall net sales increased slightly in 2015 compared to 2014. asia/pacific - net sales decreased 38.0 % in 2015 compared to 2014 , primarily due to the closing of sales offices in china , thailand and dubai , which accounted for approximately $ 5.6 million of the total decreases in net sales in the region . foreign currency translations due to the weakening of the respective currencies against the united states dollar negatively affected net sales by approximately $ 0.6 million . consolidated net sales channels and product groups : net sales to contractor distributors , dealer distributors , home centers and lumber dealers increased in 2015 compared to 2014 , primarily due to increased home construction activity . wood construction product net sales , including connectors , truss plates , fastening systems , fasteners and shearwalls , represented 85 % of our total net sales in both 2015 and 2014. concrete construction product sales , including adhesives , chemicals , mechanical anchors , powder actuated tools and reinforcing fiber materials , represented 15 % of our total net sales in both 2015 and 2014. gross profit the following table shows gross profit by segment for the years ended december 31 , 2014 and 2015 , respectively : replace_table_token_8_th 30 the following table shows gross profit percentages by segment for the years ended december 31 , 2014 and 2015 , respectively : replace_table_token_9_th gross profit increased to $ 358.9 million in 2015 from $ 342.0 million in 2014. gross profit
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in the fourth quarter of 2012 , we received u.s. food and drug administration ( fda ) approval of the pcm device , a motion preserving total disc replacement device , which further strengthens our cervical product offerings and enables us to continue our trend of increasing our market share . our nerve monitoring offerings include both the nvm5 and nvjjb products based on our proprietary software-driven nerve monitoring systems and our iom services business , impulse monitoring . revenues . to date , the majority of our revenues are derived from the sale of disposables and implants and we expect this trend to continue for the foreseeable future . we loan our proprietary software-driven nerve monitoring systems and surgical instrument sets at no cost to surgeons and hospitals that purchase disposables and implants for use in individual procedures . in addition , we place our proprietary software-driven nerve monitoring systems , maxcess ® and other mas or cervical surgical instrument sets with hospitals for an extended period at no up-front cost to them . our implants and disposables are currently sold and shipped from our primary distribution and warehousing operations facility located in memphis , tennessee . we generally recognize revenue for disposables or implants used upon receiving acknowledgement of a purchase order from the hospital indicating product use or implantation . in addition , we sell an immaterial number of mas instrument sets , maxcess devices , and our proprietary software-driven nerve monitoring systems . to date , we have derived less than 5 % of our total revenues from these sales . we expect monitoring service revenue from iom services to remain consistent with the current year . monitoring service revenue consists of hospital based revenues and net patient service revenues and is recorded in the period the service is provided . hospital based revenues are recorded based upon contracted billing rates . net patient services are billed to various payers , including medicare , commercial insurance companies , other directly billed managed healthcare plans , employers , and individuals . we report revenues based on the amount expected to be collected . 35 sales and marketing . through 2012 , substantially all of our operations are located in the united states and substantially all of our sales have been generated in the united states . we sell our products in the united states through a sales force comprised of exclusive independent sales agencies and directly-employed sales shareowners ; both selling only nuvasive products . our sales force provides a delivery and consultative service to our surgeon and hospital customers and is compensated based on sales and product placements in their territories . sales force commissions are reflected in our statement of operations in the sales , marketing and administrative expense line . we expect to continue to expand our distribution channels . we are continuing our expansion of international sales efforts with the focus on european , asian and latin american markets . our international sales force is comprised of directly-employed sales shareowners as well as exclusive distributors and independent sales agents . critical accounting policies our discussion and analysis of our financial condition and results of operations is based upon our audited consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states ( gaap ) . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . on an ongoing basis , we evaluate our estimates including those related to bad debts , inventories , valuation of goodwill , intangibles , other long-term assets , stock-based compensation , income taxes , and legal proceedings . we base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources . actual results may differ from these estimates . we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements . revenue recognition . we follow the provisions of the securities and exchange commission staff accounting bulletin ( sab ) no . 104 , revenue recognition , which sets forth guidelines for the timing of revenue recognition based upon factors such as passage of title , installation , payment and customer acceptance . we recognize revenue when all four of the following criteria are met : ( i ) persuasive evidence that an arrangement exists ; ( ii ) delivery of the products and or services has occurred ; ( iii ) the selling price is fixed or determinable ; and ( iv ) collectability is reasonably assured . specifically , revenue from the sale of implants and disposables is recognized upon acknowledgement of a purchase order from the hospital indicating product use or implantation or upon shipment to third-party customers who immediately accept title . revenue from the sale of our instrument sets is recognized upon receipt of a purchase order and the subsequent shipment to customers who immediately accept title . monitoring service revenue consists of hospital based revenues and net patient service revenues and is recorded in the period the service is provided . hospital based revenues are recorded based upon contracted billing rates . net patient services are billed to various payers , including medicare , commercial insurance companies , other directly billed managed healthcare plans , employers , and individuals . we report revenues from contracted payers , including medicare , certain insurance companies and certain managed healthcare plans , based on the contractual rate , or in the case of medicare , the published fee schedules . we report revenues from non-contracted payers , including certain insurance companies and individuals , based on the amount expected to be collected . story_separator_special_tag the difference between the amount billed and the amount expected to be collected from non-contracted payers is recorded as a contractual allowance to arrive at net revenues . the expected revenues from non-contracted payers are based on the historical collection experience of each payer or payer group , as appropriate . in each reporting period , we review our historical collection experience for non-contracted payers and adjust our expected revenues for current and subsequent periods accordingly . allowance for doubtful accounts and sales return reserve . we maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments . the allowance for doubtful accounts is reviewed quarterly and is estimated based on the aging of account balances , collection history and known trends with current customers and in the economy in general . as a result of this review , the allowance is adjusted on a specific identification basis . an increase to the allowance for doubtful accounts results in a corresponding charge to sales , marketing and administrative expense . if the historical data used to calculate the allowance provided for doubtful accounts does not reflect the company 's future ability to collect outstanding receivables or if the financial condition of customers were to deteriorate , resulting in impairment of their ability to make payments , an increase in the provision for doubtful accounts may be required . we maintain a relatively large customer base that mitigates the risk of concentration with any one particular customer . however , if the overall condition of the healthcare industry were to deteriorate , or if the historical data used to calculate the allowance provided for doubtful accounts does not accurately reflect our customer 's future failure to pay outstanding receivables , significant additional allowances could be required . in addition , we establish a reserve for estimated sales returns that is recorded as a reduction to revenue . this reserve is maintained to account for future return of products sold in the current period . this reserve is reviewed quarterly and is estimated based on an analysis of our historical experience related to product returns . excess and obsolete inventory . we provide an inventory reserve for estimated obsolescence and excess inventory based upon historical turnover and assumptions about future demand for our products and market conditions . our allograft products 36 have shelf lives ranging from two to five years and are subject to demand fluctuations based on the availability and demand for alternative products . our inventory , which consists primarily of disposables and specialized implants , is at risk of obsolescence following the introduction and development of new or enhanced products . our estimates and assumptions for excess and obsolete inventory are reviewed and updated on a quarterly basis . the estimates we use for demand are also used for near-term capacity planning and inventory purchasing and are consistent with our revenue forecasts . increases in the reserve for excess and obsolete inventory result in a corresponding charge to cost of goods sold . a stated goal of our business is to focus on continual product innovation and to obsolete our own products . while we believe this provides a competitive edge , it also results in the risk that our products and related capital instruments will become obsolete prior to sale or to the end of their anticipated useful lives . if we introduce new products or next-generation products , we may be required to dispose of existing inventory prior to the end of its estimated useful life and or write off the value or accelerate the depreciation of the capital instruments . financial instruments and fair value . inputs to valuation techniques are observable or unobservable . observable inputs reflect market data obtained from independent sources , while unobservable inputs reflect our market assumptions . these two types of inputs have created the following fair-value hierarchy : level 1 : quoted prices ( unadjusted ) in active markets that are accessible at the measurement date for assets or liabilities . level 2 : observable prices that are based on inputs not quoted on active markets , but corroborated by market data . level 3 : unobservable inputs are used when little or no market data is available . this hierarchy requires us to minimize the use of unobservable inputs and to use observable market data , if available , when determining fair value . we recognize transfers between levels of this hierarchy based on the fair values of the respective financial instruments at the end of the reporting period in which the transfer occurred . changes in fair value are recognized in earnings each period for financial instruments that are carried at fair value . the types of instruments that trade in markets that are not considered to be active , but are valued based on quoted market prices , broker or dealer quotations , or alternative pricing sources with reasonable levels of price transparency are generally classified within level 2 of the fair value hierarchy . as more fully discussed in notes 1 and 4 to the consolidated financial statements included in this annual report , in june 2011 , in connection with the offering of the 2017 notes , we entered into convertible note hedge transactions , and recorded an embedded conversion derivative liability and derivative asset . the fair values of these derivatives were determined using an option pricing model based on unobservable inputs and were classified within level 3. the significant inputs to the model included our stock price , risk free interest rate , bond yield , credit rating , and expected volatility of our stock price . on september 28 , 2011 , upon obtaining stockholder approval to increase the number of authorized shares of our common stock , in accordance with authoritative literature , the derivative asset and liability were marked to fair value and reclassified to stockholders ' equity .
| our total revenues increased $ 79.7 million in 2012 compared to 2011 and $ 62.3 million in 2011 compared to 2010 , representing total revenue growth of 15 % and 13 % , respectively . revenue from our spine surgery products increased $ 40.2 million , or 9 % , in 2012 compared to 2011 and $ 43.2 million , or 11 % , in 2011 compared to 2010 . these increases resulted from increases in volume of approximately 11 % and 12 % for the years ended december 31 , 2012 and 2011 respectively , compared to the prior periods , offset by small unfavorable changes in price of approximately 1 % and 2 % , respectively , for the same periods . revenue from biologics increased $ 10.4 million , or 10 % , in 2012 compared to 2011 and $ 9.6 million , or 11 % , in 2011 compared to 2010 . these increases resulted from increases in volume of approximately 11 % and 12 % for the years ended december 31 , 2012 and 2011 , respectively , compared to the prior periods , offset by small unfavorable changes in price of approximately 1 % for the same periods . revenue from monitoring services increased $ 29.1 million in 2012 compared to 2011 , and $ 9.5 million from $ 0.3 million in 2011 compared to 2010 . these increases resulted from the acquisition of impulse monitoring in october of 2011. cost of goods sold , excluding amortization of purchased technology replace_table_token_4_th cost of goods sold consists of costs of purchased goods , inventory-related costs and royalty expense , as well as the cost of providing iom service , which includes personnel and physician oversight costs . cost of goods sold as a percentage of revenue increased in 2012 over 2011 primarily related to higher costs as a percentage of revenue with monitoring service revenues of approximately 2 % and estimated royalty expense accruals associated with the 40 judgment in the medtronic litigation of approximately 1 % . cost
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if different assumptions or conditions were to prevail , the carrying value of these investments may need to be further reduced and a loss recorded or previously recognized losses reversed and a gain recorded . at december 31 , 2006 and 2005 , other investments totaled $ 2.8 million and $ 3.6 million , respectively , all of which are illiquid . see the other asset discussion for further information . assets of companies held for sale or disposal companies , and or the operations of companies , which have met the accounting criteria of held for sale or disposal are carried at the lower of cost or fair market value less estimated selling costs . the valuations of such businesses are allocated to the assets and liabilities of the businesses . the asset groups are then periodically evaluated for impairment as required under financial accounting standards board ( fasb ) statement no . 144 , based upon the estimated undiscounted cash flows of the asset group . if the estimated undiscounted cash flows of the asset group are not sufficient to recover the carrying value of the asset group , then the fair value of the asset group is determined using a discounted cash flow approach . if the fair value of the asset group is less than the carrying amount , a loss is recognized . should future estimated cash flows be reduced or if applicable discount rates increase , then the carrying value of the asset groups may need to be reduced and a loss recorded . when these assets are acquired in full or partial satisfaction of a loan , any excess of the related loan balance over the fair value , less estimated selling cost , is charged as a loan loss against the allowance for loan losses . net operating income or loss of the companies held for disposal and which meet the criteria as discontinued operations are included in gain or loss from discontinued operations . once a decision is made to cease operations and liquidate the company , cib marine discontinues recording any future operating results of the company and records an impairment value , if any , based on the estimated liquidation value of the company 's net assets less costs to sell . the impairment loss is recorded as loss from discontinued operations . at december 31 , 2006 and 2005 , cib marine had three companies classified as held for sale/disposal ; cib construction , including canron , micr and msi . micr and canron were acquired in full or partial satisfaction of loans . the remaining assets and liabilities of these companies were included in assets/liabilities of companies held for sale/disposal . during the fourth quarter of 2005 , cib marine sold substantially all the assets and operations of micr . during the fourth quarter of 2004 , cib marine sold substantially all the assets and liabilities of msi . cib marine is in the process of winding down the remaining affairs of these 27 companies . cib marine retained liability for repurchase obligations of msi relative to certain mortgage loans as a result of external fraud and or documentation issues . during the third quarter of 2003 , the boards of directors of cib marine and of canron authorized management to cease operating canron and commence a wind down of its affairs and a voluntary liquidation of its assets . in august 2005 , canron authorized and began liquidation distributions to its shareholders . during 2005 , 2006 and the first nine months of 2007 , canron paid $ 4.3 million in total liquidation distributions to its parent cib construction and cib construction paid $ 5.4 million in total dividends to cib marine . 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 . story_separator_special_tag due to the significant losses incurred in 2005 and 2006 and the expectation of additional losses in 2007 , management has determined that it is not more likely than not that the entire net deferred tax asset of $ 77.4 million at december 31 , 2006 , which includes the entire net deferred tax asset of companies held for sale or disposal of $ 6.2 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 , 2006 and 2005 , and its changes in financial condition and results of operations for the three years ended december 31 , 2006 , 2005 and 2004. 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 10k . overview cib marine continued its focus on improving credit quality and financial condition during 2006. in addition , cib marine allocated increased resources to business development during 2006 as part of is strategic focus and sold or closed certain of its subsidiary bank branches . net loss declined to $ 9.3 million in 2006 compared to a net loss of $ 11.7 million in 2005 and $ 17.3 million in 2004. while assets declined from $ 1.1 billion at december 2005 to $ 1.0 billion at december 2006 , the majority of the decline was in the securities available for sale , as cib marine reduced its security portfolio to fund the deposits of sold branches . at both december 31 , 2006 and 2005 , cib marine had three companies included in assets and liabilities of companies held for disposal ; cib construction , including canron , micr and msi . the majority of the assets and operations of micr and msi were sold in prior periods and during 2006 cib marine continued to wind down the remaining business affairs of these two companies . canron , a 28 subsidiary of cib construction , continued to collect both on and off-balance sheet receivables and settle and resolve payables and claims through the voluntary liquidation process . story_separator_special_tag style= '' font-size : 10pt '' width= '' 100 % '' > ( 1 ) in the future , cib marine may not realize all of the tax benefits associated with tax-exempt assets due to substantial losses , and at december 31 , 2006 , 2005 and 2004 no u.s. federal or state loss carryback potential remains . accordingly , 2006 , 2005 and 2004 are not presented on a tax-equivalent basis . if 2006 , 2005 and 2004 had been shown on a tax-equivalent basis of 35 % , the net interest margin would have been 2.34 % , 2.13 % and 2.29 % , respectively . ( 2 ) loan balance totals include nonaccrual loans . ( 3 ) interest earned on loans includes amortized loan fees of $ 0.6 million , $ 0.9 million , and $ 1.5 million for the years ended december 31 , 2006 , 2005 and 2004 , respectively . ( 4 ) includes fixed assets and deposits of branches held for sale or sold during 2006 . ( 5 ) excludes average loans of $ 1.6 million for 2004 held by cib-chicago , which on a consolidated basis are classified as receivables from sale of stock . see item 8 , note 14-stockholders ' equity in part ii of this form 10-k for information on receivables from sale of stock . ( 6 ) interest rates and amounts include the effects of derivatives entered into for interest rate risk management and accounted for as fair value hedges . ( 7 ) net interest rate spread is the difference between the average rates on interest-earning assets and interest-bearing liabilities . ( 8 ) net interest margin is the ratio of net interest income , on a tax-equivalent basis , to average interest-earning assets . net interest income decreased $ 1.8 million , or 7.1 % , from $ 25.1 million in 2005 to $ 23.3 million in 2006. the decrease was mainly volume driven as the average interest-earning assets , net of interest-bearing liabilities declined $ 19.8 million during 2006 compared to 2005. the impact of the volume decline was partially offset by a 2 basis 32 point increase in the net interest spread . net interest income decreased $ 7.6 million , or 23.4 % , from $ 32.7 million in 2004 to $ 25.1 million in 2005. the decrease was mainly due to a $ 260.4 million decline in the average balance of interest-earning assets partially offset by an 18 basis point increase in the average yield on these assets . 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 . total company-continuing and discontinued operations : replace_table_token_9_th ( 1 ) in the future , cib marine may not realize all of the tax benefits associated with tax-exempt assets due to substantial losses , and at december 31 , 2006 , 2005 and 2004 no u.s. federal or state loss carryback potential remains . accordingly , 2006 , 2005 and 2004 are not presented on a tax-equivalent basis . ( 2 ) variances which were not specifically attributable to volume or rate have been allocated proportionally between volume and rate using absolute values as a basis for the allocation . nonaccruing loans were included in the average balances used in determining yields .
