document stringlengths 8.64k 13.4k | summary stringlengths 179 2.97k | __index_level_0__ int64 0 16.8k |
|---|---|---|
repurchases will be effected if and when management deems prudent . approval to execute this plan must be obtained from lasalle business credit under the company 's credit facility prior to initiating any purchases . ( 3 ) results of operations 2002 compared with 2001 net sales increased $ 3.2 million ( 11 % ) in fiscal year 2002 compared to fiscal year 2001. this increase is primarily due to revenues resulting from the $ 15.6 million javelin missile field tactical trainer ( ftt ) award , which was announced in october 2001. gross margin as a percentage of sales increased to 34 % in fiscal year 2002 compared to 14 % in fiscal year 2001. the higher margins are primarily a result of improvement in gross margins due to performance efficiencies on several programs including cctt , javelin ftt and javelin bst . overhead expenses were also significantly reduced in fiscal year 2002 due to reductions in the workforce and other cost reduction initiatives which took place in fiscal year 2001 and early fiscal year 2002. selling , general and administrative decreased $ 3.4 million ( 34 % ) in fiscal year 2002 compared to fiscal year 2001. this decrease is primarily a result of decreased bid and proposal expenses and reductions in the workforce that took place in fiscal year 2001. there were several major pursuits of long-term programs in fiscal year 2001 , which required significant investments . independent research and development ( ir & d ) expense increased $ 640,000 ( 67 % ) in fiscal year 2002 compared to fiscal year 2001 primarily due to increased research projects related to the est 2000 product . deferred tax assets decreased $ 1.1 million ( 16 % ) in fiscal year 2002 compared to fiscal year 2001 due primarily to increased tax deductions due to disposal of excess and obsolete inventory . the tax valuation allowance was decreased by the same amount . due to uncertainty as to the ultimate realization of these assets , the company has provided a valuation reserve against its deferred tax assets . based on recent tax law changes , which extended the carryback period for net operating losses and changed certain alternative minimum tax liability rules , a net $ 216,000 tax benefit was recorded in fiscal year 2002 . 2001 compared with 2000 net sales decreased $ 12.1 million ( 30 % ) in fiscal year 2001 compared to fiscal year 2000. this decrease is primarily due to the completion of the javelin multi-year 1 , f-18 , uk catt and agts contracts and delays in the awards of the javelin multi-year 2 and est lot 2 contracts . page 11 of 54 gross margin as a percentage of sales decreased to 14 % in fiscal year 2001 compared to 33 % in fiscal year 2000. the lower margins are primarily a result of the completion of several high margin contracts in fiscal year 2000 and the spreading of fixed costs over a smaller revenue base . in addition , the company incurred $ 1.4 million of severance costs in fiscal year 2001 and recorded additional losses totaling $ 1.3 million related to completion of the est system development due to continuing technical issues . selling , general and administrative expense increased $ 791,000 ( 9 % ) in fiscal year 2001 compared to fiscal year 2000. this increase is primarily a result of increased bid and proposal , and marketing investments related to the pursuit of new business and increased bad debt expense related to recording a reserve for doubtful accounts for receivables associated with the former u.k. operation totaling $ 657,000. see note 2 in the notes to the consolidated financial statements . these increases were partially offset by decreases in sg & a salaries and bonuses . independent research and development ( ir & d ) expense increased $ 581,000 ( 155 % ) in fiscal year 2001 compared to fiscal year 2000 primarily due to research in the area of new simulation technologies and products . interest expense decreased $ 383,000 ( 53 % ) in fiscal year 2001 compared to fiscal year 2000. this decrease is primarily a result of improved cash flows from operations that enabled the company to maintain a positive cash balance for the first five months of fiscal year 2001. deferred tax assets increased $ 2.7 million ( 60 % ) in fiscal year 2001 compared to fiscal year 2000 due primarily to increased federal operating loss carryforwards . the tax valuation allowance was increased by the same amount due to uncertainty as to the ultimate realization of these assets . critical accounting policies the company considers that certain accounting policies are critical due to the estimation process involved in each of them . the assumptions and judgement utilized in developing these estimates are based on the information available at the time including an assessment of the risks and uncertainties . these estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented . the significant accounting policies , which the company believes are the most critical to aid in fully understanding and evaluating our reported financial results , include the following : revenue recognition contract sales and anticipated profits are recognized using the percentage of completion method measured by the ratio of costs incurred to date to estimated total costs . the company reevaluates the estimated costs to complete on the entire contract on a quarterly basis . any revisions in estimated costs or contract value during the progress of the work may affect the estimated gross margin percentage for the contract . estimated costs may be adjusted favorably or unfavorably based on projected changes in areas such as labor efficiencies , material price negotiations , supplier delivery schedules , design and development progress and overhead rate projections . changes in story_separator_special_tag repurchases will be effected if and when management deems prudent . approval to execute this plan must be obtained from lasalle business credit under the company 's credit facility prior to initiating any purchases . ( 3 ) results of operations 2002 compared with 2001 net sales increased $ 3.2 million ( 11 % ) in fiscal year 2002 compared to fiscal year 2001. this increase is primarily due to revenues resulting from the $ 15.6 million javelin missile field tactical trainer ( ftt ) award , which was announced in october 2001. gross margin as a percentage of sales increased to 34 % in fiscal year 2002 compared to 14 % in fiscal year 2001. the higher margins are primarily a result of improvement in gross margins due to performance efficiencies on several programs including cctt , javelin ftt and javelin bst . overhead expenses were also significantly reduced in fiscal year 2002 due to reductions in the workforce and other cost reduction initiatives which took place in fiscal year 2001 and early fiscal year 2002. selling , general and administrative decreased $ 3.4 million ( 34 % ) in fiscal year 2002 compared to fiscal year 2001. this decrease is primarily a result of decreased bid and proposal expenses and reductions in the workforce that took place in fiscal year 2001. there were several major pursuits of long-term programs in fiscal year 2001 , which required significant investments . independent research and development ( ir & d ) expense increased $ 640,000 ( 67 % ) in fiscal year 2002 compared to fiscal year 2001 primarily due to increased research projects related to the est 2000 product . deferred tax assets decreased $ 1.1 million ( 16 % ) in fiscal year 2002 compared to fiscal year 2001 due primarily to increased tax deductions due to disposal of excess and obsolete inventory . the tax valuation allowance was decreased by the same amount . due to uncertainty as to the ultimate realization of these assets , the company has provided a valuation reserve against its deferred tax assets . based on recent tax law changes , which extended the carryback period for net operating losses and changed certain alternative minimum tax liability rules , a net $ 216,000 tax benefit was recorded in fiscal year 2002 . 2001 compared with 2000 net sales decreased $ 12.1 million ( 30 % ) in fiscal year 2001 compared to fiscal year 2000. this decrease is primarily due to the completion of the javelin multi-year 1 , f-18 , uk catt and agts contracts and delays in the awards of the javelin multi-year 2 and est lot 2 contracts . page 11 of 54 gross margin as a percentage of sales decreased to 14 % in fiscal year 2001 compared to 33 % in fiscal year 2000. the lower margins are primarily a result of the completion of several high margin contracts in fiscal year 2000 and the spreading of fixed costs over a smaller revenue base . in addition , the company incurred $ 1.4 million of severance costs in fiscal year 2001 and recorded additional losses totaling $ 1.3 million related to completion of the est system development due to continuing technical issues . selling , general and administrative expense increased $ 791,000 ( 9 % ) in fiscal year 2001 compared to fiscal year 2000. this increase is primarily a result of increased bid and proposal , and marketing investments related to the pursuit of new business and increased bad debt expense related to recording a reserve for doubtful accounts for receivables associated with the former u.k. operation totaling $ 657,000. see note 2 in the notes to the consolidated financial statements . these increases were partially offset by decreases in sg & a salaries and bonuses . independent research and development ( ir & d ) expense increased $ 581,000 ( 155 % ) in fiscal year 2001 compared to fiscal year 2000 primarily due to research in the area of new simulation technologies and products . interest expense decreased $ 383,000 ( 53 % ) in fiscal year 2001 compared to fiscal year 2000. this decrease is primarily a result of improved cash flows from operations that enabled the company to maintain a positive cash balance for the first five months of fiscal year 2001. deferred tax assets increased $ 2.7 million ( 60 % ) in fiscal year 2001 compared to fiscal year 2000 due primarily to increased federal operating loss carryforwards . the tax valuation allowance was increased by the same amount due to uncertainty as to the ultimate realization of these assets . critical accounting policies the company considers that certain accounting policies are critical due to the estimation process involved in each of them . the assumptions and judgement utilized in developing these estimates are based on the information available at the time including an assessment of the risks and uncertainties . these estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented . the significant accounting policies , which the company believes are the most critical to aid in fully understanding and evaluating our reported financial results , include the following : revenue recognition contract sales and anticipated profits are recognized using the percentage of completion method measured by the ratio of costs incurred to date to estimated total costs . the company reevaluates the estimated costs to complete on the entire contract on a quarterly basis . any revisions in estimated costs or contract value during the progress of the work may affect the estimated gross margin percentage for the contract . estimated costs may be adjusted favorably or unfavorably based on projected changes in areas such as labor efficiencies , material price negotiations , supplier delivery schedules , design and development progress and overhead rate projections . changes in
| page 13 of 54 to date , a substantial portion of the company 's revenues have been attributable to long-term contracts with various government agencies . as a result , any factor adversely affecting procurement of long-term government contracts could have a material adverse effect on the company 's financial condition and results of operations . because of these and other factors , past financial performance should not be considered an indication of future performance . the company 's future quarterly operating results may vary significantly . investors should not use historical trends to anticipate future results and should be aware that the trading price of the company 's common stock may be subject to wide fluctuations in response to quarterly variations in operating results and other factors , including those discussed
| 13,480 |
at december 31 , 2019 ; and · results for 2020 in the specialty health segment were impacted by covid-19 during 2020. we expected that sales of stm might have grown more if not for displaced workers taking advantage of special enrollment periods for aca coverage , and the subsidies provided through advanced premium tax credits , as well as employers continuing to offer employer sponsored coverage to 34 furloughed workers . evolving regulatory mandates for testing and treatment coverage , the length and severity of the outbreak , claims activity , and impacts on payment of premiums have not had a significant impact on the 2020 results to date , however , we may incur additional expenses in 2021 relating to possible covid-19 related claims activity and possible non-payment of premiums as the full effects of the outbreak continue to unfold . to date , we have experienced lower utilization related to the deferral of services which more than offset the extra incurred costs mentioned previously . it is still unpredictable how this level of deferred utilization will reverse or not in the future but emerging results will continue to be monitored . results for the group disability , life , dbl and pfl segment were not materially impacted by covid-19 from an aggregate claims standpoint . decreases in incidence rates for disability products earlier in the year returned to near historical averages later in the year . the life incidence rate was not affected by covid-19 in aggregate . premiums decreased in the dbl business as a result of higher unemployment and the loss of smaller groups that have gone out of business due to covid-19 . the following is a summary of key performance information by segment : · the specialty health segment reported $ 4.3 million of income before taxes for the year ended december 31 , 2020 compared to $ 7.8 million for the comparable period in 2019. the decrease in 2020 when compared to 2019 is primarily due to : ( i ) $ 3.7 million of expenses for compliance with the mce ; ( ii ) shift in product mix in 2020 to higher earned premium from somewhat higher loss ratio products than those impacting 2019 ; ( iii ) increased costs related to overall infrastructure improvements in lead generation capabilities and sales automation platforms at ihc specialty benefits , inc. without a meaningful increase in sales yet ; partially offset by ( iv ) other income of $ 5.6 million for the recognition of an arbitration award received in 2020. o premiums earned increased 7.2 % or $ 12.8 million for the year ended december 31 , 2020 over the comparable period in 2019. increases in premiums from the pet and stm lines were partially offset by decreases in premiums from fixed indemnity limited benefit , group gap , occupational accident and group health modified indemnity lines of business ; o underwriting experience , as indicated by its u.s. generally accepted accounting principles ( “ gaap ” ) combined ratios , for the specialty health segment are as follows for the years indicated ( in thousands ) : replace_table_token_6_th ( a ) loss ratio represents insurance benefits claims and reserves divided by premiums earned . ( b ) expense ratio represents net commissions , administrative fees , premium taxes and other underwriting expenses divided by premiums earned . ( c ) the combined ratio is equal to the sum of the loss ratio and the expenses ratio . o the higher loss ratios in 2020 primarily reflects the broadening of the mix of business , with a higher concentration of product lines with lower profit margins . the higher 35 expense ratio in 2020 is primarily due to $ 3.7 million of expenses for compliance with the mce as well as changes in the mix of products in the specialty health segment . · income before taxes from the group disability , life , dbl and pfl segment increased $ 11.4 million in 2020 compared to the prior year . the increase in 2020 primarily reflects an increase in pfl profitability due to increased premium rates partially offset by benefits recorded for a potential risk adjustment payment amounting to $ 25.0 million in 2020 , as compared to $ 10.7 million in the 2019 , associated with the company 's pfl product due to estimated amounts that the company may have to pay into the new york state adjustment pool as a result of ihc 's experience with pfl being significantly better than that of the industry as a whole . in addition , dbl had favorable premium reserve adjustments offset by higher loss ratios and unfavorable loss development in the group std line of business and , beginning in third quarter 2020 , a decrease in dbl premium volume as a result of higher unemployment due to covid-19 . · the individual life , annuities and other segment in run-off reported an insignificant amount of income before income taxes in 2020 compared with losses before income taxes of $ 1.1 million in 2019 ; · the corporate segment reported losses before tax of $ 9.0 million for the year ended december 31 , 2020 compared to $ 7.1 million for the same period in 2019. the change is primarily due to lower annualized yields on investments in 2020 and less income from equity method investments , partially offset by lower compensation expenses in 2020 ; · premiums by principal product for the years indicated are as follows ( in thousands ) : replace_table_token_7_th replace_table_token_8_th information pertaining to the company 's business segments is provided in note 19 of notes to consolidated financial statements included in item 8 . 36 critical accounting policies the accounting and reporting policies of the company conform to u.s. gaap . the preparation of the consolidated financial statements in conformity with u.s. gaap requires the company 's management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes . actual results could differ from those estimates . story_separator_special_tag a summary of the company 's significant accounting policies and practices is provided in note 1 of the notes to the consolidated financial statements included in item 8 of this report . management has identified the accounting policies described below as those that , due to the judgments , estimates and assumptions inherent in those policies , are critical to an understanding of the company 's consolidated financial statements and this management 's discussion and analysis . insurance premium revenue recognition and policy charges premiums for short-duration medical insurance contracts are intended to cover expected claim costs resulting from insured events that occur during a fixed period of short duration . the company has the ability to not renew the contract or to revise the premium rates at the end of each annual contract period to cover future insured events . insurance premiums from annual health contracts are collected monthly and are recognized as revenue evenly as insurance protection is provided . premiums related to long-term and short-term disability contracts are recognized on a pro rata basis over the applicable contract term . traditional life insurance products consist principally of products with fixed and guaranteed premiums and benefits , primarily term and whole life insurance products . premiums from these products are recognized as revenue when due . annuities and interest-sensitive life contracts , such as universal life and interest-sensitive whole life , are contracts whose terms are not fixed and guaranteed . premiums from these policies are reported as funds on deposit . policy charges consist of fees assessed against the policyholder for cost of insurance ( mortality risk ) , policy administration and early surrender . these revenues are recognized when assessed against the policyholder account balance . policies that do not subject the company to significant risk arising from mortality or morbidity are considered investment contracts . deposits received from such contracts are reported as other policyholder funds . policy charges for investment contracts consist of fees assessed against the policyholder account for maintenance , administration and surrender of the policy prior to contractually specified dates , and are recognized when assessed against the policyholder account balance . fee income revenue recognition fee income includes fees and commissions for various sales , marketing and administrative services provided by the ihc agencies and lead generation company . revenue is recognized as these services are performed in an amount that reflects the consideration we expect to be entitled to in exchange for these services . the company utilizes the following five-step approach to recognize revenue from contracts with customers : ( 1 ) identification of the contract , or contracts , with a customer ; ( 2 ) identification of the performance obligation in the contract ; ( 3 ) determination of the transaction price ; ( 4 ) allocation of the transaction price to the performance obligations in the contract ; and 37 ( 5 ) recognition of revenue when , or as , we satisfy a performance obligation . commission revenues result from the sales of certain policies by the ihc agencies on behalf of multiple unaffiliated insurance carriers . the company has identified the unaffiliated insurance carriers as its customers . a significant portion of our commission revenues are recorded at a point in time based on expected constrained ltv that represent expected commissions to be received over the lifetime of the policies sold . these policies primarily consist of senior products , such as medicare advantage , medicare part d prescription drug plans and medicare supplement plans , as well as aca plans and small group stop-loss . commission rates are agreed to in advance with the relevant insurance carrier and vary by carrier and policy type . other commission revenues are recorded over a period of time commensurate with the performance of certain policy retention and renewal services . in circumstances where the contract is terminable at any time by either party , commission revenues are recorded when consideration is received to the extent it is nonrefundable . constrained ltv commissions are recorded at a point in time upon the issuance of a policy by the unaffiliated insurance carrier . it is at this point the performance obligation is considered satisfied . no significant additional performance obligation occurs with renewal of the initial policy . ihc records substantially all of the anticipated revenue from these policies on this date , adjusted for certain expected constraints . various factors are analyzed to estimate the constrained ltv commissions . these include , but are not limited to , commission rates , carrier mix , contract amendments and terminations , estimated average plan durations , cancellations and non-renewals . after our initial estimate and constraints are made , the company reassesses its estimates and constraints at the end of each reporting period . we recognize any material impact of changes to commission revenue in the period when the changes are made to the assumptions we use to calculate constrained ltv or previously estimated constrained ltv already recognized as revenue . revenues for administrative services , such as premium collections , client services and claims processing , all considered to be a single performance obligation , are recognized over time as these services are performed . one of our agencies administers a block of pet business for an unaffiliated pet insurer that is in run-off and , until its sale in june 2020 , another one of our agencies administered occupational accident plans including injured-on-duty accident plans and employer liability plans , and self-funded workers ' compensation plans . the company has identified the unaffiliated insurance carriers as its customers . some payments are received monthly or quarterly over the underlying policy period which is shorter than the life of the administrative period . a portion of these payments , in addition to any payments that are received as a lump-sum in advance , are recorded as deferred revenues and recognized in income over the life of the administrative contracts .
| net investment gains ( losses ) and net impairment losses recognized in earnings the company had net investment gains of $ 1.3 million in 2020 compared to $ 4.7 million in 2019. these amounts include gains and losses from sales of fixed maturities available-for-sale , equity securities and other investments . decisions to sell securities are based on management 's ongoing evaluation of investment opportunities and economic and market conditions , thus creating fluctuations in gains and losses from period to period . in 2020 , the company did not recognize any other-than-temporary impairment losses on fixed maturities available-for-sale . in 2019 , the company recognized $ .6 million of other-than-temporary impairment losses on fixed maturities available-for-sale as the company determined that it was more likely than not that we would sell the securities before the recovery of their amortized cost basis . fee income and other income fee income increased $ 10.1 million in 2020 compared to 2019 primarily due to an increase in the sales of insurance products ( primarily senior products , aca plans and small group stop-loss ) by the ihc 45 agencies for multiple unaffiliated insurance carriers . the increase in sales of these particular products began in 2020 as a result of new contracts with the unaffiliated carriers and increased distribution channels . other income increased $ 7.1 million in 2020 compared to the same period in 2019. in 2020 , other income includes the recognition of a $ 5.6 million arbitration award received . in 2019 , other income included a $ 3.6 million pretax gain on the sale of an equity investment and $ 1.3 million of income from partnership investments offset by a $ 3.7 million impairment loss on an equity investment in ebix health administration exchange from its carried value to its estimated fair value . insurance benefits , claims and reserves in 2020 , insurance benefits , claims and reserves increased $ 34.1 million over the comparable period in 2019. the increase is principally attributable to : ( i ) an increase of $
| 13,481 |
in addition to providing life insurance coverage , whereby the bank as well as the officers and employees receive life insurance benefits , the appreciation of the cash surrender value of the boli will serve to offset and finance existing and future employee benefit costs . increases in this account are typically associated with an increase in the cash surrender value of the policies , partially offset by certain administrative expenses . boli increased $ 334,000 , or 2.9 % , to $ 11.7 million at december 31 , 2017 from $ 11.4 million at december 31 , 2016 . premises and equipment . premises and equipment decreased $ 272,000 , or 1.5 % , to $ 18.0 million at december 31 , 2017 from $ 18.3 million at december 31 , 2016 . the overall decrease in premises and equipment during the year was due to depreciation and amortizaton of $ 1.2 million , partially offset by capital expenditures of $ 204,000. additions for 2017 also included $ 708,000 of fixed assets acquired from nhb . goodwill . goodwill remained unchanged from $ 10.3 million at december 31 , 2017 and december 31 , 2016 . goodwill represents the excess of the total purchase price paid for the acquisition over the fair value of the identifiable assets acquired , net of the fair value of the liabilities assumed . goodwill is evaluated for impairment at least annually and more frequently if events and circumstances indicate that the asset might be impaired . management evaluated goodwill and concluded that no impairment existed at december 31 , 2017 . core deposit intangible . the core deposit intangible was $ 481,000 at december 31 , 2017 , compared to $ 560,000 at december 31 , 2016 . during 2017 , the corporation recorded a core deposit intangible of $ 167,000 related to the nhb acquisition . the core deposit intangible also includes amounts associated with the assumption of deposits in the 2016 uasb acquisition and the 2009 titusville branch acquisition . this asset represents the long-term value of the core deposits acquired . in each instance , the fair value was determined using a third-party valuation expert specializing in estimating fair values of core deposit intangibles . the fair value was derived using an industry standard present value methodology . all-in costs and runoff balances by year were discounted by comparable term fhlb advance rates , used as an alternative cost of funds measure . this intangible asset amortizes utilizing the double declining balance method of amortization over a weighted average estimated life of the related deposits . the core deposit intangible asset is not estimated to have a significant residual value . the corporation recorded $ 246,000 and $ 226,000 of intangible amortization in 2017 and 2016 , respectively . k-22 deposits . total deposits increased $ 69.7 million , or 11.9 % , to $ 654.6 million at december 31 , 2017 from $ 584.9 million at december 31 , 2016 . noninterest bearing deposits increased $ 2.5 million , or 2.1 % , during the year while interest bearing deposits increased $ 67.2 million , or 14.6 % . deposits assumed from nhb totaled $ 19.7 million at the time of the acquisition in september 2017 and $ 17.2 million at december 31 , 2017 borrowed funds . borrowed funds decreased $ 18.0 million , or 40.9 % , to $ 26.0 million at december 31 , 2017 from $ 44.0 million at december 31 , 2016 primarily as the corporation repaid $ 15.0 million of fhlb borrowings which matured in november 2017. borrowed funds at december 31 , 2017 consisted of short-term borrowings of $ 2.5 million and long-term borrowings of $ 23.5 million . long-term advances are utilized primarily to fund loan growth and short-term advances are utilized primarily to compensate for the normal deposit fluctuations . stockholders ' equity . stockholders ' equity increased $ 5.0 million , or 9.3 % , to $ 59.1 million at december 31 , 2017 from $ 54.1 million at december 31 , 2016 . the increase was primarily due to proceeds from the exercise of stock options of $ 1.4 million , $ 1.7 million of common stock issued in connection with the acquisition of nhb and net income of $ 4.3 million for 2017 , offset by common stock dividends paid of $ 2.4 million . changes in results of operations the corporation reported net income before preferred stock dividends of $ 4.3 million and $ 4.0 million in 2017 and 2016 , respectively . the following “ average balance sheet and yield/rate analysis ” and “ analysis of changes in net interest income ” tables should be utilized in conjunction with the discussion of the interest income and interest expense components of net interest income . k-23 average balance sheet and yield/rate analysis . the following table sets forth , for the periods indicated , information concerning the total dollar amounts of interest income from interest-earning assets and the resulting average yields , the total dollar amounts of interest expense on interest-bearing liabilities and the resulting average costs , net interest income , interest rate spread and the net interest margin earned on average interest-earning assets . for purposes of this table , average loan balances include nonaccrual loans and exclude the allowance for loan losses and interest income includes accretion of net deferred loan fees . interest and yields on tax-exempt loans and securities ( tax-exempt for federal income tax purposes ) are shown on a fully tax equivalent basis . the information is based on average daily balances during the periods presented . replace_table_token_12_th k-24 analysis of changes in net interest income . the following table analyzes the changes in interest income and interest expense in terms of : ( 1 ) changes in volume of interest-earning assets and interest-bearing liabilities and ( 2 ) changes in yields and rates . story_separator_special_tag the table reflects the extent to which changes in the corporation 's interest income and interest expense are attributable to changes in rate ( change in rate multiplied by prior year volume ) , changes in volume ( changes in volume multiplied by prior year rate ) and changes attributable to the combined impact of volume/rate ( change in rate multiplied by change in volume ) . the changes attributable to the combined impact of volume/rate are allocated on a consistent basis between the volume and rate variances . changes in interest income on loans and securities reflect the changes in interest income on a fully tax equivalent basis . replace_table_token_13_th 2017 results compared to 2016 story_separator_special_tag compared to $ 2.8 million for 2016 . the average balance of interest-bearing deposits increased $ 53.2 million , or 12.0 % , causing a $ 345,000 increase in interest expense . the average rate on interest-bearing deposits increased by 3 basis points to 0.66 % for 2017 versus 0.63 % for 2016 causing a $ 139,000 increase in interest expense . interest expense on borrowed funds increased $ 64,000 , or 5.5 % , to $ 1.2 million for 2017 , compared to $ 1.2 million for 2016 . the average balance of borrowed funds increased $ 3.1 million , or 8.2 % , to $ 40.5 million for 2017 , compared to $ 37.5 million for 2016 causing a $ 90,000 increase in interest expense . partially offsetting this unfavorable variance , the average cost of borrowed funds decreased 8 basis points to 3.00 % for 2017 versus 3.08 % for 2016 causing a $ 26,000 decrease in interest expense . provision for loan losses . the corporation records provisions for loan losses to maintain a level of total allowance for loan losses that management believes , to the best of its knowledge , covers all probable incurred losses estimable at each reporting date . management considers historical loss experience , the present and prospective financial condition of borrowers , current conditions ( particularly as they relate to markets where the corporation originates loans ) , the status of nonperforming assets , the estimated underlying value of the collateral and other factors related to the collectability of the loan portfolio . nonperforming loans increased $ 370,000 , or 11.1 % , to $ 3.7 million at december 31 , 2017 from $ 3.3 million at december 31 , 2016 . the increase in nonperforming loans was primarily related to a $ 646,000 increase in loans past due more than 90 days , partially offset by the payoff of two residential mortgage loans which were previously on nonaccrual status totaling $ 391,000. the provision for loan losses increased $ 439,000 , or 94.6 % , to $ 903,000 for 2017 from $ 464,000 for 2016 . the corporation 's allowance for loan losses amounted to $ 6.1 million , or 1.05 % of the corporation 's total loan portfolio at december 31 , 2017 compared to $ 5.5 million or 1.06 % of total loans at december 31 , 2016 . the allowance for loan losses , as a percentage of nonperforming loans at december 31 , 2017 and 2016 , was 165.9 % and 166.9 % , respectively . the allocation of the allowance for loan losses related to residential mortgage loans and commercial mortgage loans increased during the year as a result of growth in the loan portfolios , while the allocation related to commercial business loans decreased as the portfolio remained flat . at december 31 , 2017 , there was no provision for loan losses allocated to loans acquired from ua or nhb . k-26 noninterest income . noninterest income includes revenue that is related to services rendered and activities conducted in the financial services industry , including fees on depository accounts , general transaction and service fees , commissions on financial services , title premiums , security and loan sale gains and losses , and earnings on bank-owned life insurance ( boli ) . noninterest income increased $ 1.4 million , or 37.4 % , to $ 5.0 million in 2017 from $ 3.7 million in 2016 . the increase in noninterest income is primarily due to a $ 1.3 million bargain purchase gain related to the acquisition of nhb at september 30 , 2017. also during 2017 , the corporation recorded a $ 508,000 other-than-temporary impairment charge on a subordinated debt investment issued by first nbc bank holding company . on april 28 , 2017 , the louisiana office of financial institutions closed first nbc bank , the wholly owned banking subsidiary of first nbc bank holding company , and named the fdic as receiver for the bank . partially offsetting this impairment charge , the corporation realized securities gains of $ 346,000 during 2017 , compared to $ 82,000 during the same period in 2016. additionally , gains on the sale of loans totaled $ 248,000 for 2017 compared to $ 119,000 during the same period in 2016 and customer service fees increased $ 133,000 as overdraft charges during 2017 outpaced the same period last year . noninterest expense . noninterest expense increased $ 2.2 million , or 12.6 % , to $ 19.6 million for 2017 , compared to $ 17.4 million for 2016 . this increase was primarily related to increases in acquisition costs , other noninterest expense , compensation and employee benefits , premises and equipment expense and intangible asset amortization . acquisition costs increased $ 718,000 to $ 1.1 million for 2017 , compared to $ 401,000 for 2016 .