| the $ 0.5 million reduction in net loss on securities was mainly due to a $ 1.1 million impairment loss recognized in 2006 compared to a $ 2.0 million impairment loss in 2005. during the first quarter of 2007 , cib marine decided to sell certain securities in its available for sale portfolio . as a result of this sale , cib marine determined the full value of these securities at december 31 , 2006 and 2005 would not be fully recovered and accordingly , recognized an other-than-temporary impairment loss during both 2006 and 2005. cib marine 's net loss was $ 11.7 million in 2005 compared to a net loss of $ 17.3 million in 2004. the decrease in net loss was primarily the result of a $ 15.4 million decrease in net loss from continuing operations , partially offset by a $ 9.7 million decline in the net income of discontinued operations as cib marine continued its wind down of nonbank subsidiaries . net loss from continuing operations was $ 13.1 million in 2005 compared to $ 28.5 million in 2004. the $ 15.4 million decrease in net loss from continuing operations was mainly due to a $ 26.1 million decrease in provision for credit losses due to an improvement in the overall quality of the credit portfolio as a result of actions taken by cib marine during 2004 and 2005. this amount was partially offset by a $ 7.6 million decrease in net interest income and a $ 4.0 million decrease in income tax benefit . the results from discontinued operations are comprised of impairment losses on assets held for disposal , net gains and losses on sales of assets held for disposal and the operating results of companies held for disposal . the $ 9.7 million decrease in net income from discontinued operations during 2005 compared to 2004 was primarily due to a $ 15.1 million net pretax gain on the sale of cib-chicago , commercial finance and msi during 2004 , partially offset by a $ 2.0 million decrease
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in october 2014 , we completed an underwritten follow-on offering ( the “ october 2014 follow-on offering ” ) of 3,035,444 shares of class a common stock , inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters , on october 8 , 2014. net proceeds of the october 2014 follow-on offering were approximately $ 32.9 million after deducting underwriting discounts and commissions and offering costs . 50 in january 2015 , we completed an underwritten shelf takedown offering ( the “ january 2015 follow-on offering ” ) of 4,600,000 shares of class a common stock , inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters , on january 20 , 2015. net proceeds of the january 2015 follow-on offering were approximately $ 53.7 million after deducting underwriting discounts and commissions and estimated offering costs . on may 22 , 2015 , we completed an underwritten shelf takedown offering ( the “ may 2015 follow-on offering ” ) of 6,348,000 shares of class a common stock , inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters . net proceeds of the may 2015 follow-on offering were approximately $ 77.6 million after deducting underwriting discounts and commissions and offering costs . on october 21 , 2015 , we completed an underwritten shelf takedown offering of 2,875,000 shares of 8.250 % series a cumulative redeemable preferred stock ( the “ october 2015 preferred stock offering ” ) , par value $ 0.01 per share , liquidation preference $ 25.00 per share , inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters . net proceeds of the october 2015 preferred stock offering were approximately $ 69.2 million after deducting underwriting discounts and commissions and estimated offering costs . together , the january 2015 follow-on offering , the may 2015 follow-on offering and the october 2015 preferred stock offering are referred to as the 2015 follow-on offerings . the october 2014 follow-on offering , together with the 2015 follow-on offerings are referred to as the follow-on offerings . our total stockholders ' equity increased $ 114.8 million from $ 92.4 million as of december 31 , 2014 to $ 207.2 million as of december 31 , 2015. the increase in our total stockholders ' equity is primarily attributable to the 2015 follow-on offerings which increased our stockholders ' equity by $ 131.3 million , our net income of $ 1.8 million , $ 5.9 million of equity compensation and partially offset by distributions declared of $ 22.1 million for the year ended december 31 , 2015. other significant developments acquisition of interest in lansbrook village on may 23 , 2014 , bluerock special opportunity + income fund ii , llc ( “ fund ii ” ) sold a 32.67 % limited liability company interest in br lansbrook jv member , llc , or br lansbrook jv member , to brg lansbrook , llc , a wholly-owned subsidiary of our operating partnership , for a purchase price of approximately $ 5.4 million in cash , and bluerock special opportunity + income fund iii , llc ( “ fund iii ” ) sold a 52.67 % limited liability company interest in br lansbrook jv member to brg lansbrook , llc , for a purchase price of approximately $ 8.8 million in cash . br lansbrook jv member is the owner and holder of a 90 % limited liability company interest in br carroll lansbrook jv , llc , which , as of december 31 , 2014 , owned 588 condominium units being operated as an apartment community within a 774-unit condominium property known as lansbrook village located in palm harbor , florida , or the lansbrook property . as further consideration for the lansbrook acquisition , we were required to provide certain standard scope non-recourse carveout guarantees ( and related hazardous materials indemnity agreements ) related to approximately $ 42.0 million of indebtedness encumbering the lansbrook property through a joinder to the loan agreement . the purchase price paid for the acquired interest was based on the amounts capitalized by fund ii and fund iii in the lansbrook property plus an 8 % annualized return for the period they held their respective interests in br lansbrook jv member . the approximate dollar value attributed to mr. kamfar , as a result of his indirect ownership of bluerock , was $ 0.2 million . both fund ii and fund iii continued to own a 7.33 % and 7.33 % , respectively , limited liability interest in br lansbrook jv member . in december 2015 , we invested an additional $ 3.7 million , plus customary prorations , in equity in lansbrook , increasing our indirect ownership interest in the property from 76.8 % to 90.00 % . the additional interests were purchased from fund ii and fund iii , affiliates of our manager , based on an appraisal value , plus customary prorations . investment in alexan citycentre property on july 1 , 2014 , through a wholly-owned subsidiary of our operating partnership , we made a convertible preferred equity investment in a multi-tiered joint venture along with bluerock growth fund , llc , ( “ bgf ” ) , fund ii and fund iii ( collectively , the “ brg co-investors ” ) , which are affiliates of our manager , and an affiliate of trammell crow residential , or tcr , to develop a 340-unit class a , apartment community located in houston , texas , to be known as alexan citycentre . for development of the alexan citycentre property and funding of any required reserves , we have made a capital commitment of $ 6.5 million , all of which has been funded , to acquire 100 % of the preferred membership interests in br t & c blvd member , llc , or the br alexan member , through a wholly-owned subsidiary of our operating partnership , brg t & c blvd houston , llc ( “ brg alexan ” ) . story_separator_special_tag the brg co-investors ' budgeted development-related capital commitments are as follows : bgf , $ 8.8 million ; fund ii , $ 5.4 million ; and fund iii , $ 3.4 million , to acquire 49.95 % , 30.61 % and 19.44 % of the common membership interests in the br alexan member , respectively . under the operating agreement for br alexan member , our preferred membership interest earns and shall be paid on a current basis a preferred return at the annual rate of 15.0 % times the outstanding amount of our capital contributions made pursuant to our capital commitment . as of december 31 , 2015 we have fully funded our capital commitment and ( ii ) the brg co-investors have funded $ 17.7 million . 51 br alexan member is required to redeem our preferred membership interests on the earlier of the date which is six ( 6 ) months following the maturity of the construction loan ( including any extensions thereof but excluding refinancing ) , or any acceleration of the construction loan . on the redemption date , br alexan member is required to pay us an amount equal to our outstanding net capital contributions to br alexan member plus any accrued but unpaid preferred return . if br alexan member does not redeem our preferred membership interest in full on the required redemption date , then any of our net capital contributions remaining outstanding shall accrue a preferred return at the rate of 20.0 % per annum . we have the right , in our sole discretion , to convert our preferred membership interest in br alexan member into a common membership interest for a period of six months from and after the date upon which 70 % of the units in the alexan citycentre property have been leased ( the “ alexan conversion trigger date ” ) . assuming that we and the brg co-investors have made all of our budgeted development-related capital contributions as required , and all accrued preferred returns have been paid to us , upon conversion we will receive a common membership interest of 18.5 % of the aggregate common membership interest in br alexan member ( the “ alexan expected interest ” ) , and the membership percentages of the brg co-investors shall be adjusted accordingly . if the facts as of the alexan conversion trigger date are substantially different from the capital investment assumptions resulting in our receipt of the alexan expected interest , then we and the brg co-investors are required to confer and determine in good faith a new common membership interest percentage relative to our conversion . prior to the exercise of the conversion right , bgf , fund ii and fund iii shall be the managers of br alexan member , and shall have the power and authority to govern the business of br alexan member , subject to the approval of certain “ major decisions ” by members holding a majority of the membership interests and subject to the further requirement that our economic interests and other rights in and to alexan citycentre may not be diluted or altered without our prior written consent . investment in eos property , formerly referred to as ucf orlando on july 29 , 2014 , through a wholly-owned subsidiary of our operating partnership , we made a convertible preferred equity investment in a multi-tiered joint venture along with fund i , an affiliate of our manager , and cdp ucfp developer , llc , a georgia limited liability company and non-affiliated entity , to develop a 296-unit class a apartment community located in orlando , florida , located in close proximity to the university of central florida and central florida research park , and will be a featured component of a master-planned , publix-anchored retail development known as town park , or the eos property . for development of the eos property and funding of any required reserves , we have made a capital commitment of $ 3.6 million , all of which has been funded , to acquire 100 % of the preferred membership interests in br orlando ucfp , llc , or br orlando jv member , through a wholly-owned subsidiary of our operating partnership , brg ucfp investor , llc . under the operating agreement for br orlando jv member , our preferred membership interest earns and shall be paid on a current basis a preferred return at the annual rate of 15.0 % on the outstanding amount of our capital contributions made pursuant to our capital commitment . to date we have fully funded our capital commitment and fund i has funded $ 5.6 million . we are not required to make any additional capital contributions beyond our capital commitment . however , if br orlando jv member makes an additional capital call and fund i does not fully fund it , then we may elect to fund such shortfall as an additional capital contribution , in which case those contributions will accrue a preferred return at the annual rate of 20.0 % on the outstanding amount of such capital contributions . br orlando jv member is required to redeem our preferred membership interests on the earlier of the date which is six ( 6 ) months following the maturity of the construction loan ( including any extensions thereof but excluding refinancing ) , or any acceleration of the construction loan . on the redemption date , br orlando jv member is required to pay us an amount equal to our outstanding net capital contributions to br orlando jv member plus any accrued but unpaid preferred return . if br orlando jv member does not redeem our preferred membership interest in full on the required redemption date , then any of our net capital contributions remaining outstanding shall accrue a preferred return at the rate of 20.0 % per annum .
| general and administrative expenses amounted to $ 4.1 million for the year ended december 31 , 2015 as compared to $ 2.7 million for the same prior year period . excluding non-cash amortization of ltips and restricted stock expense of $ 2.1 million and $ 1.0 million , for the years ended december 31 , 2015 and 2014 , respectively , general and administrative expenses increased to $ 2.0 million , or 4.4 % of revenues for the year ended december 31 , 2015 as compared to $ 1.7 million , or 5.5 % of revenues , for the same prior year end period . management fees amounted to $ 4.2 million for the year ended december 31 , 2015 as compared to $ 1.0 million for the same prior year period . base management fees were $ 3.3 million and $ 0.9 million for the years ended december 31 , 2015 and 2014 , respectively . incentive fees were $ 0.9 million and $ 0.1 million for the years ended december 31 , 2015 and 2014 , respectively . these increases were primarily due to the significant increase in our equity base as a result of our follow-on offerings . ltip units were issued for the payment of base management and incentive fees of $ 3.7 million and $ 0.1 million for the years ended december 31 , 2015 and 2014 , respectively , while cash payment was made for $ 0.5 million and $ 0.9 million for the years ended december 31 , 2015 and 2014 , respectively . acquisition costs amounted to $ 3.5 million for the year ended december 31 , 2015 as compared to $ 4.4 million for the same prior year period . this decrease was primarily due to the acquisition of numerous properties during the second quarter of 2014 in conjunction with the ipo contribution transactions and subsequent 2014 acquisitions as compared to the acquisitions in 2015. depreciation and amortization expenses increased to $ 16.3 million for the year ended december 31 , 2015 as compared to $ 12.6 million for the same prior year period . this
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in this challenging economic environment , our strong balance sheet has allowed us to capitalize on the opportunity to increase the size of our revolving credit facility and acquire substantially all of the assets of fuddruckers in july 2010. since the acquisition , we have sold eight properties that were closed during or before our cash flow improvement and capital redeployment plan announced in october 2009. as a result , we have been able to use the proceeds from these property sales and cash generated from operations to aggressively pay down our debt balance to $ 21.5 million by the end of fiscal year 2011 , representing over a 50 % reduction in our outstanding debt balance . fiscal 2011 review same-store restaurant sales at our luby 's cafeteria units increased 2.5 % for fiscal year 2011 compared to fiscal year 2010. same-store sales increased in the first three quarters in the fiscal year and turned slightly negative in the fourth quarter , compared to a relatively strong fourth quarter 2010 when we significantly increased our use of limited time offers to generate customer traffic and sales . our increase in sales in fiscal year 2011 was generated by customer traffic growth , in large part due to our weekend breakfast offering , but at a lower overall ticket average . fiscal year 2011 represents our first full year of same-store sales growth since fiscal year 2006. net income from continuing operations improved from a loss of $ 0.6 million , or $ 0.02 per share , on $ 244.8 million in total sales in fiscal year 2010 to a profit from continuing operations of $ 2.6 million , or $ 0.09 per share , on $ 348.7 million in total sales in fiscal year 2011. fiscal year 2011 net income improved by $ 5.9 million year-over-year . this profitability improvement was the result of the inclusion of a full year of results from fuddruckers and growing sales in each of our brands , combined with careful cost management and operational focus . the following provides a brief summary of selected expenses : food costs , as a percentage of restaurant sales increased to 28.9 % in fiscal year 2011 from 27.6 % in fiscal year 2010. the increase in food costs as a percentage of sales was driven primarily by higher food commodity costs , an increased impact from beef commodities due to the inclusion of the fuddruckers units , and our ability to only partially pass along these higher food costs in the form of menu price increases . payroll and related costs as a percentage of sales declined primarily due to the inclusion of the fuddruckers units , which generally operated at a lower labor costs due to the lower complexity of operations when compared to our cafeteria units . as a percentage of restaurant sales , payroll and related costs improved 120 basis points in fiscal year 2011 compared to fiscal year 2010 as a percentage of restaurant sales , other operating expenses increased 150 basis points . the higher operating expenses as percentage of sales reflect the higher aggregate occupancy costs of the fuddruckers restaurants due to the greater mix of leased properties over owned properties . as the fuddruckers units were incorporated into our operations , we also incurred higher repairs and maintenance costs to improve the appearance and operations of selected restaurants . depreciation expense increased $ 2.0 million and reflects primarily the addition of fuddruckers assets , partially offset by lower depreciation of our cafeteria assets . general and administrative expenses increased by $ 4.0 million reflecting primarily incremental corporate staffing and related expenses to support the addition of the company-operated fuddruckers units as well as the network of franchise restaurants . fiscal year 2011 also included approximately $ 1.5 million in professional fees and integration expenses related to the acquisition of substantially all of the assets of fuddruckers . 23 income taxes reflected a valuation allowance decrease of $ 0.5 million in fiscal year 2011 income from continuing operations of approximately $ 0.02 per share . our culinary contract services ( ccs ) business continued to grow through the net addition of four new locations . we view this area as a growth business that generally requires less capital investment and more favorable percentage returns on invested capital . our culinary contract services business generated $ 15.6 million in sales during fiscal year 2011 compared to $ 13.7 million in sales during fiscal year 2010. in fiscal year 2011 , we spent $ 11.0 million on capital expenditures , which primarily represented maintaining the attractiveness and efficiency of our restaurant units . during fiscal year 2011 , we added leasehold improvements at a new fuddruckers location in downtown houston and at a relocated luby 's restaurant in west houston . we also acquired the assets at one former franchise location , including a building on a ground lease and the related furniture , fixtures and equipment . our long-term plan continues to focus on expanding both of our brands , including the fuddruckers franchise network , as well as growing our ccs business . we are also committed to reducing debt through sales of properties where we have closed restaurants as well as using cash flow from operations . we believe our operational execution has improved through our commitment to higher operating standards , and we believe that we are well-positioned to enhance shareholder value over the long term . accounting periods our fiscal year ends on the last wednesday in august . accordingly , each fiscal year normally consists of 13 four-week periods , or accounting periods , accounting for 364 days in the aggregate . however , every fifth or sixth year , we have a fiscal year that consists of 53 weeks , accounting for 371 days in the aggregate ; fiscal year 2011 was such a year . each of the first three quarters of each fiscal year consists of three four-week periods , while the fourth quarter normally consists of four four-week periods . story_separator_special_tag however , the fourth quarter of fiscal year 2011 , as a result of the additional week , consisted of three four week periods and one five-week period , accounting for 17 weeks , or 119 days , in the aggregate . fiscal years 2010 and 2009 both contained 52 weeks . comparability between quarters may be affected by the varying lengths of the quarters , as well as the seasonality associated with the restaurant business . same-store sales the restaurant business is highly competitive with respect to food quality , concept , location , price , and service , all of which may have an effect on same-store sales . our same-store sales calculation measures the relative performance of a certain group of restaurants . to qualify for inclusion in this group , a store must have been in operation for 18 consecutive accounting periods . stores that close on a permanent basis are removed from the group in the fiscal quarter when operations cease at the restaurant , but remain in the same-store group for previously reported fiscal quarters . although management believes this approach leads to more effective year-over-year comparisons , neither the time frame nor the exact practice may be similar to those used by other restaurant companies . same-store sales at our cafeteria units increased 2.5 % for fiscal year 2011 , decreased 7.4 % for fiscal year 2010 and decreased 6.6 % for fiscal year 2009. the following table shows the same-store sales change for comparative historical quarters : replace_table_token_6_th 24 minimum wage increase impact the third of three federal minimum wage increases took effect on july 23 , 2009. we experienced a compression due to these minimum wage increases , meaning that wages earned by employees within a certain range of the new minimum wage were adjusted over time as the new minimum wage increases were phased in through calendar year 2009. discontinued operations our cash flow improvement and capital redeployment plan called for the closure of more than 20 underperforming units . in accordance with the plan , the entire fiscal activity of the applicable stores closed after the inception of the plan has been classified as discontinued operations . results related to these same locations have also been classified as discontinued operations for all periods presented . impact of hurricane ike hurricane ike struck southeast texas in september 2008 causing massive power outages and inflicting wide-spread damage in the greater houston area . over 40 luby 's locations in the houston area were closed over varying lengths of time due to the storm . restaurant sales were negatively impacted by approximately 273 days in the aggregate when some of our locations were unable to open due to storm damage or loss of power . we incurred approximately $ 1.5 million in lost sales from these store closures . we incurred storm related direct costs of $ 1.5 million for damages , auxiliary power , food loss and other miscellaneous costs . we received insurance proceeds of approximately $ 0.6 million related to hurricane property damage claims which were recognized in income in fiscal year ended august 25 , 2010. story_separator_special_tag restaurant area leaders , share-based compensation , professional fees , travel and recruiting expenses and other office expenses . general and administrative expenses increased by approximately $ 4.0 million , or 15.8 % , in fiscal year 2011 compared to fiscal year 2010. the increase was due to ( 1 ) an increase of $ 3.1 million in salaries and benefits expense in fiscal year 2011with the addition of corporate staff related to the fuddruckers-branded restaurants acquired in july 2010 ; ( 2 ) an increase of approximately $ 1.2 million in travel and supplies , largely related to supporting the fuddruckers-branded restaurants , which have a larger geographic footprint ; and ( 3 ) an increase of $ 0.5 million in insurance and other corporate-related expenses ; partially offset by ( 4 ) a decrease of approximately $ 0.8 million in professional fees and corporate services . as a percentage of total sales , general and administrative expenses decreased to 8.5 % in fiscal year 2011 compared to 10.4 % in fiscal year 2010 primarily due to our ability to use much of our existing corporate overhead to support the additional fuddruckers restaurants acquired in july 2010. provision for asset impairments , net the provision for asset impairments , net decreased $ 0.2 million in fiscal year 2011 compared to fiscal year 2010. the impairment charges in fiscal year 2011 relate to one closed restaurant property that was sold during the fiscal year and one closed restaurant property at the end of the fiscal year that was under contract to be sold . the impairment charges in fiscal year 2010 relate to one closed restaurant property that was held for sale sold at the end of the fiscal year . in each case , the actual or estimated net sales proceeds were less than the net carrying value of the assets . net loss ( gain ) on disposition of property and equipment the disposition of property and equipment in fiscal year 2011 resulted in a net gain of approximately $ 1.4 million , which included a gain of the sales of restaurant properties in excess of net book value , partially offset by asset retirement activity in our restaurant units . the disposition of property and equipment in fiscal year 2010 resulted in a net gain of approximately $ 0.9 million , which included a gain on the sale of an easement right and the sale of one restaurant property in excess of net book value , partially offset by asset retirement activity in our restaurant units . interest income interest income decreased approximately $ 35 thousand primarily due to maintaining lower cash and cash equivalent balances .
| cost of food food costs increased approximately $ 30.7 million , or 48.3 % , in fiscal year 2011 compared to fiscal year 2010 primarily due to the inclusion in our operations of the fuddruckers units acquired in july 2010 and the inclusion of one additional week in fiscal year 2011. the additional week accounted for approximately 25 $ 1.8 million in food costs . as a percentage of restaurant sales , food costs increased 1.3 % , to 28.9 % , in fiscal year 2011 compared to 27.6 % in fiscal year 2010. the increase was due primarily to ( 1 ) higher food commodity costs in most categories ; ( 2 ) adding the all-you-can-eat breakfast offer on the weekends in the majority of our luby 's cafeteria units ; and ( 3 ) offering select menu items at a lower price on a limited time basis during certain periods of the year in order to generate incremental customer traffic . payroll and related costs payroll and related costs increased approximately $ 30.3 million , or 36.5 % in fiscal year 2011 compared to fiscal year 2010 due primarily to the inclusion in our operations of the fuddruckers units acquired in july 2010 and the inclusion of one additional week in fiscal year 2011. the additional week accounted for approximately $ 2.2 million in payroll and related costs . as a percentage of restaurant sales , these costs decreased 1.2 % , to 34.8 % , in fiscal year 2011 compared to 36.0 % in fiscal year 2010. the decrease in these costs as a percentage of sales is due to inclusion of lower restaurant labor costs associated with the acquired fuddruckers units partially offset by additional hourly labor to accommodate the increased customer traffic at our luby 's cafeteria units driven by longer operating hours at the majority of units that now serve breakfast on the weekends , as well as increased customer traffic from limited time offers . other operating expenses other operating expenses primarily include restaurant-related expenses for utilities , repairs and maintenance , advertising , insurance , services and occupancy costs . other
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we continue to incur significant research and development and other expenses related to our ongoing operations . despite the potential to receive future payments from kkc , we anticipate that we will continue to incur losses for the foreseeable future , and we anticipate that our losses will increase as we continue our development of , seek regulatory approval for , and potential commercialization of our product candidates . if we do not successfully develop and obtain regulatory approval of our existing product candidates or any future product candidates and effectively manufacture , market , and sell any products that are approved , we may never generate revenue from product sales . furthermore , even if we do generate revenue from product sales , we may never again achieve or sustain profitability on a quarterly or annual basis . our prior losses , combined with expected future losses , have had and will continue to have an adverse effect on our stockholders ' equity and working capital . our failure to become and remain profitable could depress the market price of our class a common stock and could impair our ability to raise capital , expand our business , diversify our product offerings , or continue our operations . on december 4 , 2020 , we closed a follow-on underwritten public offering of 2,000,000 shares of our class a common stock for gross proceeds of $ 281.7 million . we received net proceeds from the offering of $ 277.5 million , after deducting underwriting discounts and commissions and offering expenses . we intend to use the net proceeds for working capital and general corporate purposes , which include , but are not limited to , advancing the development of bardoxolone , omaveloxolone , and rta 901 through clinical trials , pursuing approval of the nda filed with the fda for bardoxolone in patients with ckd caused by alport syndrome , preparing to file for marketing approval in europe for bardoxolone in patients with ckd caused by alport syndrome , and preparing for commercialization of our potential products . the probability of success for each of our product candidates and clinical programs and our ability to generate product revenue and become profitable depend upon a variety of factors , including the quality of the product candidate , clinical results , investment in the program , competition , manufacturing capability , commercial viability , and our collaborators ' ability to successfully execute our development and commercialization plans . we will also require additional capital through equity , debt , or royalty financings or collaboration arrangements in order to fund our operations and execute on our business plans , and there is no assurance that such financing or arrangements will be available to us on commercially reasonable terms or at all . for a description of the numerous risks and uncertainties associated with product development and raising additional capital , see “ risk factors ” included in this annual report on form 10-k. financial operations overview revenue our revenue to date has been generated primarily from licensing fees received under our collaborative license agreements and reimbursements for expenses . we currently have no approved products and have not generated any revenue from the sale of products to date . in the future , we may generate revenue from product sales , royalties on product sales , reimbursements for collaboration services under our current collaboration agreements , or license fees , milestones , or upfront payments if we enter into any new collaborations or license agreements . we expect that our 106 future revenue will fluctuate from quarter to quarter for many reasons , including the uncertain timing and amount of any such payments and sales . our license and milestone revenue has been generated primarily from the kkc agreement , the abbvie license agreement , and the collaboration agreement and consists of upfront payments and milestone payments . license revenue recorded with respect to the kkc agreement , the abbvie license agreement , and the abbvie collaboration agreement consists solely of the recognition of deferred revenue . under our revenue recognition policy , collaboration revenue associated with upfront , non-refundable license payments received under our license and collaboration agreements are deferred and recognized ratably over the expected term of the performance obligations under each agreement . under the reacquisition agreement , we no longer have performance obligations under the abbvie license agreement and the collaboration agreement . we only expect to recognize the deferred revenue under the kkc agreement through 2021. research and development expenses the largest component of our total operating expenses has historically been our investment in research and development activities , including the clinical development of our product candidates . from our inception through december 31 , 2020 , we have incurred a total of $ 934.0 million in research and development expense , a majority of which relates to the development of bardoxolone and omaveloxolone . we expect our research and development expense to continue to increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio . the process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming , and we consider the active management and development of our clinical pipeline to be crucial to our long-term success . the actual probability of success for each product candidate and preclinical program may be affected by a variety of factors , including the safety and efficacy data for product candidates , investment in the program , competition , manufacturing capability , and commercial viability . story_separator_special_tag research and development expenses include : expenses incurred under agreements with clinical trial sites that conduct research and development activities on our behalf ; expenses incurred under contract research agreements and other agreements with third parties ; employee and consultant-related expenses , which include salaries , benefits , travel , and stock-based compensation ; laboratory and vendor expenses related to the execution of preclinical and non-clinical studies and clinical trials ; the cost of acquiring , developing , manufacturing , and distributing clinical trial materials ; the cost of development , scale up , and process validation activities to support product registration ; and facilities , depreciation , and other expenses , which include direct and allocated expenses for rent and maintenance of facilities , insurance , and other supply costs . research and development costs are expensed as incurred . costs for certain development activities such as clinical trials are highly judgmental and are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites . we base our expense accruals related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and cros that conduct and manage clinical trials on our behalf . the financial terms of these agreements vary from contract to contract and may result in uneven payment flows . payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones . in accruing costs , we estimate the time period over which services will be performed and the level of effort to be expended in each period . if we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services , our actual expenses could differ from our estimates . 107 to date , we have not experienced material changes in our estimates of accrued research and development expenses after a reporting period . however , due to the nature of estimates , we can not assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities . currently , kkc has allowed us to conduct clinical studies of bardoxolone in certain rare forms of kidney diseases in japan and has reimbursed us the majority of the costs for our cardinal study in japan and is paying for the costs of a certain number of patients as the in-country caretaker in our falcon study in japan . we reduced our expenses by $ 0 million , $ 0.5 million , and $ 2.0 million for kkc 's share of the cardinal study costs for the year ended december 31 , 2020 , 2019 , and 2018 , respectively . the following table summarizes our research and development expenses incurred during the years ended december 31 : replace_table_token_8_th the program-specific expenses summarized in the table above include costs that we directly allocate to our product candidates . our other research and development expenses include salaries , benefits , stock-based compensation , and preclinical , research , and discovery costs , which we do not allocate on a program-specific basis . 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 personnel expense , facility-related costs , professional fees , accounting and legal services , depreciation expense , other external services , and expenses associated with obtaining and maintaining our intellectual property rights . 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 have also incurred , and anticipate incurring in the future , increased expenses associated with being a public company , including exchange listing and sec requirements , director and officer insurance premiums , legal , audit and tax fees , compliance with the sarbanes-oxley act , regulatory compliance programs , and investor relations costs . 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 for the sales and marketing of our product candidates . other income ( expense ) , net other income ( expense ) includes interest and gains earned on our cash and cash equivalents , interest expense on term loans , amortization of debt issuance costs , imputed interest on long term payables , loss on extinguishment of debt , gain on termination of lease , foreign currency exchange gains and losses , gains and losses on sales of assets , and non-cash interest expense on liability related to the sale of future royalties . benefit from ( provision for ) taxes on income provision for taxes on income consists of net loss , taxed at federal tax rates and adjusted for certain permanent differences . during 2020 , we recognized a tax benefit and receivable of $ 22.2 million associated with the ability to carryback an applicable prior year 's net operating losses to a preceding year to generate a refund under the cares act . realization of deferred tax assets is generally dependent upon future earnings by jurisdiction , of which the 108 timing and amount are uncertain for the majority of our deferred tax assets , and valuation allowances are maintained against them . changes in valuation allowance s also affect the tax provision .
| 109 the following table summarizes the sources of our revenue for the years ended december 31 : replace_table_token_10_th the following table summarizes our expenses , in thousands and as a percentage of total expenses , for the years ended december 31 : replace_table_token_11_th research and development expenses research and development expenses increased by 24 % during 2020 compared to 2019. the increase was primarily due to $ 30.2 million in increased personnel and equity compensation expenses to support growth of our development activities , including accelerated recognition of stock-based compensation expense as a result of the death of an executive and employees who entered into consulting agreements at the termination of employment . the remaining changes included increased manufacturing and regulatory costs to support product registration , increased clinical pharmacology and toxicity study expenses for our rta 901 program , decreased clinical study expenses related to pah studies terminated in the first quarter 2020 , and decreased medical affairs and research expenses . research and development expenses increased by 32 % during 2019 compared to 2018. the increase was primarily due to $ 16.0 million in increased personnel and equity compensation expenses to support growth of our development activities , $ 3.8 million in increased medical affairs and other research activities to support our registrational trials , and $ 9.8 million in increased manufacturing to support product registration and increased clinical expenses for startup activities for falcon and the extension trials for our registrational programs , which were offset by decreased clinical expenses for fully enrolled and completed studies . research and development expenses , as a percentage of total expenses , was 68 % , 41 % , and 75 % for 2020 , 2019 , and 2018 , respectively . the decrease in 2019 compared to 2020 and 2018 was primarily due to the reacquired license rights expense of $ 124.4 million incurred during 2019. the decrease in 2019 compared to 2018 was also due to increased general and administrative expenses related to rent , insurance premiums , and other office expenses . reacquired license rights the reacquired license rights expense incurred in 2019 was due to the reacquisition agreement we entered into with abbvie in october 2019 to reacquire the development , manufacturing , and commercialization rights provided in the abbvie license agreement and the collaboration
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internal controls over financial reporting are assessed for effectiveness annually using criteria set forth in internal controls - integrated framework issued by the committee of sponsoring organizations of the treadway commission . all data such as commodity prices , lease operating expenses , production taxes , field level commodity price differentials , ownership percentages , and well production data are updated in the reserve database by our third-party reservoir engineers and then analyzed by management to ensure that they have been entered accurately and that all updates are complete . once the reserve database has been entirely updated with current information , and all relevant technical support material has been assembled , our independent engineering firms prepare their independent reserve estimates and final report . 38 the following table reflects our estimated proved reserves as of the dates indicated : replace_table_token_11_th ( 1 ) excludes reserves attributable to our 37 % in terest in exaro . ( 2 ) during the year ended december 31 , 2014 , proved reserves decreased by approximately 38.7 bcfe primarily due to a 2 2 . 4 bcfe negative revision of proved developed producing reserves at our eugene island 11 field and normal depletion . the negative revision at eugene island 11 was due to a change in forecasted condensate yield and ultimate field abandonment pressure , as determined by our third party engineers taking into account recent field performance . ( 3 ) under sec rules , prices used in determining our proved reserves are based upon an unweighted 12-month first day of the month average price per mmbtu ( henry hub spot ) of natural gas and per barrel of oil ( west texas intermediate posted ) . prices for natural gas liquids in the table represent average prices for natural gas liquids used in the proved reserve estimates , calculated in accordance with applicable sec rules . all prices were adjusted for quality , energy content , transportation fees and regional price differentials in determining proved reserves . p v ‑10 pv-10 at year-end is a non-gaap financial measure and represents the present value , discounted at 10 % per year , of estimated future cash inflows from proved natural gas and crude oil reserves , less future development and production costs using pricing assumptions in effect at the end of the period . pv-10 differs from standardized measure of discounted net cash flows because it does not include the effects of income taxes on future net revenues . neither pv-10 nor standardized measure of discounted net cash flows represents an estimate of fair market value of our natural gas and crude oil properties . pv-10 is used by the industry and by our management as an arbitrary reserve asset value measure to compare against past reserve bases and the reserve bases of other business entities that are not dependent on the taxpaying status of the entity . the following table provides a reconciliation of our standardized measure to pv ‑10 ( in thousands ) : replace_table_token_12_th 39 the following table reflects our estimated proved reserves by category as of december 31 , 20 14 ( dollars in thousands ) : replace_table_token_13_th our estimated net proved reserves as of december 31 , 20 14 were approximately 18 % crude oil and condensate , 65 % natural gas and 17 % natural gas liquids . pro ved developed reserves total proved developed reserves decreased from 255.6 bcfe at december 31 , 20 13 to 208.7 bcfe at december 31 , 20 14 primarily as a result of normal production . pro ved undeveloped reserves the company annually reviews any proved undeveloped reserves ( “ puds ” ) to ensure their development within five years from the date of originally booking the reserves . as of december 31 , 20 14 , the company had approximately 66.5 bcfe of puds related to its onshore activities . development costs related to these puds are projected to be approximately $ 197 million over the next five years . our financial resources are expected to be sufficient and within our budget to drill all of the remaining 66.5 bcfe of proved undeveloped reserves within the five year period . the following table presents the changes in our total proved undeveloped reserves for the year ended december 31 , 20 14 : replace_table_token_14_th ( 1 ) includes previously planned rate acceleration well in our dutch and mary rose field that will no longer be drilled as well as revisions of previous estimates due to a revised type curve for our force area of our madison/grimes acreage and lower commodity prices . ( 2 ) attributable to our onshore drilling program duri n g the year ended december 31 , 2014 . 40 sign ificant properties summary proved reserve information for our properties as of december 31 , 20 14 , by region , is provided below ( excluding reserves attributable to our investment in exaro ) ( dollars in thousands ) : replace_table_token_15_th ( 1 ) under sec rules , prices used in determining our proved reserves are based upon an unweighted 12-month first day of the month average price per mmbtu ( henry hub spot ) of natural gas and per barrel of oil ( west texas intermediate posted ) . prices for natural gas liquids in the table represent average prices for natural gas liquids used in the proved reserve estimates , calculated in accordance with applicable sec rules . all prices , using sec rules , are adjusted for quality , energy content , transportation fees and regional price differentials in determining proved reserves . while we are reasonably certain of recovering our calculated reserves , the process of estimating natural gas and oil reserves is complex . it requires various assumptions , including natural gas and oil prices , drilling and operating expenses , capital expenditures , taxes and availability of funds . story_separator_special_tag our third party engineers must project production rates , estimate timing and amount of development expenditures , analyze available geological , geophysical , production and engineering data , and the extent , quality and reliability of all of this data may vary . actual future production , natural gas and oil prices , revenues , taxes , development expenditures , operating expenses and quantities of recoverable natural gas and oil reserves most likely will vary from estimates . any significant variance could materially affect the estimated quantities and net present value of reserves . in addition , estimates of proved reserves may be adjusted to reflect production history , results of exploration and development , prevailing natural gas and oil prices and other factors , many of which are beyond our control . reserves attributable to our investment in exaro estimates of proved reserves and future net revenue as of december 31 , 20 14 and 20 13 associated with our investment in exaro , which we account for using the equity method , were prepared by w.d . von gonten and associates ( “ von gonten ” ) in accordance with the definitions and regulations of the sec . the technical persons responsible for preparing the reserve estimates are independent petroleum engineers and geoscientists that meet the requirements regarding qualifications , independence , objectivity , and confidentiality set forth in the standards pertaining to the estimating and auditing of oil and gas reserves information promulgated by the society of petroleum engineers . reserves as of december 31 , 20 14 and 2013 were reviewed by our corporate reservoir engineering department as described above . the technical individual at von gonten responsible for overseeing the preparation of our reserve estimates as of december 31 , 20 14 and december 31 , 20 13 has over 1 4 years of practical experience in the estimation and evaluation of reserves ; is a registered professional engineer in the state of texas ; holds a bachelor of science degree in petroleum engineering for texas a & m university ; and is a member in good standing of the society of petroleum engineers . 41 the following table reflects the estimated proved reserves attributable to our investment in exaro : replace_table_token_16_th ( 1 ) the company 's share of the standardized measure of discounted future net cash flows attributable to our investment in exaro does not include the effect of income taxes because exaro is treated a partnership for tax purposes . exaro allocates any income or expense for tax purposes to its partners . ( 2 ) under sec rules , prices used in determining our proved reserves are based upon an unweighted 12-month first day of the month average price per mmbtu ( henry hub spot ) of natural gas and per barrel of oil ( west texas intermediate posted ) . prices for natural gas liquids in the table represent average prices for natural gas liquids used in the proved reserve estimates , calculated in accordance with applicable sec rules . all prices are adjusted for quality , energy content , transportation fees and regional price differentials in determining proved reserves . ( 3 ) reserve amounts and standardized measure as of december 31 , 2012 revised by immaterial amount compared to amounts previously stated in the annual report on form 10-k/a for the year ended december 31 , 2013. prior year reserves our estimated net proved natural gas , oil and natural gas liquids reserves as of december 31 , 20 13 , 20 12 and 20 11 are disclosed in “ item 8. financial statements and supplementary data – supplemental oil and gas disclosures ( unaudited ) ” . reserves as of december 31 , 2013 were based on reserve reports generated by nsai and cobb . reserves as of december 31 , 2012 and 2011 were based on reserve reports generated by cobb , while the reserves associated with our 37 % investment in exa ro were prepared by von gonten . ite m 3. legal proceedings from time to time , we are involved in legal proceedings relating to claims associated with our properties , operations or business or arising from disputes with vendors in the normal course of business , including the material matters discussed below . mineral interest owners in south louisiana filed suit against a subsidiary of the company and several co-defendants in june 2009 in the 31st judicial district court situated in jefferson davis parish , louisiana alleging failure to act as a reasonably prudent operator , failure to explore , waste , breach of contract , etc . in connection with two wells located in jefferson davis parish . many of the alleged improprieties occurred prior to our ownership of an interest in the wells at issue , although we may have assumed liability otherwise attributable to our predecessors-in-interest through the acquisition documents relating to the acquisition of our interest in these wells . we and our co-defendants obtained a favorable judgment from the trial court following a bench trial . on october 1 , 2014 , the louisiana third circuit court of appeals issued an opinion reversing the trial court 's rulings and rendering ju dgment in favor of the plaintiffs for approximately $ 13.4 million . the decision by the court of appeals did not allocate liability among the defendants although we would likely be responsible for at least one-half , and possibly as much as two-thirds , of the judgment if it stands . we and our co-defendants have filed an application for a writ of certiorari to the louisiana supreme court seeking review of this case by the state 's highest court . while there is uncertainty whether the louisiana supreme court will accept our application and , if accepted , rule in our favor , we believe that the decision by the court of appeals presents issues that will resonate with the louisiana supreme court 42 and are of precedential significance sufficient to warrant review by that court .
| also during the year ended december 31 , 2012 , we revised estimated proved reserves at ship shoal 263 , resulting in non-cash impairment expenses of approximately $ 12.0 million . ( 3 ) the increase in the working capital deficit for the year ended december 31 , 2014 is primarily attributable to the decrease in trade receivable associated with the decline in commodity prices during the fourth quarter of 2014. the decrease in working capital for the year ended december 31 , 2013 is attributable to using all of our cash reserves to pay down crimson debt at the time of the merger . ( 4 ) on november 29 , 2012 , the board of directors declared a one-time special dividend of $ 2.00 per share of common stock which was paid on december 17 , 2012 . ( 5 ) on october 1 , 2013 , in connection with the merger , we entered into a revolving credit facility with royal b ank of canada and other lenders . the borrowing base was reaffirmed on october 28 , 2014. as of december 31 , 20 14 , we had approximately $ 6 3.4 million outstanding under such facility . ( 6 ) during the year ended december 31 , 2014 , our proved reserves decreased by approximately 38.7 bcfe and our standardized measure decreased by approximately $ 0.1 million . this decrease is primarily attributable to a 2 2 . 4 bcfe negative revision of proved developed producing reserves at our eugene island 11 field and normal production . the negative revision at eugene island 11 was due to a change in forecasted condensate yield and ultimate field abandonment pressure , as determined by our third party engineers related to recent field performance . during t he year ended december 31 , 2013 , our proved reserves increased by approximately 92.8 bcfe and our standardized measure increased by approximately $ 383.4 million , primarily as a result of our merger with crimson . also contributing to the increase was the exercise of our preferential right to purchase approximately 17.0 bcfe
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for those incentives that require the estimation of sales volumes or redemption rates , such as for volume rebates , kodak uses historical experience and both internal and customer data to estimate the sales incentive at the time revenue is recognized . in the event that the actual results of these items differ from the estimates , adjustments to the sales incentive accruals are recorded . future market conditions and product transitions may require kodak to take actions to increase customer incentive offers , possibly resulting in an incremental reduction of revenue at the time the incentive is offered . valuation and useful lives of long-lived assets , including goodwill and intangible assets kodak performs a test for goodwill impairment annually and whenever events or changes in circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying amount . goodwill is tested for impairment at a level of reporting referred to as a reporting unit , which is an operating segment or one level below an operating segment ( a component ) if the component constitutes a business for which discrete financial information is available and regularly reviewed by segment management . the print systems segment has two goodwill reporting units : prepress solutions and electrophotographic printing solutions . the software and solutions segment has two goodwill reporting units : kodak technology solutions and unified workflow solutions . the consumer and film segment has two goodwill reporting units , motion picture , industrial chemicals and films and consumer products . the enterprise inkjet systems segment , advanced materials and 3d printing segment and eastman business park segment all have one goodwill reporting unit . as of december 31 , 2018 , goodwill is recorded in the unified workflow solutions and consumer products reporting units . goodwill is also recorded in the flexographic packaging business and is reported in current assets held for sale in the consolidated statement of financial position . kodak early adopted accounting standards update ( “ asu ” ) 2017-04 , intangibles – goodwill and other ( topic 350 ) : simplifying the accounting for goodwill impairment effective january 1 , 2017 which requires entities to calculate a goodwill impairment as the amount by which a reporting unit 's carrying value exceeds its fair value , not to exceed the carrying amount of goodwill . determining the fair value of a reporting unit involves the use of significant estimates and assumptions . kodak estimates the fair value of its reporting units using the guideline public company method and discounted cash flow method . to estimate fair value utilizing the guideline public company method , kodak applies valuation multiples , derived from the operating data of publicly-traded benchmark companies , to the same operating data of the reporting units . the valuation multiples are based on earnings before interest , taxes , depreciation and amortization ( “ ebitda ” ) . to estimate fair value utilizing the discounted cash flow method , kodak establishes an estimate of future cash flows for each reporting unit and discounts those estimated future cash flows to present value . kodak performed a quantitative test of impairment for all reporting units for its annual goodwill impairment test as of december 31 , 2018. kodak utilized the discounted cash flow method and guideline public company method to estimate the fair value of reporting units with goodwill . for these reporting units , kodak selected equal weighting of the guideline public company method and the discounted cash flow method as the valuation approaches produced comparable ranges of fair value . fair values for the other reporting units were estimated using the discounted cash flow method only . 29 to estimate fair value utilizing the discounted cash flow method , kodak established an estimate of future cash flows for the period ranging from january 1 , 2019 to december 31 , 2023 and discounted the estimated future cash flows to present value . the expected cash flows were derived from earnings forecasts and assumptions regarding growth and margin projections , as applicable . the discount rates are estimated based on an after-tax weighted average cost of capital ( “ wacc ” ) for each reporting unit reflecting the rate of return that would be expected by a market participant . the wacc also takes into consideration a co mpany specific risk premium for each reporting unit reflecting the risk associated with the overall uncertainty of the financial projections . discount rates of 13 % to 55 % were utilized in the valuation based on kodak 's best estimates of the after-tax weig hted-average cost of capital of each reporting unit . a terminal value was included for all reporting units at the end of the cash flow projection period to reflect the remaining value that the reporting unit is expected to generate . the terminal value was calculated using either the constant growth method ( “ cgm ” ) based on the cash flows of the final year of the discrete period or the h-model , which assumes the growth during the terminal period starts at a higher rate and declines in a linear manner over a specified transition period toward a stable growth rate . based upon the results of kodak 's december 31 , 2018 analysis , kodak concluded that the fair value of the reporting units substantially exceeded their carrying values , therefore no impairment of goodwill was indicated . impairment of goodwill could occur in the future if a reporting unit 's fair value changes significantly , if kodak 's market capitalization significantly declines , if a reporting unit 's carrying value changes materially compared with changes in its fair values , or as a result of changes in operating segments or reporting units . the carrying value of the indefinite-lived intangible asset related to the kodak trade name is evaluated for potential impairment annually or whenever events or changes in circumstances indicate that it is more likely than not that the asset is impaired . story_separator_special_tag kodak performed its annual test of impairment for the kodak trade name as of december 31 , 2018. the fair value of the kodak trade name was valued using the income approach , specifically the relief from royalty method based on the following significant assumptions : ( a ) forecasted revenues ranging from january 1 , 2019 to december 31 , 2023 , including a terminal year with growth rates ranging from -2 % to 2.5 % ; ( b ) after-tax royalty rates ranging from .4 % to .8 % of expected net sales determined with regard to comparable market transactions and profitability analysis ; and ( c ) discount rates ranging from 17 % to 32 % , which were based on the after-tax weighted-average cost of capital based on the results of kodak 's december 31 , 2018 assessment , the carrying value of the kodak trade name exceeded its fair value and kodak recorded a pre-tax impairment charge of $ 13 million . impairment of the kodak trade name could occur in the future if expected revenues decline or if there are significant changes in the discount rates or royalty rates . long-lived assets other than goodwill and indefinite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable . when evaluating long-lived assets for impairment , the carrying value of an asset group is compared to its estimated undiscounted future cash flows . an impairment is indicated if the estimated future cash flows are less than the carrying value of the asset group . the impairment is the excess of the carrying value over the fair value of the long-lived asset group . the value of property , plant , and equipment is depreciated over its expected useful life in such a way as to allocate it as equitably as possible to the periods during which services are obtained from their use , which aims to distribute the value over the remaining estimated useful life of the unit in a systematic and rational manner . an estimate of useful life not only considers the economic life of the asset , but also the remaining life of the asset to the entity . impairment of long-lived assets other than goodwill and indefinite lived intangible assets could occur in the future if expected future cash flows decline or if there are significant changes in the estimated useful life of the assets . series a preferred stock embedded conversion features derivative on november 15 , 2016 , the company issued 2,000,000 shares of 5.50 % series a convertible preferred stock , no par value per share ( the “ series a preferred stock ” ) . the company concluded that the series a preferred stock is considered more akin to a debt-type instrument and that the economic characteristics and risks of the embedded conversion features , except where the conversion price is increased to the liquidation preference , were not considered clearly and closely related to the series a preferred stock . accordingly , these embedded conversion features were bifurcated from the series a preferred stock and separately accounted for on a combined basis at fair value as a single derivative . the company allocated $ 43 million of the net proceeds received to the derivative liability based on the aggregate fair value of the embedded conversion features on the date of issuance which reduced the original carrying value of the series a preferred stock . the derivative is being accounted for at fair value with subsequent changes in the fair value being reported as part of other ( income ) charges , net in the consolidated statement of operations . the fair value of the derivative as of both december 31 , 2018 and 2017 was an asset of $ 4 million and is included within other long-term assets in the accompanying consolidated statement of financial position . the fair value of the series a preferred stock embedded conversion features derivative is calculated using a binomial lattice model . the following table presents the key inputs in the determination of fair value at december 31 , 2018 and 2017 : 30 replace_table_token_3_th the fundamental change and reorganization conversion value at issuance was calculated as the difference between the total value of the series a preferred stock and the sum of the net present value of the cash flows if the series a preferred stock is redeemed on its fifth anniversary and the values of the other embedded derivatives . the fundamental change and reorganization conversion value reduces the value of the embedded conversion features derivative liability . the fundamental change and reorganization conversion value exceeded the value of the embedded conversion features derivative liability at december 31 , 2018 and 2017 resulting in the derivative being reported as an asset . taxes kodak recognizes deferred tax liabilities and assets for the expected future tax consequences of operating losses , credit carry-forwards and temporary differences between the carrying amounts and tax basis of kodak 's assets and liabilities . kodak records a valuation allowance to reduce its net deferred tax assets to the amount that is more likely than not to be realized . kodak has considered forecasted earnings , future taxable income , the geographical mix of earnings in the jurisdictions in which kodak operates and prudent and feasible tax planning strategies in determining the need for these valuation allowances . as of december 31 , 2018 , kodak has net deferred tax assets before valuation allowances of approximately $ 999 million and a valuation allowance related to those net deferred tax assets of approximately $ 853 million , resulting in net deferred tax assets of approximately $ 146 million . the net deferred tax assets can be used to offset taxable income in future periods and reduce kodak 's income tax payable in those future periods . at this time , it is considered more likely than not that taxable income in the future will be sufficient to allow realization of these net deferred tax assets .