| this increase can be attributed to increases in interest earned on loans , deposits with banks and dividends received on federal bank stocks of $ 2.9 million , $ 100,000 and $ 56,000 , respectively , partially offset by a decrease in interest earned on securities of $ 128,000. tax equivalent interest earned on loans receivable increased $ 2.9 million , or 13.6 % , to $ 24.1 million for 2017 , compared to $ 21.2 million for 2016 . the average balance of loans increased $ 69.7 million , or 14.4 % , generating $ 3.0 million of additional interest income on loans . offsetting this favorable variance , the average yield on loans decreased 2 basis points to 4.34 % for 2017 , versus 4.36 % for 2016 causing a $ 135,000 decrease in interest income . k-25 tax equivalent interest earned on securities decreased $ 128,000 , or 5.1 % , to $ 2.4 million for 2017 , compared to $ 2.5 million for 2016 . the average balance of securities decreased $ 7.0 million , or 6.5 % , causing a $ 166,000 decrease in interest income . partially offsetting the unfavorable volume variance , the average yield on securities increased 3 basis points to 2.39 % for 2017 versus 2.36 % for 2016 causing a $ 38,000 increase in interest income . interest earned on interest-earning deposit accounts increased $ 100,000 , or 74.1 % , to $ 235,000 for 2017 , compared to $ 135,000 for 2016 . the average yield on these accounts increased 52 basis points to 1.05 % for 2017 versus 0.53 % for 2016 causing a $ 119,000 increase in interest income . offsetting this favorable variance , the average balance of interest-earning deposits decreased $ 3.2 million causing a $ 19,000 decrease in interest income . interest earned on federal bank stocks increased $ 56,000 , or 30.1 % , to $ 242,000 for 2017 , compared to $ 186,000 for 2016 . the average balance of federal bank stocks increased $ 1.1 million , or 29.0 % , generating a $ 54,000 increase in interest income . enhancing this favorable variance , the average yield on these accounts increased 4 basis points to 4.99 % for 2017 versus 4.95 % for 2016 causing a $ 2,000 increase
| 13,482 |
fiscal 2016 compared to fiscal 2015 branded data protection tape automation revenue declined 42 % , or $ 41.8 million while oem tape automation revenue decreases of 25 % , or $ 13.0 million in fiscal 2016 compared to fiscal 2015. the decline in branded data protection tape automation revenue resulted from decreased sales in all product categories with enterprise , midrange and entry-level systems each declining at similar rates . the decline in oem tape automation revenue was due to decreased sales of midrange and entry-level systems partially offset by an increase in enterprise systems revenue . revenue from disk backup systems decreased in fiscal 2016 compared to fiscal 2015 primarily due to decreased sales of midrange systems , which comprised of over half of the decrease , as well as lower enterprise systems and oem deduplication software revenue . product revenue from devices , which includes tape drives and removable hard drives , and non-royalty media sales decreased in fiscal 2016 primarily due to lower media sales . our scale-out tiered storage revenue increased in fiscal 2016 compared to fiscal 2015 primarily due to increased sales of stornext appliances in the unstructured data market segment . during fiscal 2016 , we also experienced an increase in revenue from large scale-out storage tiered storage orders over $ 200,000. service revenue service revenue is primarily comprised of customer field support contracts which provide standard support services for our hardware . standard service contracts may be extended or include enhanced service , such as faster service response times . fiscal 2017 compared to fiscal 2016 service revenue decreased in fiscal 2017 compared to fiscal 2016 due to decreased service revenue for our data protection products which was partially offset by increased revenue from branded service contracts for our stornext appliances . fiscal 2016 compared to fiscal 2015 service revenue was relatively flat in fiscal 2016 compared to fiscal 2015 as a result of a greater number of service contracts for disk backup and scale-out storage appliances offset by a decline in service contracts for tape automation . royalty revenue fiscal 2017 compared to fiscal 2016 royalty revenue decreased in fiscal 2017 compared fiscal 2016 primarily due to lower media royalties from lto generation 1 through 6 , offset by increased media royalties from lto 7. fiscal 2016 compared to fiscal 2015 royalty revenue decreased in fiscal 2016 compared fiscal 2015 primarily due to lower media royalties from lto generation 1 through 5 , offset by increased media royalties from lto 6 and lto 7 which was introduced in 2016 . 32 gross margin replace_table_token_6_th the 50 basis point decrease in gross margin percentage in fiscal 2017 compared to fiscal 2016 was primarily driven by changes in our overall revenue mix , in particular , decreases in both service and royalty revenues which carry higher margins . the 160 basis point decrease in gross margin percentage in fiscal 2016 compared to fiscal 2015 was primarily driven by decreased higher margin service revenue and a shift in revenue mix from higher margin products to lower margin products . product margin fiscal 2017 compared to fiscal 2016 product gross margin dollars increased $ 11.9 million , or 15 % in fiscal 2017 , and our product gross margin rate increased 60 basis points in fiscal 2017. these increases were the result of increased sales of higher margin disk backup and scale-out storage solution appliances with decreased sales of tape automation as well as a reduction of fixed costs during fiscal 2017 related to efficiency improvements . fiscal 2016 compared to fiscal 2015 product gross margin dollars decreased $ 39.1 million , or 33 % in fiscal 2016 , and our product gross margin rate decreased 560 basis points in fiscal 2016. these decreases were the result of a combination of lower revenue to cover fixed costs , a shift in revenue mix from higher margin products to lower margin products , and increased discounting from overall pricing pressure in the storage market . service margin fiscal 2017 compared to fiscal 2016 service gross margin dollars increased $ 0.9 million , or 1 % , in fiscal 2017 compared to fiscal 2016 , and service gross margin percentage increased 220 basis points compared to fiscal 2016. the increased service margin percentage was primarily due to decreases in external repair expense in fiscal 2017 due to a lower level of service contracts . fiscal 2016 compared to fiscal 2015 service gross margin dollars decreased $ 2.2 million , or 3 % , in fiscal 2016 compared to fiscal 2015 , and service gross margin percentage increased 110 basis points compared to fiscal 2015 on a 5 % decrease in service revenue . the increased service margin percentage was primarily due to decreases in external repair expense and compensation and benefits from recognition of a profit sharing bonus in fiscal 2015 which was not repeated in fiscal 2016. royalty margin royalties do not have related cost of sales and have a 100 % gross margin percentage . therefore , royalty gross margin dollars vary directly with royalty revenue . royalty revenue and therefore related gross margin dollars decreased in both fiscal 2017 and fiscal 2016 compared to the prior year periods . 33 research and development expenses replace_table_token_7_th fiscal 2017 compared to fiscal 2016 the decrease in research and development expense in fiscal 2017 compared to fiscal 2016 was primarily due to a $ 2.7 million decrease in compensation and benefits largely related to lower staffing levels due to efficiency improvements and a $ 0.7 million decrease in external services provider costs . fiscal 2016 compared to fiscal 2015 the decrease in research and development expense in fiscal 2016 compared to fiscal 2015 was primarily due to a $ 8.4 million decrease in compensation and benefits largely related to lower staffing levels and recognition of a profit sharing bonus in fiscal 2015 which was not repeated in fiscal 2016. additionally , we had a $ 1.2 million decrease in depreciation expense due to lower capital expenditures . story_separator_special_tag sales and marketing expenses replace_table_token_8_th fiscal 2017 compared to fiscal 2016 sales and marketing expense decreased $ 5.5 million in fiscal 2017 compared to fiscal 2016 was due mainly to our continued focus on our sales strategies . the decrease was primarily due to a $ 4.4 million decrease in compensation and benefits due to a reduction in head count in fiscal 2017 , and a $ 1.0 million decrease in market development fund spend . fiscal 2016 compared to fiscal 2015 the decrease in sales and marketing expense in fiscal 2016 compared to fiscal 2015 was primarily due to net decreases of $ 4.9 million in commission expense due to lower branded product revenue , $ 2.8 million in intangible amortization expense due to certain intangibles becoming fully amortized during fiscal 2015 and $ 1.0 million in compensation and benefits primarily due to recognition of a profit sharing bonus in fiscal 2015 which was not repeated in fiscal 2016. these decreases were offset by increases of $ 2.6 million in advertising and marketing , $ 0.6 million in sponsored employee activities from higher spending on sales-related meetings and $ 0.4 million in sales demonstration unit costs . general and administrative expenses replace_table_token_9_th fiscal 2017 compared to fiscal 2016 the decrease in general and administrative expense in fiscal 2017 compared to fiscal 2016 was primarily the due to a $ 1.5 million decrease in facilities costs including utilities and network costs , a $ 0.9 million decrease in external service provider fees due to a lower number of service contracts and a decrease of $ 0.8 million related to an increase in sublease income in fiscal 2017. these decreases were offset mainly by $ 1.3 million of proxy contest fees . 34 fiscal 2016 compared to fiscal 2015 the decrease in general and administrative expense in fiscal 2016 compared to fiscal 2015 was largely the result of a $ 3.1 million decrease in compensation and benefits primarily from recognition of a profit sharing bonus in fiscal 2015 which was not repeated in fiscal 2016 and decreased share-based compensation expense . we also had a $ 0.6 million decrease in it-related expense as a result of cost reductions in fiscal 2016. these decreases were partially offset by an increase of $ 0.7 million related to a refund received for it purchases in fiscal 2015. restructuring charges replace_table_token_10_th our restructuring plans have been undertaken in an effort to return to consistent profitability and generate cash from operations . for additional information on our restructuring plans and disclosure of restructuring charges refer to note 8 “ restructuring charges ” to the consolidated financial statements . until we achieve consistent and sustainable levels of profitability , we may incur restructuring charges in the future from additional strategic cost reduction efforts , and efforts to align our cost structure with our business model . fiscal 2017 compared to fiscal 2016 restructuring charges decreased in fiscal 2017 compared to fiscal 2016 due to the lower severance and benefits and facilities costs incurred in the plan period related to the fiscal 2017 april restructuring plan . the severance and benefits payments related to the fiscal 2016 restructuring plan were completed in the first quarter of fiscal 2017. fiscal 2016 compared to fiscal 2015 restructuring charges increased in fiscal 2016 compared to fiscal 2015 primarily due to a $ 1.9 million increase in severance and benefits restructuring charges from the fiscal 2016 restructuring plan and a $ 0.5 million increase in facility restructuring charges resulting from a change in estimate of sublease timing for our facilities previously used in manufacturing . goodwill impairment replace_table_token_11_th during the fourth quarter of fiscal 2016 , our stock price declined from $ 0.93 per share at december 31 , 2015 to a low closing price of $ 0.44 per share . as a result of this decrease in stock price , we determined it was more likely than not that the fair value of our goodwill was less than its carrying amount and performed an analysis to quantify the potential amount of goodwill impairment during the fourth quarter of fiscal 2016. based on our impairment analysis , we determined our goodwill was impaired and recorded an impairment charge of $ 55.6 million in fiscal 2016. for additional information , refer to note 5 “ intangible assets and goodwill ” to the consolidated financial statements . gain on sale of assets replace_table_token_12_th 35 we had a $ 0.5 million gain on the sale of assets in fiscal 2015 primarily due to the sale of ip addresses . other income ( expense ) replace_table_token_13_th fiscal 2017 compared to fiscal 2016 the change in other income in fiscal 2017 compared to other expense in fiscal 2016 was primarily due to a increase in foreign currency income of $ 0.6 million as compared to fiscal 2016. fiscal 2016 compared to fiscal 2015 the change in other expense in fiscal 2016 compared to other income in fiscal 2015 was primarily due to a $ 13.6 million gain on the sale of our investment in a privately held company in fiscal 2015. interest expense replace_table_token_14_th interest expense includes the amortization of debt issuance costs for debt . for further information , refer to note 7 “ debt ” to the consolidated financial statements . fiscal 2017 compared to fiscal 2016 interest expense increased in fiscal 2017 compared to fiscal 2016 due to the higher interest rate on our $ 50.0 million term loan closed in fiscal 2017. fiscal 2016 compared to fiscal 2015 interest expense decreased in fiscal 2016 compared to the prior year period primarily due to the payment of $ 50.0 million of aggregate principal amount of 3.50 % notes during the fourth quarter of fiscal 2015. loss on debt extinguishment , net replace_table_token_15_th the loss on debt extinguishment in fiscal 2017 was due to the repayment of our wells fargo credit agreement resulting in a loss on debt extinguishment of $ 0.1 million almost entirely offset by repurchases of our 4.50 % notes with an aggregate principal amount totaling $ 6.9 million
| total revenue in fiscal 2017 increased from fiscal 2016 primarily due to increased product and services revenue of $ 21.9 million , or 17 % , from scale-out storage solutions and $ 9.4 million , or 3 % , from data protection products . this increase was offset by a decrease in service revenue and a decrease in royalty revenue , primarily due to lower lto media technology royalties , in fiscal 2017. data protection products include our tape automation systems , disk backup systems and devices and media offerings . revenue from branded data protection products and services was flat from fiscal 2016 largely due to an increase in disk backup systems and media and devices offset by a decrease in revenue from oem tape automation systems . total revenue in fiscal 2016 decreased from fiscal 2015 primarily due to reduced revenue from branded data protection products of $ 84.0 million , or 24 % , largely due to a decrease in tape automation systems , media , disk backup systems and service revenue . revenue from branded scale-out storage solutions and services increased $ 24.2 million , or 24 % , from fiscal 2015 largely due to increased sales of our stornext appliances . in addition , oem product and service revenue , which is primarily comprised of data protection tape automation systems , decreased $ 16.7 million , or 26 % , from fiscal 2015. royalty revenue decreased slightly from fiscal 2015 primarily due to lower lto media technology royalties . product revenue total product revenue increased $ 36.0 million in fiscal 2017 compared to fiscal 2016 largely due to an increase in sales of scale-out storage solutions , disk backup and media . partially offset by lower sales of oem tape automation systems . revenue from sales of branded products increased 3 % , and sales of products to our oem customers decreased 26 % in fiscal 2017 compared to fiscal 2016. total product revenue , decreased $ 69.4 million in fiscal 2016 compared to fiscal 2015 .
| 13,483 |
if the fair value of a reporting unit is less than book value , an expense may be required to write down the related goodwill to record an impairment loss . as of december 31 , 2019 , the company had only one banking reporting unit . recent accounting pronouncements and developments the notes to the consolidated financial statements discuss new accounting policies that the company adopted during 2019 and the expected impact of accounting policies recently issued or proposed but not yet required to be adopted . to the extent the adoption of new accounting standards materially affects our financial condition , results of operations or liquidity , the impacts are discussed in the applicable section ( s ) of this discussion and notes to the consolidated financial statements . results of operations net interest income and net interest margin net interest income remains the most significant factor affecting our results of operations . net interest income represents the excess of interest and fees earned on total average earning assets ( loans , investment securities , federal funds sold and interest-bearing deposits with other banks ) over interest owed on average interest-bearing liabilities ( deposits and borrowings ) . tax-equivalent net interest income is net interest income adjusted for the tax-favored status of income from certain loans and investments . as shown in the table below , tax-equivalent net interest income for 2019 was $ 50.3 million . this represented a $ 455 thousand , or less than 1 % , decrease from 2018. net interest income increased $ 5.0 million , or 10.9 % , for 2018 when compared to 2017. the decrease in net interest income when comparing 2019 to 2018 was primarily the result of higher average balances and rates paid on interest-bearing deposits , partially offset by higher average balances and yields on loans . the increase in net interest income when comparing 2018 to 2017 was primarily due to funding loan growth with lower yielding assets and , to a lesser extent a higher overall yield on earning assets . when comparing 2019 to 2018 , interest income increased $ 3.9 million while interest expense increased $ 4.4 million . when comparing 2018 to 2017 , interest income increased $ 8.0 million while interest expense increased $ 3.0 million . our net interest margin ( i.e. , tax-equivalent net interest income divided by average earning assets ) represents the net yield on earning assets minus the cost of average interest liabilities . the net interest margin is managed through loan and deposit pricing and asset/liability strategies . the net interest margin was 3.54 % for 2019 and 3.74 % for 2018. the net interest margin decreased when comparing 2019 to 2018 due to the significant increase in the average balance of interest-bearing deposits in conjunction with higher rates paid on these deposits , partially offset by an improvement in the yield on total earning assets and a reduction in the average balance of short-term borrowings . the net interest margin was stable in 2018 and 2017. the net interest spread , which is the difference between the average yield on earning assets and the rate paid for interest-bearing liabilities , was 3.20 % for 2019 , 3.57 % for 2018 and 3.67 % for 2017 . 36 the following table sets forth the major components of net interest income , on a tax-equivalent basis , for the years ended december 31 , 2019 , 2018 , and 2017. replace_table_token_2_th ( 1 ) all amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21 % for 2019 and 21 % for 2018 and 35 % for 2017 , exclusive of the alternative minimum tax rate and nondeductible interest expense . the tax-equivalent adjustment amounts used in the above table to compute yields aggregated $ 162 thousand in 2019 , $ 114 thousand in 2018 and $ 242 thousand in 2017 . ( 2 ) average loan balances include nonaccrual loans . ( 3 ) interest income on loans includes amortized loan fees , net of costs , and all are included in the yield calculations . on a tax-equivalent basis , total interest income was $ 59.9 million for 2019 compared to $ 56.0 million for 2018. the increase in interest income for 2019 compared to 2018 was primarily due to the increase in the average balance and yields on loans . for 2019 compared to 2018 , the average balance of loans increased $ 73.2 million and the yield earned on these loans improved to 4.53 % from 4.46 % . the increased volume of loans coupled with a disciplined effort to maintain and attempt to improve rates on new loan originations resulted in an increase in tax-equivalent interest income of $ 4.1 million . interest income on interest-bearing deposits with other banks increased $ 508 thousand or 177.6 % , partially offset by a reduction in the average balance on taxable investment securities in 2019 compared to 2018. on a tax-equivalent basis , total interest income was $ 56.0 million for 2018 compared to $ 48.0 million for 2017. the increase in interest income for 2018 compared to 2017 was primarily due to the increase in the average balance of loans coupled with a higher yield on taxable investment securities . interest income on taxable investment securities increased 37 $ 442 thousand or 11.5 % in 2018 compared to 2017. for 2018 compared to 2017 , average loans increased $ 169.7 million and the yield earned on loans remained flat at 4.46 % . the increased volume of loans coupled with a disciplined effort to maintain and attempt to improve rates on new loan originations resulted in an increase in tax-equivalent interest income of $ 7.6 million . also impacting interest income is the accretion of acquisition accounting adjustments from the branch acquisition in 2017 for loans of $ 319 thousand and $ 506 thousand for 2018 and 2017 , respectively , which is accounted for using a level yield method . story_separator_special_tag as a percentage of total average earning assets , loans , investment securities , and interest-bearing deposits were 86.2 % , 11.0 % , and 2.8 % , respectively , for 2019 which reflected an increase in higher yielding earning assets as well as excess liquidity over 2018. the comparable percentages for 2018 were 84.9 % , 14.0 % , and 1.1 % , respectively , and for 2017 were 80.9 % , 16.6 % , and 2.5 % , respectively . when comparing 2019 to 2018 , the overall increase in average balances of earning assets produced $ 3.9 million more in interest income the result of an increasing yield on loans , coupled with higher average balances in interest-bearing deposits , as seen in the rate/volume variance analysis below . when comparing 2018 to 2017 , the overall increase in average balances of earning assets produced $ 7.1 million more in interest income the result of a stable yield on loans , coupled with higher yields on taxable investment securities and interest-bearing deposits which produced $ 860 thousand more in interest income , as seen in the rate/volume variance analysis below . interest expense was $ 9.6 million for 2019 compared to $ 5.3 million for 2018. the increase in interest expense for 2019 was primarily due to increases in the average balances and rates paid on interest-bearing deposits , partially offset by a reduction in the average balances on short-term borrowings . during 2019 demand deposits , money market/savings deposits and certificates of deposit over $ 100 thousand experienced the most significant growth with increases in the average balances of $ 37.3 million , $ 10.7 million and $ 14.7 million , respectively , while the rates paid on these deposits increased 37 , 45 and 96 bps , respectively . alternatively , the average balances on short-term borrowings decreased $ 58.9 million when compared to 2018 , with a rate of 2.61 % and 2.12 % , respectively . interest expense was $ 5.3 million for 2018 compared to $ 2.3 million for 2017. the increase in interest expense for 2018 was primarily due to increases in short and long-term borrowings , rates paid on interest-bearing deposits and the addition of brokered deposits . the average balances on short-term and long-term deposits increased $ 72.8 million and $ 3.6 million when compared to 2017 , with a rate of 2.12 % and 2.89 % , respectively . additionally , brokered deposits were added during 2018 resulting in an average balance of $ 14.8 million with a rate of 2.12 % . both demand deposits and money market/savings deposits experienced growth with increases in average balances of $ 5.5 million and $ 38.4 million , respectively , while the rates paid on these deposits increased 12 and 15 bps , respectively . also impacting interest expense is the accretion of acquisition accounting adjustments from the branch acquisition in 2017 for cd 's of $ 275 thousand . during 2019 , higher rates on interest-bearing liabilities produced $ 5.5 million more in interest expense and decreased volume produced $ 1.1 million less in interest expense , as shown in the table below . in 2018 , higher rates on interest-bearing liabilities produced $ 1.2 million more in interest expense and increased volume produced $ 1.8 million more in interest expense . 38 the following rate/volume variance analysis identifies the portion of the changes in tax-equivalent net interest income attributable to changes in volume of average balances or to changes in the yield on earning assets and rates paid on interest-bearing liabilities . the rate and volume variance for each category has been allocated on a consistent basis between rate and volume variances , based on a percentage of rate , or volume , variance to the sum of the absolute two variances . replace_table_token_3_th noninterest income noninterest income , excluding discontinued operations , increased $ 1.0 million , or 11.2 % , in 2019 when compared to 2018. the increase in noninterest income in 2019 when compared to 2018 was primarily due to increases in other noninterest income of $ 1.0 million which was attributed to other loan and bank services fees for a combined $ 613 thousand , coupled with income from boli of $ 443 thousand , partially offset by lower trust and investment fee income of $ 35 thousand . the bank services fees increased due to a conscience effort by management to implement cross-selling services and products within our branch network . the increase in boli assets were attributed to the purchase of $ 26.5 million of additional insurance contracts during december of 2019 which will be used to offset future employee compensation benefit costs . the following table summarizes our noninterest income from continuing operations for the years ended december 31. replace_table_token_4_th noninterest income from discontinued operations , excluding the gain on sale of avon on december 31 , 2018 , decreased $ 9.3 million , or 99.8 % when compared to 2018. the decrease in noninterest income from discontinued operations was primarily due to insurance agency commissions from avon of $ 9.0 million in 2018. the sale of avon resulted in a net gain before tax of $ 12.7 million for 2018 . 39 noninterest expense noninterest expense , excluding discontinued operations , increased $ 726 thousand , or 2.0 % , in 2019 when compared to 2018. the increase in noninterest expenses was primarily due to higher employee benefits of $ 1.3 million , due to an increase in medical claims from the company 's self-funded insurance program and the additional of supplemental executive retirement plans ( “ serps ” ) during 2019 , data processing of $ 459 thousand , the result of utilizing additional services from our core processor , legal and professional fees of $ 242 thousand and other noninterest expenses of $ 265 thousand , partially offset by decreases in salaries and wages of $ 1.1 million , the result of amortization of intangible assets of $ 261 thousand and fdic insurance premiums of $ 427 thousand .