| restructuring costs and other these costs , as well as the restructuring costs reported in cost of revenues , are discussed under the `` restructuring costs and other '' section in this md & a . other operating expense ( income ) , net for details , refer to note 15 , “ other operating expense ( income ) , net. ” 36 pension income for details , refer to note 19 , “ retirement plans. ” other ( income ) charges , net for details , refer to note 16 , “ other ( income ) charges , net. ” benefit from income taxes for details , refer to note 17 , “ income taxes. ” discontinued operations discontinued operations of kodak include the flexographic packaging segment . refer to note 27 , “ discontinued operations ” in the notes to financial statements for additional information . print systems segment replace_table_token_8_th revenues the decrease in print systems revenues of approximately $ 47 million reflected lower pricing ( $ 8 million ) driven by competitive pressures in the industry combined with volume declines in prepress solutions ( $ 41 million ) and electrophotographic printing solutions consumables and service ( $ 9 million ) . partially offsetting the declines was favorable foreign currency ( $ 14 million ) . operational ebitda the decrease in print systems operational ebitda of approximately $ 22 million reflected lower pricing ( $ 8 million ) and volume declines ( $ 5 million ) in prepress solutions , higher aluminum costs ( $ 23 million ) , unfavorable costs in electrophotographic printing solutions ( $ 5 million ) and the unfavorable impact of currency ( $ 5 million ) partially offset by manufacturing cost improvements in prepress consumables ( $ 12 million ) , a lower level of investment in product development , advertising and sales activities ( $ 13 million ) and a reduction in workers ' compensation reserves ( $ 2 million ) . enterprise inkjet systems segment replace_table_token_9_th revenues the decrease in enterprise inkjet systems revenues of approximately $ 8 million primarily reflected lower volume of versamark service and consumables ( $ 12 million ) due to declines in the installed base of versamark systems , lower volume of versamark system placements ( $ 5
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during 2014 , we acquired three companies , olson , mostra and citytech . see “ acquisitions and business combinations ” for a more detailed discussion of these acquisitions . the acquisition of olson , a leading provider of marketing technology and digital services , was significant and was completed on november 5 , 2014. the aggregate purchase price of approximately $ 296.4 million in cash , which includes the estimated working capital adjustment required by the agreement and plan of merger ( the “ merger agreement ” ) , was funded by our fourth amended and restated business loan and security agreement ( the “ credit facility ” ) . we modified the credit facility on november 5 , 2014 to increase the available commitments from $ 400.0 million to $ 500.0 million , giving effect to the $ 100.0 million available under the accordion , and to reinstate the borrowing capacity under the accordion for an additional $ 100.0 million . due to the increased level of debt outstanding under our credit facility , applicable interest rates , as determined by the pricing matrices in the agreement , increased approximately one percentage point following the acquisition . as a result of the acquisitions of olson , mostra and citytech , we expect our concentration of business to both commercial clients and within the health , social programs , and consumer/financial market will continue to grow as a percentage of our total revenue . we believe that demand for our services will continue to grow as government , industry , and other stakeholders seek to address critical long-term societal and natural resource issues in our key markets due to heightened concerns about clean energy and energy efficiency ; health promotion , treatment , and cost control ; and ever-present homeland security threats . our future results will depend on the success of our strategy to enhance our client relationships and seek larger engagements across the program life cycle in our three key markets , and to complete and successfully integrate additional acquisitions . in our three markets , we will continue to focus on building scale in vertical and horizontal domain expertise ; developing business with both our government and commercial clients ; and replicating our business model geographically throughout the world . in doing so , we will continue to evaluate acquisition opportunities that enhance our subject matter knowledge , broaden our service offerings , and or provide scale in specific geographies . while we continue to see favorable long-term market opportunities , there are certain near-term challenges facing all government service providers including top-line legislative constraints on federal government discretionary spending that limit expenditure growth through 2021. actions by congress could result in a delay or reduction to our revenue , profit , and cash flow and could have a negative impact on our business and results of operations ; however , we believe we are well positioned in markets that have been , and will continue to be , priorities to the federal government . we believe that the combination of internally-generated funds , available bank borrowings , and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund on-going operations , potential acquisitions , customary capital expenditures , and other current working capital requirements . our results of operations and cash flow may vary significantly from quarter to quarter depending on a number of factors , including , but not limited to : progress of contract performance ; extraordinary economic events and natural disasters ; number of billable days in a quarter ; 35 timing of client orders ; timing of award fee notices ; changes in the scope of contracts ; variations in purchasing patterns under our contracts ; federal and state government and other clients ' spending levels ; timing of billings to , and payments by , clients ; timing of receipt of invoices from , and payments to , employees and vendors ; commencement , completion , and termination of contracts ; strategic decisions we make , such as acquisitions , consolidations , divestments , spin-offs , joint ventures , strategic investments , and changes in business strategy ; timing of significant costs and investments ( such as bid and proposal costs and the costs involved in planning or making acquisitions ) ; our contract mix and use of subcontractors ; additions to , and departures of , staff ; changes in staff utilization ; paid time off taken by our employees ; level and cost of our debt ; changes in accounting principles and policies ; and or general market and economic conditions . because a significant portion of our expenses , such as personnel , facilities , and related costs , are fixed in the short term , contract performance and variation in the volume of activity , as well as in the number and volume of contracts commenced or completed during any quarter , may cause significant variations in operating results from quarter to quarter . we generally have been able to price our contracts in a manner to accommodate the rates of inflation experienced in recent years , although we can not ensure that we will be able to do so in the future . critical accounting policies the preparation of our financial statements in accordance with gaap requires that we make estimates and judgments that affect the reported amount of assets , liabilities , revenue , and expenses , as well as the disclosure of contingent assets and liabilities . if any of these estimates or judgments prove to be incorrect , our reported results could be materially affected . actual results may differ significantly from our estimates under different assumptions or conditions . we believe that the estimates , assumptions , and judgments involved in the accounting practices described below have the greatest potential impact on our financial statements and therefore consider them to be critical accounting policies . story_separator_special_tag 36 revenue recognition we recognize revenue when persuasive evidence of an arrangement exists , services have been rendered , the contract price is fixed or determinable , and collectability is reasonably assured . we enter into three types of contracts : time-and-materials , cost-based and fixed-price . time-and-materials contracts . revenue for time-and-materials contracts is recorded on the basis of allowable labor hours worked multiplied by the contract-defined billing rates , plus the costs of other items used in the performance of the contract . profits and losses on time-and-materials contracts result from the difference between the cost of services performed and the contract-defined billing rates for these services . cost-based contracts . revenue under cost-based contracts is recognized as costs are incurred . applicable estimated profit , if any , is included in earnings in the proportion that incurred costs bear to total estimated costs . incentives , award fees , or penalties related to performance are also considered in estimating revenue and profit rates based on actual and anticipated awards , taking into consideration factors such as the company 's prior award experience and communications with the customer regarding performance . fixed-price contracts . revenue for fixed-price contracts is recognized when earned , generally as work is performed . services performed vary from contract to contract and are not always uniformly performed over the term of the arrangement . we recognize revenue in a number of different ways on fixed-price contracts , including : proportional performance : revenue on certain fixed-price contracts is recorded each period based upon certain contract performance measures ( labor hours , labor costs , or total costs ) incurred , expressed as a proportion of a total project estimate . thus , labor hours , labor costs , or total contract costs incurred to date are compared with the total estimate for these items at completion . performance is based on the ratio of the incurred hours or costs to the total estimate . progress on a contract is monitored regularly to ensure that revenue recognized reflects project status . when hours or costs incurred are used as the basis for revenue recognition , the hours or costs incurred represent a reasonable surrogate for output measures of contract performance , including the presentation of deliverables to the client . clients are obligated to pay as services are performed , and in the event that a client cancels the contract , payment for services performed through the date of cancellation is negotiated with the client . contractual outputs : revenue on certain fixed-price contracts is recognized based upon outputs completed to date expressed as a percentage of total outputs required in the contract or based upon units delivered to the customer multiplied by the contract-defined unit price . straight-line : when services are performed or are expected to be performed consistently throughout an arrangement , or when we are compensated on a retainer or fixed-fee basis and thus regardless of level of effort , revenue is recognized ratably over the period benefited . completed contract : revenue and costs on certain fixed-price contracts are recognized at completion if the final act is so significant to the arrangement that value is deemed to be transferred only at completion . 37 revenue recognition requires us to use judgment relative to assessing risks , estimating contract revenue and costs or other variables , and making assumptions for scheduling and technical issues . due to the size and nature of many of our contracts , the estimation of revenue and estimates at completion can be complicated and are subject to many variables . contract costs include labor , subcontractor costs , and other direct costs , as well as an allocation of allowable indirect costs . at times , we must also make assumptions regarding the length of time to complete the contract because costs include expected increases in wages , prices for subcontractors , and other direct costs . from time to time , facts develop that require us to revise our estimated total costs or hours and thus the associated revenue on a contract . to the extent that a revised estimate affects contract profit or revenue previously recognized , we record the cumulative effect of the revision in the period in which the facts requiring the revision become known . a provision for the full amount of an anticipated loss on any type of contract is recognized in the period in which it becomes probable and can be reasonably estimated . as a result , operating results could be affected by revisions to prior accounting estimates . our contractual arrangements are evaluated to assess whether revenue should be recognized on a gross versus net basis . management 's assessment when determining gross versus net revenue recognition is based on several factors such as whether we serve as the primary service provider , have autonomy in selecting subcontractors , or have credit risk ; all of which are primary indicators that we serve as the principal to the transaction and revenue is recognized on a gross basis . when such indicators are not present and we are primarily functioning as an agent under an arrangement , revenue is recognized on a net basis . we generate invoices to clients in accordance with the terms of the applicable contract , which may not be directly related to the performance of services . unbilled receivables are invoiced based upon the achievement of specific events as defined by each contract , including deliverables , timetables , and incurrence of certain costs . unbilled receivables are classified as a current asset . advanced billings to clients in excess of revenue earned are recorded as deferred revenue until the revenue recognition criteria are met . reimbursements of out-of-pocket expenses are included in revenue with corresponding costs incurred by us included in the cost of revenue . we may proceed with work based upon client direction prior to the completion and signing of formal contract documents . we have a review process for approving any such work .
| direct costs for the year ended december 31 , 2014 , were $ 654.9 million compared to $ 591.5 million for the year ended december 31 , 2013 , an increase of $ 63.4 million or 10.7 % . the increase in direct costs is primarily attributable to the acquisition of olson , mostra and citytech . direct costs as a percent of revenue of 62.4 % for the year ended december 31 , 2014 were consistent with direct costs as a percent of revenue of 62.3 % for the year ended december 31 , 2013 . 43 changes in the mix of services and other direct costs provided under our contracts can result in variability in our direct costs as a percentage of revenue . for example , when we perform work in the area of implementation , we expect that more of our services will be performed in client-provided facilities and or with dedicated staff . such work generally has a higher proportion of direct costs than much of our current research and advisory work , and we anticipate that higher utilization of such staff will decrease indirect expenses . in addition , to the extent we are successful in winning larger contracts , our own labor services component could decrease because larger contracts typically are broader in scope and require more diverse capabilities , potentially resulting in more subcontracted labor , more other direct costs , and lower margins . although these factors could lead to a higher ratio of direct costs as a percentage of revenue , the economics of these larger jobs are nonetheless generally favorable because they increase income , broaden our revenue base , and have a favorable return on invested capital . indirect and selling e xpenses . indirect and selling expenses for the year ended december 31 , 2014 , were $ 302.0 million compared to $ 272.4 million for the year ended december 31 , 2013 , an increase of $ 29.6 million or 10.9 % . indirect and selling expenses include our management , facilities , and infrastructure costs for all employees , as well as salaries and wages , including stock-based compensation
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noncredit-related impairment losses are charged to other comprehensive income , to the extent we intend to hold the security until recovery . the determination of other-than-temporary impairment is a subjective process , requiring the use of judgments and assumptions . we examine all individual securities that are in an unrealized loss position at each reporting date for other-than-temporary impairment . specific investment-related factors are examined to assess impairment which include the nature of the investments , severity and duration of the loss , the probability that we will be unable to collect all amounts due , an analysis of the issuers of the securities and whether there has been any cause for default on the securities and any change in the rating of the securities by the various rating agencies . additionally , we evaluate whether the creditworthiness of the issuer calls the realization of contractual cash flows into question . we take into consideration the financial resources , intent and the overall ability of the company to hold the securities until their fair values recover . investment securities are discussed in more detail in note 5 to the company 's consolidated financial statements presented elsewhere in this report . the company considers all available information relevant to the collectability of the security , including information about past events , current conditions , and reasonable and supportable forecasts , when developing the estimate of future cash flows and making its other-than-temporary impairment assessment for its portfolio of trust preferred securities . the company considers factors such as remaining payment terms of the security , prepayment speeds , expected defaults , the financial condition of the issuer ( s ) , and the value of any underlying collateral . acquired loans acquired loans are initially recorded as of acquisition date at fair value in accordance with asc 805 , business combinations . loans purchased with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are accounted for under asc 310-30 , receivables loans and debt securities acquired with deteriorated credit quality . further , the company elected to account for all other acquired loans within the scope of asc 310-30 using the same methodology . an allowance for loan losses is not carried over or recorded as of the acquisition date . in situations where loans have similar risk characteristics , loans were aggregated into pools to estimate cash flows under asc 310-30. a pool is accounted for as a single asset with a single interest rate , cumulative loss rate and cash flow expectation . the company aggregated all of the loans acquired in the fdic-assisted acquisitions of wfib and ucb into different pools , based on common risk characteristics . the cash flows expected over the life of the pools are estimated using an internal cash flow model that projects cash flows and calculates the carrying values of the pools , book yields , effective interest income and impairment , if any , based on pool level events . assumptions as to cumulative loss rates , loss curves and prepayment speeds are utilized to calculate the expected cash flows . under asc 310-30 , the excess of the expected cash flows at acquisition over the recorded investment is considered to be the accretable yield and is recognized as interest income over the life of the loan or pool . the excess of the contractual cash flows over the expected cash flows is considered to be the nonaccretable difference . subsequent to the acquisition date , any increases in cash flow over those expected at purchase date in excess of the fair value that are probable are recorded as an adjustment to the accretable difference on a prospective basis . any subsequent decreases in cash flow over those expected at purchase date that are probable are recognized by recording an allowance for loan losses . any disposals of loans , including sales of loans , payments in full or foreclosures result in the removal of the loan from the asc 310-30 portfolio at the carrying amount . 31 the majority of the loans acquired in the fdic-assisted acquisitions of wfib and ucb are included in the fdic shared-loss agreements and are referred to as covered loans . covered loans are reported exclusive of the expected cash flow reimbursements from the fdic . at the date of acquisition , all covered loans were accounted for under asc 805 and asc 310-30. fdic indemnification asset in conjunction with the fdic-assisted acquisitions of wfib and ucb , the bank entered into shared-loss agreements with the fdic for amounts receivable covered by the shared-loss agreements . at the date of the acquisition the company elected to account for amounts receivable under the shared-loss agreements as an indemnification asset in accordance with asc 805. subsequent to the acquisition the indemnification asset is tied to the loss in the covered loans and is not being accounted for under fair value . the fdic indemnification asset is accounted for on the same basis as the related covered loans and is the present value of the cash flows the company expects to collect from the fdic under the shared-loss agreements . the difference between the present value and the undiscounted cash flow the company expects to collect from the fdic is accreted into noninterest income over the life of the fdic indemnification asset . the fdic indemnification asset is adjusted for any changes in expected cash flows based on the loan performance . any increases in cash flow of the loans over those expected will reduce the fdic indemnification asset and any decreases in cash flow of the loans over those expected will increase the fdic indemnification asset . over the life of the fdic indemnification asset , increases and decreases are recorded as adjustments to noninterest income . in december 2010 , the bank lowered the credit discount on the ucb covered loan portfolio as the credit quality was performing better than originally estimated . story_separator_special_tag by lowering the credit discount , interest income will increase over the life of the loans . correspondingly , with the lowered credit discount , the expected reimbursement from the fdic under the loss sharing agreement will decrease , resulting in amortization on the fdic indemnification asset which is recorded as a charge to noninterest income . allowance for loan losses our allowance for loan loss methodology incorporates a variety of risk considerations , both quantitative and qualitative , in establishing an allowance for loan loss that management believes is appropriate at each reporting date . quantitative factors include our historical loss experience , delinquency and charge-off trends , collateral values , changes in nonperforming loans , and other factors . qualitative considerations include , but are not limited to , prevailing economic or market conditions , relative risk profiles of various loan segments , volume concentrations , growth trends , delinquency and nonaccrual status , problem loan trends , and geographic concentrations . for a detailed discussion of our allowance for loan loss methodology see management 's discussion and analysis of consolidated financial condition and results of operations allowance for loan losses presented elsewhere in this report . as we add new products , increase the complexity of our loan portfolio , and expand our geographic coverage , we continue to enhance our methodology to keep pace with the size and complexity of the loan portfolio and the changing credit environment . changes in any of the factors cited above could have a significant impact on the loan loss calculation . we believe that our methodologies continue to be appropriate given our size and level of complexity . this discussion should also be read in conjunction with the company 's consolidated financial statements and the accompanying notes presented elsewhere in this report . see note 8 to the company 's consolidated financial statements . goodwill impairment under asc 350 , intangiblesgoodwill and other , goodwill must be allocated to reporting units and tested for impairment . the company tests goodwill for impairment at least annually or more frequently if events or circumstances , such as adverse changes in the business , indicate that there may be justification for conducting an interim test . impairment testing is performed at the reporting-unit level ( which is the same level as the company 's two major operating segments identified in note 24 to the company 's consolidated financial statements presented elsewhere in this report ) . the first part of the test is a comparison , at the reporting unit level , of the fair value of each reporting unit to its carrying value , including goodwill . in order to determine the fair value of the reporting units , a combined income approach and market approach was used . under the income approach , the company provided a net income projection and a terminal growth rate was used to calculate the discounted cash flows and the present value of the reporting units . under the market approach , the fair value was calculated using the current fair values of comparable peer banks of similar size , geographic footprint and focus . the market capitalizations and multiples of these peer banks were used to calculate the market price of the company and each reporting unit . the fair value was also subject to a control premium adjustment , which is the cost savings that a purchase of the reporting unit could achieve by eliminating duplicative costs . under the combined income and market approach , the value from each approach was appropriately weighted to determine the fair value . if the fair value is less than the carrying value , then the second part of the test is needed to measure the amount of goodwill impairment . the implied fair value of the reporting unit goodwill is calculated and compared to the actual carrying value of goodwill recorded within the reporting unit . if the carrying value of reporting unit goodwill exceeds the implied fair value of that goodwill , then the company would recognize an impairment loss for the amount of the difference , which would be recorded as a charge against net income . for complete discussion and disclosure see note 12 to the company 's consolidated financial statements presented elsewhere in this report . 32 share-based compensation we account for share-based awards to employees , officers , and directors in accordance with the provisions of asc 505 , equity , and asc 718 , compensationstock compensation . share-based compensation cost is measured at the grant date , based on the fair value of the award , and is recognized as expense over the employee 's requisite service period . we grant nonqualified stock options and restricted stock , which include a service condition for vesting . additionally , some of our stock awards include a company financial performance requirement for vesting . the stock option awards generally vest in one to four years from the grant date , while the restricted stock awards generally vest in three to five years from the date of grant . compensation expense is amortized on a straight-line basis over the requisite service period for the entire award , which is generally the maximum vesting period of the award . we use an option-pricing model to determine the grant-date fair value of our stock options which is affected by assumptions regarding a number of complex and subjective variables . we make assumptions regarding expected term , expected volatility , expected dividend yield , and risk-free interest rate in determining the fair value of our stock options . the expected term represents the weighted-average period that stock options are expected to remain outstanding . the expected term assumption is estimated based on the stock options ' vesting terms and remaining contractual life and employees ' historical exercise behavior . the expected volatility is based on the historical volatility of our common stock over a period of time equal to the expected term of the stock options .