| we have the intent and current ability to hold such securities until maturity . at december 31 , 2019 , 94 % of the portfolio was classified as available for sale and 6 % as held to maturity , similar to the 96 % and 4 % , respectively , at december 31 , 2018. the percentage of securities designated as available for sale reflects the amount that management believes is needed to support our anticipated growth and liquidity needs . with the exception of municipal securities and corporate securities , our general practice is to classify all newly-purchased debt securities as available for sale . on september 16 , 2019 , the company bought a $ 4.0 million corporate bond which it intends to hold to maturity of september 16 , 2027. we do not typically invest in derivative securities and held no such investments at december 31 , 2019 or december 31 , 2018. total investment securities decreased $ 31.1 million from $ 168.2 million at december 31 , 2018 to $ 137.1 million at december 31 , 2019. average investment securities decreased $ 33.5 million in 2019. investment securities available for sale were $ 122.8 million at the end of 2019 and $ 154.4 million at the end of 2018. the company purchased no available for sale securities in 2019 or 2018. the company purchased a corporate bond of $ 4.0 million in the third quarter of 2019 which is classified as held to maturity and there were no purchases of held to maturity securities in 2018. at year-end 2019 , 19.4 % of the available for sale securities in the portfolio were u.s. government agencies and 80.6 % of the securities were mortgage-backed securities , compared to 21.0 % and 79.0 % , respectively , at year-end 2018. as seen in the table below , 43 % of the available-for-sale portfolio will mature in over five through ten years and 37 % will mature in over ten years based on contractual maturities . the comparable amounts for
| 13,484 |
net revenue excludes sales taxes and value added taxes ( vat ) and is presented net of estimated customer refunds , chargebacks and amortization of creator signing fees . during the year ended december 31 , 2020 , our actual refunds of our fees and our estimates for future customer refunds were significantly higher than previous periods as a result of refund activity largely related to the covid-19 pandemic . we also generate a small portion of our net revenue from complementary solutions , such as day-of-event on-site product and services , web presence development and branding , software solutions to manage event venue administration and marketing services that we provide to creators . cost of net revenue cost of net revenue consists of fixed costs related to making our platform generally available and variable costs related to activities on our platform . our fixed costs consist primarily of expenses associated with the operation and maintenance of our platform , including website hosting fees and platform infrastructure costs , amortization of capitalized software development costs , onsite operations costs and allocated customer support costs . cost of net revenue also includes the amortization expense related to our acquired developed technology assets , which may be incurred in future periods related to future acquisitions . variable costs relate to creator activity and primarily consist of payment processing fees . generally , we expect cost of net revenue to fluctuate as a percentage of net revenue in the near- to mid-term primarily as a result of both our geographical revenue mix and our total net revenue . our payment processing costs for credit and debit card payments are generally lower outside of the united states due to a number of factors , including lower card network fees and lower cost alternative payment networks . consequently , if we generate more revenue internationally than in the united states , we expect that our payment processing costs will decline as a percentage of revenue . as our total net revenue increases or decreases and to the extent our fixed costs are unaffected , our cost of net revenue as a percentage of net revenue will similarly fluctuate . consequently , the effects of the covid-19 pandemic and our increased refunds and revenue reserves for estimated future refunds in the year ended december 31 , 2020 resulted in a significant increase in our cost of net revenue as a percentage of net revenue . operating expenses operating expenses consist of product development , sales , marketing and support and general and administrative expenses . direct and indirect personnel costs , including stock-based compensation expense , are the most significant recurring component of operating expenses . we also include sublease income as a reduction of our operating expenses . as our total net revenue increases or decreases and to the extent our operating expenses are not equally affected , our operating expenses as a percentage of net revenue will similarly fluctuate . the effect of the covid-19 pandemic and its effect on our operating expenses , along with the related decrease in net revenue resulted in a significant increase in our operating expenses as a percentage of our net revenue in the year ended december 31 , 2020. in april 2020 , our board of directors approved a global reduction in workforce impacting approximately 45 % of our employees as part of an expense reduction plan related to the impact of the covid-19 pandemic and its effect on our reported paid ticket volume and net revenue . with this reduction in workforce , we are repositioning our platform to focus on self-sign on and sales creators who use our platform with limited training , support or professional services . we recorded approximately $ 9.5 million in operating expenses in the year ended december 31 , 2020 related to this reduction in workforce , of which $ 7.5 million was related to severance costs and post-termination employee benefits and the remaining $ 2.0 million were costs related primarily to disposals of assets . product development . product development expenses consist primarily of costs associated with our employees in product development and product engineering activities . we expect our product development expenses to continue to increase in absolute dollars over the long term . in the near-term , we anticipate our product development expenses will increase as we focus on enhancing , improving and expanding the capabilities of our platform . we also expect to continue investing in building eventbrite 's infrastructure to enhance and support development of new technologies . over the long-term , we anticipate that 46 table of content s product development expenses will decrease as a percentage of net revenue as we expect our revenue to recover and grow and as we continue to expand our development staff in lower cost markets . sales , marketing and support . sales , marketing and support expenses consist primarily of costs associated with our employees involved in selling and marketing our products , public relations and communication activities , marketing programs , travel and customer support costs associated with free events on our platform . for our sales teams , this also includes commissions . sales , marketing and support expenses are driven by investments to grow and retain creators and attendees on our platform . additionally , we classify certain creator-related expenses , such as refunds of the ticket price paid by us on behalf of a creator as sales , marketing and support expense . in april 2020 , we reduced our sales , marketing and support personnel by 64 % , consistent with our increased priority on delivering a self-service platform experience to our creators . the majority of the related headcount reduction costs were recorded in the three months ended june 30 , 2020. as a result of the workforce reduction , we expect personnel-related sales , marketing and support expenses to decrease over the near-term . story_separator_special_tag during the year ended december 31 , 2020 , as a result of the covid-19 pandemic , we increased our chargebacks and refunds reserve by $ 30.5 million to account for estimated losses related to event cancellations and postponements , recorded within sales , marketing and support expense . this reserve is an estimate and requires significant judgement . due to the nature of the covid-19 situation and the limited amount of currently available data , there is a high degree of uncertainty around these reserves and our actual losses could be materially different from our current estimates . we will adjust our recorded reserves in the future to reflect our best estimates of future outcomes . general and administrative . general and administrative expenses consist of personnel costs , including stock-based compensation , for finance , accounting , legal , risk , human resources and administrative personnel . it also includes professional fees for legal , accounting , finance , human resources and other corporate matters . our general and administrative expenses also include accruals for sales tax and vat , as well as impairment charges related to creator upfront payments , which increased in the year ended december 31 , 2020 as a result of the effects of the covid-19 pandemic . our general and administrative expenses have increased on an actual dollar basis over time . over the long-term , we anticipate general and administrative expenses to decline as a percentage of net revenue as we expect to grow our net revenues and scale our business . interest expense interest expense for the year ended december 31 , 2020 consists primarily of cash interest expense and amortization of the discount and debt issuance costs on our term loans and 2025 notes . the credit agreement provides for initial term loans in an aggregate principal amount of $ 125.0 million . the full amount of the initial term loans was funded in may 2020. in june 2020 , we also issued the 2025 notes , which consisted of $ 150.0 million aggregate principal amount of 5.000 % convertible senior notes due 2025. previously , interest expense consisted primarily of interest related to a senior secured credit facility , which consisted of term loans with an aggregate principal amount of $ 75.0 million ( 2019 term loans ) , which was fully repaid in september 2019. other income ( expense ) , net other income ( expense ) , net consists primarily of interest income and foreign exchange rate remeasurement gains and losses recorded from consolidating our subsidiaries each period-end . the primary driver of our other income ( expense ) , net is fluctuation in the value of the u.s. dollar against the local currencies of our foreign subsidiaries . income tax provision ( benefit ) income tax provision ( benefit ) consists primarily of u.s. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business . the differences in the tax provision and benefit for the periods presented and the u.s. federal statutory rate is primarily due to foreign taxes in profitable jurisdictions and the recording of a full valuation allowance on our deferred tax assets . 47 table of content s story_separator_special_tag style= '' color : # 000000 ; font-family : 'times new roman ' , sans-serif ; font-size:8pt ; font-weight:700 ; line-height:100 % '' > $ % ( in thousands , except percentages ) loss on debt extinguishment $ — $ ( 1,742 ) $ ( 1,742 ) * percentage of total net revenue — % ( 0.5 ) % * not meaningful in september 2019 , we repaid the 2019 term loans in full making payments of $ 62.2 million of principal and $ 0.8 million of accrued interest and fees , and we terminated the underlying credit agreement . we recorded a loss on debt extinguishment of $ 1.7 million during 2019 related to the write-off of unamortized debt issuance costs . other income ( expense ) , net replace_table_token_12_th the decrease in other income during 2020 compared to 2019 was primarily driven by a $ 3.9 million decrease in interest income due to lower interest rates on our money market funds . the remaining change was primarily driven by higher other expense of $ 3.7 million as a result of fluctuations in foreign currency transaction gains or losses . income tax provision ( benefit ) replace_table_token_13_th the benefit from income taxes decreased $ 0.1 million in 2020 compared to 2019 and was primarily attributable to the change in our year-over-year jurisdictional earnings mix . 51 table of content s quarterly results of operations data the following tables set forth our unaudited quarterly statements of operations data for each of the eight quarters in the period ended december 31 , 2020. the information for each quarter has been prepared on a basis consistent with our audited consolidated financial statements included in this annual report on form 10-k , and , in the opinion of management , includes all adjustments , which consist only of normal recurring adjustments , necessary for the fair statement of the results of operations for these periods . this data should be read in conjunction with our audited consolidated financial statements and related notes included in this annual report on form 10-k. these quarterly results of operations are not necessarily indicative of the results we may achieve in any future period .
| cost of net revenue replace_table_token_7_th the decrease in cost of net revenue during 2020 compared to 2019 was primarily due to a decrease in payment processing costs of $ 55.1 million , driven by a reduction in paid ticket volume resulting from the effects of the covid-19 pandemic , a decrease in field operations costs of $ 6.9 million , a decrease in allocated customer support costs of $ 1.4 million , a decrease in depreciation of $ 1.3 million and other costs relating to platform fees and web design . 49 table of content s our gross margin decreased in the year ended december 31 , 2020 primarily due to the significant increase in our actual refunds and estimated future refunds of our fees discussed above under net revenue . operating expense product development replace_table_token_8_th the decrease in product development costs during 2020 compared to 2019 was primarily due to a decrease of $ 11.1 million in compensation costs due to lower headcount , offset by an increase in software maintenance costs . sales , marketing and support replace_table_token_9_th the decrease in sales , marketing and support expenses during 2020 compared to 2019 was primarily due to a decrease of $ 21.9 million in compensation costs due to lower headcount , a decrease of $ 6.6 million in direct and discretionary marketing costs and a decrease of $ 4.3 million in costs relating to event hosting and professional services . this decrease was partially offset by an increase of $ 14.1 million in creator related expenses primarily due to chargebacks and refunds reserve and event cancellation losses . general and administrative replace_table_token_10_th the increase in general and administrative expenses during 2020 compared to 2019 was primarily due to an increase of $ 18.1 million in creator related expenses driven by the increased reserves for creator signing fees and creator advances , as a result of the effects of the covid-19 pandemic . this increase was partially offset by decreased compensation
| 13,485 |
our initial focus is on the development of tesetaxel , an investigational , orally administered chemotherapy agent that belongs to a class of drugs known as taxanes , which are widely used in the treatment of cancer . tesetaxel has several properties that make it unique among taxanes , including : oral administration with a low pill burden ; a long ( ~8-day ) terminal plasma half-life in humans , enabling the maintenance of adequate drug levels with relatively infrequent dosing ; no history of hypersensitivity ( allergic ) reactions ; and significant activity against chemotherapy-resistant tumors . in patients with metastatic breast cancer ( “ mbc ” ) , tesetaxel was shown to have significant , single-agent antitumor activity in two multicenter , phase 2 studies . tesetaxel currently is the subject of three studies in breast cancer , including a multinational , multicenter , randomized , phase 3 study in patients with mbc , known as contessa . positive results of contessa were presented at the 2020 san antonio breast cancer symposium . we plan to submit a new drug application for tesetaxel to the u.s. food and drug administration in mid-2021 . our goal for tesetaxel is to develop an effective chemotherapy choice for patients that provides quality-of-life advantages over current alternatives . story_separator_special_tag activities was $ 113.1 million and $ 96.6 million for the years ended december 31 , 2020 and 2019 , respectively . net cash used in operating activities was primarily the result of our net loss and change in working capital , partially offset by equity-based compensation expense , depreciation and amortization expense and non-cash lease expense . net cash used in investing activities was $ 0.4 million and $ 0.2 million for the years ended december 31 , 2020 and 2019 , respectively . net cash used in investing activities was the result of purchases of property and equipment . net cash provided by financing activities was $ 90.4 million and $ 138.7 million for the years ended december 31 , 2020 and 2019 , respectively . net cash provided by financing activities was primarily the result of net proceeds from the sale of common stock in underwritten public offerings . until such time as we can generate substantial product revenues , we expect to finance our cash needs through a combination of equity offerings , debt financings , collaborations , strategic partnerships and licensing arrangements . to the extent that we raise additional capital through the sale of equity or convertible debt securities , the ownership interest of our stockholders will be or could be diluted , and the 68 terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders . debt financing , if available , may involve agreements that include covenants limiting or restricting our ability to take specific actions , such as incurring additional debt , making capital expenditures or declaring dividends . if we raise additional funds through collaborations , strategic partnerships or licensing arrangements with third parties , we may have to relinquish valuable rights to our product candidates , associated intellectual property , our other technologies , future revenue streams or research programs or grant licenses on terms that may not be favorable to us . if we are unable to raise additional funds through equity or debt financings when needed , we may be required to delay , limit , reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidate even if we would otherwise prefer to develop and market such product candidate ourselves . impact of the covid-19 pandemic although the ongoing coronavirus disease 2019 ( “ covid-19 ” ) pandemic did not have a material impact on our results of operations , financial condition or clinical studies during the year ended december 31 , 2020 , we are unable to accurately predict the full impact that the covid-19 pandemic will have on our business in the future due to numerous factors that are not within our control , including its duration and severity . contractual obligations and commitments in february 2018 , we entered into an agreement to lease office space in new york , new york ( the “ new york lease ” ) with aggregate payments of approximately $ 2.8 million over the 7-year term of the lease . we have an option to extend the new york lease for an additional three years at the end of the initial term . further , we provided a standby letter of credit of $ 0.3 million in lieu of a security deposit during the term of the lease , subject to a reduction 3.5 years after the lease commencement . as of december 31 , 2020 , $ 0.3 million was pledged as collateral for the letter of credit and was recorded as restricted cash . in march 2018 , we entered into an agreement to lease office space in san diego , california ( the “ san diego lease ” ) with aggregate payments of approximately $ 0.8 million over the term of the lease . the san diego lease originally provided for expiration on december 31 , 2019. in august 2019 , we entered into a first amendment to the san diego lease to extend the term of the lease through the commencement of the new san diego lease ( defined below ) . in october 2019 , we entered into an agreement to lease office space in san diego , california ( the “ new san diego lease ” ) with aggregate payments of approximately $ 4.1 million over the 7.5-year term of the lease . story_separator_special_tag the new san diego lease commenced in july 2020. we have an option to extend the new san diego lease for an additional 5 years at the end of the initial term . further , we provided a standby letter of credit of $ 0.5 million as a security deposit during the term of the lease , subject to certain reductions beginning 4 years after the lease commencement . as of december 31 , 2020 , $ 0.5 million was pledged as collateral for the letter of credit and recorded as restricted cash . we enter into contracts in the normal course of business with contract development and manufacturing organizations and other service providers and vendors . these contracts generally provide for termination on notice and , therefore , are cancellable contracts and not considered contractual obligations and commitments . 69 in 2013 , we licensed rights to tesetaxel in all major markets from daiichi sankyo company , limited ( “ daiichi sankyo ” ) , the original inventor of the product . under the daiichi sankyo license agreement , we are obligated to use commercially reasonable efforts to develop and commercialize tesetaxel in the following countries : france , germany , italy , spain , the united kingdom and the u.s. we are required to make aggregate future milestone payments of up to $ 31.0 million , contingent on attainment of certain regulatory milestones . additionally , we are obligated to pay daiichi sankyo a tiered royalty that ranges from the low to high single digits , depending on annual net sales of tesetaxel . off–balance sheet arrangements during the periods presented , we did not have , nor do we currently have , any off-balance sheet arrangements as defined under the rules of the sec . jumpstart our business startups act we are an emerging growth company , as defined in the jumpstart our business startups act of 2012 ( the “ jobs act ” ) . under this act , an emerging growth company can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the jobs act until those standards would otherwise apply to private companies . we have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and , therefore , will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies . however , we intend to rely on other exemptions provided by the jobs act , including without limitation , an exemption from the auditor attestation requirements of section 404 ( b ) of the sarbanes-oxley act of 2002 , as amended . we will remain an emerging growth company until december 31 , 2023 unless , prior to that time , we : ( i ) have more than $ 1.07 billion in annual gross revenue ; ( ii ) have a market value for shares of our common stock held by non-affiliates of more than $ 700 million as of the last day of our second quarter of any year ; or ( iii ) issue more than $ 1.0 billion of non-convertible debt over a three-year period . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of financial condition and results of operations is based on our audited financial statements , which have been prepared in accordance with generally accepted accounting principles in the u.s. ( “ gaap ” ) . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported expenses during the reporting periods . these items are monitored and analyzed by us for changes in facts and circumstances , and material changes in these estimates could occur in the future . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . changes in estimates are reflected in reported results for the period in which they become known . actual results may differ materially from these estimates under different assumptions or conditions . while our significant accounting policies are more fully described in the notes to our audited financial statements elsewhere in this annual report on form 10-k , we believe that the following accounting policies related to accrued expenses and equity-based compensation are most critical to understanding and evaluating our reported financial results . accrued expense s as part of the process of preparing our financial statements , we are required to estimate our accrued expenses . this process involves reviewing open contracts and purchase orders , communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost . the majority of our service providers invoice us monthly in arrears for 70 services performed or when contractual milestones are met . we make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time . we periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary . examples of estimated accrued expenses include costs associated with conducting our development and regulatory activities , including fees paid to third-party professional consultants and service providers , and costs to develop and manufacture clinical study materials . we base our accrued expenses on our estimates of the services received and efforts expended pursuant to our contractual arrangements . the
| non-personnel-related expense includes expense related to : ( i ) professional fees for legal , patent , consulting , accounting and audit services ; ( ii ) insurance ; and ( iii ) facilities and information technology . personnel-related expense includes expense related to salaries , benefits and equity-based compensation for personnel engaged in finance and administrative functions . we do not expect our general and administrative expense to change significantly in the near term . the following table summarizes our general and administrative expense for each of the periods below ( in thousands ) : replace_table_token_3_th general and administrative expense of $ 10.4 million for the year ended december 31 , 2020 remained consistent compared to $ 10.9 million for the year ended december 31 , 2019 . 67 other income , n et other income , net consists primarily of interest income generated from cash held in savings accounts . other income , net also includes losses on disposal of property and equipment and gains and losses on foreign currency transactions . other income , net was $ 1.1 million and $ 3.1 million for the years ended december 31 , 2020 and december 31 , 2019 , respectively . the decrease in other income , net was due primarily to decreased interest income as a result of lower interest rates during the year ended december 31 , 2020. liquidity and capital resources as of december 31 , 2020 and 2019 , we had cash in the amount of $ 157.3 million and $ 180.5 million , respectively . we believe that our existing cash will be sufficient to meet our anticipated cash requirements through at least one year from the date this annual report on form 10-k is filed with the u.s. securities and exchange commission . we have incurred losses in each year since our inception . our net loss was $ 126.4 million and $ 111.8 million for the years ended december 31 , 2020 and 2019 , respectively . as of december 31 , 2020 and 2019 , we had an accumulated deficit of $ 366.4 million and $ 240.1 million , respectively . substantially all of our operating losses resulted from expenses incurred
| 13,486 |
we may offer shares of our common stock pursuant to our form s-3 shelf registration statement filed with the sec on october 30 , 2015 and declared effective on november 16 , 2015 , including the related at-market-facility entered into on april 11 , 2016 with cantor ( shelf registration ) . we are an emerging growth company . under the jumpstart our business startups act of 2012 , or jobs act , emerging growth companies can delay adopting new or revised accounting standards until such time that those standards apply to private companies . we have irrevocably elected not to adopt this exemption from new or revised accounting standards , and therefore , we will be subject to the same new or revised accounting standards as other public companies that are not “ emerging growth companies. ” 43 story_separator_special_tag replace_table_token_7_th revenue . for the year ended december 31 , 2016 , revenue remained consistent when compared to the year ended december 31 , 2015 and consisted of the continued amortization of a non-refundable upfront payment received under our collaboration arrangement with r-pharm . for the year ended december 31 , 2015 , revenue decreased to $ 0.3 million compared to $ 1.3 million of revenue for the year ended december 31 , 2014. the decrease of $ 1.0 million , or 79.5 % , was the result of a $ 1.0 million upfront non-refundable payment received from a third party collaborator in the fourth quarter of 2014. we recognized the $ 1.0 million payment as revenue because we satisfied all deliverables associated with the payment prior to december 31 , 2014 , and have no remaining substantive performance obligations . research and development .. for the year ended december 31 , 2016 , research and development expenses increased to $ 20.1 million from $ 16.4 million for the year ended december 31 , 2015 . the increase of $ 3.7 million , or 22.1 % , was primarily the result of the expansion of our development programs for scy-078 during the year ended december 31 , 2016 , including the completion of two phase 2 studies , the extension of the phase 1 iv program , and the completion of three-month toxicology studies and two ddi studies . for the year ended december 31 , 2015 , research and development expenses increased to $ 16.4 million from $ 8.3 million for the year ended december 31 , 2014. the increase of $ 8.2 million , or 98.4 % , was primarily the result of a $ 7.8 million increase in scy-078 development third-party service expenses and a $ 0.4 million increase in employee compensation expense . the increase in scy-078 development third-party service expenses was primarily related to ongoing clinical development activities , including phase 1 and phase 2 studies of the oral formulation of scy-078 , the preclinical and clinical development of an iv formulation of scy-078 , and continued chemistry , manufacturing , and control ( cmc ) activities . the increase in employee compensation expense was primarily due to an increase of $ 0.3 million related to former services business personnel devoting more time and effort to scy-078 development in 2015 ( until the services business sale in july 2015 ) . when scientific personnel in our former services business devoted time to research and development projects , the associated salaries and personnel-related costs for this effort were included in research and development expense , rather than in costs of revenue , which are included within discontinued operations . the former services business personnel continued to provide support for scy-078 development following the july 2015 sale pursuant to the services agreement with accuratus , including $ 1.6 million for services provided in the year ended december 31 , 2015. this expense is included in the scy-078 development third-party research and development service expense increase described above . 46 selling , general and administrative . for the year ended december 31 , 2016 , selling , general and administrative expenses decreased to $ 8.0 million from $ 12.2 million for the year ended december 31 , 2015 . the decrease of $ 4.2 million , or 34.3 % , was primarily the result of the decrease in severance , retention , and stock compensation expense recognized during the year end december 31 , 2015 associated with the departure of a former executive officer and the disposal of our services business in july 2015. for the year ended december 31 , 2015 , selling , general and administrative expenses increased to $ 12.2 million from $ 7.6 million for the year ended december 31 , 2014. the increase of $ 4.6 million , or 59.7 % , was primarily the result of a $ 3.4 million increase in employee compensation expense and a $ 1.5 million increase in professional services expenses directly associated with our continuing operations as a regulated , publicly traded company , partially offset by a $ 0.3 million decrease in other administrative expenses . the increase in employee compensation expense was primarily due to an increase in accrued severance and retention compensation costs totaling $ 1.5 million and an increase in stock compensation expense of $ 1.9 million . the increase in severance and retention costs was associated with costs incurred pursuant to the retention plan we established in connection with the sale of our services business , which we refer to as the `` retention plan '' , a compensatory plan with our former chief financial officer , and a separation agreement with our former president , as described in note 10 to the annual audited financial statements in this form 10-k. the increase in stock compensation expense is related to incremental compensation expense incurred when stock options were modified in the third quarter of 2015 and new option grants awarded in 2015 , which are described in further detail in note 10 to our audited financial statements in this form 10-k. the decrease in other compensation costs related to a reduction in salary , bonus , and benefits expenses associated with a story_separator_special_tag reduction in selling , general , and administrative personnel headcount following the sale of the services business in july 2015. amortization of deferred financing costs and debt discount . amortization of deferred financing costs was $ 0.8 million in the year ended december 31 , 2014 , which was associated with our 2013 credit agreement deferred financing costs . we amortized these deferred financing costs until may 2014 , when we repaid the entire outstanding balance of the 2013 credit agreement totaling $ 15.0 million plus accrued interest using the proceeds from the ipo . there was no amortization in the year ended december 31 , 2015 , because the 2013 credit agreement was repaid in full in may 2014. for the year ended december 31 , 2016 , there was $ 0.1 million in amortization of debt discount associated with the loan and security agreement ( loan agreement ) with solar capital ltd. ( solar ) . loss on extinguishment of debt . loss on extinguishment of debt was $ 1.4 million in the year ended december 31 , 2014. as described in the preceding paragraph , the entire outstanding balance of the 2013 credit agreement was repaid in may 2014. the remaining unamortized balance of the deferred financing costs on the debt settlement date of $ 1.4 million was immediately recognized as a loss on the extinguishment of debt in the year ended december 31 , 2014. there was no gain or loss incurred in the years ended december 31 , 2016 and 2015 , because the 2013 credit agreement was repaid in full in may 2014. interest income . during the year ended december 31 , 2016 , we recognized $ 0.2 million in interest income associated with the short-term investments . interest expense during the year ended december 31 , 2016 , we recognized $ 0.4 million in interest expense associated with the loan agreement with solar . warrant liability fair value adjustment . on june 21 , 2016 , we sold an aggregate of 9,375,000 shares of common stock and warrants to purchase up to 4,218,750 shares of our common stock at a public offering price of $ 2.40 per share of common stock sold . we accounted for these warrants as a liability instrument measured at their fair value . the fair values of these warrants have been determined using the black-scholes valuation model ( `` black-scholes '' ) . the warrants are subject to remeasurement at each balance sheet date , using black-scholes , with any changes in the fair value of the outstanding warrants recognized in the accompanying statements of operation . for the year ended december 31 , 2016 , we recognized a $ 1.9 million loss in the fair value adjustment related to the warrant liability . derivative fair value adjustment . for the years ended december 31 , 2016 and 2015 , derivative fair value adjustment was $ 0.0 million compared to $ 10.1 million in the year ended december 31 , 2014. the derivative fair value adjustment was a gain in the year ended december 31 , 2014 and was due to the decrease in the estimated fair value of our common stock , from $ 47.74 per share as of december 31 , 2013 , to $ 10.00 per share as of may 2 , 2014. the warrants to purchase common stock accounted for as derivatives were exercised in may 2014 in conjunction with the ipo , and therefore the remaining derivative liability was reclassified to additional paid in capital at that time . therefore , no gain or loss was incurred during the years ended december 31 , 2016 and 2015. income tax benefit . for the years ended december 31 , 2016 and 2015 , income tax benefit was $ 0.0 million compared to $ 1.2 million in the year ended december 31 , 2014. no income tax benefit was recognized during the years ended december 31 , 2016 and 2015 , because it is directly correlated to income tax expense in discontinued operations and there was no corresponding income tax expense in discontinued operations in 2016 and 2015. during the year ended december 31 , 2014 , we 47 recognized an income tax benefit equal to the corresponding income tax expense on income from discontinued operations for the period . discontinued operations . for the year ended december 31 , 2015 , we incurred a loss from discontinued operations of $ 4.3 million compared to income from discontinued operations of $ 1.4 million for the year ended december 31 , 2014. the loss from discontinued operations during the year ended december 31 , 2015 , resulted from revenue of $ 7.4 million , cost of revenue , research and development , and selling , general , and administrative expenses of the services business of $ 8.2 million , and non-recurring 2015 costs that included severance charges of $ 2.1 million associated with the termination of employees in connection with the exit and disposal of the services business , an impairment charge on classification of assets as held for sale of $ 1.4 million , and a loss on disposal of $ 0.1 million . these non-recurring 2015 costs have been described in notes 10 , 11 , 12 , and 13 to the annual audited financial statements in this form 10-k. the income from discontinued operations in the year ended december 31 , 2014 , resulted from revenue of $ 17.8 million , cost of revenue and selling , general , and administrative expenses of the services business of $ 15.4 million , a gain on sale of assets of $ 0.2 million , and income tax expense of $ 1.2 million .