| also includes the net ( amortization ) of deferred loan fees and cost totaling ( $ 16.2 ) million , ( $ 13.1 ) million , and ( $ 7.4 ) million for the years ended december 31 , 2012 , 2011 and 2010 . ( 2 ) average balances exclude unrealized gains or losses on available-for-sale securities . ( 3 ) average balances include nonperforming loans . analysis of changes in net interest income changes in our net interest income are a function of changes in rates and volumes of both interest-earning assets and interest-bearing liabilities . the following table sets forth information regarding changes in interest income and interest expense for the years indicated . the total change for each category of interest-earning assets and interest-bearing liabilities is segmented into the change attributable to variations in volume ( changes in volume multiplied by old rate ) and the change attributable to variations in interest rates ( changes in rates multiplied by old volume ) . nonaccrual loans are included in average loans used to compute this table . 35 table 3 : analysis of changes in net interest income replace_table_token_5_th ( 1 ) changes in interest income/expense not arising from volume or rate variances are allocated proportionately to rate and volume . provision for loan losses the provision for loan losses on non-covered loans and covered loans amounted to $ 60.2 million and $ 5.0 million for 2012 , as compared to $ 92.6 million and $ 2.4 million for 2011 and $ 195.9 million and $ 4.2 million for 2010 , respectively . throughout 2012 , the company continued to proactively manage credit , resulting in improvements in key asset quality metrics . total non-covered net charge-offs amounted to $ 42.2 million or 0.38 % of the average non-covered loans during 2012. this compares to $ 112.1 million or 1.16 % of the average non-covered loans during 2011. total net charge-offs for covered loans amounted to $ 6.5 million during 2012. no net charge-offs on covered loans were
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our net losses were principally attributable to insufficient revenue to cover the combination of operating expenses , interest expenses that we incur on our debt , depreciation expenses resulting from the capital investments we have made , and continue to make , in our cable properties , amortization expenses related to our customer relationship intangibles and higher non-cash income tax expense . we will incur significant increases in interest expense and depreciation and amortization as a result of the transactions and will incur restructuring and transition costs for at least one to two years , and as a result , absent non-recurring impacts such as the reversal of the income tax valuation allowance in the second quarter of 2016 , we may incur net losses in the future . critical accounting policies and estimates certain of our accounting policies require our management to make difficult , subjective and or complex judgments . management has discussed these policies with the audit committee of charter 's board of directors , and the audit committee has reviewed the following disclosure . we consider the following policies to be the most critical in understanding the estimates , assumptions and judgments that are involved in preparing our financial statements , and the uncertainties that could affect our results of operations , financial condition and cash flows : property , plant and equipment capitalization of labor and overhead costs valuation and impairment of property , plant and equipment useful lives of property , plant and equipment intangible assets valuation and impairment of franchises valuation and impairment of goodwill valuation and impairment and amortization of customer relationships income taxes litigation programming agreements pension plans in addition , there are other items within our financial statements that require estimates or judgment that are not deemed critical , such as the allowance for doubtful accounts and valuations of our financial instruments , but changes in estimates or judgment in these other items could also have a material impact on our financial statements . 39 property , plant and equipment the cable industry is capital intensive , and a large portion of our resources are spent on capital activities associated with extending , rebuilding , and upgrading our cable network . as of december 31 , 2016 and 2015 , the net carrying amount of our property , plant and equipment ( consisting primarily of cable distribution systems ) was approximately $ 33.0 billion ( representing 22 % of total assets ) and $ 8.3 billion ( representing 49 % of total assets excluding restricted cash and cash equivalents ) , respectively . total capital expenditures for the years ended december 31 , 2016 , 2015 and 2014 were approximately $ 5.3 billion , $ 1.8 billion and $ 2.2 billion , respectively . capitalization of labor and overhead costs . costs associated with network construction , initial placement of the customer drop to the dwelling and the initial placement of outlets within a dwelling along with the costs associated with the initial deployment of customer premise equipment necessary to provide video , internet or voices services , are capitalized . costs capitalized include materials , direct labor , and certain indirect costs . these indirect costs are associated with the activities of personnel who assist in installation activities , and consist of compensation and overhead costs associated with these support functions . while our capitalization is based on specific activities , once capitalized , we track these costs on a composite basis by fixed asset category at the cable system level , and not on a specific asset basis . for assets that are sold or retired , we remove the estimated applicable cost and accumulated depreciation . the costs of disconnecting service and removing customer premise equipment from a dwelling and the costs to reconnect a customer drop or to redeploy previously installed customer premise equipment are charged to operating expensed as incurred . costs for repairs and maintenance are charged to operating expense as incurred , while plant and equipment replacement , including replacement of certain components , betterments , and replacement of cable drops and outlets , are capitalized . we make judgments regarding the installation and construction activities to be capitalized . we capitalize direct labor and overhead using standards developed from actual costs and applicable operational data . we calculate standards annually ( or more frequently if circumstances dictate ) for items such as the labor rates , overhead rates , and the actual amount of time required to perform a capitalizable activity . for example , the standard amounts of time required to perform capitalizable activities are based on studies of the time required to perform such activities . overhead rates are established based on an analysis of the nature of costs incurred in support of capitalizable activities , and a determination of the portion of costs that is directly attributable to capitalizable activities . the impact of changes that resulted from these studies were not material in the periods presented . labor costs directly associated with capital projects are capitalized . capitalizable activities performed in connection with installations include such activities as : dispatching a “ truck roll ” to the customer 's dwelling or business for service connection or placement of new equipment ; verification of serviceability to the customer 's dwelling or business ( i.e. , determining whether the customer 's dwelling is capable of receiving service by our cable network and or receiving advanced or internet services ) ; customer premise activities performed by in-house field technicians and third-party contractors in connection with customer installations , installation of equipment in connection with the installation of video , internet or voice services , and equipment replacement and betterment ; and verifying the integrity of the customer 's network connection by initiating test signals downstream from the headend to the customer 's digital set-top box , as well as testing signal levels at the pole or pedestal . judgment is required to determine the extent to which overhead costs incurred result from specific capital activities , and therefore should be capitalized . story_separator_special_tag the primary costs that are included in the determination of the overhead rate are ( i ) employee benefits and payroll taxes associated with capitalized direct labor , ( ii ) direct variable costs associated with capitalizable activities , ( iii ) the cost of support personnel , such as care personnel and dispatchers , who assist with capitalizable installation activities , and ( iv ) indirect costs directly attributable to capitalizable activities . while we believe our existing capitalization policies are appropriate , a significant change in the nature or extent of our system activities could affect management 's judgment about the extent to which we should capitalize direct labor or overhead in the future . we monitor the appropriateness of our capitalization policies , and perform updates to our internal studies on an ongoing basis to determine whether facts or circumstances warrant a change to our capitalization policies . we capitalized direct labor and overhead of $ 991 million , $ 420 million and $ 427 million , respectively , for the years ended december 31 , 2016 , 2015 and 2014 . valuation and impairment of property , plant and equipment . we evaluate the recoverability of our property , plant and equipment upon the occurrence of events or changes in circumstances indicating that the carrying amount of an asset may not be recoverable . such events or changes in circumstances could include such factors as the impairment of our indefinite life franchises , changes in technological advances , fluctuations in the fair value of such assets , adverse changes in relationships with local franchise authorities , adverse changes in market conditions , or a deterioration of current or expected future operating results . a long-lived 40 asset is deemed impaired when the carrying amount of the asset exceeds the projected undiscounted future cash flows associated with the asset . no impairments of long-lived assets to be held and used were recorded in the years ended december 31 , 2016 , 2015 and 2014 . we utilize the cost approach as the primary method used to establish fair value for our property , plant and equipment in connection with business combinations . the cost approach considers the amount required to replace an asset by constructing or purchasing a new asset with similar utility , then adjusts the value in consideration of physical depreciation and functional and economic obsolescence as of the appraisal date . the cost approach relies on management 's assumptions regarding current material and labor costs required to rebuild and repurchase significant components of our property , plant and equipment along with assumptions regarding the age and estimated useful lives of our property , plant and equipment . useful lives of property , plant and equipment . we evaluate the appropriateness of estimated useful lives assigned to our property , plant and equipment , based on annual analysis of such useful lives , and revise such lives to the extent warranted by changing facts and circumstances . any changes in estimated useful lives as a result of this analysis are reflected prospectively beginning in the period in which the study is completed . our analysis of useful lives in 2016 did not indicate a change in useful lives . the effect of a one-year decrease in the weighted average remaining useful life of our property , plant and equipment as of december 31 , 2016 would be an increase in annual depreciation expense of approximately $ 1.7 billion . the effect of a one-year increase in the weighted average remaining useful life of our property , plant and equipment as of december 31 , 2016 would be a decrease in annual depreciation expense of approximately $ 863 million . depreciation expense related to property , plant and equipment totaled $ 5.0 billion , $ 1.9 billion and $ 1.8 billion for the years ended december 31 , 2016 , 2015 and 2014 , respectively , representing approximately 19 % , 21 % and 22 % of costs and expenses , respectively . depreciation is recorded using the straight-line composite method over management 's estimate of the useful lives of the related assets as listed below : cable distribution systems 7-20 years customer premise equipment and installations 3-8 years vehicles and equipment 3-6 years buildings and improvements 15-40 years furniture , fixtures and equipment 6-10 years intangible assets valuation and impairment of franchises . the net carrying value of franchises as of december 31 , 2016 and 2015 was approximately $ 67.3 billion ( representing 45 % of total assets ) and $ 6.0 billion ( representing 35 % of total assets excluding restricted cash and cash equivalents ) , respectively . for more information and a complete discussion of how we value and test franchise assets for impairment , see note 6 to the accompanying consolidated financial statements contained in “ part ii . item 8. financial statements and supplementary data. ” we perform an impairment assessment of franchise assets annually or more frequently as warranted by events or changes in circumstances . we performed a qualitative assessment in 2016 . our assessment included consideration of the fair value appraisals of legacy charter and the newly-acquired operations performed as of the date of acquisition for tax and acquisition accounting purposes , respectively , along with a multitude of factors that affect the fair value of our franchise assets . examples of such factors include environmental and competitive changes within our operating footprint , actual and projected operating performance , the consistency of our operating margins , equity and debt market trends , including changes in our market capitalization , and changes in our regulatory and political landscape , among other factors . based on our assessment , we concluded that it was more likely than not that the estimated fair values of our franchise assets equals or exceeds their carrying values and that a quantitative impairment test is not required .
| the increases in video revenues are attributable to the following ( dollars in millions ) : replace_table_token_10_th on a pro forma basis , assuming the transactions occurred as of january 1 , 2015 , residential video customers decreased by 226,000 in 2016 and the increase in video revenues is attributable to the following ( dollars in millions ) : replace_table_token_11_th 45 excluding the impacts of the transactions , residential internet customers grew by 461,000 and 442,000 customers in 2016 and 2015 , respectively . the increases in internet revenues from our residential customers are attributable to the following ( dollars in millions ) : replace_table_token_12_th on a pro forma basis , assuming the transactions occurred as of january 1 , 2015 , residential internet customers increased by 1,463,000 in 2016 and the increase in internet revenues is attributable to the following ( dollars in millions ) : 2016 compared to 2015 increase in average residential internet customers $ 957 service level changes , price adjustments and bundle revenue allocation 436 $ 1,393 excluding the impacts of the transactions , residential voice customers grew by 95,000 and 159,000 customers in 2016 and 2015 , respectively . the change in voice revenues from our residential customers is attributable to the following ( dollars in millions ) : replace_table_token_13_th on a pro forma basis , assuming the transactions occurred as of january 1 , 2015 , residential voice customers increased by 368,000 in 2016 and the increase in voice revenues is attributable to the following ( dollars in millions ) : replace_table_token_14_th 46 excluding the impacts of the transactions , small and medium business psus increased 128,000 and 109,000 in 2016 and 2015 , respectively . the increases in small and medium business commercial revenues are attributable to the following ( dollars in millions ) : replace_table_token_15_th on a pro forma basis , assuming the transactions occurred as of january 1 , 2015 , small and medium business psus increased by 291,000 in 2016 and the increase in small and medium business commercial revenues is attributable to the following ( dollars in millions ) : replace_table_token_16_th excluding the impacts of the transactions , enterprise psus increased 6,000 and 5,000 in 2016 and 2015 , respectively . on a pro forma basis , assuming the transactions occurred as of january 1 , 2015 , enterprise psus increased by 16,000 in 2016 . the transactions increased enterprise commercial revenues for year ended december 31 , 2016 as compared to 2015 by approximately $ 1.0
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consequently , revenues and or orders resulting from sales of our robotic magnetic navigation system can vary significantly from one reporting period to the next . we have strategic relationships with technology leaders in the global interventional market . through these strategic relationships we provide compatibility between our robotic magnetic navigation system and digital imaging and 3d catheter location sensing technology , as well as disposable interventional devices . the maintenance of these strategic relationships , or the establishment of equivalent alternatives , is critical to our commercialization efforts . there are no guarantees that any existing strategic relationships will continue and efforts are ongoing to ensure the availability of integrated next generation systems and or equivalent alternatives . we can not provide assurance as to the timeline of the ongoing availability of such compatible systems or our ability to obtain equivalent alternatives on competitive terms or at all . covid-19 pandemic prior to the spread of covid-19 , we experienced procedure trends consistent with the fourth quarter of 2019. we also saw strength in new capital orders . beginning in january 2020 , we saw a substantial reduction in robotic procedures in asia pacific , especially in china . by the height of the pandemic in that region , weekly procedures decreased to approximately 40 % of the average rate experienced in the fourth quarter . as the covid-19 pandemic subsided in china in march 2020 , procedure volume began to recover and , by the end of the first quarter of 2020 , we were seeing weekly procedures in the asia pacific region approach 70 % of the fourth quarter average rates . procedure disruption in other geographies was not significant until the middle of march 2020 , when the worldwide impact of covid-19 intensified . by the end of march , procedures in the u.s and europe , which represent the majority of our procedures , declined to approximately 70 % of the weekly procedure rate experienced in the fourth quarter of 2019. as the pandemic spread throughout the first quarter of 2020 , various local restrictions on travel , mandatory closures , social distancing protocols and shelter-in-place orders negatively impacted our ability to complete installation and service activities , which resulted in declines in system and service revenue in the first quarter . our supply-chain also experienced some impact as some suppliers struggled to source sub-components in february when most factories in china were seemingly closed . these issues were mostly alleviated by the end of the first quarter with the opening of the chinese economy . during the first quarter , we also took proactive actions to reduce the risk that a prolonged future reduction in chinese manufacturing might have on us . 35 during the early portion of the second quarter , weekly procedures in the united states and europe continued to decline , reaching approximately 40 % of fourth quarter 2019 levels by the middle of april . in may , with the reopening of various regions , procedures in both geographies began to recover and by the end of june , procedures were approximating the level seen before the pandemic . during the second quarter of 2020 , weekly procedure rates in asia pacific continued to improve , eventually reaching the pre-pandemic weekly procedure rate . during the third quarter of 2020 , weekly procedures continued to recover and approached the levels seen before the pandemic . during the fourth quarter of 2020 , periodic resurgence of covid-19 caused hospitals and patients in some areas to again postpone procedures . overall , weekly procedures during the fourth quarter remained generally consistent with the recovery seen in the third quarter . ongoing even with the anticipated rollout of an effective vaccine , we do not expect all markets to recover at the same pace . the impact that the pandemic will have on our business will likely continue to vary by individual geography based on the extent of the outbreak in each area , the timing of the vaccine distribution , specific governmental restrictions and the availability of testing capabilities , personal protective equipment , and hospital facilities , as well as decisions by our vendors , suppliers , customers and , ultimately , patients in response to the pandemic , none of which we are able to currently and accurately predict . while we can not reliably estimate the depth or length of the impact , we continue to anticipate significant , periodic disruptions to our procedures volumes , service activities and system placements into 2021. in addition , we would expect that additional capital system orders will also experience some delay . capital markets and worldwide economies have also been significantly impacted by the covid-19 pandemic , and it is possible that it could cause a local and or global economic recession . such economic recession could have a material adverse effect on our long-term business as hospitals curtail and reduce capital and overall spending or redirect such spending to treatments related directly to the pandemic . to-date , our manufacturing operations and supply chains have been minimally interrupted , but we can not guarantee that such will not be interrupted further in the future . if our manufacturing operations or supply chains are interrupted , it may not be possible for us to timely manufacture relevant products at required levels , or at all . a material reduction or interruption to any of our manufacturing processes could have a material adverse effect on our business , operating results , and financial condition . further , the covid-19 pandemic and local actions , such as “ shelter-in-place ” orders and restrictions on our ability to travel and access our customers or temporary closures of our facilities or the facilities of our suppliers and their contract manufacturers , could also significantly impact our sales and our ability to ship our products and supply our customers . story_separator_special_tag any of these events could negatively impact the number of procedures performed and the number of system placements and have a material adverse effect on our business , financial condition , results of operations , or cash flows . critical accounting policies and 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 u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenue and expenses and related disclosures . we review our estimates and judgments on an ongoing basis . we base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . actual results may differ from these estimates . we believe the following accounting policies are critical to the judgments and estimates we use in preparing our financial statements . revenue recognition the company accounts for revenue in accordance with accounting standards codification topic 606 ( “ asc 606 ” ) , revenue from contracts with customers . we generate revenue from the initial capital sales of systems as well as recurring revenue from the sale of our proprietary disposable devices , from royalties paid to the company on the sale by biosense webster of co-developed catheters , and from other recurring revenue including ongoing software updates and service contracts . we account for a contract with a customer when there is a legally enforceable contract between the company and the customer , the rights of the parties are identified , the contract has commercial substance , and collectability of the contract consideration is probable . we record our revenue based on consideration specified in the contract with each customer , net of any taxes collected from customers that are remitted to government authorities . for contracts containing multiple products and services the company accounts for individual products and services as separate performance obligations if they are distinct , which is if a product or service is separately identifiable from other items in the bundled package , and if a customer can benefit from it on its own or with other resources that are readily available to the customer . the company recognizes revenues as the performance obligations are satisfied by transferring control of the product or service to a customer . 36 for arrangements with multiple performance obligations , revenue is allocated to each performance obligation based on its relative standalone selling price . standalone selling prices are based on observable prices at which the company separately sells the products or services . if a standalone selling price is not directly observable , then the company estimates the standalone selling price considering market conditions and entity-specific factors including , but not limited to , features and functionality of the products and services and market conditions . the company regularly reviews standalone selling prices and updates these estimates as necessary . our revenue recognition policy affects the following revenue streams in our business as follows : systems : contracts related to the sale of systems typically contain separate obligations for the delivery of system ( s ) , installation and an implied obligation to provide software enhancements if and when available for one year following installation . revenue is recognized when the company transfers control to the customer , which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation , depending on the terms of the arrangement . revenue from the implied obligation to deliver software enhancements if and when available is recognized ratably typically over the first year following installation of the system as the customer receives the right to software updates throughout the period and is included in other recurring revenue . the company 's system contracts generally do not provide a right of return . systems are generally covered by a one-year assurance type warranty ; warranty costs were less than $ 0.1 million for the periods presented . disposables : revenue from sales of disposable products is recognized when control is transferred to the customers , which generally occurs at the time of shipment , but can also occur at the time of delivery depending on the customer arrangement . disposable products are covered by an assurance type warranty that provides for the return of defective products . warranty costs were not material for the periods presented . royalty : the company is entitled to royalty payments from biosense webster , payable quarterly based on net revenues from sales of the co-developed catheters . other recurring revenue : other recurring revenue includes revenue from product maintenance plans , other post warranty maintenance , and the implied obligation to provide software enhancements if and when available for a specified period , typically one year following installation of our systems . revenue from services and software enhancements is deferred and amortized over the service or update period , which is typically one year . revenue related to services performed on a time-and-materials basis is recognized when performed . sublease revenue : a portion of our principal executive office is subleased to a third party through 2021. in accordance with financial accounting standards board ( “ fasb ” ) accounting standards update ( “ asu ” ) 2016-02 , leases ( topic 842 ) , the company records sublease income as revenue . the company invoices its customers based on the billing schedules in its sales arrangements . contract assets primarily represent the difference between the revenue that was recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements . deferred revenue is primarily related to service contracts , for which the service fees are billed up-front , generally quarterly or annually , and for amounts billed in advance for system contracts for which some performance obligations remain outstanding .
| gross margin for systems decreased from $ 0.7 million for the year ended december 31 , 2019 to less than negative $ 0.1 million for the year ended december 31 , 2020 due to initial installation costs and changes in production and obsolescence reserves . cost of revenue for disposables , service , and accessories decreased to $ 3.0 million for the year ended december 31 , 2020 from $ 3.7 million for year ended december 31 , 2019 driven by decreased disposable sales volumes and lower expenses incurred under service contracts in the current year period , both as a result of the covid pandemic . gross margin for disposables , service and accessories was 87 % for the current year period compared to 86 % for the year ended december 31 , 2019 , driven by product mix and lower expenses incurred under service contracts in the current year period . cost of sublease revenue was $ 1.0 million for both the years ended december 31 , 2020 and 2019. research and development expense . research and development expense decreased from $ 9.0 million for the year ended december 31 , 2019 , to $ 8.1 million for the year ended december 31 , 2020 , a decrease of approximately 10 % . this decrease was due to lower genesis rmn project spending in the year ended december 31 , 2020. sales and marketing expense . sales and marketing expense decreased from $ 12.7 million for the year ended december 31 , 2019 to $ 11.2 million for the year ended december 31 , 2020 , a decrease of approximately 12 % . this decrease was primarily due to reductions in travel and trade-show related expenses in the year ended december 31 , 2020 , as a result of the covid pandemic . general and administrative expense . general and administrative expenses include finance , information systems , legal , and general management expenses . general and administrative expense increased from $ 5.8 million for the year ended december 31 , 2019 to $ 6.4 million for the year ended december 31 , 2020 , an increase of approximately 9 % . this increase was primarily driven by higher professional service fees in
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such loans are secured by client assets . interest earned on client margin balances is a component of net interest revenue . client margin balances are included in `` receivable from clients , net '' on our consolidated balance sheets . consolidated duration — the weighted average remaining years until maturity of our spread-based assets . for purposes of this calculation , floating rate balances are treated as having a one-month duration . consolidated duration is used in analyzing our aggregate interest rate sensitivity . daily average revenue trades ( `` darts `` ) — total trades divided by the number of trading days in the period . this metric is also known as average client trades per day . ebitda — ebitda ( earnings before interest , taxes , depreciation and amortization ) is a non-gaap financial measure . we consider ebitda to be an important measure of our financial performance and of our ability to generate cash flows to service debt , fund capital expenditures and fund other corporate investing and financing activities . ebitda is used as the denominator in the consolidated leverage ratio calculation for covenant purposes under our holding company 's senior revolving credit facility . ebitda eliminates the non-cash effect of tangible asset depreciation and amortization and intangible asset amortization . ebitda should be considered in addition to , rather than as a substitute for , pre-tax income , net income and cash flows from operating activities . eps excluding amortization of intangible assets — earnings per share ( `` eps '' ) excluding amortization of intangible assets is a non-gaap financial measure . we define eps excluding amortization of intangible assets as earnings ( loss ) per share , adjusted to remove the after-tax effect of amortization of acquired intangible assets . we consider eps excluding amortization of intangible assets an important measure of our financial performance . amortization of acquired intangible assets is excluded because we believe it is not indicative of underlying business performance . eps excluding amortization of intangible assets should be considered in addition to , rather than as a substitute for , gaap earnings per share . eps from ongoing operations — eps from ongoing operations is a non-gaap financial measure . we define eps from ongoing operations as earnings ( loss ) per share , adjusted to remove any significant unusual gains or charges . we consider eps from ongoing operations an important measure of the financial performance of our ongoing business . unusual gains and charges are excluded because we believe they are not likely to be indicative of the ongoing operations of our business . eps from ongoing operations should be considered in addition to , rather than as a substitute for , gaap earnings per share . fee-based investment balances — client assets invested in money market mutual funds , other mutual funds and company programs such as advisordirect ® and amerivest , ® on which we earn fee revenues . fee revenues earned on these balances are included in investment product fees on our consolidated statements of income . funded accounts — all open client accounts with a total liquidation value greater than zero . futures accounts — sub-accounts maintained by the company on behalf of clients for trading in futures and or options on futures . each futures account must be associated with a brokerage account . futures accounts are not counted separately for purposes of the company 's client account metrics . insured deposit account — the company is party to an insured deposit account ( `` ida '' ) agreement with td bank usa , n.a . ( `` td bank usa '' ) , td bank , n.a . and the toronto-dominion bank ( `` td '' ) . under the ida 26 agreement , td bank usa and td bank , n.a . ( together , the `` td depository institutions '' ) make available to clients of the company fdic-insured money market deposit accounts as either designated sweep vehicles or as non-sweep deposit accounts . the company provides marketing , recordkeeping and support services for the td depository institutions with respect to the money market deposit accounts . in exchange for providing these services , the td depository institutions pay the company an aggregate marketing fee based on the yield earned on the client ida assets , less the actual interest paid to clients , a servicing fee to the td depository institutions and the cost of fdic insurance premiums . interest-earning assets — consist of client margin balances , segregated cash , deposits paid on securities borrowing and other cash and interest-earning investment balances . interest rate-sensitive assets — consist of spread-based assets and client cash invested in money market mutual funds . investment product fees — revenues earned on fee-based investment balances . investment product fees include fees earned on money market mutual funds , other mutual funds and through company programs such as advisordirect ® and amerivest ® . ira accounts ( individual retirement arrangements ) — a personal trust account for the exclusive benefit of a u.s. individual ( or his or her beneficiaries ) that provides tax advantages in accumulating funds to save for retirement or other qualified purposes . these accounts are subject to numerous restrictions on additions to and withdrawals from the account , as well as prohibitions against certain investments or transactions conducted within the account . the company offers traditional , roth , savings incentive match plan for employees ( simple ) and simplified employee pension ( sep ) ira accounts . liquid assets available for corporate investing and financing activities — liquid assets available for corporate investing and financing activities is a non-gaap financial measure . we consider liquid assets available for corporate investing and financing activities to be an important measure of our liquidity . story_separator_special_tag we define liquid assets available for corporate investing and financing activities as the sum of ( a ) corporate cash and cash equivalents and short-term investments , excluding $ 750 million that is being maintained to provide liquidity for operational contingencies , including lending to our broker-dealer and futures commission merchant ( `` fcm '' ) subsidiaries under intercompany credit agreements and ( b ) regulatory net capital of ( i ) our clearing broker-dealer subsidiary in excess of 10 % of aggregate debit items and ( ii ) our introducing broker-dealer subsidiaries in excess of a minimum operational target established by management ( $ 50 million in the case of our primary introducing broker-dealer , td ameritrade , inc. ) . we include the excess capital of our broker-dealer subsidiaries in the calculation of liquid assets available for corporate investing and financing activities , rather than simply including broker-dealer cash and cash equivalents , because capital requirements may limit the amount of cash available for dividend from the broker-dealer subsidiaries to the parent company . excess capital , as defined under clause ( b ) above , is generally available for dividend from the broker-dealer subsidiaries to the parent company . liquid assets available for corporate investing and financing activities is based on more conservative measures of broker-dealer net capital than regulatory requirements because we generally manage to higher levels of net capital at the broker-dealer subsidiaries than the regulatory thresholds require . liquid assets available for corporate investing and financing activities should be considered as a supplemental measure of liquidity , rather than as a substitute for cash and cash equivalents . liquidation value — the net value of a client 's account holdings as of the close of a regular trading session . liquidation value includes client cash and the value of long security positions , less margin balances and the cost to buy back short security positions . it also includes the value of open futures , foreign exchange and options positions . margin accounts — brokerage accounts in which clients may borrow from the company to buy securities or for any other purpose , subject to regulatory and company-imposed limitations . market fee-based investment balances — client assets invested in mutual funds ( except money market funds ) and company programs such as advisordirect ® and amerivest , ® on which we earn fee revenues that are largely based on a percentage of the market value of the investment . market fee-based investment balances are a component of fee-based investment balances . fee revenues earned on these balances are included in investment product fees on our consolidated statements of income . net income excluding amortization of intangible assets — net income excluding amortization of intangible assets is a non-gaap financial measure . we define net income excluding amortization of intangible assets as net 27 income ( loss ) , adjusted to remove the after-tax effect of amortization of acquired intangible assets . we consider net income excluding amortization of intangible assets an important measure of our financial performance . amortization of acquired intangible assets is excluded because we believe it is not indicative of underlying business performance . net income excluding amortization of intangible assets should be considered in addition to , rather than as a substitute for , gaap net income . net interest margin ( `` nim `` ) — a measure of the net yield on our average spread-based assets . net interest margin is calculated for a given period by dividing the annualized sum of insured deposit account fees and net interest revenue by average spread-based assets . net interest revenue — net interest revenue is interest revenues less brokerage interest expense . interest revenues are generated by charges to clients on margin balances maintained in margin accounts , the investment of cash from operations and segregated cash and interest earned on securities borrowing/securities lending . brokerage interest expense consists of amounts paid or payable to clients based on credit balances maintained in brokerage accounts and interest incurred on securities borrowing/securities lending . brokerage interest expense does not include interest on company non-brokerage borrowings . net new assets — consists of total client asset inflows , less total client asset outflows , excluding activity from business combinations . client asset inflows include interest and dividend payments and exclude changes in client assets due to market fluctuations . net new assets are measured based on the market value of the assets as of the date of the inflows and outflows . net new asset growth rate ( annualized ) — annualized net new assets as a percentage of client assets as of the beginning of the period . operating expenses excluding advertising — operating expenses excluding advertising is a non-gaap financial measure . operating expenses excluding advertising consists of total operating expenses , adjusted to remove advertising expense . we consider operating expenses excluding advertising an important measure of the financial performance of our ongoing business . advertising spending is excluded because it is largely at the discretion of the company , can vary significantly from period to period based on market conditions and generally relates to the acquisition of future revenues through new accounts rather than current revenues from existing accounts . operating expenses excluding advertising should be considered in addition to , rather than as a substitute for , total operating expenses . order routing revenue — revenues generated from revenue-sharing arrangements with market destinations ( also referred to as `` payment for order flow '' ) . order routing revenue is a component of transaction-based revenues . securities borrowing — we borrow securities temporarily from other broker-dealers in connection with our broker-dealer business . we deposit cash as collateral for the securities borrowed , and generally earn interest revenue on the cash deposited with the counterparty . we also incur interest expense for borrowing certain securities . securities lending — we loan securities temporarily to other broker-dealers in connection with our broker-dealer business .
| ebitda should be considered in addition to , rather than as a substitute for , pre-tax income , net income and cash flows from operating activities . the following table sets forth ebitda in dollars and as a percentage of net revenues for the periods indicated , and provides reconciliations to net income , which is the most directly comparable gaap measure ( dollars in millions ) : replace_table_token_7_th our ebitda increased 2 % for fiscal 2015 compared to fiscal 2014 , primarily due to a 4 % increase in net revenues , partially offset by a 5 % increase in operating expenses excluding depreciation and amortization . detailed analysis of net revenues and operating expenses is presented later in this discussion . our diluted earnings per share increased 5 % to $ 1.49 for fiscal 2015 compared to $ 1.42 for fiscal 2014 , primarily due to higher ebitda , a lower effective income tax rate during fiscal 2015 resulting from favorable resolutions of state income tax matters and a 1 % decrease in average diluted shares outstanding as a result of our stock repurchase program , partially offset by higher interest on borrowings due to increases in our average debt outstanding and the average effective interest rate incurred on our debt . based on our expectations for net revenues and expenses , we expect diluted earnings per share to range from $ 1.45 to $ 1.75 for fiscal year 2016 , depending largely on the level of client trading activity , client asset growth and the nature of the interest rate environment . details regarding our fiscal year 2016 expectations for net revenues and expenses are presented later in this discussion . 31 operating metrics our largest sources of revenues are asset-based revenues and transaction-based revenues . for fiscal 2015 , asset-based revenues and transaction-based revenues accounted for 55 % and 43 % of our net revenues , respectively . asset-based revenues consist of ( 1 ) insured deposit account fees , ( 2 ) net interest revenue and ( 3 ) investment product fees . the primary factors driving
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elements on the owl canyon , california property ( subsequently abandoned ) ; ( iv ) strategic working capital reserve and ( v ) to finance our operations . in addition to our historic exploration activities , we are currently under taking 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 . 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 ( 10 ) years to twenty ( 20 ) years ( the “ primary term ” ) and candeo has the option to extend the term for an additional thirty ( 30 ) years exercisable at any time with no less than three ( 3 ) months written notice prior to the expiration of the primary term , provided that candeo is not in default under any of the provisions of the amended msa and that the whole of the initial amount has been removed from the property . 21 results of operations for the years ended december 31 , 2016 , 2015 , and 2014 : replace_table_token_5_th revenues : rental revenue was $ 9,167 for the year ended december 31 , 2016 , $ 33,100 for 2015 , and $ 27,500 for 2014. rental revenue relates to income derived from the rental of the company 's land for the purposes of mineral extraction , filming movies or conducting photo shoots . the decrease in rental revenue in 2016 was due to the rental contracts not being renewed . no rental revenues have been realized in any interim period in 2017. exploration costs : for the year ended december 31 , 2016 , exploration costs were $ 17,096 , $ 10,929 in 2015 , and $ 10,161 for the year ended december 31 , 2014. the increase in exploration costs is due to higher property taxes paid on our locations in 2016. we incurred about $ 5,000 in exploration costs in the 2017 interim period ended june 30 , 2017 and none in the other periods . story_separator_special_tag font-size : 10pt '' > 23 contractual obligations we have no significant changes in contractual obligations as of december 31 , 2016 and there were no significant changes in contractual obligations as at december 31 , 2015. critical accounting policies and estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america requires us to make estimates and judgments that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and story_separator_special_tag elements on the owl canyon , california property ( subsequently abandoned ) ; ( iv ) strategic working capital reserve and ( v ) to finance our operations . in addition to our historic exploration activities , we are currently under taking 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 . 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 ( 10 ) years to twenty ( 20 ) years ( the “ primary term ” ) and candeo has the option to extend the term for an additional thirty ( 30 ) years exercisable at any time with no less than three ( 3 ) months written notice prior to the expiration of the primary term , provided that candeo is not in default under any of the provisions of the amended msa and that the whole of the initial amount has been removed from the property . 21 results of operations for the years ended december 31 , 2016 , 2015 , and 2014 : replace_table_token_5_th revenues : rental revenue was $ 9,167 for the year ended december 31 , 2016 , $ 33,100 for 2015 , and $ 27,500 for 2014. rental revenue relates to income derived from the rental of the company 's land for the purposes of mineral extraction , filming movies or conducting photo shoots . the decrease in rental revenue in 2016 was due to the rental contracts not being renewed . no rental revenues have been realized in any interim period in 2017. exploration costs : for the year ended december 31 , 2016 , exploration costs were $ 17,096 , $ 10,929 in 2015 , and $ 10,161 for the year ended december 31 , 2014. the increase in exploration costs is due to higher property taxes paid on our locations in 2016. we incurred about $ 5,000 in exploration costs in the 2017 interim period ended june 30 , 2017 and none in the other periods . story_separator_special_tag font-size : 10pt '' > 23 contractual obligations we have no significant changes in contractual obligations as of december 31 , 2016 and there were no significant changes in contractual obligations as at december 31 , 2015. critical accounting policies and estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america requires us to make estimates and judgments that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
| 22 net operating gain or loss : net operating loss for the year ended december 31 , 2016 was $ 155,275 or $ 0.00 per share , there was a net operating loss of $ 169,803 or $ 0.00 per share for 2015 , and $ 232,484 for the year ended december 31 , 2014 , or $ 0.01 per share . this operating loss decrease is primarily due to decrease in exploration costs and general and administrative expense as explained above . other income : there was other non-recurring revenue for the year ended december 31 , 2016 of $ 268 , $ 2,626 in 2015 and $ 19,224 for the year ended december 31 , 2014. the other income in 2016 was due to the write-off of charges incurred , the other income in 2015 and 2014 was due to the write-off of accounts payable for stale-dated payables confirmed as no longer owed . in the interim periods in 2017 other income consisted of gain on sale of assets of $ 9,000 in the three months ended june 30 , 2017. interest expense : interest expense for the year ended december 31 , 2016 was $ 13,243 , $ 13,399 in 2015 , and $ 9,706 for the year ended december 31 , 2014. the increase in interest expense is due to the higher average carrying amounts on the notes payable throughout the year . in the interim periods in 2017 interest expense remained steady at about $ 3,000 per quarter . net loss : see the explanation of net operating loss above . liquidity and capital resources the following table summarizes total assets , accumulated deficit , stockholders ' equity ( deficit ) and working capital at december 31 , 2016 , 2015 , and 2014. replace_table_token_6_th at december 31 , 2016 , we had total assets of $ 1,290 , consisting of prepaid expenses , compared to assets of $ 3,195 in 2015 , and $ 867 in 2014. we have implemented financial controls in the business to ensure each expense is warranted and needed . our cash on hand at december 31 , 2016 was $ nil . no significant changes have taken place in the three quarters of 2017 as noted below : replace_table_token_7_th off balance sheet arrangements we do not have any off-balance sheet arrangements of any kind . < table