| we do not expect to incur any substantial research and development expenses related to our cyclophilin inhibitor platform in the near future . the successful development of product candidates is highly uncertain . at this time , we can not reasonably estimate the nature , timing or costs required to complete the remaining development of any product candidates . this is due to the numerous risks and uncertainties associated with the development of product candidates . selling , general and administrative expense selling , general and administrative expense consists primarily of salaries and personnel-related costs , including employee benefits and any stock-based compensation . this includes personnel in executive , accounting and finance , commercial , human resources and administrative support functions . other expenses include facility-related costs not otherwise allocated to research and development expense , professional fees for accounting , auditing , tax and legal services , consulting costs for general and administrative purposes , information systems maintenance and marketing efforts . other expense ( income ) substantially all of our other expense ( income ) during the periods reported consists of costs associated with : fair value adjustments to our warrant liability ; interest expense associated with our long term loan payable obligation ; interest income associated with our held-to-maturity short-term investments 44 amortization of deferred financing costs , including the effects of a related party guarantee of our outstanding credit facility ; interest paid our outstanding bank debt ; a loss on the extinguishment of debt ; and fair value adjustments to our derivative liability for warrants issued in conjunction with the related party convertible debt . in april 2010 , we entered into a $ 15.0 million credit facility agreement with hsbc bank usa , national association , or hsbc , which we refer to as the 2010 credit agreement . this 2010 credit agreement was guaranteed by a related party . we concluded that the guarantee represented a deemed contribution and recognized the value of the guarantee as deferred financing costs . the value of the guarantee was determined based on
| 13,487 |
the company maintains insurance coverage , which it believes is customary in the industry , although the company is not fully insured against all environmental risks . development commitments during the ordinary course of oil and gas prospect development , the company commits to a proportionate share for the cost of acquiring mineral interests , drilling exploratory or development wells and acquiring seismic and geological information . production incentive compensation plan in august 2013 , the company 's compensation committee adopted a production incentive compensation plan . the purpose of the plan is to encourage employees and consultants participating story_separator_special_tag general we are an independent energy company focused on the development , exploration , exploitation , acquisition , and production of natural gas and crude oil properties in the u.s. gulf coast region and in south america . our oil and gas reserves and operations are concentrated primarily in the south american country of colombia and in the onshore gulf coast region , particularly texas and louisiana . our mission is to deliver outstanding net asset value per share growth to our investors via attractive oil and gas investments . our strategy is to focus on early identification of , and entrance into , existing and emerging resource plays , particularly in south america and the u.s. gulf coast . we typically seek to partner with larger operators in development of resources or retain interests , with or without contribution on our part , in prospects identified , packaged and promoted to larger operators . by entering these plays earlier and partnering with , or promoting to , larger operators , we believe we can capture larger resource potential at lower cost and minimize our exposure to drilling risks and costs and ongoing operating costs . we , along with our partners , actively manage our resources through opportunistic acquisitions and divestitures where reserves can be identified , developed , monetized and financial resources redeployed with the objective of growing reserves , production and shareholder value . generally , we generate nearly all our revenues and cash flows from the sale of produced natural gas and crude oil , whether through royalty interests , working interests or other arrangements . we may also realize gains and additional cash flows from the periodic divestiture of assets . recent developments commodity pricing steep declines in the price of oil and natural gas during 2015 adversely affected our revenues , profitability and financial position , and resulted in an impairment charge with respect to our oil and gas assets . average realized prices from sales our oil and natural gas declined by 44 % and 33 % , respectively , from 2014 to 2015. drilling and related activity with the weakness in oil and natural gas prices , we curtailed drilling activity during 2015 , drilling two domestic wells , both dry holes . at december 31 , 2015 , we had no drilling operations in progress . during 2015 , our capital investment expenditures in colombia related to the preparation and evaluation of our three concessions in colombia totaled $ 79,511. capital expenditures during 2015 related to permitting , pre-drilling road work and environmental work on the serrania concession . hupecol , the operator of our colombian concessions , has advised that they intend to complete pre-drilling work and to drill a first test well on the serrania concession during the first quarter of 2016. our estimated share of costs associated with drilling the first test well on the serrania concession , above and beyond expenditures through december 31 , 2015 , is approximately $ 425,000. hupecol has also advised that it plans , during 2016 , to begin seismic work on the los picachos and macaya concessions . 25 hupecol 's plans with respect to our colombian concessions may change based on field conditions and other factors beyond our control or the control of hupecol . leasehold developments during 2015 , we disposed of some or all of our interest in three non-producing domestic prospects for which we received $ 56,705 of proceeds . proceeds received from disposal of such interests were accounted for as a reduction in capitalized cost of oil and gas properties . with the continuing weakness in oil and natural gas prices , we are not presently planning additional domestic drilling operations during 2016. we intend to evaluate other opportunities that may arise in the domestic energy sector , including possible acquisitions of non-core assets and other assets that may become available as other operators divest or otherwise address excess leverage and other issues in the current low price environment . settlement of sec administrative proceeding our prior sec administrative proceeding was settled in april 2015. as a result of that settlement , among other things , we paid a penalty in the amount of $ 400,000. the penalty and associated expense were recorded during 2014. settlement of shareholder class action suit final settlement of our prior shareholder class action suit was approved in july 2015. as a result of that settlement , among other things , we paid a settlement of $ 7,000,000 which was fully funded by insurance . the settlement was recorded during 2014. the associated settlement payable , accrued legal fees payable and insurance claim receivable were each reflected as settled on our balance sheet at december 31 , 2015. changes in officers and directors under the terms of the settlement of our prior sec administrative proceeding , john terwilliger , our prior chairman and chief executive officer , resigned from all positions as an officer and director of our company . story_separator_special_tag in connection with the resignation of john terwilliger : ( 1 ) john boylan , a current director , was appointed chairman , president and chief executive officer of the company ; ( 2 ) an additional independent director was appointed to fill the vacancy created by mr. terwilliger 's resignation ; and ( 3 ) we agreed to continue to employ mr. terwilliger in a non-executive capacity to assist in the management transition through at least december 31 , 2015. mr. boylan 's compensation , in addition to benefits generally provided to company employees , consists of : ( 1 ) an annual base salary of $ 120,000 ; and ( 2 ) a ten-year stock option grant , exercisable at fair market value on the date of grant , to purchase 900,000 shares of our common stock . the stock option vests 1/3 on each of the first three anniversaries of the date of grant subject to accelerated vesting upon either ( i ) our receipt , on or after the grant date and during the term of mr. boylan 's employment , of $ 10 million or more of aggregate gross proceeds from the sale of equity securities or securities convertible into equity securities , or ( ii ) our acquisition , on or after the grant date and during the term of mr. boylan 's employment , of $ 10 million or more in aggregate purchase price of oil and gas properties . escrow settlements during 2015 , we received $ 59,412 in partial settlement of our escrow receivable relating to properties sold in previous years . planned tamboran investment in april 2016 , we agreed to acquire a 12.5 % equity ownership interest in tamboran resources limited for $ 1,000,000. closing of the planned acquisition of the interest in tamboran is subject to satisfaction of certain conditions by tamboran , including the receipt by tamboran of funding from investors other than houston american energy in an amount not less than $ 705,000. critical accounting policies the following describes the critical accounting policies used in reporting our financial condition and results of operations . in some cases , accounting standards allow more than one alternative accounting method for reporting . such is the case with accounting for oil and gas activities described below . in those cases , our reported results of operations would be different should we employ an alternative accounting method . 26 full cost method of accounting for oil and gas activities . we follow the full cost method of accounting for oil and gas property acquisition , exploration and development activities . under this method , all productive and nonproductive costs incurred in connection with the exploration for and development of oil and gas reserves are capitalized . capitalized costs include lease acquisition , geological and geophysical work , delay rentals , costs of drilling , completing and equipping successful and unsuccessful oil and gas wells and related internal costs that can be directly identified with acquisition , exploration and development activities , but does not include any cost related to production , general corporate overhead or similar activities . gain or loss on the sale or other disposition of oil and gas properties is not recognized unless significant amounts of oil and gas reserves are involved . no corporate overhead has been capitalized as of december 31 , 2015. the capitalized costs of oil and gas properties , plus estimated future development costs relating to proved reserves , are amortized on a units-of-production method over the estimated productive life of the reserves . unevaluated oil and gas properties are excluded from this calculation . the capitalized oil and gas property costs , less accumulated amortization , are limited to an amount ( the ceiling limitation ) equal to the sum of : ( a ) the present value of estimated future net revenues from the projected production of proved oil and gas reserves , calculated using the average oil and natural gas sales price received by the company as of the first trading day of each month over the preceding twelve months ( such prices are held constant throughout the life of the properties ) and a discount factor of 10 % ; ( b ) the cost of unproved and unevaluated properties excluded from the costs being amortized ; ( c ) the lower of cost or estimated fair value of unproved properties included in the costs being amortized ; and ( d ) related income tax effects . costs in excess of this ceiling are charged to proved properties impairment expense . unevaluated oil and gas properties . unevaluated oil and gas properties consist principally of our cost of acquiring and evaluating undeveloped leases , net of an allowance for impairment and transfers to depletable oil and gas properties . when leases are developed , expire or are abandoned , the related costs are transferred from unevaluated oil and gas properties to oil and gas properties subject to amortization . additionally , we review the carrying costs of unevaluated oil and gas properties for the purpose of determining probable future lease expirations and abandonments , and prospective discounted future economic benefit attributable to the leases . unevaluated oil and gas properties not subject to amortization include the following at december 31 , 2015 and 2014 : replace_table_token_10_th the carrying value of unevaluated oil and gas prospects includes $ 79,511 and $ 2,034,008 expended for properties in south america at december 31 , 2015 and december 31 , 2014 , respectively .
| depreciation and depletion expense increased by 110 % to $ 756,757 in 2015 from $ 359,897 in 2014. the increase in depreciation and depletion was due to an increase in the cost pool and increased production attributable to additional wells brought on line during 2014. impairment of oil and gas properties . we reported an impairment charge of $ 1,718,088 during 2015 as compared to an impairment charge of $ 1,492,148 during 2014. the charges in both years resulted from the effects of steeply lower commodity prices when applying the ceiling test under the full cost method of accounting . general and administrative expenses . general and administrative expense decreased by 31.4 % to $ 1,541,294 in 2015 from $ 2,246,519 in 2014. the change in general and administrative expense reflects a combination of ( 1 ) a reduction in stock compensation of $ 359,384 , ( 2 ) a reduction in directors and officers insurance of $ 238,424 , and ( 3 ) a reduction in legal fees of $ 235,172. other income ( expense ) . other income ( expense ) consists of interest earned on cash balances net of other bank fees , currency losses relating to funds held for operations in colombia and a contingent loss relating to the 28 company 's sec settlement . net other income ( expense ) totaled $ ( 76,570 ) in 2015 as compared to $ ( 392,654 ) in 2014. the change was attributable to higher interest rates received on bank deposits offset by a currency loss of $ 97,103 during 2015 and a contingent loss relating to the sec settlement of $ 400,000 during 2014. income tax expense/benefit . we reported income tax expense of $ 18,865 in 2015 as compared to $ 2,183 in 2014. financial condition liquidity and capital resources . at december 31 , 2015 , we had a cash balance of $ 2,123,520 and working capital of $ 2,384,283 compared to a cash balance of
| 13,488 |
most lasers were obtained from the manufacturer and accounted for as a capital lease under sfas no . 13 , accounting for leases. effective december 18 , 2007 , the company amended its master capital lease agreement which extended the lease payment period and reduced periodic lease payments . management has determined that the amended lease agreement still qualifies as a capital lease . under sfas no . 13 , when both the original lease and the amended agreement are classified as capital leases , the recorded asset and obligation balances are adjusted at the date of the revision , by the difference between the outstanding obligation balance and the present value of the future minimum lease payments . accordingly , the company has recorded an approximate $ 1 million reduction to its debt and fixed asset balances during the quarter ended december 31 , 2007. critical accounting policies impairment of goodwill the company accounts for its goodwill in accordance with sfas no . 142 , goodwill and other intangible assets , which requires the company to test goodwill for impairment annually and whenever events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value . sfas no . 142 requires the company to determine the fair value of its reporting units . because quoted market prices do not exist for the company 's reporting units , the company uses the present value of expected future cash flows to estimate fair value . management must make significant estimates and assumptions about future conditions to estimate future cash flows . if these estimates or their related assumptions change in the future , including general economic and competitive conditions , the company may be required to record impairment charges related to these assets . impairment of long-lived assets the company accounts for its long-lived assets in accordance with sfas no . 144 , which requires the company to assess the recoverability of these assets when events or changes in circumstances indicate that the carrying amount of the long-lived asset ( group ) might not be recoverable . if impairment indicators exist , the company determines whether the projected undiscounted cash flows will be sufficient to cover the carrying value of such assets . this requires the company to make significant judgments about the expected future cash flows of the asset group . the future cash flows are dependent on many factors including general and economic conditions and are subject to change . a change in these assumptions could result in material charges to income . recoverability of deferred tax assets the company has generated deferred tax assets and liabilities due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the income tax bases of such assets and liabilities . valuation allowances are recorded to reduce deferred tax assets to the amount expected to be realized . in assessing the adequacy of the valuation allowances , the company considers the scheduled reversal of deferred tax liabilities , future taxable income and prudent and feasible tax planning strategies . at december 31 , 2007 , the company had valuation allowances of $ 126.9 million to fully offset deferred tax assets of $ 126.9 million . the valuation allowance was based on the uncertainty of the realizability of certain deferred tax assets . in the event 34 the company determines it is more likely than not it will be able to use a deferred tax asset in the future in excess of its net carrying value , the valuation allowance would be reduced , thereby increasing net income , reducing goodwill or increasing equity in the period such determination was made . accrual of medical malpractice claims the nature of the company 's business is such that it is subject to medical malpractice lawsuits . to mitigate a portion of this risk , the company maintains insurance in the united states for individual malpractice claims with a deductible of $ 250,000 per claim . management and the company 's insurance carrier review malpractice lawsuits for purposes of establishing ultimate loss estimates . the company has recorded reserves to cover the estimated costs of the deductible for both reported and unreported medical malpractice claims incurred . the estimates are based on the average monthly claims expense and the estimated average time lag between the performance of a procedure and notification of a claim . if the number of claims or the cost of settled claims is higher than the company 's historical experience or if the actual time lag varies from the estimated time lag , the company may need to record significant additional expense . risk factors see item 1a risk factors. year ended december 31 , 2007 compared to the year ended december 31 , 2006 total revenues for the year ended december 31 , 2007 were $ 298.4 million , an increase of $ 20.6 million ( 7 % ) over revenues of $ 277.9 million for the year ended december 31 , 2006. this increase was due to a $ 13.0 million ( 8 % ) increase in refractive center revenues , a $ 3.9 million increase in doctor services revenues and a $ 3.7 million increase in eye care revenues . revenues from the refractive center segment for the year ended december 31 , 2007 were $ 174.8 million , an increase of $ 13.0 million ( 8 % ) from revenues of $ 161.8 million for the year ended december 31 , 2006. refractive center revenues increased primarily due to procedure volume increase , which accounted for a $ 7.7 million increase in revenues , and an increased mix of higher priced procedures , which accounted for a $ 5.3 million increase in revenues . for the year ended december 31 , 2007 , majority-owned refractive center procedures were approximately 105,700 , an increase of 4,700 ( 5 % ) over the prior year . story_separator_special_tag revenues from doctor services for the year ended december 31 , 2007 were $ 97.1 million , an increase of $ 3.9 million ( 4 % ) from revenues of $ 93.2 million for the year ended december 31 , 2006. this increase was primarily due to increases in the company 's mobile cataract and other segments . revenues from the company 's mobile cataract segment for the year ended december 31 , 2007 were $ 37.6 million , an increase of $ 2.5 million ( 7 % ) from revenues of $ 35.1 million for the year ended december 31 , 2006. this increase was due to a higher average price and revenues generated from foresee php , a new product offering that the company began selling at the end of 2006. revenues from the refractive access segment for the year ended december 31 , 2007 were $ 35.9 million , a decrease of $ 1.0 million ( 3 % ) from revenues of $ 36.9 million for the year ended december 31 , 2006. for the year ended december 31 , 2007 , access procedures declined by approximately 6,400 ( 10 % ) from the prior year period and accounted for a decrease in revenues of approximately $ 3.9 million . this decrease in access revenues was offset by higher average pricing , which accounted for an increase in access revenues of approximately $ 2.9 million . revenues from the company 's other businesses , which manage cataract and secondary care centers , for the year ended december 31 , 2007 were $ 23.6 million , an increase of $ 2.4 million ( 11 % ) from revenues of $ 21.2 million for the year ended december 31 , 2006. this increase is primarily related to the opening of two new ambulatory surgery centers in 2007 as well as growth in surgical volume due to the addition of surgeons . revenues from eye care for the year ended december 31 , 2007 were $ 26.5 million , an increase of $ 3.7 million ( 16 % ) from revenues of $ 22.9 million for the year ended december 31 , 2006. this increase was primarily due to an increase in the company 's optometric franchising segment and its 9 % growth in the number of franchisees that it serves . total cost of revenues ( excluding amortization expense for all segments ) for the year ended december 31 , 2007 was $ 209.1 million , an increase of $ 16.2 million ( 8 % ) over the cost of revenues of $ 192.9 million for the year ended december 31 , 2006. primarily causing the increase in cost of revenues was a $ 11.9 million ( 10 % ) increase at refractive centers on higher revenues . 35 the cost of revenues from refractive centers for the year ended december 31 , 2007 was $ 126.8 million , an increase of $ 11.9 million ( 10 % ) from cost of revenues of $ 114.9 million for the year ended december 31 , 2006. this increase was primarily attributable to an increase in procedures , which accounted for approximately $ 5.6 million in costs , and approximately $ 6.3 million of costs associated with higher-priced procedures and costs from centers acquired or opened within the past year . gross margins for centers were 27.5 % for the year ended december 31 , 2007 , down from 29.0 % during the year ended december 31 , 2006. the cost of revenues from doctor services for the year ended december 31 , 2007 was $ 70.3 million , an increase of $ 3.6 million ( 5 % ) from cost of revenues of $ 66.7 million for the year ended december 31 , 2006. this increase was spread across all business components of doctor services . gross margins for doctor services were 27.6 % for the year ended december 31 , 2007 , down from 28.5 % during the year ended december 31 , 2006. the cost of revenues from the company 's mobile cataract segment for the year ended december 31 , 2007 was $ 26.9 million , an increase of $ 2.3 million ( 9 % ) from cost of revenues of $ 24.6 million for the year ended december 31 , 2006. this increase was consistent with the increase in revenues , which was due to higher cataract volume and a new product offering that the company began selling at the end of 2006. gross margins for the company 's mobile cataract segment were 28.4 % , down from 29.7 % during the year ended december 31 , 2006. the cost of revenues from refractive access segment for the year ended december 31 , 2007 was $ 28.2 million , an increase of $ 0.5 million ( 2 % ) from cost of revenues of $ 27.7 million for the year ended december 31 , 2006. this increase was primarily attributable to $ 3.7 million of higher costs primarily associated with higher priced procedures and new service offerings , offset in part by the decrease in access procedures that reduced cost of revenues by approximately $ 3.1 million . gross margins for the refractive access segment decreased to 21.4 % for the year ended december 31 , 2007 , from 25.0 % in the prior year period . the cost of revenues from the company 's other businesses , which manage cataract and secondary care centers , for the year ended december 31 , 2007 was $ 15.1 million , an increase of $ 0.7 million ( 5 % ) from cost of revenues of $ 14.4 million for the year ended december 31 , 2006. the increase was primarily due to increased costs of supplies at several of the company 's ambulatory surgery centers in the current year due to volume growth . gross margins increased to 35.8 % during the year ended december 31 , 2007 from 32.2 % in the prior year .
| the management service agreements typically are for an extended period of time , ranging from five to 15 years . management fees are equal to the net revenue of the physician practice , less amounts retained by the physician groups . during the year ended december 31 , 2007 , the company began charging a fee on certain procedures as part of the lifetime commitment program . under this program , patients are charged a small fee in exchange for the guarantee of re-treatment if it is needed to maintain vision results for qualified patients . revenues generated under this program are initially deferred and recognized over future periods based on management 's estimates of re-treatment volume . 31 included in costs of revenue are the laser fees payable to laser manufacturers for royalties , doctors ' compensation , use and maintenance of the lasers , variable expenses for consumables and facility fees , as well as center costs associated with personnel , facilities and depreciation of center assets . marketing and sales and general and administrative expenses include expenses that are not directly related to the provision of laser correction services or cataract services . the company serves surgeons who performed approximately 270,400 procedures , including refractive and cataract procedures , at the company 's centers or using the company 's equipment during the year ended december 31 , 2007. in the year ended december 31 , 2007 , the company 's refractive center and access procedure volume , including minority owned centers , decreased to 186,600 from 187,200 in the year ended december 31 , 2006 , a decrease of 600 procedures or less than 1 % . being an elective procedure , laser vision correction volumes fluctuate due to changes in economic and stock market conditions , unemployment rates , consumer confidence and political uncertainty . demand for laser vision correction also is affected by perceived safety and effectiveness concerns given the lack of long-term follow-up data . the company continually assesses patient , optometric and ophthalmic industry trends as it strives to improve laser vision correction revenues and
| 13,489 |
we remain highly leveraged and rely upon our ability to continue to borrow under our loan facility with snb or to raise debt and equity from our principal stockholders and third parties to support operations . substantially all of our assets are pledged as collateral under our loan facility . if snb were to cease providing revolving loans to us under the loan facility , we would lack funds to continue our operations . over the past two years we have also relied upon our ability to borrow money from certain stockholders and raise debt and equity capital to support our operations . should we continue to need to borrow funds from our principal stockholders or raise debt or equity , there is no assurance that we will be able to do so or that the terms on which we borrow funds or raise equity will be favorable to us or our existing stockholders . the snb loan facility provides for a $ 16,000,000 revolving loan and a term loan ( the “ term loan ” ) of $ 3,800,000. the term loan requires monthly principal installments in the amount of $ 45,238 , payable on the first business day of each month , beginning on february 1 , 2020 , with a final payment of any unpaid balance of principal and interest payable on the scheduled maturity date . the terms of the loan facility require that , among other things , we maintain a specified fixed charge coverage ratio of 1.25 to 1.00 at the end of each fiscal quarter beginning with the fiscal quarter ending march 31 , 2020. in addition , we are limited in the amount of capital expenditures we can make . the loan facility also restricts dividends we may pay to our stockholders . under the terms of the loan facility , both the revolving credit line and the term loan will bear an interest rate equal to 30-day libor , plus 2.5 % ( with a floor of 3.5 % ) . the use of libor as a reference rate to determine interest rates is expected to phase out at the end of 2021. we have not commenced discussion with snb as to how the rate of interest under our revolving and term loans will be determined if and when the libor is no longer published or used as a reference rate . prior to entering into the new loan facility with snb , our loan facility was with pnc bank . on december 31 , 2019 , we used a substantial portion of the proceeds of the snb loan facility to pay pnc $ 15,401,521 in connection with the termination of the credit facility , including $ 14,908,339 in full payment of amounts due under the revolving credit loan and $ 94,254 in full payment of tall amounts due under our term loan . for information concerning our loan facility with pnc , see note 9 to our 2019 consolidated financial statements . as of december 31 , 2019 , our debt to snb in the amount of $ 16,343,000 consisted of the revolving credit loan in the amount of $ 12,543,000 and the term loan in the amount of $ 3,800,000. the revolver balance included the company 's negative general ledger balances in its controlled disbursement cash accounts . as of december 31 , 2018 , our debt to pnc in the amount of $ 15,615,000 consisted of the revolving credit note due to pnc in the amount of $ 14,043,000 and the term loan due to pnc in the amount of $ 1,572,000. as of december 31 , 2019 , we had capitalized lease obligations to third parties of $ 22,000 as compared to capitalized lease obligations to third parties of $ 1,786,000 as of december 31 , 2018. significant transactions since january 1 , 2018 which have impacted our liquidity dispositions on december 20 , 2018 , we completed the sale of wmi group to cpi for a purchase price of $ 9,000,000 , net of a working capital adjustment of $ ( 1,093,000 ) , pursuant to a stock purchase agreement dated as of march 21 , 2018. of the net purchase price for wmi , $ 2,000,000 is held in escrow to secure any obligation we may have under the purchase agreement as a result of the working capital adjustment and as a result of our breach of the representations and warranties we made in the purchase agreement . the amount of the working capital deficit has been contested by cpi . see note 14 to our 2019 consolidated financial statements . 17 financings – related parties due to net losses and negative cash flow in recent years , we have financed our operations in part through private placements of our debt and equity securities . each of michael and robert taglich , two of our directors , have invested substantial amounts in our company , including the financings described below and in other financings discussed in note 9 to our consolidated financial statements for the periods ended december 31 , 2019 and 2018. taglich brothers , inc. ( “ taglich brothers ” ) , a corporation founded by michael and robert taglich , and in which a third director of our company is a vice president of investment banking , has acted as a placement agent for our debt and equity financing transactions and has received cash and equity compensation for its services . for additional information , see note 9 to our 2019 consolidated financial statements . debt financings on march 29 , 2018 and april 4 , 2018 michael taglich and robert taglich , advanced $ 1,000,000 and $ 100,000 , respectively , to our company for use as working capital . our obligation to repay these advances is evidenced by our 2019 notes , as defined below . story_separator_special_tag in may 2018 , we issued $ 1,200,000 principal amount of subordinated notes due may 31 , 2019 ( the “ 2019 notes ” ) , to evidence the $ 1,000,000 due to michael taglich , $ 100,000 due to robert taglich and $ 100,000 due to a third investor . on january 15 , 2019 , we issued our 7 % senior subordinated convertible promissory notes due december 31 , 2020 , each in the principal amount of $ 1,000,000 ( together , the “ 7 % notes ” and each a “ 7 % note ” ) , to michael taglich and robert taglich , each for a purchase price of $ 1,000,000. each 7 % note bears interest at the rate of 7 % per annum , is convertible into shares of our common stock at a conversion price of $ 0.93 per share , subject to the anti-dilution adjustments set forth in the 7 % notes , is subordinated to our indebtedness under the loan facility , and matures at december 31 , 2020 , or earlier upon an event of default . we paid taglich brothers , inc. a fee of $ 80,000 ( 4 % of the purchase price of the 7 % notes ) , in the form of a promissory note having terms substantially identical to the 7 % notes , in connection with the purchase of the 7 % notes . on june 26 , 2019 , the company was advanced $ 250,000 from each of michael and robert taglich . the terms of these notes are identical to the terms of the 2019 notes that were extended to june 30 , 2020. in connection with these notes the company issued to 37,500 shares to each of michael and robert taglich . during the second quarter of 2019 , the maturity date of the 2019 notes was extended to june 30 , 2020. the interest rate of the notes remains at 12 % per annum . in connection with the extension , 180,000 shares of common stock were issued on a pro-rata basis to each of the note holders , including 150,000 shares to michael taglich and 15,000 shares to robert taglich at $ 1.01 per share or $ 182,000. the costs have been recorded as a debt discount and are being accreted over the revised term . on october 21 , 2019 , the company was advanced $ 1,000,000 from michael taglich . this was repaid in full on january 2 , 2020. in connection with the consummation of the snb loan facility , the due date of the 2019 notes and notes held by michael and robert taglich was extended to december 31 , 2020. related party notes payable , net of debt discount to michael and robert taglich , and their affiliated entities , totaled $ 6,862,000 and $ 4,835,000 , as of december 31 , 2019 and december 31 , 2018 , respectively . sale of future proceeds from disposition of subsidiary in connection with the sale of the company 's wholly-owned subsidiary , amk to meyer tool , inc. , ( “ meyer ” ) in 2017 , meyer was obligated to pay the company within 30 days after the end of each calendar quarter , commencing april 1 , 2017 , an amount equal to five ( 5 % ) percent of the net sales of amk for that quarter until the aggregate payments made to the company ( the “ meyer agreement ” ) equals $ 1,500,000 ( the “ maximum amount ” ) . 18 as of december 31 , 2018 , the company received an aggregate of $ 363,000 under the meyer agreement . in order to increase liquidity , on january 15 , 2019 , the company entered into a “ purchase agreement ” with 15 accredited investors ( the “ purchasers ” ) , including michael and robert taglich , pursuant to which the company assigned to the purchasers all of their rights , title and interest to the remaining $ 1,137,000 of the $ 1,500,000 in payments due from meyer for the sale of amk ( the “ remaining amount ” ) for an immediate payment of $ 800,000 , including $ 100,000 from each of michael and robert taglich , and $ 75,000 for the benefit of the children of michael taglich . the timing of the payments is based upon the net sales of amk . if the purchasers have not received the entire remaining amount by march 31 , 2023 , they have the right to demand payment of their pro rata portion of the unpaid remaining amount from us ( “ put right ” ) . to the extent the purchasers exercise their put right , the remaining payments from meyer will be retained by us . the purchasers have agreed to pay taglich brothers a fee equal to 2 % per annum of the purchase price paid by such purchasers , payable quarterly , to be deducted from the payments of the remaining amount , for acting as paying agent in connection with the payments from meyer . equity financings on july 19 , 2018 , we issued and sold a total of 322,000 shares of our common stock for gross proceeds of $ 460,460 , or a $ 1.43 per share , to four accredited investors pursuant to subscription agreements . for acting as placement agent of the offering , taglich brothers , inc. is entitled to a placement agent fee equal to $ 27,627.60 ( 6 % of the gross proceeds of the offering ) , payable at our option , in cash or shares of common stock on the terms sold to the purchasers .
| our turbine engine segment makes components for jet engines that are used on the usaf f-15 and f-16 , the airbus a-330 and a-380 , and the boeing 777 , in addition to a number of ground-power turbine applications . air industries machining , corp. ( “ aim ” ) became a public company in 2005. in response to recent operating losses and their impact on our working capital , we have repositioned our business through the sale and liquidation of certain businesses we acquired since becoming a public company . we also consolidated our headquarters and the operations of our subsidiaries , aim and ntw , at our primary location in bay shore , new york , allowing us to re-focus our operations on our core competencies . in december 2018 we sold wmi group , and in march 2019 we closed our subsidiaries eur-pac ( “ epc ” ) and electronic connection corporation ( “ ecc ” ) . as a result of our restructuring , complex machining and turbine engine components constitute all of our operations . in addition to repositioning our business to obtain profitability and positive cash flow , we remain resolute on meeting customers ' needs and continue to align production schedules to meet the needs of customers . we believe that an unyielding focus on our customers will allow us to execute on our existing backlog in a timely fashion and take on additional commitments . we are pleased with our progress and the positive responses received from our customers . the aerospace market is highly competitive in both the defense and commercial sectors and we face intense competition in all areas of our business . nearly all of our revenues are derived by producing products to customer specifications after being awarded a contract through a competitive bidding process . as the commercial aerospace and defense industries continue to consolidate and major contractors seek to streamline supply chains by buying more complete sub-assemblies from fewer suppliers , we have sought to remain competitive not only by providing cost-effective world class service but also by increasing our ability to produce more complex and complete assemblies for our
| 13,490 |
as we are a global company , our revenues are denominated in multiple currencies and may be significantly affected by currency exchange rate fluctuations . if the u.s. dollar strengthens against other currencies , resulting in unfavorable currency translation , our revenues , revenue growth and results of operations in u.s. dollars may be lower . if the u.s. dollar weakens against other currencies , resulting in favorable currency translation , our revenues , revenue growth and results of operations in u.s. dollars may be higher . when compared to the same periods in fiscal 2015 , the u.s. dollar strengthened against many currencies during the fourth quarter and fiscal year ended august 31 , 2016 , resulting in unfavorable currency translation and u.s. dollar revenue growth that was approximately 2 % and 5 % lower , respectively , than our revenue growth in local currency . assuming that exchange rates stay within recent ranges for fiscal 2017 , we estimate that our full fiscal 2017 revenue growth in u.s. dollars will be approximately equal to our revenue growth in local currency . the primary categories of operating expenses include cost of services , sales and marketing and general and administrative costs . cost of services is primarily driven by the cost of client-service personnel , which consists mainly of compensation , subcontractor and other personnel costs , and non-payroll costs on outsourcing contracts . cost of services includes a variety of activities such as : contract delivery ; recruiting and training ; software development ; and integration of acquisitions . sales and marketing costs are driven primarily by : compensation costs for business development activities ; marketing- and advertising-related activities ; and certain acquisition-related costs . general and administrative costs primarily include costs for non-client-facing personnel , information systems and office space . utilization for the fourth quarter of fiscal 2016 was 92 % , up from 91 % in the third quarter of fiscal 2016 and 90 % in the fourth quarter of fiscal 2015 . we continue to hire to meet current and projected future demand . we proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services and solutions , given that compensation costs are the most significant portion of our operating expenses . based on current and projected future demand , we have increased our headcount , the majority of which serve our clients , to approximately 384,000 as of august 31 , 2016 , compared to approximately 358,000 as of august 31 , 2015 . the year-over-year increase in our headcount reflects an overall increase in demand for our services and solutions , as well as headcount added in connection with acquisitions . annualized attrition , excluding involuntary terminations , for the fourth quarter of fiscal 2016 was 16 % , up from 15 % in the third quarter of fiscal 2016 and 14 % in the fourth quarter of fiscal 2015 . we evaluate voluntary attrition , adjust levels of new hiring and use involuntary terminations as means to keep our supply of skills and resources in balance with changes in client demand . in addition , we adjust compensation in certain skill sets and geographies in order to attract and retain appropriate numbers of qualified employees . for the majority of our personnel , compensation increases for fiscal 2016 became effective december 1 , 2015. we strive to adjust pricing and or the mix of resources to reduce the impact of compensation increases on our gross margin . our ability to grow our revenues and maintain or increase our margin could be adversely affected if we are unable to : keep our supply of skills and resources in balance with changes in the types or amounts of services and solutions clients are demanding ; recover increases in compensation ; deploy our employees globally on a timely basis ; manage attrition ; and or effectively assimilate and utilize new employees . gross margin ( net revenues less cost of services before reimbursable expenses as a percentage of net revenues ) for the fourth quarter of fiscal 2016 was 31.3 % , compared with 31.7 % for the fourth quarter of fiscal 2015 . gross margin for fiscal 2016 was 31.3 % , compared with 31.6 % for fiscal 2015 . the reduction in gross margin for fiscal 2016 was principally due to higher labor costs and higher costs associated with acquisition activities compared to fiscal 2015 . sales and marketing and general and administrative costs as a percentage of net revenues were 17.2 % for the fourth quarter of fiscal 2016 , compared with 17.9 % for the fourth quarter of fiscal 2015 . sales and marketing and general and administrative costs as a percentage of net revenues were 16.6 % for fiscal 2016 , compared with 17.1 % for fiscal 2015 . we continuously monitor these costs and implement cost-management actions , as appropriate . for fiscal 2016 compared to fiscal 2015 , sales and marketing costs as a percentage of net revenues decreased 40 basis points principally due to improved operational efficiency in our business development activities , and general and administrative costs as a percentage of net revenues decreased 10 basis points . operating expenses in fiscal 2015 included a pension settlement charge of $ 64 million related to lump sum cash payments made from our u.s. defined benefit pension plan to former employees who elected to receive such payments . for additional information , see note 10 ( retirement and profit sharing plans ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data. ” operating margin ( operating income as a percentage of net revenues ) for the fourth quarter of fiscal 2016 was 14.1 % , compared with 13.9 % for the fourth quarter of fiscal 2015 . operating margin for fiscal 2016 was 14.6 % , compared with 14.3 % for fiscal 2015 . story_separator_special_tag the pension settlement charge of $ 64 million recorded in fiscal 2015 decreased operating 29 margin by 20 basis points for fiscal 2015 . excluding the effect of the pension settlement charge , operating margin for fiscal 2015 would have been 14.5 % . during fiscal 2016 , we recorded a $ 548 million gain on sale of business and $ 56 million in taxes related to the divestiture of our navitaire business , as well as a $ 301 million gain on sale of business and $ 48 million in taxes related to the partial divestiture of our duck creek business . for additional information , see note 5 ( business combinations and divestitures ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data. ” the effective tax rate for fiscal 2016 was 22.4 % , compared with 25.8 % for fiscal 2015 . absent the $ 849 million gain on sale of businesses and related $ 104 million in taxes recorded during fiscal 2016 , our effective tax rate for fiscal 2016 would have been 24.2 % . absent the $ 64 million pension settlement charge and related $ 25 million in taxes recorded during fiscal 2015 , our effective tax rate for fiscal 2015 would have been 26.0 % . diluted earnings per share were $ 6.45 for fiscal 2016 , compared with $ 4.76 for fiscal 2015 . the gain on sale of businesses , net of taxes , recorded during fiscal 2016 increased diluted earnings per share by $ 1.11 in fiscal 2016 . the pension settlement charge , net of taxes , recorded during fiscal 2015 decreased diluted earnings per share by $ 0.06 in fiscal 2015 . excluding these impacts , diluted earnings per share would have been $ 5.34 and $ 4.82 for fiscal 2016 and 2015 , respectively . we have presented operating income , operating margin , effective tax rate and diluted earnings per share excluding the impacts of the fiscal 2016 gain on sale of businesses and the fiscal 2015 pension settlement charge , as we believe doing so facilitates understanding as to both the impacts of these items and our operating performance in comparison to the prior period . our operating income and diluted earnings per share are affected by currency exchange rate fluctuations on revenues and costs . most of our costs are incurred in the same currency as the related net revenues . where practical , we seek to manage foreign currency exposure for costs not incurred in the same currency as the related net revenues , such as the cost of our global delivery network , by using currency protection provisions in our customer contracts and through our hedging programs . we seek to manage our costs , taking into consideration the residual positive and negative effects of changes in foreign exchange rates on those costs . for more information on our hedging programs , see note 7 ( derivative financial instruments ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data. ” bookings and backlog new bookings for the fourth quarter of fiscal 2016 were $ 8.99 billion , with consulting bookings of $ 4.81 billion and outsourcing bookings of $ 4.18 billion . new bookings for fiscal 2016 were $ 35.39 billion , with consulting bookings of $ 19.16 billion and outsourcing bookings of $ 16.23 billion . we provide information regarding our new bookings , which include new contracts , including those acquired through acquisitions , as well as renewals , extensions and changes to existing contracts , because we believe doing so provides useful trend information regarding changes in the volume of our new business over time . new bookings can vary significantly quarter to quarter depending in part on the timing of the signing of a small number of large outsourcing contracts . the types of services and solutions clients are demanding and the pace and level of their spending may impact the conversion of new bookings to revenues . for example , outsourcing bookings , which are typically for multi-year contracts , generally convert to revenue over a longer period of time compared to consulting bookings . information regarding our new bookings is not comparable to , nor should it be substituted for , an analysis of our revenues over time . new bookings involve estimates and judgments . there are no third-party standards or requirements governing the calculation of bookings . we do not update our new bookings for material subsequent terminations or reductions related to bookings originally recorded in prior fiscal years . new bookings are recorded using then-existing foreign currency exchange rates and are not subsequently adjusted for foreign currency exchange rate fluctuations . the majority of our contracts are terminable by the client on short notice , and some without notice . accordingly , we do not believe it is appropriate to characterize bookings attributable to these contracts as backlog . normally , if a client terminates a project , the client remains obligated to pay for commitments we have made to third parties in connection with the project , services performed and reimbursable expenses incurred by us through the date of termination . 30 critical accounting policies and estimates the preparation of our consolidated financial statements in conformity with u.s. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses . we continually evaluate our estimates , judgments and assumptions based on available information and experience . because the use of estimates is inherent in the financial reporting process , actual results could differ from those estimates . certain of our accounting policies require higher degrees of judgment than others in their application . these include certain aspects of accounting for revenue recognition and income taxes .
| net revenues reflected modest growth , as significant growth in utilities across all geographic regions was largely offset by declines in chemicals & natural resources in growth markets and north america and energy in europe and growth markets . we have experienced lower or negative revenue growth in chemicals & natural resources and energy , principally due to economic challenges in these industries , and we expect this trend to continue in the near term . geographic regions north america net revenues increased 11 % in local currency , driven by the united states . europe net revenues increased 11 % in local currency , driven by the united kingdom , italy , switzerland , spain , germany and france . growth markets net revenues increased 8 % in local currency , led by japan , as well as china , india , south africa and mexico . operating expenses operating expenses for fiscal 2016 increased $ 1,509 million , or 5 % , over fiscal 2015 , and decreased as a percentage of revenues to 86.2 % from 86.5 % during this period . operating expenses before reimbursable expenses for fiscal 2016 increased $ 1,460 million , or 5 % , over fiscal 2015 , and decreased as a percentage of net revenues to 85.4 % from 85.7 % during this period . cost of services cost of services for fiscal 2016 increased $ 1,415 million , or 6 % , over fiscal 2015 , and increased as a percentage of revenues to 70.5 % from 70.2 % during this period . cost of services before reimbursable expenses for fiscal 2016 increased $ 1,367 million , or 6 % , over fiscal 2015 , and increased as a percentage of net revenues to 68.7 % from 68.4 % during this period . gross margin for fiscal 2016 decreased to 31.3 % from 31.6 % in fiscal 2015. the reduction in gross margin for fiscal 2016 was principally due to higher labor costs and higher costs associated with acquisition activities compared to fiscal 2015 . sales and marketing sales and marketing expense for fiscal 2016 increased $ 75 million , or 2 % , over fiscal 2015 , and decreased as a percentage
| 13,491 |
” 42 on april 10 , 2014 , the partnership completed an acquisition of natural gas compression assets , including a fleet of 337 compressor units , comprising approximately 444,000 horsepower from midcon for $ 352.9 million . the compressor units were previously used by midcon to provide compression services to a subsidiary of access midstream partners l.p. ( “ access ” ) . effective as of the closing of the acquisition , the partnership and access entered into a seven-year contract operations services agreement under which the partnership provides compression services to access which , following its february 2015 merger with williams partners l.p. , was renamed williams partners l.p. ( “ williams partners ” ) . in accordance with the terms of the purchase and sale agreement relating to this acquisition , the partnership directed midcon to sell a tract of real property and the facility located thereon , a fleet of vehicles , personal property and parts inventory to one of our wholly-owned subsidiaries for $ 7.7 million . these assets are used in conjunction with the compression units the partnership acquired from midcon to provide compression services . we refer to the acquisition of these assets by the partnership and our wholly-owned subsidiary as the “ april 2014 midcon acquisition. ” spin-off transaction on november 3 , 2015 ( the “ distribution date ” ) , we completed the spin-off ( the “ spin-off ” ) of our international contract operations , international aftermarket services and global fabrication businesses into a standalone public company operating as exterran corporation . to effect the spin-off , we distributed on the distribution date , on a pro rata basis , all of the shares of exterran corporation common stock to our stockholders as of october 27 , 2015 ( the “ record date ” ) . archrock stockholders received one share of exterran corporation common stock for every two shares of our common stock held at the close of business on the record date . upon the completion of the spin-off , we were renamed “ archrock , inc. ” and , on november 4 , 2015 , the ticker symbol for our common stock on the new york stock exchange was changed to “ aroc. ” following the completion of the spin-off , we and exterran corporation are independent , publicly traded companies with separate public ownership , board of directors and management , and we continue to own and operate the u.s. contract operations and aftermarket services businesses that we previously owned . additionally , we continue to hold our interests in the partnership . effective on november 3 , 2015 , the partnership was renamed “ archrock partners , l.p. , ” and , on november 4 , 2015 , the ticker symbol for its common units on the nasdaq global select market was changed to “ aplp. ” in order to effect the spin-off and govern our relationship with exterran corporation after the spin-off , we entered into several agreements with exterran corporation on november 3 , 2015 : separation and distribution agreement . our separation and distribution agreement with exterran corporation contains the key provisions relating to the separation of our business from exterran corporation 's business . the separation and distribution agreement identifies the assets and rights that were transferred , liabilities that were assumed or retained and contracts and related matters that were assigned to us or exterran corporation in the spin-off and describes how these transfers , assumptions and assignments occurred . in addition , the separation and distribution agreement contains certain noncompetition provisions addressing restrictions for three years after the spin-off on exterran corporation 's ability to provide contract operations and aftermarket services in the united states and on our ability to provide contract operations and aftermarket services outside of the united states and to provide products for sale worldwide that compete with exterran corporation 's product sales business , subject to certain exceptions . additionally , the separation and distribution agreement specifies our right to receive payments from a subsidiary of exterran corporation based on a notional amount corresponding to payments received by exterran corporation 's subsidiaries from pdvsa gas , a subsidiary of petroleos de venezuela , s.a. ( “ pdvsa ” ) , in respect of the sale of exterran corporation 's subsidiaries ' and joint ventures ' previously nationalized assets . tax matters agreement . our tax matters agreement with exterran corporation governs the respective rights , responsibilities and obligations of exterran corporation and us with respect to tax liabilities and benefits , tax attributes , the preparation and filing of tax returns , the control of audits and other tax proceedings and certain other matters regarding taxes . employee matters agreement . our employee matters agreement with exterran corporation governs the allocation of liabilities and responsibilities between us and exterran corporation relating to employee compensation and benefit plans and programs , including the treatment of retirement , health and welfare plans and equity and other incentive plans and awards . 43 transition services agreement . our transition services agreement with exterran corporation sets forth the terms on which exterran corporation will provide to us , and we will provide to exterran corporation , on a temporary basis , certain services or functions that the companies historically have shared , including accounting , administrative , payroll , human resources , environmental health and safety , real estate , fleet , financial audit support , legal , tax , treasury and other support and corporate services . supply agreement . our supply agreement with exterran corporation sets forth the terms under which exterran corporation will provide manufactured equipment , including the design , engineering , manufacturing and sale of natural gas compression equipment , on an exclusive basis to us and the partnership . storage agreement . story_separator_special_tag our storage agreements with exterran corporation set forth the terms under which exterran corporation will provide each of us and the partnership with storage space for equipment purchased under the supply agreement , as well as the terms under which we will provide storage space to exterran corporation for certain of its equipment . services agreements . our services agreements with exterran corporation set forth the terms under which exterran corporation will provide us ( or our customers on our behalf ) with engineering , preservation and installation and commissioning services and we will provide exterran corporation ( or its customers on its behalf ) with make-ready , parts sales , preservation and installation and commissioning services . exterran corporation 's capital structure includes a new $ 925.0 million credit facility , consisting of a $ 680.0 million revolving credit facility and a $ 245.0 million term loan facility ( collectively , the “ exterran corporation credit facility ” ) that became available on november 3 , 2015. exterran corporation transferred the net proceeds from the borrowings under the exterran corporation credit facility to us to allow for our repayment of a portion of our indebtedness prior to the spin-off . our capital structure includes a new $ 350.0 million revolving credit facility that became available on november 3 , 2015. results of operations for exterran corporation have been classified as discontinued operations in all periods presented in this annual report on form 10-k. for additional information , see note 2 ( “ discontinued operations ” ) to our financial statements within part iv , item 15 “ exhibits and financial statement schedules ” in this annual report on form 10-k. trends and outlook our business environment and corresponding operating results are affected by the level of energy industry spending for the exploration , development and production of oil and natural gas reserves in the u.s. spending by oil and natural gas exploration and production companies is dependent upon these companies ' forecasts regarding the expected future supply , demand and pricing of oil and natural gas products as well as their estimates of risk-adjusted costs to find , develop and produce reserves . oil and natural gas prices and the level of drilling and exploration activity can be volatile . for example , oil and natural gas exploration and development activity and the number of well completions typically decline when there is a significant reduction in oil and natural gas prices or significant instability in energy markets . our revenue , earnings and financial position are affected by , among other things , market conditions that impact demand and pricing for natural gas compression , our customers ' decisions between using our services or our competitors ' services , our customers ' decisions regarding whether to own and operate the equipment themselves and the timing and consummation of any acquisition of additional contract operations customer service agreements and equipment from third parties . although we believe our business is typically less impacted by commodity prices than certain other oil and natural gas service providers , changes in oil and natural gas exploration and production spending normally result in changes in demand for our services . natural gas consumption in the u.s. for the twelve months ended november 30 , 2015 increased by approximately 2 % to approximately 27,551 bcf compared to approximately 26,931 bcf for the twelve months ended november 30 , 2014. the u.s. energy information administration ( “ eia ” ) forecasts that total u.s. natural gas consumption will increase by 1.5 % in 2016 compared to 2015. the eia estimates that the u.s. natural gas consumption level will be approximately 30 tcf in 2040 , or 16 % of the projected worldwide total of approximately 185 tcf . natural gas marketed production in the u.s. for the twelve months ended november 30 , 2015 increased by approximately 6 % to 28,849 bcf compared to 27,096 bcf for the twelve months ended november 30 , 2014. the eia forecasts that total u.s. natural gas marketed production will increase by 0.7 % in 2016 compared to 2015. the eia estimates that the u.s. natural gas production level will be approximately 33 tcf in 2040 , or 18 % of the projected worldwide total of approximately 187 tcf . 44 historically , oil and natural gas prices in the u.s. have been volatile . for example , the henry hub spot price for natural gas was $ 2.28 per mmbtu at december 31 , 2015 , which was approximately 8 % and 27 % lower than prices at september 30 , 2015 and december 31 , 2014 , respectively , and the u.s. natural gas liquid composite price was $ 4.72 per mmbtu for the month of november 2015 , which was approximately 3 % and 16 % lower than the price for the months of september 2015 and december 2014 , respectively . these price declines have caused many companies to reduce their natural gas drilling and production activities , particularly in more mature and predominantly dry gas areas and shale plays in the u.s. , where we provide a significant amount of contract operations services , which led to a decline in our contract operations business during 2015. these price declines are expected to lead to a continued decrease in capital investment and in the number of new gas wells being drilled in 2016 by exploration and production companies . in addition , the west texas intermediate crude oil spot price was $ 37.13 per barrel at december 31 , 2015 which was approximately 18 % and 31 % lower than prices at september 30 , 2015 and december 31 , 2014 , respectively , which is expected to lead to a continued decrease in capital investment and in the number of new oil wells being drilled in 2016 by exploration and production companies .