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net income attributable to mpc was $ 3.39 billion , or $ 9.89 per diluted share , in 2012 compared to $ 2.39 billion , or $ 6.67 per diluted share , in 2011. the increase was primarily due to our refining & marketing segment operations , which generated income from operations of $ 5.10 billion in 2012 compared to $ 3.59 billion in 2011. the increase in refining & marketing segment income from operations was due to an improved refining and marketing gross margin , which was primarily a result of larger light louisiana sweet crude oil ( lls ) 6-3-2-1 crack spreads and wider sweet/sour differentials . in 2012 , we completed a $ 2.2 billion ( excluding capitalized interest ) heavy oil upgrading and expansion project at our detroit refinery . this project increased the refinery 's heavy crude oil refining capacity from 20 mbpcd to 100 mbpcd , allowing it to process more heavy , sour crude oils , including canadian bitumen blends , which have traded at a significant discount to light sweet crude oil . in addition , the project increased the refinery 's total crude oil refining capacity by approximately 14 mbpcd to 120 mbpcd . we also continued to optimize our other refineries in 2012 , which includes increasing our garyville refinery crude oil refining capacity from 490 mbpcd to 522 mbpcd as of december 31 , 2012. our speedway segment generated income from operations of $ 310 million for 2012 compared to $ 271 million for 2011. the increase in 2012 was primarily due to increases in our merchandise gross margin and our gasoline and distillates gross margin , partially offset by higher expenses associated with an increase in the number of convenience stores . in 2012 , speedway llc acquired 10 convenience stores located in the northern kentucky and southwestern ohio regions from road ranger llc in exchange for cash and a truck stop location in the chicago metropolitan area and 87 convenience stores situated throughout indiana and ohio from gasamerica services , inc. these acquisitions support our strategic initiative to increase speedway segment sales and complement our existing network of assets . 43 our pipeline transportation segment generated income from operations of $ 216 million for 2012 compared to $ 199 million for 2011. the increase primarily reflects higher transportation tariffs , partially offset by higher mechanical integrity expenses and a reduction in income from a pipeline affiliate . on february 1 , 2013 , we acquired from bp the 451,000 barrel per calendar day texas city , texas refinery , three intrastate natural gas liquid pipelines originating at the refinery , an allocation of bp 's colonial pipeline company shipper history , four light product terminals , branded-jobber marketing contract assignments for the supply of approximately 1,200 branded sites and a 1,040 megawatt electric cogeneration facility . we refer to these assets as the galveston bay refinery and related assets . the financial results and operating statistics included in this section do not include these assets . see item 8. financial statements and supplementary data note 26 for additional information on the acquisition of these assets . in 2012 , we formed mplx , a master limited partnership , to own , operate , develop and acquire pipelines and other midstream assets related to the transportation and storage of crude oil , refined products and other hydrocarbon-based products . on october 31 , 2012 , mplx completed its initial public offering of 19,895,000 common units , which represented the sale by us of a 26.4 percent interest in mplx . we own a 73.6 percent interest in mplx , including the general partner interest , and we consolidate this entity for financial reporting purposes since we have a controlling financial interest . headquartered in findlay , ohio , mplx 's initial assets consist of a 51 percent general partner interest in pipe line holdings , which owns a network of common carrier crude oil and product pipeline systems and associated storage assets in the midwest and gulf coast regions of the united states , and a 100 percent interest in a butane storage cavern in west virginia . we own the remaining 49 percent limited partner interest in pipe line holdings . the financial results and operating statistics in this section include 100 percent of these assets for all time periods presented . see item 8. financial statements and supplementary data note 4 for additional information on mplx 's initial public offering . in 2012 , we signed a letter of intent with harvest pipeline company , agreeing to jointly develop infrastructure that will facilitate transportation of hydrocarbon liquids production from the utica shale in eastern ohio and western pennsylvania . the proposed project is expected to result in up to 24,000 barrels per day of truck unloading capacity and a terminal capable of loading up to 50,000 barrels per day onto barges on the ohio river at our wellsville , ohio asphalt terminal . in 2012 , to increase access to bakken and canadian crude oil , we agreed to be the anchor shipper on enbridge inc. 's proposed southern access extension pipeline with an option to acquire a 25 percent equity interest in the pipeline . this line will originate in flanagan , illinois near chicago and terminate in patoka , illinois , a critical crude storage and blending hub and the origination point for crude supply to our four midwest refineries . on february 1 , 2012 , we announced that our board of directors authorized a share repurchase plan , enabling us to purchase up to $ 2.0 billion of mpc common stock over a two-year period . we entered into two asr programs in 2012 to repurchase shares of mpc common stock totaling $ 1.35 billion . we received 27,760,674 shares under these programs in 2012 and 870,947 shares in february 2013. on january 30 , 2013 , we announced that our board of directors approved an additional $ 2.0 billion share repurchase authorization . story_separator_special_tag the board also extended the remaining $ 650 million share repurchase authorization announced on february 1 , 2012 , for a total outstanding authorization of $ 2.65 billion through december 2014. in 2012 , we entered into a five-year revolving credit agreement with an initial borrowing capacity of $ 2.0 billion and terminated our previous four-year revolving credit agreement . we subsequently amended this agreement to increase the borrowing capacity to $ 2.5 billion , which became effective in february 2013 in conjunction with the acquisition of the galveston bay refinery and related assets . also in 2012 , mplx operations llc , an affiliate of mpc and wholly-owned subsidiary of mplx , entered into a five-year senior unsecured revolving credit agreement with an initial borrowing loan capacity of $ 500 million that became effective at the time of mplx 's initial public offering . the agreement provides mplx with an independent source of liquidity . 44 as of december 31 , 2012 , we had cash and cash equivalents of $ 4.86 billion and no borrowings or letters of credit outstanding under mpc 's revolving credit agreement or trade receivables securitization facility or mplx 's revolving credit agreement . on december 1 , 2010 , we completed the sale of the minnesota assets . these assets included the 74,000 barrel per calendar day st. paul park refinery and associated terminals , 166 convenience stores primarily branded superamerica ® ( including six stores in wisconsin ) along with the supermom 's bakery and commissary ( a baked goods and sandwich supply operation ) and certain associated trademarks , superamerica franchising llc , interests in pipeline assets in minnesota and associated inventories . our financial results and operating statistics for all periods prior to the disposition include amounts for the minnesota assets . the above discussion includes forward-looking statements that relate to our expectations with respect to the proposed project with harvest pipeline company and the share repurchase plan . factors that could affect the proposed project with harvest pipeline company include , but are not limited to , our ability to reach a definitive agreement with harvest pipeline company and the timing and extent of hydrocarbon liquids production and demand from the utica shale . factors that could affect the share repurchase plan and its timing include , but are not limited to , business conditions , availability of liquidity and the market price of our common stock . these factors , among others , could cause actual results to differ materially from those set forth in the forward-looking statements . overview of segments refining & marketing refining & marketing segment income from operations depends largely on our refining and marketing gross margin and refinery throughputs . our refining and marketing gross margin is the difference between the prices of refined products sold and the costs of crude oil and other charge and blendstocks refined , including the costs to transport these inputs to our refineries , the costs of purchased products and manufacturing expenses , including depreciation and amortization . the crack spread is a measure of the difference between market prices for refined products and crude oil , commonly used by the industry as a proxy for the refining margin . crack spreads can fluctuate significantly , particularly when prices of refined products do not move in the same relationship as the cost of crude oil . as a performance benchmark and a comparison with other industry participants , we calculate midwest ( chicago ) and u.s. gulf coast ( usgc ) crack spreads that we believe most closely track our operations and slate of products . lls prices and a 6-3-2-1 ratio of products ( 6 barrels of lls crude oil producing 3 barrels of unleaded regular gasoline , 2 barrels of ultra-low sulfur diesel and 1 barrel of 3 percent sulfur residual fuel ) are used for these crack-spread calculations . our refineries can process significant amounts of sour crude oil , which typically can be purchased at a discount to sweet crude oil . the amount of this discount , the sweet/sour differential , can vary significantly , causing our refining and marketing gross margin to differ from crack spreads based on sweet crude . in general , a larger sweet/sour differential will enhance our refining and marketing gross margin . historically , wti has traded at prices similar to lls . during 2012 and 2011 , wti traded at prices significantly less than lls , which favorably impacted our refining and marketing gross margin . the logistical constraints in the u.s. mid-continent markets have prevented the price of wti from rising with the prices of crude oil produced in other regions . future differentials will be dependent on changes made to the logistical infrastructure . 45 the following table provides sensitivities showing the estimated change in annual net income , including the impact of the galveston bay refinery , due to potential changes in market conditions . replace_table_token_18_th ( a ) weighted 38 % chicago and 62 % usgc lls 6-3-2-1 crack spreads and assumes all other differentials and pricing relationships remain unchanged . ( b ) lls ( prompt ) - [ delivered cost of sour crude oil : arab light , kuwait , maya , western canadian select and mars ] . ( c ) assumes 20 % of crude oil throughput volumes are wti-based domestic crude oil . in addition to the market changes indicated by the crack spreads , the sweet/sour differential and the discount of wti to lls , our refining and marketing gross margin is impacted by factors such as : the types of crude oil and other charge and blendstocks processed ; the selling prices realized for refined products ; the impact of commodity derivative instruments used to hedge price risk ; the cost of products purchased for resale ; and changes in manufacturing costs , which include depreciation and amortization .
| ( b ) corporate and other unallocated items consists primarily of mpc 's corporate administrative expenses , including allocations from marathon oil for periods prior to the spinoff , and costs related to certain non-operating assets . ( c ) see item 8. financial statements and supplementary data - note 7 . ( d ) see item 8. financial statements and supplementary data - note 22 . ( e ) includes related party net interest and other financial income . the following table presents certain market indicators that we believe are helpful in understanding the results of our refining & marketing segment 's business . replace_table_token_24_th ( a ) all spreads and differentials are measured against prompt lls . ( b ) calculation utilizes usgc 3 % bunker value as a proxy for chicago residual fuel price . ( c ) blended chicago/usgc crack spread is 52 % /48 % in 2012 and 53 % /47 % in 2011 based on mpc 's refining capacity by region in each period . ( d ) lls ( prompt ) - [ delivered cost of sour crude oil : arab light , kuwait , maya , western canadian select and mars ] . refining & marketing segment income from operations increased $ 1.51 billion in 2012 from 2011 , primarily due to a higher refining and marketing gross margin per barrel , which averaged $ 10.45 per barrel in 2012 compared to $ 7.75 per barrel in 2011. our realized refining & marketing gross margin for 2012 benefited from increases in the chicago and usgc lls 6-3-2-1 blended crack spread of $ 3.36 per barrel and the sweet/sour differential of $ 3.36 per barrel in 2012 , and we estimate these had positive impacts on our refining & marketing gross margin of $ 1.68 billion and $ 870 million , respectively . these favorable impacts on our refining & marketing gross margin for 2012 compared to 2011 were partially offset by higher cost realizations of the actual mix of crude oils we processed compared to market indicators and higher direct operating costs associated with higher planned turnaround and major maintenance expenses and depreciation and amortization expenses . 51 the following table
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during 2014 , total printer sales to gtech increased approximately 7 % , compared to 2013. our sales to gtech each year are directly dependent on the timing and number of new and upgraded lottery terminal installations gtech performs and are not indicative of gtech 's overall business or revenue . however based on current orders and forecasts from gtech , we expect sales in 2015 to be higher than in 2014 , especially during the first half of 2015. sales of our printrex branded printers include wide format , rack mounted and vehicle mounted thermal printers used by customers to log and plot oil field and down hole well drilling data in the oil and gas exploration industry . sales in this market also includes wide format printers used to print test results in ophthalmology devices in the medical industry , as well as vehicle mounted printers used to print schematics and certain other critical information in emergency services vehicles and other mobile printing applications . during 2014 , we had solid revenue contributions from our new printrex® 920 and printrex® 980 oil and gas color printers developed in 2012. we believe that over time , sales of our color printers will increase as these printers provide customers with more value as data printed in color is easier to read and analyze than the same data printed in black and white . despite the increase in color printer sales , printrex printer sales for 2014 decreased by approximately 10 % primarily due to the negative impact of steeply declining worldwide oil prices , as well as an 11 % decline in the medical and mobile market . in 2015 , we expect initial revenue contributions from the responder mp2 , as we plan to introduce our first printer for the large machine-to-machine ( m2m ) vertical market . the responder mp2 is an all-in-one mobile printing solution for a number of vehicles , including fire , police , ems , insurance , public utilities and delivery . our tsg group , which sells service , replacement parts and consumable products , including receipt paper , ribbons and inkjet cartridges , continues to offer a recurring revenue stream for the company . tsg sales decreased 3 % in 2014 from 2013 primarily due to lower sales of non-printrex consumables compared to 2013 from the effect of lower hp inkjet cartridge sales as we deemphasize our focus on this commoditized product . this decrease was partially offset by higher replacement part sales and printrex color printer consumable sales which should continue to increase as the installed base of these printers grows . operationally , our gross margin declined to 40.9 % from 41.7 % in 2013. our gross margin for 2014 was impacted by lower sales of our higher margin value-added casino printers , food safety terminals and epicentral® installations compared to 2013. in 2014 we incurred a negative operating margin of 7.1 % compared to a positive operating margin of 11.0 % in 2013. the negative operating margin in 2014 resulted mainly from $ 5.5 million in legal and settlement expenses we incurred related to the ad lawsuit that we settled in march 2015 and to a lesser extent , lower gross margins due to sales declines . we reported a net loss of $ 2,421,000 and net loss per diluted share of $ 0.29 for 2014 , compared to net income of $ 4,935,000 and net income per diluted share of $ 0.57 in 2013. in terms of cash flow for 2014 , we experienced a very strong year , generating over $ 6.0 million of cash from operating activities . we also returned almost $ 5,200,000 to our shareholders in the form of $ 2,634,000 for treasury share repurchases and $ 2,556,000 for cash dividends while still finishing the year with cash and cash equivalents of $ 3,131,000 and no debt on our consolidated balance sheet at december 31 , 2014. critical accounting policies and estimates the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates , judgments and assumptions that affect both balance sheet items and statement of income categories . such estimates and judgments are based upon historical experience and certain assumptions that are believed to be reasonable in the particular circumstances . we evaluate our assumptions on an ongoing basis by comparing actual results with our estimates . actual results may differ from the original estimates . the following accounting policies are those that we believe to be most critical in the preparation of our financial statements . these items utilize assumptions and estimates about the effect of future events that are inherently uncertain and are therefore based on our judgment . please refer to note 2 – summary of significant accounting policies in the accompanying consolidated financial statements for a complete listing of our accounting policies . revenue recognition – our typical contracts include the sale of printers and terminals , which are sometimes accompanied by separately-priced extended warranty contracts . we also sell replacement parts , consumables , and other repair services ( sometimes pursuant to multi-year product maintenance contracts ) , which are not included in the original printer sale and are ordered by the customer as needed . we recognize revenue pursuant to the guidance within accounting standards codification ( “ asc ” ) 605 , “ revenue recognition ” ( asc 605 ) . specifically , revenue is recognized when evidence of an arrangement exists , delivery ( based on shipping terms which are generally fob shipping point ) has occurred , the selling price is fixed and determinable , and collectability is reasonably assured . we recognize revenue from the sale of printers and terminals to our distributors and resellers on a sell-in basis and on substantially the same terms as we recognize revenue from all our other customers . we provide for an estimate of product returns and price protection based on historical experience at the time of revenue recognition . story_separator_special_tag 12 our software solution , epicentral tm , enables casino operators to create promotional coupons and marketing messages and to print them in real-time at the slot machine . r evenue arrangements for epicentral tm include multiple deliverables and as a result such arrangements are accounted for in accordance with both asc 605-25 , “ multiple-element arrangements ” and asc 985-605 , “ software. ” epicentral tm is primarily comprised of both a software component , which is licensed to the customer , and a hardware component . epicentral contains both software and hardware that are integrated to deliver the system 's full functionality . these arrangements are accounted for in accordance with asc 605-25 , “ multiple-element arrangements ” . epicentral can also include an additional software offering , mobile host , that allows the customer to access certain applications on mobile devices . mobile host is accounted for in accordance with asc 985-605 , “ software ” as mobile host software does not function together with the hardware device to deliver its essential functionality . revenue , inclusive of software license fees , is generally recognized upon installation and formal acceptance by the customer with the exception of any amount allocated to free maintenance which is deferred and recognized over the initial maintenance period , generally one year . for epicentral tm and other multiple deliverable arrangements , we consider whether the deliverables in an arrangement are within the scope of existing higher-level gaap and apply such literature to the extent that it provides guidance regarding whether to separate multiple-deliverable arrangements and how to allocate value among those separate units of accounting . when we enter into a multiple deliverable arrangement , we also determine whether revenue arrangements consist of more than one unit of accounting . at that time , we allocate arrangement consideration to the separate units of accounting based on a relative selling price hierarchy , except where amounts allocable to the delivered units is limited to that which is contingent upon the delivery of additional deliverables or meeting other specified performance conditions . the relative selling price for each element is based upon the following selling price hierarchy : vendor specific objective evidence ( “ vsoe ” ) if available , third party evidence ( “ tpe ” ) if vsoe is not available , or best estimate of selling price ( “ besp ” ) to the extent that vsoe or tpe are not available . revenue related to extended warranty and product maintenance contracts is recognized pursuant to asc 605-20-25 , “ separately priced extended warranty and product maintenance contracts. ” pursuant to this guidance , revenue related to separately priced product maintenance contracts is deferred and recognized over the term of the maintenance period . we record deferred revenue for advance payments received from customers for maintenance contracts . our customers have the right to return products that do not function properly within a limited time after delivery . we monitor and track product returns and record a provision for the estimated future returns based on historical experience . returns have historically been within expectations and the provisions established , but we can not guarantee that we will continue to experience return rates consistent with historical patterns . we offer some of our customers price protection as an incentive to carry inventory of our product . these price protection plans provide that if we lower prices , we will credit them for the price decrease on inventory they hold . our customers typically carry limited amounts of inventory , and we infrequently lower prices on current products . as a result , the amounts paid under these plans have not been material . however , we can not guarantee that this minimal level will continue . we charge our customers for shipping and handling services . the amounts billed to customers are recorded as revenue when the product ships . any costs incurred related to these services are included in cost of sales . accounts receivable – we have standardized credit granting and review policies and procedures for all customer accounts , including : credit reviews of all new customer accounts ; ongoing credit evaluations of current customers ; credit limits and payment terms based on available credit information ; and adjustments to credit limits based upon payment history and the customer 's current creditworthiness . we also provide an estimate of doubtful accounts based on historical experience and specific customer collection issues . our allowance for doubtful accounts as of december 31 , 2014 was approximately $ 100,000 , or approximately 1.1 % of outstanding accounts receivable , which we feel is appropriate considering the overall quality of our accounts receivable . while credit losses have historically been within expectations and the reserves established , we can not guarantee that our credit loss experience will continue to be consistent with historical experience . inventories – our inventories are stated at the lower of cost ( principally standard cost , which approximates actual cost on a first-in , first-out basis ) or market . we review market value based on historical usage and estimates of future demand . assumptions are reviewed at least quarterly and adjustments are made , as necessary , to reflect changing market conditions . based on these reviews , inventory write-downs are recorded , as necessary , to reflect estimated obsolescence , excess quantities and market value . should circumstances change and we determine that additional inventory is subject to obsolescence , additional write-downs of inventory could result in a charge to income . goodwill and intangible asse t s – we acquire businesses in purchase transactions that result in the recognition of goodwill and intangible assets . the determination of the value of intangible assets requires management to make estimates and assumptions .