| gross margin , a non-gaap financial measure , is reconciled , in total , to net income ( loss ) , its most directly comparable financial measure calculated and presented in accordance with gaap , in part ii , item 6 selected financial data — non gaap financial measures to this annual report on form 10-k. aftermarket services ( dollars in thousands ) replace_table_token_9_th the decrease in revenue during the year ended december 31 , 2015 compared to the year ended december 31 , 2014 was due to a decrease in service activities . gross margin and gross margin percentage remained relatively flat during the year ended december 31 , 2015 compared to the year ended december 31 , 2014 . 49 costs and expenses ( dollars in thousands ) replace_table_token_10_th sg & a expense during the year ended december 31 , 2015 compared to the year ended december 31 , 2014 remained relatively flat . sg & a as a percentage of revenue was 13 % and 14 % during the years ended december 31 , 2015 and 2014 , respectively . depreciation and amortization expense during the year ended december 31 , 2015 compared to the year ended december 31 , 2014 increased primarily due to an increase in property , plant and equipment and intangible assets additions , including the assets acquired in the august 2014 midcon acquisition and the april 2014 midcon acquisition . during the year ended december 31 , 2015 , we reviewed the future deployment of our idle compression assets used in our contract operations segment for units that were not of the type , configuration , condition , make or model that are cost efficient to maintain and operate . based on this review , we determined that approximately 900 idle compressor units totaling approximately 371,000 horsepower would be retired from the active fleet during the year ended december 31 , 2015 . the retirement of these units from the active fleet triggered a review of these assets for impairment . as a result , we recorded a $ 111.7 million asset impairment to reduce the book value of each unit to its estimated fair value
| 13,492 |
sbs 's selling , general and administrative expenses decreased $ 24.0 million , or 2.6 % for the fiscal year ended september 30 , 2019. this decrease was primarily as a result of the impact of the 2018 restructuring plan , our recently implemented field structure realignment and store labor hour optimization initiatives ( net of labor rate inflation ) , the positive impact from changes in the foreign currency exchange rate of approximately $ 11.3 million and lower advertising expense of $ 6.7 million . this decrease was partially offset by higher facility costs of $ 2.3 million and the impact of the reduction of an estimated casualty loss related to hurricanes of $ 2.4 million during fiscal year 2018 . bsg . bsg 's selling , general and administrative expenses decreased $ 12.8 million , or 3.1 % for the fiscal year ended september 30 , 2019. this decrease was primarily as a result of as a result of the impact of the 2018 restructuring - 28 - plan , lower sales commissions of $ 3 . 5 million , lower advertising expenses of $ 2 . 9 million and a positive impact from changes in foreign currency exchange rate of approximately $ 1 . 4 million . unallocated . unallocated selling , general and administrative expenses increased $ 5.3 million , or 3.7 % , for the fiscal year ended september 30 , 2019. this increase is primarily a result of higher expenses related to our information technology systems and no comparable positive adjustments related to our actuarially determined insurance liabilities in the current year compared to $ 6.9 million in the prior year . these increases were partially offset by no expenses related to the data security incidents compared to $ 7.9 million in the prior year . restructuring for the fiscal year ended september 30 , 2019 , we recognized a $ 8.4 million gain resulting from the sale of our secondary headquarters and fulfillment center in denton , texas , and our marinette , wisconsin , fulfillment center in connection with the supply chain modernization plan , partially offset by charges of $ 7.7 million in connection with our supply chain modernization plan and the 2018 restructuring plan . for the fiscal year ended september 30 , 2018 , we incurred restructuring charges of approximately $ 33.6 million in connection with the 2018 restructuring plan . see note 18 of the notes to consolidated financial statements included in item 8 of this annual report for more information about our restructuring plans . interest expense interest expense decreased as a result of fewer borrowings under the abl facility during the current fiscal year and lower outstanding principal balances on our senior notes and term loan b. this decrease was partially offset by a higher interest rate on our term loan b variable tranche . provision for income taxes for the fiscal year ended september 30 , 2019 and 2018 , our effective tax rate was 25.0 % and 21.4 % , respectively . the increase in the effective tax rate was due primarily to the impact of u.s. tax reform in the prior year , partially offset by a decrease in our federal statutory tax rate this year to 21.0 % compared to 24.5 % in the prior year . see note 14 of the notes to consolidated financial statements included in item 8 of this annual report for more information about the impact of the u.s. tax reform on our consolidated financial statements . the fiscal year ended september 30 , 2018 compared to the fiscal year ended september 30 , 2017 net sales sbs . the decrease in net sales for sbs was primarily driven by a decrease in same store sales of approximately $ 23.7 million and lower net sales from new company-operated stores of approximately $ 17.9 million , partially offset by the positive impact from changes in foreign currency exchange rates of approximately $ 30.1 million . sbs experienced lower unit volume , including lower customer traffic , partially offset by a positive impact from an increase in average unit prices , resulting primarily from select price increases in certain geographical areas of the u.s. and a change in product mix ( to higher-priced products ) resulting from shifts in customer preferences . bsg . the increase in net sales for bsg was driven by the impact of the chalut acquisition , net of the impact of peerless sales in the prior year now included in same store sales , of approximately $ 10.1 million , the positive impact from changes in foreign currency exchange rates of approximately $ 3.0 million and higher net sales from other sales channels of approximately $ 7.2 million , partially offset by decreases in sales by our dscs of approximately $ 11.1 million and same store sales of approximately $ 3.8 million . net sales from other sales channels include sales from new company-operated stores , sales to our franchisees and sales by our dscs . bsg experienced an increase in average unit prices ( resulting primarily from the introduction of certain third-party brands with higher average unit prices in the preceding 12 months ) , partially offset by a decrease in unit volume ( notwithstanding the impact of incremental sales from 28 company-operated stores opened or acquired during the last 12 months ) . in addition , we were impacted by vendor supply chain issues that negatively affected bsg 's net sales by approximately $ 13 million . - 29 - gross profit sbs . sbs 's gross profit decreased as a result of lower sales and a lower gross margin . this decrease reflects a change in geographic sales mix , as a result of lower-margin non-u.s. sales making up a greater portion of total segment sales , and higher coupon redemption , compared to the prior fiscal year . bsg . bsg 's gross profit decreased as a result of a lower gross margin , partially offset by higher sales . story_separator_special_tag bsg 's gross margin decrease was driven by opportunistic purchases that were not repeated from the prior year and lower vendor allowances . selling , general and administrative expenses consolidated . consolidated selling , general and administrative expenses increased primarily as a result of the negative impact from changes in foreign currency exchange rates , the impact from the chalut acquisition , higher expenses related to the data security incidents and higher facility expenses . these increases were partially offset by a reduction of estimated casualty loss and no comparable casualty loss this fiscal year , positive impact from gift card breakage , positive adjustments to actuarially determined insurance liabilities and cost reduction initiatives , related to our restructuring plans . consolidated selling , general and administrative expenses , as a percentage of net sales , increased 50 basis points to 37.7 % for the fiscal year ended september 30 , 2018. sbs . sbs 's selling , general and administrative expenses increased primarily as a result of the negative impact from changes in the foreign currency exchange rate of approximately $ 13.2 million , higher facility expense of $ 5.0 million and higher advertising expense of $ 2.0 million . these increases were partially offset by the impact of the reduction of prior year 's estimated casualty loss , in connection with natural disasters that occurred in the fourth quarter of our fiscal year 2017 , and no comparable casualty losses this fiscal year , in the aggregate , of $ 6.5 million and by positive impact from gift card breakage of $ 2.1 million in the current fiscal year . bsg . bsg 's selling , general and administrative expenses increased primarily as a result of the incremental operating expenses associated with chalut of $ 8.6 million and higher facility expenses of $ 3.3 million . these increases were partially offset by lower commission expense of $ 3.0 million , advertising expense of $ 1.5 million and intangible asset amortization expense of $ 1.3 million , resulting from the impact of intangible assets that became fully amortized in the preceding 12 months . unallocated . unallocated selling , general and administrative expenses increased $ 4.1 million , or 2.9 % , for the fiscal year ended september 30 , 2018. this increase includes expenses related to the previously disclosed data security incidents of $ 7.9 million and higher professional fees of $ 1.7 million . see note 10 of the notes to consolidated financial statements included in item 8 of this annual report for more information about the data security incidents . this increase was partially offset by lower compensation and compensation-related expenses of $ 4.3 million primarily due to the results of the 2018 restructuring plan . in addition , for our actuarially determined insurance liabilities , we recorded net positive adjustments of $ 6.9 million in fiscal year 2018 as a result of a decrease in our estimated future payments , compared to positive adjustments of $ 5.7 million in fiscal year 2017. restructuring charges restructuring charges increased $ 10.9 million for the fiscal year ended september 30 , 2018. during the fiscal year ended september 30 , 2018 , we incurred restructuring charges of approximately $ 33.6 million in connection with the 2018 restructuring plan , including severance and related expenses of approximately $ 15.6 million , consulting expenses of $ 10.9 million and other costs of $ 7.1 million . during the fiscal year ended september 30 , 2017 , we incurred restructuring charges of approximately $ 22.7 million in connection with the 2017 restructuring plan , including severance and related expenses of $ 12.1 million , facility closure expenses of $ 6.7 million and other expenses of $ 3.9 million . see note 18 of the notes to consolidated financial statements included in item 8 of this annual report for more information about our restructuring plans . interest expense interest expense decreased as a result of a loss on extinguishment of debt of $ 28.0 million in the prior fiscal year , compared to $ 0.9 million in the current fiscal year . these losses were the result of our redemption of certain senior notes in july 2017 with the proceeds from the term loan b with lower interest rates in the prior fiscal year and from the repricing of the variable-rate tranche of the term loan b in the current fiscal year . the lower interest rate on the - 30 - term loan b reduced interest expense by $ 8.8 million . the decrease was offset in part by incremental interest expense of $ 1.3 million in connection with borrowings under the abl facility . provision for income taxes the provision for income taxes was $ 70.4 million and $ 130.6 million , resulting in an effective tax rate of 21.4 % and 37.8 % , for the fiscal year ended september 30 , 2018 and 2017 , respectively . the decrease in the effective tax rate was due primarily to the impact of the u.s. tax reform . more specifically , we recognized a provisional income tax benefit of $ 37.7 million in connection with the revaluation of our deferred income tax assets and liabilities , including a benefit related to the adoption of income tax method changes of $ 2.7 million , and a provisional income tax charge of $ 11.7 million for federal and state income taxes applicable to accumulated but undistributed earnings of our foreign operations . see note 14 of the notes to consolidated financial statements included in item 8 of this annual report for more information about the impact of the u.s. tax reform on our consolidated financial statements . liquidity and capital resources we are highly leveraged and a substantial portion of our liquidity needs will arise from debt service on our outstanding indebtedness and from funding the costs of operations , working capital , capital expenditures and opportunistic share repurchases .
| sbs experienced lower unit volume , including lower customer traffic and the impact of fewer company-operated stores , partially offset by a positive impact from increase in average unit prices , resulting from price increases and a promotional efficiency effort ( which reduced promotions that provided ‘ free ' units , such as buy one , get one offers ) . bsg . the decrease in net sales for bsg was driven by the following ( in thousands ) : distributor sales consultants $ ( 12,092 ) foreign currency exchange ( 4,534 ) same store sales 1,722 other ( a ) ( 506 ) total $ ( 15,410 ) ( a ) other consists of stores outside same store sales and sales to our franchisees . bsg experienced a decrease in unit volume , including from the impact of fewer company-operated stores , partially offset by an increase in average unit prices ( resulting primarily from the introduction of certain third-party brands with higher average unit prices in the preceding 12 months ) . gross profit sbs . sbs 's gross profit decreased as a result of lower sales , partially offset by a higher gross margin . the higher gross margin reflects improved gross margins in our u.s. and canadian operations , from price increases and promotional efficiency efforts , partially offset by weaker gross margins in our european
| 13,493 |
the real estate market for residential properties was flat to slightly down compared to the prior beige book , released december 3 , 2014. home sales are expected to remain flat or increase slightly over the next few months . new home construction activity has remained flat . most builders had a positive outlook , expecting new home sales to be flat or show a slight increase . commercial construction activity has improved modestly , with demand for apartment construction showing strong growth . employment levels were mixed . some areas reported slight gains in jobs , while others reported flat employment levels with some scattered layoffs . pricing pressures remained stable in most industries . however , some skilled and professional positions are seeing above-average wage increases and higher starting pay due to competition . the beige book also noted that some companies were having to increase starting pay in order to retain their employees . loan demand across most of the markets that hancock serves has increased slightly since the last beige book report , but competition for quality borrowers remains . consumer lending and business outside the oil and gas industry increased . commercial real estate continued to grow as a result of increased demand for multifamily housing . the outlook for increased growth remained positive but with some concern that lower oil prices may slow growth in texas for 2015. the overall u.s. economy continued to expand , with almost all regions showing modest to moderate growth rates . confidence in the prospect of a higher rate of sustained growth is improving for businesses and consumers alike , although uncertainties remain about such matters as the health of the international economy and the implications of pending or proposed changes in u.s. fiscal and tax policies and regulations . story_separator_special_tag experiencing more significant decreases in prior years . the overall reported yield on earning assets was 4.09 % in 2014 , down 36 bps from 2013. the reported loan portfolio yield was 4.71 % in 2014 compared to 5.45 % in 2013. excluding the impact from purchase accounting accretion , the loan yield decreased 26 bps . the reported tax equivalent yield on the investment securities portfolio increased 17 bps from 2013 , reflecting higher yields in cmos and mortgage-backed securities from a decrease in premium amortization as prepayments decreased . the mix of average earning assets improved in 2014 , as the proportion of loans increased to 75 % of earnings assets compared to 71 % in 2013 with corresponding declines in both investment securities and short-term investments . the decline in these portfolios resulted from a management decision to fund a portion of the company 's loan growth from repayments and maturities of investment securities . the cost of funding earning assets declined to 0.22 % in 2014 , down 3 bps from 2013. the overall rate paid on interest-bearing deposits declined 1 bp from 2013 to 0.24 % in 2014 as the company was able to replace approximately $ 211.6 million of higher cost time deposits and public fund deposits with lower cost interest-bearing transaction and saving deposits . borrowing costs decreased 37 bps from 1.45 % in 2013 to 1.08 % in 2014. this decrease was mainly attributable to a june 2014 early redemption of $ 115 million in fixed rate repurchase obligations bearing an average rate of 3.43 % . the early redemption reduced borrowing costs by approximately $ 1.8 million during the second half of 2014. interest-free funding sources , including noninterest-bearing demand deposits , funded almost 35 % of average earnings assets in 2014 and 34 % in 2013. net interest income ( te ) for 2013 was down $ 31.4 million , or 4 % , from 2012 as interest and fees on loans declined $ 37.6 million . the reported net interest margin declined 28 bps to 4.20 % in 2013. the core margin was 3.39 % in 2013 , down 35 bps from 2012. the core margin was relatively stable during 2013 after decreasing throughout 2012 , mainly from a decline in the core yields on the loan and securities portfolios . 40 the overall reported yield on earning assets in 2013 was down 35 bps from 2012 as the reported loan portfolio yield declined 56 bps . loan growth in commercial loans during 2013 was in very competitively priced segments . the reported yield on the mainly fixed-rate portfolio of investment securities declined 12 bps from 2012 , reflecting lower yields available on the reinvestment of maturities and repayments . the mix of average earning assets improved moderately in 2013 , as the proportion of loans increased to 71.2 % of earnings assets compared to 69.7 % in 2012 with a corresponding decline in short-term investments . the cost of funding earning assets declined to 0.25 % in 2013 , down 7 bps from 2012. the overall rate paid on interest-bearing deposits declined 8 bps from 2012 to 0.25 % in 2013. this decrease was due primarily to the impact of the sustained low rate environment on deposit rates in general and on the re-pricing of time deposits in particular . the mix of funding sources improved during 2013 , as higher-cost time deposits continued to decrease as a percentage of total deposits , and interest-bearing transaction and savings deposits increased . interest-free sources , including noninterest-bearing demand deposits , funded almost 34 % of average earnings assets in 2013 compared to 32 % in 2012. the factors contributing to the changes in net interest income ( te ) for 2014 , 2013 , and 2012 are presented in tables 1 and 2. table 1 shows average balances and related interest and rates and provides a reconciliation of reported and core nim . table 2 details the effects of changes in balances ( volume ) and rates on net interest income in 2014 and 2013 . story_separator_special_tag 41 table 1. summary of average balances , interest and rates ( te ) ( a ) replace_table_token_10_th ( a ) tax equivalent ( te ) amounts are calculated using a marginal federal income tax rate of 35 % . ( b ) includes nonaccrual loans ( c ) average securities do not include unrealized holding gains or losses on available for sale securities . 42 reconciliation of reported net interest margin to core margin replace_table_token_11_th table 2. summary of changes in net interest income ( te ) ( a ) ( b ) replace_table_token_12_th ( a ) tax equivalent ( te ) amounts are calculated using a marginal federal income tax rate of 35 % . ( b ) amounts shown as due to changes in either volume or rate includes an allocation of the amount that reflects the interaction of volume and rate changes . this allocation is based on the absolute dollar amounts of change due solely to changes in volume or rate . ( c ) includes nonaccrual loans . 43 provision for loan losses the provision for loan losses was $ 33.8 million in 2014 compared to a provision of $ 32.7 million in 2013. the provision for non-fdic acquired loans in 2014 was $ 34.8 million , compared to $ 25.3 million in 2013. the provision for the fdic acquired portfolio was a net credit of almost $ 1 million , compared to a provision of $ 7.5 million in 2013. the decrease in the fdic acquired portfolio provision was primarily due to reductions in expected losses . the section on the allowance for loan and lease losses provides additional information on changes in the allowance for loans losses and general credit quality . certain differences in the determination of the allowance for loan losses for originated loans and for acquired performing loans and acquired impaired loans ( which includes all covered loans ) are described in note 1 to the consolidated financial statements . noninterest income noninterest income for 2014 totaled $ 228 million , an $ 18.1 million , or 7 % , decrease from 2013. decreases related to increased amortization of the fdic loss share receivable , reduced fees resulting from the sale of certain insurance business lines in the second quarter , and a decrease in income from secondary mortgage operations were the primary factors in the decline in noninterest income . table 3 presents the components of noninterest income for the prior three years along with the percentage changes between years : table 3. noninterest income replace_table_token_13_th amortization on the fdic loss share receivable increased $ 9.9 million in 2014 from the prior year . the current year 's $ 12.1 million amortization of the fdic loss share receivable reflects a reduction in the amount of expected reimbursements under the loss sharing agreements due to lower loss projections for the related fdic acquired loan pools . accounting for amortization of the loss share receivable is described in note 1 to the consolidated financial statements . management expects a lower level of amortization in future periods as the fdic loss share coverage on the non-single family portfolio expired in december 2014. the loss share agreement covering the single family portfolio expires in december 2019. fees from secondary mortgage operations totaled $ 8.0 million in 2014 , down $ 4.5 million , or 36 % , from a year-earlier . secondary mortgage operations fee income is generated from selling certain types of originated single 44 family mortgage loans into the secondary market , in order to provide mortgage products for our customers while managing interest rate risk and liquidity . these loans are originated by the company through its branch network . the company typically sells its longer-term fixed-rate loans while retaining in the portfolio the majority of its adjustable rate loans as well as loans generated through certain programs to support customer relationships including programs for high net worth individuals and non-builder construction loans . during 2014 , single family loan originations decreased 24 % as refinancing activity was down almost 57 % from 2013 , consistent with national trends . the decline in fee income in 2014 reflects a 36 % reduction in loans sold into the secondary market from the lower level of originations . trust and investment and annuity fees totaled $ 65.1 million in 2014 , a 7.4 million , or 13 % , increase over 2013. trust revenue was positively impacted by strong sales of our hancock horizon mutual funds via national distribution channels and increased new business from our personal trust , institutional trust and retirement services lines of businesses . revenues from these lines increased $ 6.8 million , or 20 % , from 2013. bank card and atm fees totaled $ 45.0 million in 2014 , down less than 2 % compared to 2013. included in bank card and atm fees are fees from credit card , debit card and atm transactions , and merchant service fees . commercial card fees were up $ 2.4 million , or 41 % as a result of various strategic initiatives during 2014 to increase card usage , including specific commercial card enhancements . this increase is offset by a decrease in atm fee income due in part to the closing of approximately 50 branches in 2013 and 2014 as part of the company 's branch rationalization program . during the second quarter of 2014 , the company sold its property and casualty and group benefits insurance intermediary business . the business lines sold contributed approximately 50 % of the company 2013 insurance commissions and fees . as a result of the sale , insurance commissions and fees were down $ 6.3 million , or 40 % compared to 2013. service charges on deposit accounts were down $ 2.0 million , or 3 % from 2013 , primarily due to a decrease in overdraft charges . the company implemented a number of initiatives in 2014 to grow deposit balances and the related service charges as part of its general strategy of growing revenue .
| in addition to expense reductions , management has implemented a number of revenue initiatives that resulted in an increase in net interest income , excluding purchase accounting adjustments , of $ 15.6 million , or 3 % , in 2014 , as compared to 2013. this increase was a direct result of a $ 1.2 billion , or 11 % , increase in average loan balances and a more favorable average earning asset mix . the company has set a longer-term sustainable efficiency ratio target of 57 % - 59 % for 2016 , which management hopes to achieve through continued expense control and increased revenues . reported net interest income ( te ) in 2014 totaled $ 665.4 million , a $ 25.7 million , or 4 % , decrease from 2013 , which is the result of a $ 41.3 million decrease in net purchase accounting accretion . the reported net interest margin decreased 33 basis points ( bps ) to 3.87 % in 2014. the core net interest margin , which is calculated excluding total net purchase accounting adjustments , decreased a modest 6 bps to 3.33 % in 2014. the provision for loan losses was $ 33.8 million in 2014 compared to $ 32.7 million in 2013 , with the provision taken in each year primarily driven by loans not covered under fdic loss-sharing agreements . net charge-offs from the non-fdic acquired portfolio during 2014 were $ 17.1 million , or 0.13 % of average total loans . this compares to the net non-fdic acquired charge-offs of $ 24.3 million , or 0.21 % of average total loans , in 2013. at december 31 , 2014 , the allowance for loan losses was $ 128.8 million , or 0.93 % of period-end loans , down $ 4.9 million from the previous year-end . a $ 17.6 million increase in the allowance for the originated and acquired portfolios was offset by a $ 22.5 million decrease in the impaired reserve on the fdic acquired portfolio as the fdic acquired portfolio had significant reductions in projected losses . the determination of allowances for fdic acquired loans and other acquired-impaired loans is discussed in note 1 to the consolidated financial statements . at december 31 , 2014 , loans in the company 's energy segment totaled approximately $ 1.7 billion , or 12 % of total loans . the energy segment
| 13,494 |
· a $ 1.6 million charge to cost of goods sold in 2014 to correct an error in the value of machine clothing inventories reported in prior periods . · aec 's boerne , texas operation increased gross profit by $ 5.0 million , principally due to operational improvements that resulted in lower cost of goods sold . · a $ 1.9 million reduction in cost associated with the company 's u.s. postretirement plan , principally resulting from plan changes in 2013. these costs are reported as corporate expenses in the table above . selling , technical , general , and research ( stg & r ) the following table summarizes stg & r by business segment : replace_table_token_8_th the decrease in stg & r expenses in 2015 in comparison to 2014 , was principally due to the net effect of the following individually significant items : · changes in currency translation rates reduced mc stg & r costs by $ 13.5 million . · mc revaluation of nonfunctional currency assets and liabilities resulted in gains of $ 5.1 million during 2015 and gains of $ 3.9 million in 2014 . · restructuring activities and reduced travel in mc each resulted in a $ 2.7 million decline in stg & r . the decrease in stg & r expenses in 2014 in comparison to 2013 , was principally due to the net effect of the following individually significant items : · revaluation of nonfunctional currency assets and liabilities , primarily in the mc segment , which resulted in gains of $ 3.9 million during 2014 and losses of $ 0.3 million in 2013 . · currency translation effects , primarily in the mc segment , which decreased stg & r by $ 2.8 million compared to 2013 . · an increase of $ 2.2 million due to research and development activities associated with new technology platforms in the mc segment . · a reduction of approximately $ 1.8 million in 2014 due to reduced travel and lower costs for pensions in the mc segment . · an increase of $ 1.6 million in the aec segment , principally due to increased research activities . 24 · a gain on the sale of a former manufacturing facility in australia , which reduced 2013 corporate expenses by $ 3.8 million , which was mostly offset by reductions in corporate expenses for research , professional fees , health care expenses and incentive compensation in 2014. research and development the following table summarizes expenses associated with internally funded research and development by business segment : replace_table_token_9_th pension plan settlement charges in 2014 , certain participants of the u.s. pension plan were notified of a limited-time opportunity whereby they could elect to receive the value of their pension benefit in a lump-sum payment . all lump-sum payments were funded from pension plan assets and were paid during 2014. the initiative was part of the company 's pension plan de-risking strategy , and resulted in a non-cash settlement charge of $ 8.2 million in 2014. restructuring in addition to the items discussed above affecting gross profit , stg & r , and pension settlement charges , operating income was affected by restructuring costs of $ 23.8 million in 2015 , $ 5.8 million in 2014 , and $ 25.1 million in 2013. the following table summarizes restructuring expense by business segment : replace_table_token_10_th in 2015 , the company announced a plan to discontinue manufacturing operations at its press fabric manufacturing facility in göppingen , germany and manufacturing operations were discontinued during the second quarter . the restructuring program was driven by the company 's need to balance manufacturing capacity with demand . approximately 50 employees were terminated under this plan , and the estimated severance payments were recorded in the first quarter of 2015. we recorded charges of $ 11.4 million related to this restructuring , including $ 3.3 million related to the write down of the land and former manufacturing facility to estimated fair market value . cost savings associated with this action will reduce cost of goods sold in future periods . in the fourth quarter of 2015 , the company implemented an early retirement program for certain employees in the united states . restructuring charges associated with this restructuring program were $ 8.1 million . cost savings from this initiative are expected to be $ 5 million to $ 6 million and will reduce stg & r expenses , most of which will be recognized in 2016 . 25 2015 restructuring charges also includes $ 4.3 million related to the reduction in stg & r employment in machine clothing and corporate . machine clothing restructuring costs in 2014 and 2013 were principally related to restructuring of manufacturing operations in france , where employment was reduced by approximately 200 positions . albany engineered composites restructuring expenses in 2014 and 2013 were principally related to organizational changes and exiting certain aerospace programs . for more information on our restructuring charges , see note 5 to the consolidated financial statements in item 8 , which is incorporated herein by reference . operating income the following table summarizes operating income/ ( loss ) by business segment : replace_table_token_11_th other earnings items replace_table_token_12_th interest expense , net interest expense , net , decreased $ 0.7 million in 2015 and $ 3.0 million in 2014 principally due to lower average interest rates . see the capital resources section for further discussion of borrowings and interest rates . other expense/ ( income ) , net the decrease in other expense/ ( income ) , net included the following individually significant items : · foreign currency revaluations of cash and intercompany balances resulted in losses of $ 1.5 million in 2015 , gains of $ 6.4 million in 2014 , and losses of $ 5.2 million in 2013 . · in july 2013 , the company 's mc manufacturing facility in germany was damaged by severe weather . story_separator_special_tag the insurance recovery gain resulted in income of $ 1.1 million in 2014. income taxes the company has operations which constitute a taxable presence in 18 countries outside of the united states . all of these countries except one had income tax rates that were lower than the united states federal tax 26 rate of 35 % during the periods reported . the jurisdictional location of earnings is a significant component of our effective tax rate each year and therefore on our overall income tax expense . the company 's effective tax rate for fiscal years 2015 , 2014 and 2013 was ( 11.2 % ) , 38.1 % and 43.0 % , respectively . the tax rate is affected by recurring items , such as the income tax rate in the u.s. and in non-u.s. jurisdictions and the mix of income earned in those jurisdictions . the rate is also affected by u.s. tax costs on foreign earnings that have been or will be repatriated to the u.s. , and discrete items that may occur in any given year but are not consistent from year to year . significant items that impacted the 2015 tax rate included the following ( percentages reflect the effect of each item as a percentage of income before income taxes ) : a tax benefit of $ 28.6 million ( -55.5 % ) for a worthless stock deduction related to the company 's investment in its germany subsidiary , where manufacturing operations have ceased . a tax charge of $ 6.4 million ( 12.5 % ) related to the estimated settlement of the german step-up appeal . a tax charge of $ 0.4 million ( 0.8 % ) related to uncertain tax positions . a $ 0.5 million ( -0.9 % ) net tax benefit related to other discrete items . a net effective tax rate reduction of 6.2 % was recognized from income tax rate differences between non-u.s. jurisdictions and the u.s. rate . earnings in brazil , switzerland , mexico and china , where tax rates are lower than the u.s. rate of 35 % , contributed to the majority of the reduction noted . additionally , the net effect of a u.s. tax benefit on foreign earnings that have been or will be repatriated , and foreign withholdings resulted in a reduction of 1.8 % to the effective tax rate . income tax rate on continuing operations , excluding discrete items , was 32 % . significant items that impacted the 2014 tax rate included the following ( percentages reflect the effect of each item as a percentage of income before income taxes ) : tax charge of $ 7.5 million ( 11.1 % ) , primarily related to an unfavorable outcome in the tax court pertaining to another taxpayer with similar facts to the company . a net tax benefit was recognized in the amount of $ 6.8 million ( -10.0 % ) primarily due to the lapse in a tax statute . a $ 0.3 million ( 0.3 % ) net tax expense related to other discrete items . a net tax rate reduction of 10.2 % was recognized from rate differences between non-u.s. and u.s. jurisdictions . earnings in brazil , switzerland , and china , where tax rates are lower than the u.s. notional rate of 35 % , contributed to the majority of the reduction noted . u.s. tax costs on foreign earnings and foreign withholdings offset the tax rate benefits gained from operating in low tax jurisdictions by 8 % . included in the u.s. tax costs on foreign earnings is a $ 2.2 million ( 3.3 % ) expense recognized for the future repatriation of prior year earning income tax rate on continuing operations , excluding discrete items , was 34 % . significant items that impacted the 2013 tax rate included the following : a discrete charge of $ 1.8 million ( 5.7 % ) related to the settlement of a competent authority claim with u.s. and france . a discrete tax benefit of $ 3.7 million ( -12.0 % ) related to the release of a valuation allowance on deferred tax assets . a $ 0.1 million ( 0.6 % ) net tax benefit related to other discrete items . a net tax rate increase of 0.2 % was recognized in 2013 from rate differences between non-u.s. and u.s. jurisdictions . lesser earnings in jurisdictions where tax rates differ substantially from the u.s. tax rate coupled with lower tax benefits on non-u.s. restructuring charges contributed to net tax rate increase . the income tax rate on continuing operations , excluding discrete items , was 49 % . 27 segment results of operations machine clothing segment machine clothing is our primary business segment and accounted for 86 % of our consolidated revenues during 2015. machine clothing products are purchased primarily by manufacturers of paper and paperboard . according to risi , inc. , global production of paper and paperboard is expected to grow at an annual rate of approximately 2 % over the next five years , driven primarily by secular demand increases in asia and south america , with stabilization in the mature markets of europe and north america . shifting demand for paper , across different paper grades as well as across geographical regions , continues to drive the elimination of papermaking capacity in areas with significant established capacity , primarily in the mature markets of europe and north america . at the same time , the newest , most efficient machines are being installed in areas of growing demand , including asia and south america generally , as well as tissue and towel paper grades in all regions . recent technological advances in paper machine clothing , while contributing to the papermaking efficiency of customers , have lengthened the useful life of many of our products and had an adverse impact on overall paper machine clothing demand . the company 's manufacturing and product platforms position us well to meet these shifting demands across product grades and geographic regions .
| our current plans do not anticipate that we will need funds generated from foreign operations to fund our domestic operations or satisfy debt obligations in the united states . in the event that such funds were to be needed to fund operations in the u.s. , and if associated accruals for u.s. tax have not already been provided , we would be required to accrue and pay additional u.s. taxes to repatriate these funds . investing activities total capital expenditures for continuing operations , including purchased software , were $ 50.6 million in 2015 , compared to $ 58.9 million in 2014 , and $ 64.4 million in 2013. in the aec segment , capital expenditures were $ 30.4 million in 2015 , compared to $ 32.1 million in 2014 , and $ 36.9 million in 2013. we currently estimate 32 full-year spending in 2016 to be $ 75 million to $ 85 million , and an average of $ 70 million for the balance of the decade . during 2013 , the company completed the sale of its production facility in gosford , australia , resulting in net proceeds of $ 6.3 million . financing activities effective october 31 , 2013 , safran s.a. ( safran ) acquired a 10 percent equity interest in our subsidiary , albany safran composites , llc ( asc ) . under the terms of the transaction agreements , asc is the exclusive supplier to safran of advanced 3d-woven composite parts for use in aircraft and rocket engines , thrust reversers and nacelles , and aircraft landing and braking systems ( the “ safran applications ” ) . aec remains free to develop and supply parts other than advanced 3d-woven composite parts for all aerospace applications , as well as advanced 3d-woven composite parts for any aerospace applications that are not safran applications ( such as airframe applications ) and any non-aerospace applications . aec contributed to asc its existing assets and operations currently dedicated to the development and production of leap components , and safran contributed $ 28 million in cash . dividends have been declared each quarter since the fourth
| 13,495 |
none of our customers accounted for more than 10 % of our total revenue in fiscal years 2011 or 2009. in fiscal year 2010 , one customer accounted for 11 % of our total revenue . approximately 35 % , 38 % , and 36 % of our total revenue in fiscal years 2011 , 2010 and 2009 , respectively , was derived from the sale of hp products and services . the market for it products and services is generally characterized by declining unit prices and short product life cycles . our overall business is also highly competitive on the basis of price . we set our sales price based on the market supply and demand characteristics for each particular product or bundle of products we distribute and services we provide . from time to time , we also participate in the incentive and rebate programs of our oem suppliers . these programs are important determinants of the final sales price we charge to our reseller customers . to mitigate the risk of declining prices and obsolescence of our distribution inventory , our oem suppliers generally offer us limited price protection and return rights for products that are marked down or discontinued by them . we carefully manage our inventory to maximize the benefit to us of these supplier provided protections . in our distribution segment , we are highly dependent on the end-market demand for it and ce products and services . this end-market demand is influenced by many factors including the introduction of new it and ce products and software by oems , replacement cycles for existing it and ce products , overall economic growth and general business activity . a difficult and challenging economic environment may also lead to consolidation or decline in the it and ce industries and increased price-based competition . a significant portion of our cost of revenue is the purchase price we pay our oem suppliers for the products we sell , net of any rebates and purchase discounts received from our oem suppliers . cost of product distribution revenue also consists of provisions for inventory losses and write-downs , freight expenses associated with the receipt in and shipment out of our inventory , and royalties due to oem vendors . in addition , cost of revenue includes the cost of materials , labor and overhead for our contract assembly and gbs services . margins the distribution and contract assembly services industries in which we operate are characterized by low gross profit as a percentage of revenue , or gross margin , and low income from operations as a percentage of revenue , or operating margin . our gross margin has fluctuated annually due to changes in the mix of products and services we offer , customers we sell to , incentives and rebates received from our oem suppliers , competition , seasonality and replacement of less profitable business with investments in higher margin , more profitable lines and lower costs associated with increased efficiencies . increased competition arising from industry consolidation and low demand for it products may hinder our ability to maintain or improve our gross margin . generally , when our revenue becomes more concentrated on limited products or customers , our gross margin tends to decrease due to increased pricing pressure from oem suppliers or reseller customers . our operating margin from continuing operations has also fluctuated annually , based primarily on our ability to achieve economies of scale , the management of our operating expenses , changes in the relative mix of our distribution , contract assembly and bpo revenue , and the timing of our acquisitions and investments . in addition , beginning in the first fiscal quarter of 2010 , we recognized revenue on certain service contracts , post-contract software support services , and extended warranty contracts , where we are not a primary obligor , on a net basis , which favorably impacted our gross and operating margins . 24 economic and industry trends our revenue is highly dependent on the end-market demand for it and ce products . this end-market demand is influenced by many factors including the introduction of new it and ce products and software by oems , replacement cycles for existing it and ce products and overall economic growth and general business activity . a difficult and challenging economic environment may also lead to consolidation or decline in the it and ce distribution industry and increased price-based competition . the gbs industry is also extremely competitive . the customers ' performance measures are based on competitive pricing terms and quality of services . accordingly , we could be subject to pricing pressure and may experience a decline in our average selling prices for our services . in fiscal year 2009 , the distribution market place experienced an economic recession which caused overall channel volumes to decline . during fiscal year 2010 the economic environment was slow in recovering from the recession and the economy was stable and grew modestly during fiscal year 2011. while we are susceptible to economic trends in the global economy , our distribution business is largely concentrated in the united states , canada and japan , so we will be most directly impacted by economic strength or weakness in these geographies . seasonality our operating results are affected by the seasonality of the it and ce products industries . we have historically experienced higher sales in our fourth fiscal quarter due to patterns in the capital budgeting , federal government spending and purchasing cycles of our customers and end-users . these patterns may not be repeated in subsequent periods . deferred compensation plan we have a deferred compensation plan for a limited number of our directors and employees . we maintain a liability on our balance sheet for salary and bonus amounts deferred by participants and we accrue interest expense on uninvested amounts . interest expense on the deferred amounts is classified in selling , general and administrative expenses on our consolidated statements of operations . story_separator_special_tag the participant may designate one or more investments as the measure of investment return on the participant 's account . the equity securities are either classified as trading securities or cost-method securities . generally , the gains ( losses ) on the deferred compensation securities are recorded in other income ( expense ) , net and an equal amount is charged ( or credited if losses ) to selling , general and administrative expenses relating to compensation amounts which are payable to the plan participants . for the deferred compensation investments , we recorded a loss of $ 1.1 million in fiscal year 2011 and a gain of $ 0.2 million and $ 2.7 million , in fiscal years 2010 and 2009 , respectively . critical accounting policies and estimates the discussions and analyses of our consolidated financial condition and results of operations are based on our consolidated financial statements , which have been prepared in conformity with generally accepted accounting principles in the united states . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of any contingent assets and liabilities at the financial statement date , and reported amounts of revenue and expenses during the reporting period . on an ongoing basis , we review and evaluate our estimates and assumptions , including those that relate to accounts receivable , vendor programs , inventories , goodwill and intangible assets , and income taxes . our estimates are based on our historical experience and a variety of other assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making our judgment about the carrying values of assets and liabilities that are not readily available from other sources . actual results could differ from these estimates under different assumptions or conditions . we believe the following critical accounting policies are affected by our judgment , estimates and or assumptions used in the preparation of our consolidated financial statements . revenue recognition . we generally recognize revenue on the sale of hardware and software products when they are shipped and on services when they are performed , if a purchase order exists , the sales price is fixed or determinable , collection of resulting accounts receivable is reasonably assured , risk of loss and title have transferred and product returns are reasonably estimable . provisions for sales returns are estimated based on historical data and are recorded concurrently with the recognition of revenue . these provisions are reviewed and adjusted periodically by us . revenue is reduced for early payment discounts and volume incentive rebates offered to customers . we recognize revenue on certain service contracts , post-contract software support services , and extended warranty contracts , where we are not the primary obligor , on a net basis . we provide services such as call center , renewals , maintenance and contract management services to our customers under contracts that typically consist of a master services agreement or statement of work , which contains the terms and conditions of each program and service offerings . typically the contracts are time-based or transactions or volume based . revenue is generally recognized over the term of the contract or when service has been rendered , the sales price is fixed or determinable and collection of the resulting accounts receivable is reasonably assured . 25 effective in the first quarter of fiscal year 2010 , we began recognizing revenue on certain service contracts , post-contract software support services , and extended warranty contracts , where we are not the primary obligor , on a net basis . approximately 4 % of revenue was recorded on a net basis for fiscal years 2011 and 2010. our mexico operation primarily focuses on projects with the mexican government and other public agencies that are long-term in nature . under the agreements , we sell computers and equipment to contractors that provide services to the mexican government . we also sell computers , equipment and services directly to the mexican government . the payments are due on a monthly basis and contingent upon the satisfactory performance of certain services , fulfillment of certain obligations and meeting certain conditions . we recognize revenue and cost of revenue on a straight-line basis over the term of the contract , which coincides with payments no longer being contingent . allowance for doubtful accounts . we provide allowances for doubtful accounts on our accounts receivable for estimated losses resulting from the inability of our customers to make payments for outstanding balances . in estimating the required allowance , we take into consideration the overall quality and aging of the accounts receivable , credit evaluations of customers ' financial condition and existence of credit insurance . we also evaluate the collectability of accounts receivable based on specific customer circumstances , current economic trends , historical experience with collections and value and adequacy of collateral received from customers . oem supplier programs . we receive funds from oem suppliers for inventory price protection , product rebates , marketing and infrastructure reimbursement , and promotion programs . product rebates are recorded as a reduction of cost of revenue . marketing , infrastructure and promotion programs are recorded , net of direct costs , in selling , general and administrative expenses . any excess funds associated with these programs are recorded in cost of revenue . we accrue rebates based on the terms of the program and sales of qualifying products . some of these programs may extend over one or more quarterly reporting periods . amounts received or receivable from oem suppliers that are not yet earned are deferred on our balance sheet . actual rebates may vary based on volume or other sales achievement levels , which could result in an increase or reduction in the estimated amounts previously accrued . in addition , oem suppliers may seek to change the terms of some or all of these programs or cease them altogether .
| during fiscal year 2011 , our revenue in the distribution segment increased compared to the prior year period due to our acquisition of infotec japan , stability in the market conditions in the united states and the full year impact of our acquisition of jack of all games , which was completed at the end of our first fiscal quarter of 2010. this increase was offset by the sale of a portion of our contract assembly business in fiscal year 2010 and by transitioning of certain customer contracts from the traditional full service distribution relationship that had existed , to a fee-for-service basis starting in the fourth quarter of fiscal year 2011. during fiscal year 2011 , revenue from infotec japan was approximately $ 1.22 billion , or 12 % of our distribution revenue . compared to the prior year period , our sales in north america from peripherals increased 8 % , sales of it systems increased 8 % , sales of system components increased 10 % , sales of networking systems increased 19 % and sales of software increased 13 % . our revenue in the distribution segment in the fiscal year 2010 increased year over year because of the improvement in overall market conditions in both the united states and canada following the economic recession in fiscal year 2009 which had 29 impacted our channel sales volumes . our sales also benefited from our acquisition of jack of all games , new vendors and sales initiatives . by product line , in comparison to fiscal year 2009 , our networking product sales increased 37 % , system component sales increased 24 % , systems sales increased 19 % and peripheral sales increased 12 % . our revenue from software sales benefited from the sales of gaming products , but decreased by 9 % as compared to the prior year period because of the presentation of revenue generated from certain service contracts , post-contract software support services , and extended warranty contracts on a net basis beginning in fiscal first quarter of 2010. see note 2—revenue recognition . revenue also benefited from the foreign exchange translation of our canadian operations as compared to the prior year . in our gbs segment , approximately 75 % of the increase in revenue in the current year as compared to the prior year , is revenue generated from our fiscal year 2011 acquisitions and the full year impact of our fiscal year 2010 fourth quarter acquisitions , offset in part by the fiscal year 2010 sale of nds , which generated $ 11.9 million in revenue in fiscal year 2010. in addition , our revenue benefited from organic growth from expansion of our customer base and service offerings . in
| 13,496 |
the company established a company , coda octopus products a/s , in denmark to maintain a presence in the european union and to address some of the foreseeable issues . even with the trade deal in place , this subsidiary is still considered important for the company . 20 b. currency risks : the company 's operations are split between the united states , united kingdom , denmark and australia . a large proportion of our revenues ( approximately 47 % ) and costs are incurred outside of the usa with a significant part ( 46 % of our total revenues ) of that in the united kingdom ( “ uk ” ) . in addition , a significant part of our assets ( both current and fixed ) is held in british pounds by our foreign subsidiaries . significant currency fluctuations ( particularly the british pound versus the us dollar ) may affect our financial results and the value of our assets . with the conclusion of the trade agreement between the uk and eu , we anticipate that unlike the last 4 years which saw increased volatility between the british pound and other major currencies , including the us dollar , it will be more stable . c. impact of coronavirus outbreak ( referred to in this form 10-k as “ coronavirus ” , ( “ pandemic ” ) or ( “ covid-19 ” ) general impact the global outbreak of the coronavirus has resulted in governments throughout the world , implementing measures restricting the freedom of movement of people and curtailment of business activities including business closure to curb the spread of the coronavirus . our business started to be impacted in february 2020 when several significant industry events such as trade shows important for the promotion and marketing of our products were cancelled . in addition , several navy projects which had been scheduled for implementation were indefinitely postponed in february 2020. during march 2020 , governments introduced “ global restrictions of movement ” that impacted our ability to conduct much of our income generating business activities . our financial performance was materially impacted in the second quarter of 2020. in the third quarter we saw improvement in market conditions . however , in the fourth quarter with the resurgence of the so-called “ second wave ” , our operations were once again hampered with various degrees of closure of the business or reduction in activities to comply with government regulations or to perform company-wide covid-19 tests , all of which resulted in substantial fall in business productivity , the decline of revenues in the fourth quarter of our fiscal year along with increased costs of operation associated with our pandemic response . the pandemic has affected the industry in which our businesses operate in and has resulted in reduced demand for our goods and services in the 2020 fy resulting in a material fall in our revenues with total operating expenses remaining at the same level thus resulting in a fall in our net earnings in the 2020 fy . in january 2021 , the uk government imposed the highest level of restrictions limiting business operations . our uk business is therefore affected and will largely remain closed for the months of january and february 2021. since we are a manufacturing company , it is increasingly difficult and not financially viable to institute remote working . impact on revenues and earnings until the business environment normalizes , we are uncertain as to the extent of the impact the coronavirus outbreak will have on our future financial results . in the 2020 fy we have experienced three full quarters of the coronavirus impact and our financial results have been negatively impacted as we are seeing less demand for our goods and services and at the same time increased costs associated with managing the pandemic response in the company . furthermore , the ability to continue to implement projects successfully is impacted by rules requiring staff to quarantine ( which can be for many weeks ) . this is further compounded by the size of our business , where often , key functions are concentrated in a small team of staff members who may all be affected by this issue at the same time . on the products business side , a significant part of our revenues is generated from field customer support work ( training , assistance in mobilization of equipment or operating the equipment on behalf of our customers ) . coronavirus has caused many of these field projects to be postponed indefinitely – which in turn negatively affects our revenues and financial results . this is evident in our rental income which is down by 51.5 % in the 2020 fy over the 2019 fy . we believe that travel will not be normalized for much of 2021 and therefore we believe that we will continue to be impacted by the pandemic ( even with the vaccination program now being implemented ) . 21 on the services business side , travel is also an important element as many of its engineering projects require customers to attend its premises to conduct critical design reviews ( “ cdrs ” ) . the coronavirus outbreak has resulted in travel restrictions due to customers ' policy or quarantine requirements . this in turn has resulted in the delay in many engineering projects , thus negatively impacting our revenues and financial results . this business is also affected by the same business interruptions caused by requirements for staff members to self-isolate and this may be an entire team , affecting our ability to operate the business and perform customer projects . it has also dampened demand for our services as many purchasing decisions have been deferred due to many government employees ' working from home making it difficult to take these decisions in accordance with their practices . story_separator_special_tag government policies on coronavirus our operations are based in a number of countries , with each country establishing different rules related to coronavirus including rules on restricting business operations , limiting staff travel work and quarantining rules . this has generally resulted in a much less predictable working environment for planning and delivering customer projects and project cost management . several implications flow from this including : ● impairment of the business ' productivity ● project over runs ● increased operation costs resulting from our pandemic response ● increase project costs due to the delay caused by self-isolation rules or business closure or restriction on travel to work ● higher staff costs due to increased sick pay allowance which varies according to the country where the business operations are located , combined with lower overall productivity . impact on liquidity , balance sheet and assets failure to curb the coronavirus pandemic in the near future , coupled with a downturn in the global economic outlook , may adversely impact on our availability of our free cashflow , working capital and business prospects . as of october 31 , 2020 , we had cash and cash equivalents of approximately $ 15.1 million and for the year then ended we generated approximately $ 4.4 m of cash from operations . based on our outstanding obligations including loans and notes payable , their terms and our cash balances we believe we have sufficient working capital to effectively continue our business operations for the foreseeable future . products business outlook in the 2020 fy the products business revenues fell by 12.6 % compared to the previous 2019 fy . this was largely due to the business interruption caused by the coronavirus outbreak and the restrictive measures put in place by various governments to contain the virus . the coronavirus outbreak started to impact our business at the beginning of the second quarter of the current fiscal year ( february 2020 ) . the outbreak has limited the number of offshore projects which are undertaken by our customers . this has resulted in a significant fall in the category of revenues relating to project work ( rentals ) which fell in the 2020 fy by 49.4 % and was $ 1,361,151 compared to $ 2,688,570 in the 2019 fy . in addition , we have seen a reduced demand for our products and services , which are attributed to the pandemic , its impact on spending by our customers and also change in policy of the united kingdom and usa government concerning exporting of our products to china . in the current fiscal year , we have had the equivalent of $ 1,300,000 of orders intended for china refused by the uk government . this is material for our business . the products business operations are global and much of our income generating activities require us to attend customer sites , often on an offshore vessel . offshore activities now require more planning to ensure personnel entering the offshore facility are virus-free . the new norm requires personnel to be quarantined for a 14-day period in the country where the job site is located , prior to entering the vessel . this limits available resources for customer projects ( as project implementation time is likely to increase by the 14 days arrival quarantine and the additional 14 days upon return to home country ) . it also increases the costs of executing these projects . a significant part of the products business human capital and resources are based in the uk . the uk government has introduced a tiered system to manage the coronavirus outbreak in various regions of the uk . in january 2021 , the scottish government moved to the highest levels of restrictions which introduced a national lockdown for the period of january . this restricts our ability to operate the business and we anticipate that this will adversely affect our revenues . 22 a substantial part of our revenues is generated by our uk operations . with the uk leaving the european union , we believe that we will realize less sales from the eu member states countries . we rely on specialist software development skills . there is an acute shortage of these skills which has resulted in reduced resourcing of these skills in our business and at the same time significantly increased costs associated with securing these skills . this could impact our ability to service and develop our products and or serve to increase our overall costs , and therefore impact on our financial results . we rely on sophisticated electronics for our products and we anticipate delay in the supply chain and increase in price . this may affect , among other things , our gross margins and ability to fulfill customer orders in a timely manner along with a resulting decline in revenues . services business outlook in the 2020 fy the services segment revenues fell by 27.8 % compared to fy 2019. this is due to the impact of the coronavirus outbreak which has resulted in reduce demand for our services . in addition , our engineering projects require customers to attend our sites for critical design reviews ( “ cdrs ” ) . due to the policy of many organizations to limit travel to “ essential travel only ” , many cdrs are postponed and this negatively impacts on the advancement of the engineering projects which will impact revenues . the services business is likely to continue to be impacted until the curtailments caused by the coronavirus are removed . the services business is also impacted by the change in the us administration . this will result in a delay in approving the budget and making the appropriations . in addition , there may be changes in the government 's defense spending priorities which could affect the programs that use our products . this could be further compounded where the new administration in the senate is operating on a slim majority – which may result in further delays in the finalization of the federal defense budget .