| operating income information is summarized below ( in thousands , except percentages ) : replace_table_token_16_th the decrease in our operating income and operating margin was primarily due to higher legal fees and $ 3,625,000 of settlement expenses related to the lawsuit with ad that we settled in march 2015 as well as a 12 % decline in sales . in addition , our operating margin for 2013 benefited by 150 basis points from the $ 900,000 reduction in the printrex accrued contingent consideration liability . interest . we recorded net interest expense of $ 49,000 in 2014 compared to net interest expense of $ 23,000 in 2013. the increase in net interest expense is primarily due to lower interest income earned on a lower average cash balance during 2014 , as we used a significant amount of our cash to repurchase our common stock and pay cash dividends during the latter half of 2013 and 2014. interest expense related to the unused revolving credit line fee and amortization of deferred financing costs on our revolving credit facility with td bank remained consistent in 2014 and 2013. see “ liquidity and capital resources ” below for more information . other , net . we recorded other expense of $ 33,000 in 2014 compared to $ 63,000 in 2013. the change was primarily due to a $ 60,000 loss from the disposal of certain tooling equipment during 2013 somewhat offset by higher foreign currency transaction exchange losses recorded by our u.k. subsidiary in 2014 compared to 2013. income taxes . we recorded an income tax benefit for 2014 of $ 1,433,000 at an effective tax rate of 37.2 % compared to an income tax provision of $ 1,596,000 at an effective tax rate of 24.4 % for 2013. our effective tax rate for 2013 was unusually low because it included ; ( 1 ) a $ 224,000 reduction in tax liabilities for unrecognized tax benefits resulting from the completion of
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most forecasts point to a continued pick-up in demand in both of these areas into calendar 2017. industry shipments of gypsum wallboard were 24.7 billion square feet in calendar 2016 , and we are expecting shipments to increase approximately 6 % to 8 % during calendar 2017. residential housing construction and repair and remodeling are also expected to continue to grow . we are planning to restart our bernalillo plant during fiscal 2018 , and anticipate running this plant as necessary to meet customer demand . the cost to recommission the plant is not expected to be material . we expect our recycled paperboard sales volumes to remain consistent as we are currently close to our production capacity . cost of recycled fiber increased throughout fiscal 2017 , and we expect the cost to be greater in fiscal 2018 than fiscal 2017 , especially in the first half of the year . we currently have contracts that have a mechanism to adjust sales prices for increases in the cost of fiber and utilities , but these price increases are only allowed at specified times , so increases in the cost of fiber may have an adverse impact on our operating earnings in the interim prior to our ability to increase the sales price of finished paper . demand for frac sand has recently been improving . the improved demand is due to several factors , namely increased horizontal drilling and increased sand intensity . we expect drilling activity and rig counts as well as proppant intensity per well to continue to increase throughout the remainder of calendar 2017 , which should result in increased demand for frac sand . we are currently planning the build out of our utica , illinois facility . this build out will include the addition of a dry plant and distribution system . we estimate that this build out will cost approximately $ 70.0 million and will be completed in the summer of 2018 . 35 story_separator_special_tag $ 225.0 million under our credit facility in february 2017 to complete the fairborn acquisition , which increased our average debt balance . due to the issuance of the 4.5 % senior unsecured notes and our borrowing to complete the fairborn acquisition , we expect our interest expense to increase in fiscal 2018 compared to fiscal 2017. earnings before income taxes . earnings before income taxes increased to $ 294.5 million during fiscal 2017 , primarily due to increased gross profit and equity in earnings of our unconsolidated joint venture , partially offset by increased corporate general and administrative , acquisition and interest expenses . income taxes . the effective tax rate for fiscal 2017 was approximately 33 % compared to approximately 31 % in fiscal 2016. the increase in the effective tax rate during fiscal 2017 is due primarily to decrease in our percentage depletion deduction during fiscal 2017 , and the receipt of certain state tax credits in fiscal 2016. net earnings and diluted earnings per share . net earnings in fiscal 2017 of $ 198.2 million increased 30 % . diluted earnings per share in fiscal 2017 were $ 4.10 , compared to $ 3.05 for fiscal 2016 . 37 the following table highlights certain operating information related to our business segments : replace_table_token_10_th ( 1 ) gross revenue , before freight and delivery costs . ( 2 ) includes proportionate share of our joint venture . ( 3 ) net of freight and delivery costs . cement operations . cement revenues were $ 566.3 million for fiscal 2017 , a 7 % increase over fiscal 2016. approximately $ 16.6 million of the increase in revenues was related to the skyway and fairborn acquisitions . the remaining increase in revenue is primarily due to a 4 % increase in average net sales prices and a 2 % increase sales volume . the increase in average net sales prices and sales volume positively impacted cement revenues by approximately $ 14.2 million and $ 7.0 million , respectively . cement operating earnings increased 11 % to $ 153.5 million for fiscal 2017. approximately $ 5.3 million of the increase in operating earnings was related to owning skyway cement for the full fiscal year . the remaining increase in operating earnings was due primarily to increased average net sales prices and sales volume , which positively impacted operating earnings by approximately $ 14.2 million and $ 2.1 million , respectively , partially offset increased operating costs of approximately $ 6.0 million . the increase in operating costs is primarily related to increased maintenance and energy costs of approximately $ 4.3 million and $ 1.2 million , respectively , as well as the timing of the fairborn acquisition . the increase in operating costs were partially offset by reduced purchase cement , which positively impacted operating earnings by approximately $ 2.9 million . the increase in maintenance 38 costs was fairly evenly distributed between our plants , while the reduction in purchased cement was primarily related to our joint venture . additionally , the fairborn business increased our operating costs by approxi mately $ 5.0 million due to their annual maintenance outage starting after we acquired the plant , and the impact of the step up of the acquired inventory . the operating margin increased to 2 7 % in fiscal 201 7 , compared to 26 % in fiscal 2016 , primarily due to increased sales prices and a reduction in the percentage of sales of lower margin purchased cement . gypsum wallboard operations . sales revenues increased 3 % to $ 473.7 million , primarily due to a 4 % increase in sales volumes , partially offset by a 1 % decrease in average net sales prices . the increase in sales volumes positively impacted revenues by approximately $ 17.2 million , partially offset by a $ 5.0 million decrease in sales revenues due to lower average net sales prices . our market share was essentially unchanged during fiscal 2017 , with the increase in sales volumes primarily due to increased construction activity . story_separator_special_tag operating earnings improved slightly to $ 159.9 million for fiscal 2017 , primarily due to the increase in sales volumes , which positively impacted operating earnings by approximately $ 5.9 million , partially offset by decreased average net sales prices and increased operating costs of approximately $ 5.0 million and $ 0.5 million , respectively . the increase in operating costs was primarily related to energy , raw materials and paper , which increased approximately $ 1.0 million , $ 1.0 million and $ 0.7 million , respectively , partially offset by decreased maintenance costs of approximately $ 2.4 million . during fiscal 2017 , our gross margin declined to 34 % from 35 % , primarily due to the reduction in average net sales prices . fixed costs are not a significant part of the overall cost of wallboard ; therefore , changes in volume have a relatively minor impact on our operating cost per unit . recycled paperboard operations . revenues increased 12 % to $ 167.1 million for fiscal 2017. the increase in net revenue is due to increased sales volumes and average net sales prices , which contributed approximately $ 14.8 million and $ 3.1 million , respectively , to revenues . the increase in average net sales price is due to the pricing provisions in our long-term sales agreement , and the increase in sales volume is due to increased demand for gypsum facing paper . operating earnings increased 17 % to $ 37.6 million for fiscal 2017 , and gross margin increased to 23 % from 22 % . the increase in operating earnings is primarily due to increased sales volumes and average net sales prices , which increased operating earnings by approximately $ 3.2 million and $ 3.1 million , respectively , partially offset by increased operating costs of approximately $ 0.9 million . the increase in operating costs was due primarily to recycled fiber and chemical costs , which adversely impacted operating earnings by approximately $ 3.5 million and $ 1.0 million , respectively , partially offset by decreased energy and maintenance costs of approximately $ 1.5 million and $ 2.7 million , respectively . oil and gas proppants . revenues from our oil and gas proppants segment decreased 40 % to $ 34.6 million for fiscal 2017. the decrease in revenues was due to a decline in sales volumes and average net sales prices , which adversely impacted revenues by approximately $ 13.0 million and $ 10.0 million , respectively . operating loss for fiscal 2017 was approximately $ 14.6 million , compared to operating loss of approximately $ 68.5 million for fiscal 2016. during both fiscal years , we experienced non-cash charges , settlements and write-offs that impacted our operating earnings , which are summarized below . operating loss for fiscal 2017 includes the write-off of a customer contract valued at approximately $ 1.3 million and a write-down of finished and raw sand inventories at our corpus christi location of approximately $ 8.5 million . the write-down of finished and raw sand inventories was based upon the sales price of proppants in the associated shale basin at the time of the write-off . from time to time , we have sales contracts with drilling companies that specified the purchase of a certain amount of tonnage at stated sales prices . during fiscal 2017 , sales contracts with two of our customers expired , or were terminated . these customers had not purchased their contractually required amounts at the time the contracts expired or were terminated , and we entered into settlement agreements with such customers in connection with their failure to purchase the required amounts . based on these settlement agreements , we received settlement payments of approximately $ 12.9 million in exchange for releasing our claims against such customers . we also recognized $ 2.0 million related to the forfeiture of a customer 39 prepayment upon the expiration of the related contract . these payments and forfeiture were recorded in our income statement as a reduction of cost of sales . during fiscal 2016 , we recorded an impairment charge of $ 35.0 million of intangible assets ( customer contracts ) generated from the crs acquisition , $ 2.0 million of bad debt reserves and a write-down of $ 11.5 million in raw sand inventory values associated primarily with downward revaluation of raw sand inventory . these charges were partially offset by a customer forfeiture of approximately $ 10.7 million of prepaid sand . excluding the impact of the non-cash charges , settlements and write-offs outlined above , operating loss for the fiscal 2017 was approximately $ 19.7 million , compared to operating loss of approximately $ 30.7 million for fiscal 2016. the reduction in operating loss was primarily due to lower operating costs , which positively impacted earnings by $ 21.0 million , partially offset by lower average net sales price , which adversely impacted earnings by approximately $ 10.0 million . the reduction in operating expenses is due primarily to approximately $ 8.5 million of lower amortization expense from customer contracts , and cost reduction measures related to lower demand , including the idling of the corpus christi plant and the kenedy , texas and fowlerton , texas trans-load facilities . concrete and aggregates operations . concrete and aggregates revenues increased 21 % to $ 154.6 million for fiscal 2017 , compared to $ 128.1 million for fiscal 2016. the primary reason for the increase in revenue was the 14 % and 21 % increase in sales volume for concrete and aggregates , respectively , which positively impacted revenues by approximately $ 20.1 million . in addition to the increase in sales volume , average net sales prices increased 4 % for both concrete and aggregates , which positively impacted revenues by $ 6.1 million .
| the reduction in cost of goods sold from lower operating expenses primarily related to lower operating costs our oil and gas proppants and concrete and aggregates businesses of approximately $ 21.0 million and $ 0.6 million , respectively , partially offset by increased operating costs in our cement segment of approximately $ 13.4 million . gross profit . gross profit improved 35 % to $ 312.0 million in fiscal 2017. the increase in gross profit was primarily due to the reduction in operating loss in our oil and gas proppants segment , which was primarily due to reduced operating costs . the reduction in operating costs in our oil and gas proppants segment is primarily due to the write-off of certain customer contract intangible assets and raw sand inventories in fiscal 2016. this is discussed in more detail in the oil and gas proppants section on page 39. equity in earnings of unconsolidated joint venture . equity in earnings of our unconsolidated joint venture increased $ 3.3 million , or 8 % . the improvement is primarily due to increased sales volumes and reduced operating expenses , partially offset by decreased average net sales prices . the impact of the increase in sales volume and reduced operating expenses on equity in earnings of our unconsolidated joint venture was approximately $ 2.8 million and $ 7.8 million , respectively , partially offset by decreased average net sales prices of approximately $ 7.3 million . the decrease in average net sales prices was due primarily to the decline in oil well cement as a percentage of our total sales , while the increase in sales volumes was primarily due to increased demand for construction grade 36 c ement . lower operating costs in fiscal 201 7 was due primarily to reduced purchased cement , energy , raw materials and freight costs of approximately $ 2.9 million , $ 1 . 1 million , $ 0.5 million and $ 1.1 million , respectively . corporate general and administrative . corporate general and administrative expenses decreased
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additional information regarding the sale of neighborhood diabetes is provided in note 3 to the consolidated financial statements included under item 8 of this form 10-k. highlights and recent developments : strengthened leadership team with appointment of key executives across the company . evidence demonstrating omnipod 's improved glycemic control and quality of life published in the journal of diabetes technology & therapeutics and the journal of diabetes science and technology . completed private placement of $ 345.0 million in principal amount of 1.25 % convertible senior notes due in 2021 and the repurchase of $ 134.2 million in principal amount of the existing 2.00 % convertible senior notes due in 2019. divested neighborhood diabetes medical supplies distribution business to focus on growth opportunities in insulin and drug delivery . expanded development partnership with eli lilly and company for omnipod delivery of humalog 200 concentrated insulin , in addition to the company 's already-existing partnership for humalog u500 . partnered with joslin diabetes center to implement a unique training certification for insulet 's clinical team . 2016 revenue results : total revenue of $ 367.0 million ◦ u.s. omnipod revenue of $ 229.8 million ◦ international omnipod revenue of $ 71.9 million ◦ drug delivery revenue of $ 65.3 million our long-term financial objective is to achieve and sustain profitable growth . we expect our efforts in 2017 to focus primarily on the expansion of our customer base in the united states and internationally , increasing our gross profit and product development . achieving these objectives is expected to require additional investments in certain personnel and initiatives , as well as enhancements to our supply chain operation capacity , efficiency and effectiveness . we believe that we will continue to incur net losses in the near term in order to achieve these 39 objectives . however , we believe that the accomplishment of our near term objectives will have a positive impact on our financial condition in the future . components of financial operations revenue . we derive most of our revenue from global sales of the omnipod system . our revenue also includes sales of devices based on the omnipod system technology platform to global pharmaceutical and biotechnology companies for the delivery of subcutaneous drugs across multiple therapeutic areas . cost of revenue . cost of revenue consists primarily of raw material , labor , warranty , inventory reserve and overhead costs such as freight-in and depreciation and the cost of products we acquire from third party suppliers . research and development . research and development expenses consist primarily of personnel costs and outside services within our product development , regulatory and clinical functions , and product development projects . we generally expense research and development costs as incurred . sales and marketing . sales and marketing expenses consist primarily of personnel costs within our sales , marketing , reimbursement support , customer care and training functions , sales commissions paid to our sales representatives , costs associated with promotional activities and participation in industry trade shows . general and administrative . general and administrative expenses consist primarily of salaries and other related costs for personnel serving the executive , finance , legal , information technology and human resource functions , as well as legal fees , accounting fees , insurance costs , bad debt expenses , shipping , handling and facilities-related costs . 40 story_separator_special_tag , up $ 13.7 million , or 8 % , due to growth in our installed base of omnipod users offset in part by unfavorable distributor ordering patterns and a reduction in royalty revenues of $ 3.2 million . our drug delivery revenue increased to $ 34.0 million , up $ 28.6 million due to strong growth in demand for our on-body injection device following regulatory approval in december 2014. our international omnipod revenue decreased to $ 40.3 million , down $ 9.7 million , or 19 % , primarily reflecting lower distributor sales due to changes in distributor ordering patterns despite continued growth in our installed base of omnipod users . this decrease internationally was partially offset by growth in canada ( we acquired our canadian distributor in july 2015 ) . cost of revenue cost of revenue increased to $ 130.6 million , up $ 26.4 million , or 25 % , in 2015 compared to 2014 , due to an increase in sales volumes , as well as $ 11.5 million of costs directly and indirectly attributable to a voluntary field safety notification that we initiated in november 2015 after identifying certain lots of omnipod product which had a slight increase in the reported cases in which the needle mechanism failed to deploy or there was a delay in the deployment of the needle mechanism . the product manufactured in this condition was contained prior to distribution and was ultimately scrapped . gross margin gross margin decreased to 50.5 % , down approximately 4.5 points in 2015 compared to 2014 , primarily due to approximately $ 11.5 million of costs directly and indirectly attributable to the voluntary field safety notification . the decrease in gross margin also reflects an increased investment in product quality and related policies and procedures to stand behind our products , which contributed to a $ 3.3 million increase in warranty expense year over year , of which $ 0.4 million related to the voluntary field safety notification . research and development research and development expenses increased to $ 43.2 million , up $ 15.3 million , or 55 % , in 2015 compared to 2014 , due to expenses related to our development projects , including a new pdm , the use of concentrated insulin for patients with higher insulin-resistance and investment in our artificial pancreas program , as well as expenses related to software development costs of $ 10.5 million . story_separator_special_tag sales and marketing sales and marketing expenses increased to $ 78.4 million , up $ 27.9 million , or 55 % , for 2015 compared to 2014 , primarily due to a $ 19.5 million increase in employee related expenses associated with the expansion of our sales force and customer support personnel . additionally , there was a $ 6.9 million increase in costs associated with marketing campaigns , new market opportunities and other strategic initiatives . general and administrative general and administrative expenses increased to $ 60.4 million , up $ 2.8 million , or 5 % , for 2015 compared to 2014 , mainly the result of an increase of $ 1.7 million in audit , professional services and consulting fees and an increase of $ 1.6 million in technology license fees and consulting services . additionally , there was an increase in shipping costs of $ 1.4 million , an increase in employee related expenses of $ 0.9 million , a $ 0.9 million increase in expenses associated with claims and settlements and a $ 0.9 million increase in occupancy and depreciation expense . this increase was partially offset by a decrease in legal fees of approximately $ 6.2 million , mainly related to the becton , dickinson and company litigation settlement in 2014. interest and other income ( loss ) , net interest and other income ( loss ) , net decreased to $ 12.7 million , down $ 26.4 million , or 68 % for 2015 compared to 2014 , due to the loss from extinguishment of long-term debt of $ 23.2 million in 2014 as well as the change in interest rate on our long-term debt to 2 % in mid-2014 from 3.75 % . income tax expense in 2015 and 2014 , income tax expense was $ 0.2 million and $ 0.1 million , respectively . income tax expense is comprised of a current portion for 2015 and 2014 and deferred portion for 2015. the current portion primarily related to state and foreign taxes and the deferred portion primarily related to federal and state tax amounts . the increase in tax expense was due to foreign taxes due to our acquisition in 2015 of the canadian distribution assets . additional information regarding income tax expenses is provided in note 18 to the consolidated financial statements . 43 loss from discontinued operations , net of tax the loss from discontinued operations increased by approximately $ 8.4 million in 2015 compared to 2014. this increase was primarily the result of a $ 9.1 million impairment charge recorded in the fourth quarter of 2015 for the long-lived assets of neighborhood diabetes . liquidity and capital resources as of december 31 , 2016 , we had $ 137.2 million in cash and cash equivalents and $ 161.4 million in short-term investments . we believe that our current liquidity , together with the cash expected to be generated from sales , will be sufficient to meet our projected operating and debt service requirements for at least the next twelve months . to lower our manufacturing costs , increase supply redundancy , add capacity closer to our largest customer base and support growth , we intend to construct a highly-automated manufacturing facility in the u.s. , with planned production out of the facility beginning in 2019. we expect capital expenditures to increase above historic levels to fund the construction of the manufacturing facility and related equipment purchases . we believe that our current liquidity will be sufficient to meet our projected expenditures associated with this project . convertible debt in september 2016 , we issued and sold $ 345.0 million in principal amount of 1.25 % convertible senior notes due september 2021 ( `` 1.25 % notes '' ) . the interest rate on the notes is 1.25 % per annum , payable semi-annually in arrears in cash on march 15 and september 15 of each year . interest began accruing on september 13 , 2016 ; the first interest payment is due on march 15 , 2017. the 1.25 % notes are convertible into our common stock at an initial conversion rate of 17.1332 shares of common stock per $ 1,000 principal amount of the 1.25 % notes , which is equivalent to a conversion price of approximately $ 58.37 per share , subject to adjustment under certain circumstances . the 1.25 % notes will be convertible prior to the close of business on the business day immediately preceding june 15 , 2021 only under certain circumstances and during certain periods , and will be convertible on or after june 15 , 2021 until the close of business on the second scheduled trading day immediately preceding september 15 , 2021 , regardless of those circumstances . cash interest expense related to the 1.25 % notes in the year ended december 31 , 2016 was $ 1.3 million . non-cash interest expense related to the 1.25 % notes was comprised of the amortization of the debt discount and debt issuance costs and in the year ended december 31 , 2016 was $ 3.8 million . in june 2014 we issued and sold $ 201.3 million in principal amount of 2 % convertible senior notes due june 15 , 2019 ( the `` 2 % notes '' ) . the interest rate on the notes is 2 % per annum , payable semi-annually in arrears in cash on june 15 and december 15 of each year . the 2 % notes are convertible into our common stock at an initial conversion rate of 21.5019 shares of common stock per $ 1,000 principal amount of the 2 % notes , which is equivalent to a conversion price of approximately $ 46.51 per share , subject to adjustment under certain circumstances .
| our drug delivery revenue increased to $ 65.3 million , up $ 31.4 million , or 92 % , due to strong growth in demand for our primary drug delivery device following regulatory approval in december 2014. for 2017 we expect strong revenue growth across all of our product lines as we continue our expansion in the u.s. and internationally . we expect strong growth of approximately 20 % in our worldwide omnipod installed base . cost of revenue 41 cost of revenue increased to $ 155.9 million , up $ 25.3 million , or 19 % , in 2016 compared to 2015 , primarily due to an increase in sales volumes , partially offset by $ 11.5 million of costs incurred during 2015 that were considered non-recurring in nature , along with supply chain operation efficiency and effectiveness improvements made in 2016. gross margin gross margin increased to 57.5 % , up approximately 7 points , in 2016 compared to 2015 , primarily due to $ 11.5 million of costs incurred in 2015 that were considered non-recurring in nature , along with supply chain operation efficiency and effectiveness improvements made in 2016. for 2017 , we expect gross margin to increase primarily from improvements to our supply chain operation efficiency and effectiveness as demonstrated in 2016. research and development research and development expenses increased to $ 55.7 million , up $ 12.5 million , or 29 % , in 2016 compared to 2015 , primarily due to an increase in expenses related to our development projects , including our mobile application development which involves interaction with continuous glucose monitoring technology , artificial pancreas program , development efforts with eli lilly and company for the use of concentrated insulin for patients with higher insulin-resistance and other omnipod product improvement initiatives . for 2017 , we expect overall research and development spending to increase due to the development efforts on our ongoing projects described above . sales and marketing sales and marketing expenses increased to $ 94.5 million , up $ 16.1 million , or 21 % , for 2016 , compared to 2015 , primarily due to an increase of
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