| in the 2020 fy our companies established in the usa received $ 648,871 as contribution to us employees ' salary during the pandemic under the us government payroll protection program ( “ ppp ” ) . this amount has now been forgiven under the program and is recorded in our accounts as “ other income ” . in the fiscal year 2020 , r & d expenditures increased by 13.8 % and sg & a expenditures were down 8.6 % . we believe that we have realized a large part of our goals for the immediate development of our real time volumetric sonar technology and other products . as such , it is our expectation that the marine technology business will start reducing its r & d expenditures and now focus on its growth strategy thus redirecting resources to marketing and business development . diver augmented visualization display ( “ davd ” ) progress in 2018 , pursuant to the terms of a cooperative research and development agreement ( “ crada ” ) we collaborated in the development of the first-generation prototype heads up display ( hud ) unit for naval sea systems command ( navsea ) in conjunction with naval surface warfare center , panama division . the first-generation prototype davd was signed off under the crada at the end of the calendar year in 2019. this product was approved for sale to the market , including the us navy and is on the us approved navy use ( anu ) list along with certain models of our real time 3d sonar series . we also received an exclusive-license to use the face-plate invention and sell this to the commercial market . we have now started to sell gen 1 davd systems and , also in 2020 we continued the funded development of gen 2. despite the business interruption caused by the pandemic , we were able to make significant progress in developing the second generation of the davd . we have also started to sell davd systems to navsea . davd units sold in 2020 fy approximately $ 560,000 davd r & d funding for gen 2 davd for 2020fy recognized as revenues approximately $ 1,000,000 a key pillar of our strategy is to increase
| 13,497 |
these unfavorable changes were primarily the result of the significantly more expensive third-party capacity during the latter portion of the year , affecting our managed freight and truckload segments , as well as increased employee wages and increased capital costs compared to 2016. our consolidated financial results are summarized as follows : ● total revenue was $ 705.0 million , compared with $ 670.7 million for 2016 , and freight revenue ( which excludes revenue from fuel surcharges ) was $ 626.8 million , compared with $ 610.8 million for 2016 ; ● operating income was $ 28.1 million , compared with operating income of $ 32.4 million for 2016 ; ● net income was $ 55.4 million , or $ 3.02 per diluted share , compared with net income of $ 16.8 million , or $ 0.92 per diluted share , for 2016 ; ● our equity investment in tel provided $ 3.4 million of pre-tax earnings in 2017 , compared to $ 3.0 million for 2016 ; and ● stockholders ' equity and tangible book value at december 31 , 2017 , were $ 295.2 million , or $ 16.11 per basic share . in addition to operating ratio , we use `` adjusted operating ratio '' as a key measure of profitability . adjusted operating ratio means operating expenses , net of fuel surcharge revenue , expressed as a percentage of revenue , excluding fuel surcharge revenue . adjusted operating ratio is not a substitute for operating ratio measured in accordance with gaap . there are limitations to using non-gaap financial measures . we believe the use of adjusted operating ratio allows us to more effectively compare periods , while excluding the potentially volatile effect of changes in fuel prices . our board and management focus on our adjusted operating ratio as an indicator of our performance from period to period . we believe our presentation of adjusted operating ratio is useful because it provides investors and securities analysts the same information that we use internally to assess our core operating performance . although we believe that adjusted operating ratio improves comparability in analyzing our period-to-period performance , it could limit comparability to other companies in our industry , if those companies define adjusted operating ratio differently . because of these limitations , adjusted operating ratio should not be considered a measure of income generated by our business or discretionary cash available to us to invest in the growth of our business . management compensates for these limitations by primarily relying on gaap results and using non-gaap financial measures on a supplemental basis . operating ratio replace_table_token_6_th 39 outlook for 2018 , we are forecasting sequential operating income improvement throughout the year . we believe the combination of an improving economy , tightening truckload supply dynamics , industry regulatory changes including the eld mandate and its enforcement , depleting inventories , year-over-year net fuel expense savings from our improved fuel hedge positions , and further operational progress at srt should deliver increased pre-tax earnings for the full year of 2018. in addition , we expect earnings improvement from the estimated favorable effective tax rate impact of the tax cuts and jobs act of 2017. we are currently estimating our 2018 effective income tax rate to be in the range of 24.0 % to 27.0 % . we expect year-over-year average freight revenue per truck to be positive by a mid-to-high single digit percentage , inflecting more positively later in the year as a large portion of annual contractual rate revisions are implemented during the second quarter of 2018. our expectation of positive year-over-year pretax income includes higher employee wages for each quarter of 2018 versus comparable 2017 quarters . we also expect a decline in the operating income of our non-asset based logistics service offering to partially offset the forecasted operating income improvement for our truckload service offering . within the non-asset based logistics service offering , we expect some margin deterioration resulting from higher purchased transportation expense , coupled with planned investments in strategic employees and a new transport management system designed to enhance our supply chain services and growth potential . from a balance sheet perspective , with net capital expenditures scheduled to be below normal due to the timing of our expected replacement cycle , along with anticipated positive operating cash flows , we expect to further reduce combined balance sheet and off-balance sheet debt over the course of fiscal 2018. story_separator_special_tag expect driver pay to increase as we look to reduce the number of unseated tractors in our fleet in a tight market for drivers . additionally , when the freight market allows for an increase in rates we would expect to , as we have historically , pass a portion of those rate increases on to our professional drivers . salaries , wages , and related expenses will fluctuate to some extent based on the percentage of revenue generated by owner operators and our managed freight segment , for which payments are reflected in the purchased transportation line item . 41 fuel expense replace_table_token_9_th we receive a fuel surcharge on our loaded miles from most shippers ; however , this does not cover the entire increase in fuel prices for several reasons , including the following : surcharges cover only loaded miles we operate ; surcharges do not cover miles driven out-of-route by our drivers ; and surcharges typically do not cover refrigeration unit fuel usage or fuel burned by tractors while idling . moreover , most of our business relating to shipments obtained from freight brokers does not carry a fuel surcharge . finally , fuel surcharges vary in the percentage of reimbursement offered , and not all surcharges fully compensate for fuel price increases even on loaded miles . the rate of fuel price changes also can have an impact on results . most fuel surcharges are based on the average fuel price as published by the doe for the week prior to the shipment , meaning we typically bill customers in the current week based on the previous week 's applicable index . story_separator_special_tag therefore , in times of increasing fuel prices , we do not recover as much as we are currently paying for fuel . in periods of declining prices , the opposite is true . fuel prices as measured by the doe averaged approximately $ 0.35 cents per gallon higher in 2017 than 2016 and $ 0.40 cents per gallon lower in 2016 than 2015. additionally , $ 4.1 million , $ 16.7 million , and $ 15.3 million were reclassified from accumulated other comprehensive income ( loss ) to our results from operations for the years ended december 31 , 2017 , 2016 , and 2015 , respectively , as additional fuel expense for 2017 , 2016 and 2015 , related to losses on fuel hedge contracts that expired . we previously evaluated these contracts for `` hedge effectiveness , '' which is the extent to which the hedge contract effectively offsets changes in cash flows that the contract was intended to offset . at december 31 , 2017 , all fuel hedge contracts were deemed to be effective and thus continue to qualify as cash flow hedges . as a result of our early adoption of asu 2017-12 , we are no longer required to measure or record hedge ineffectiveness . to measure the effectiveness of our fuel surcharge program , we subtract fuel surcharge revenue ( other than the fuel surcharge revenue we reimburse to owner operators and other third parties , which is included in purchased transportation ) from our fuel expense . the result is referred to as net fuel expense . our net fuel expense as a percentage of freight revenue is affected by the cost of diesel fuel net of fuel surcharge collection , the percentage of miles driven by company tractors , our fuel economy , and our percentage of deadhead miles , for which we do not receive material fuel surcharge revenues . net fuel expense is shown below : replace_table_token_10_th total fuel expense remained flat for the year ended december 31 , 2017 , compared with 2016. as a percentage of total revenue , total fuel expense decreased to 14.6 % for the year ended december 31 , 2017 , from 15.4 % in 2016. as a percentage of freight revenue , total fuel expense decreased to 16.5 % of freight revenue for the year ended december 31 , 2017 , from 16.9 % in 2016. these increases primarily related to higher fuel prices in 2017 , offset by net losses from fuel hedging transactions of $ 4.1 million in 2017 compared to $ 16.7 million in 2016. net fuel expense decreased $ 16.6 million , or 33.5 % , for the year ended december 31 , 2017 compared to 2016. as a percentage of freight revenue , net fuel expense decreased 2.9 % for the year ended december 31 , 2017 compared to 2016. these decreases primarily resulted from higher fuel surcharge recovery as a result of decreased broker freight and the tiered reimbursement structure of certain fuel surcharge agreements . the decreases were partially offset by a greater percentage of miles driven by owner operators , where we pay a rate that reflects then-existing fuel prices and we do not have the natural hedge created by fuel surcharge . 42 for the year ended december 31 , 2016 , total fuel expense decreased approximately $ 19.1 million , or 15.6 % , compared with 2015. as a percentage of total revenue , total fuel expense decreased to 15.4 % of total revenue for the year ended december 31 , 2016 , from 16.9 % in 2015. as a percentage of freight revenue , total fuel expense decreased to 16.9 % of freight revenue for the year ended december 31 , 2016 , from 19.1 % in 2015. these decreases primarily related to lower fuel prices and an increase in our average fuel miles per gallon during 2016 as a result of purchasing equipment with more fuel-efficient engines . the decreases were partially offset by increased net losses from fuel hedging transactions of $ 16.7 million in 2016 compared to $ 13.9 million in 2015. net fuel expense increased $ 3.7 million , or 8.1 % , for the year ended december 31 , 2016 compared to 2015. as a percentage of freight revenue , net fuel expense increased 0.9 % for the year ended december 31 , 2016 compared to 2015. these increases primarily resulted from lower fuel surcharge recovery as a result of increased broker freight and the tiered reimbursement structure of certain fuel surcharge agreements . the increases were partially offset by improved miles per gallon due to new engine technology , internal fuel efficiency initiatives , and a greater percentage of miles driven by owner operators , where we pay a rate that reflects then-existing fuel prices and we do not have the natural hedge created by fuel surcharge . we expect to continue managing our idle time and tractor speeds , investing in more fuel-efficient tractors to improve our miles per gallon , locking in fuel hedges when deemed appropriate , and partnering with customers to adjust fuel surcharge programs that are inadequate to recover a fair portion of fuel costs . going forward , our net fuel expense is expected to fluctuate as a percentage of revenue based on factors such as diesel fuel prices , percentage recovered from fuel surcharge programs , percentage of uncompensated miles , percentage of revenue generated by team-driven tractors ( which tend to generate higher miles and lower revenue per mile , thus proportionately more fuel cost as a percentage of revenue ) , percentage of revenue generated by refrigerated operation ( which uses diesel fuel for refrigeration , but usually does not recover fuel surcharges on refrigeration fuel ) , percentage of revenue generated from owner operators , the success of fuel efficiency initiatives , and gains and losses on fuel hedging contracts . given recent historical lows , we would expect diesel fuel prices to increase over the next few years .
| for 2016 , total revenue decreased $ 53.6 million , or 7.4 % , to $ 670.7 million from $ 724.2 million in 2015. freight revenue decreased $ 29.3 million , or 4.6 % , to $ 610.8 million for 2016 , from $ 640.1 million in 2015 , while fuel surcharge revenue decreased $ 24.3 million year-over-year . the decrease in freight revenue resulted from a $ 30.4 million decrease in freight revenue from our truckload segment , partially offset by a $ 1.1 million increase in revenues from managed freight . the decrease in 2016 truckload revenue relates to a decrease in average freight revenue per tractor per week of 2.2 % compared to 2015 and a decrease in our average tractor fleet of 3.9 % from 2015 , partially offset by a $ 1.7 million increase in freight revenue contributed by our temperature-controlled intermodal service offering . the decrease in average freight revenue per tractor per week is the result of a 1.3 % decrease , or 2.2 cents per mile , in average rate per total mile and a 0.6 % decrease in average miles per unit when compared to 2015. team driven units increased approximately 5.3 % to an average of approximately 1,000 teams in 2016 from approximately 950 teams in 2015 . 40 the increase in managed freight revenue is primarily the result of improved coordination with our truckload segment , additional business from new customers added during the year , and the full year effect of a large customer added in 2015. if capacity tightens as a result of regulations impacting the industry or economic growth , we expect the pricing environment to improve into 2018 and 2019 , offset in part by higher driver pay and other inflationary costs . further , in the fourth quarter of 2017 , we exited the temperature-controlled intermodal business , which provided $ 11.0 million of total revenue in 2017 , in order to focus on our objective to continue improvements at srt , which could result in more muted revenue growth at srt . for comparison purposes in the discussion below , we use total revenue and freight revenue ( total revenue less fuel surcharge revenue ) when discussing changes as a percentage of revenue . as it
| 13,498 |
therefore , increases in the cost of key raw materials of our products have not generally affected our gross margins . we can not provide any assurance that we may be able to pass along such cost increases to our customers in the future , and if we are unable to do so , our results of operations may be adversely affected . operating expenses . our marketing , general and administrative and engineering expenses are primarily comprised of compensation and related costs for sales , marketing , pre-sales engineering and administrative personnel , as well as other sales related expenses and other costs related to research and development , insurance , professional fees , the global integrated business information system , provisions for bad debts and warranty expense . key drivers affecting our results of operations . our results of operations and financial condition are affected by numerous factors , including those described above under item 1a , “ risk factors ” and elsewhere in this annual report and those described below : timing of greenfield projects . our results of operations in recent years have been impacted by the various construction phases of large greenfield projects . on very large projects , we are typically designated as the heat tracing provider of choice by the project owner . we then engage with multiple contractors to address incorporating various heat tracing solutions throughout the overall project . our largest greenfield projects may generate revenue for several quarters . in the early stages of a greenfield project , our revenues are typically realized from the provision of engineering services . in the middle stages , or the material requirements phase , we typically experience the greatest demand for our heat tracing cable , at which point our revenues tend to accelerate . revenues tend to decrease gradually in the final stages of a project and are generally derived from installation services and demand for electrical panels and other miscellaneous electronic components used in the final installation of heat tracing cable , which we frequently outsource from third-party manufacturers . therefore , we 25 typically provide a mix of products and services during each phase of a greenfield project , and our margins fluctuate accordingly . cyclicality of end-users ' markets . demand for our products and services depends in large part upon the level of capital and maintenance expenditures of our customers and end users , in particular those in the energy , chemical processing and power generation industries , and firms that design and construct facilities for these industries . these customers ' expenditures historically have been cyclical in nature and vulnerable to economic downturns . greenfield projects , and in particular large greenfield projects ( i.e . , new facility construction projects generating in excess of $ 5 million in annual sales ) , have been a substantial source of revenue growth in recent years , and greenfield revenues tend to be more cyclical than mro/ue revenues . in recent years we have noted particular cyclicality in capital spending for new facilities in asia , eastern europe and the middle east . revenues derived from europe , including the middle east , accounted for 21 % of our total revenues during each of fiscal 2014 and fiscal 2013 and revenues derived from the asia region accounted for 12 % and 15 % of our total revenues during fiscal 2014 and fiscal 2013 , respectively . a sustained decrease in capital and maintenance spending or in new facility construction by our customers could have a material adverse effect on the demand for our products and services and our business , financial condition and results of operations . impact of product mix . typically , both greenfield and mro/ue customers require our products as well as our engineering and construction services . the level of service and construction needs will affect the profit margin for each type of revenue . we tend to experience lower margins from our design optimization , engineering , installation and maintenance services than we do from sales of our heating cable , tubing bundle and control system products . we also tend to experience lower margins from our outsourced products , such as electrical switch gears and transformers , than we do from our manufactured products . accordingly , our results of operations are impacted by our mix of products and services . we estimate that greenfield and mro/ue have each made the following contribution as a percentage of revenue in the periods listed : replace_table_token_5_th we believe that our analysis of greenfield and mro/ue is an important measurement to explain the trends in our business to investors . greenfield revenue is an indicator of both our ability to successfully compete for new contracts as well as the economic health of the industries we serve . furthermore , greenfield revenue is an indicator of potential mro/ue revenue in future years . for mro/ue orders , the sale of our manufactured products typically represents a higher proportion of the overall revenues associated with such order than the provision of our services . greenfield projects , on the other hand , require a higher level of our services than mro/ue orders , and often require us to purchase materials from third party vendors . therefore , we typically realize higher margins from mro/ue revenues than greenfield revenues . large and growing installed base . customers typically use the incumbent heat tracing provider for mro/ue projects to avoid complications and compatibility problems associated with switching providers . therefore , with the significant greenfield activity we have experienced in recent years , our installed base has continued to grow , and we expect that such installed base will continue to generate ongoing high margin mro/ue revenues . for fiscal 2014 , mro/ue sales comprised approximately 67 % of our consolidated revenues . seasonality of mro/ue revenues . revenues realized from mro/ue orders tend to be less cyclical than greenfield projects and more consistent quarter over quarter , although mro/ue revenues are impacted by seasonal factors . story_separator_special_tag mro/ue revenues are typically highest during the second and third fiscal quarters , as most of our customers perform preventative maintenance prior to the winter season . 26 story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; font-style : italic ; font-weight : bold ; '' > marketing , general and administrative and engineering . marketing , general and administrative and engineering costs were $ 65.5 million in fiscal 2014 , compared to $ 64.6 million in fiscal 2013 , an increase of $ 0.9 million , or 1.3 % . as a percentage of total revenues , marketing , general and administrative and engineering costs were 23.6 % and 22.8 % in fiscal 2014 and 2013 , respectively . in fiscal 2014 , we switched vendors for our data communications and as a result incurred a $ 0.7 million increase in communication costs related to fees and duplicate services incurred during the transition . as of march 31 , 2014 , we had nearly completed the transition and do not expect to continue to incur such communication costs in fiscal 2015. building expenses increased approximately $ 0.6 million as compared to fiscal 2013 , as we relocated our houston office to a larger and more updated facility . stock compensation expense increased $ 0.9 million due to the full year effect of awards granted in august 2012 ( fiscal 2013 ) and additional awards granted in fiscal 2014. the increases in data communications costs , building expenses and stock compensation expense were partially offset by a $ 1.5 million reduction in our personnel costs , which was driven by a decrease in our annual incentive expense of $ 3.0 million , as we did not meet the internal goals for the short term incentive plan established by our board of directors , offset in part by an increase in salaries , wages and benefit expense due to additional sales and engineering personnel . amortization of intangible assets . amortization of intangible assets was $ 11.1 million in fiscal 2014 , compared to $ 11.2 million in fiscal 2013 . the decrease is attributed to foreign currency translation adjustments . we expect fiscal 2014 and fiscal 2013 to be representative of our annual amortization expense for the foreseeable future . interest expense , net . interest expense and loss on redemptions of debt totaled $ 25.3 million in fiscal 2014 , compared to $ 15.1 million in fiscal 2013 , an increase of $ 10.2 million . in fiscal 2014 we redeemed all $ 118.1 million of the outstanding aggregate principal amount of our 9.5 % senior secured notes . in connection with the redemption , we incurred acceleration of deferred debt issuance costs of $ 4.0 million and a loss on retirement of debt of $ 15.5 million , related to redemption premiums paid to the noteholders . in fiscal 2013 , we made partial redemptions of our 9.5 % senior secured notes with $ 21.0 million of aggregate principal being redeemed , and negotiated a new revolving credit facility . in connection with the fiscal 2013 bond redemptions and the termination of the previous revolving credit facility , we incurred acceleration of deferred debt issuance costs of $ 2.3 million . interest expense on outstanding principal was $ 5.4 million and $ 11.9 million in fiscal 2014 and fiscal 2013 , respectively . the decrease in interest on outstanding principal is due to the difference in the interest rate on our redeemed 9.5 % senior secured notes and that of our term loan , which is fixed at approximately 3.62 % as a result of our interest rate swap . we expect annual interest expense in fiscal 2015 to be approximately $ 4.2 million after accounting for scheduled principal reduction payments . other expense . other expense was $ 0.6 million in fiscal 2014 , compared to $ 0.3 million in fiscal 2013 , an increase of $ 0.3 million due mostly to increased losses on foreign currency exchange transactions in fiscal 2014. see note 2 , `` fair value measurements '' to our consolidated financial statements included elsewhere in this annual report , for further discussion of our foreign currency exchange transactions . income taxes . we reported an income tax expense of $ 7.0 million in fiscal 2014 , compared to $ 14.6 million in fiscal 2013 , a decrease of $ 7.6 million . our effective tax rates were 21.3 % in fiscal 2014 and 35.1 % in fiscal 2013 , respectively . during fiscal 2014 , we concluded an income tax audit in the united states and , as a result , released certain liabilities for uncertain tax positions in the amount of $ 1.0 million . in addition , we received an income tax benefit of $ 0.6 million in fiscal 2014 related to estimated tax benefits that were determined not to be payable to the predecessor owners . excluding these discrete tax benefits , our effective tax rate in fiscal 2014 would hav e been 25.5 % . during fiscal 2014 , we adopted a permanent reinvestment position on our foreign earned earnings . accordingly , we no longer accrue incremental taxation for expected repatriation of earnings into the united states . as a result , our estimated tax rate was reduced from 35.0 % to 25.5 % , excluding discrete events . the decrease in income tax expense from fiscal 2013 is attributable to our reduced pre-tax net income , the adoption of a permanent reinvestment position as well as the two aforementioned discrete events . see note 14 , `` income taxes , '' to our consolidated financial statements , included elsewhere in this annual report , for further detail on income taxes . 28 net income . net income was $ 25.8 million in fiscal 2014 as compared to $ 27.0 million in fiscal 2013 , a decrease of $ 1.2 million .
| in fiscal 2014 , we experienced revenue growth of $ 7.7 million in the united states as compared to fiscal 2013. the increase in demand within the united states is largely attributable to upgrade efforts at refineries that are now processing heavy crude oil , from the canadian oil sands region , which needs to be heated throughout the refining process , as well demand driven by the proliferation of hydraulic fracturing methods to extract natural gas . we experienced revenue declines in canada and our asia regions of $ 6.2 million and $ 7.0 million , respectively , as compared to fiscal 2013. in canada , fiscal 2014 revenues generated from our largest greenfield project declined $ 6.0 million from $ 30.6 million in fiscal 2013 to $ 24.6 million in fiscal 2014 due to the project being in its later stages when demand for our heat tracing products tends to diminish . canadian revenues were also negatively impacted during fiscal 2014 by approximately $ 4.8 million due to the depreciation of the canadian dollar relative to the u.s. dollar . within our asia region , we had several large greenfield projects in fiscal 2013 27 whose revenues were not replaced in fiscal 2014. revenues in our european region declined $ 1.2 million in fiscal 2014 largely due to overall economic weakness in the region experienced in the first quarter of fiscal 2014 , offset in part by improved results in europe for the remainder of fiscal 2014. gross profit and margin . gross profit totaled $ 135.2 million in fiscal 2014 , compared to $ 132.8 million in fiscal 2013 , an increase of $ 2.4 million , or 1.8 % . as a percentage of revenues , profit margin increased to 48.7 % in fiscal 2014 from 46.8 % in fiscal 2013 . this increase is attributable to the higher mix of mro/ue sales during fiscal 2014
| 13,499 |
those accounting policies with the greatest uncertainty and that require management 's most difficult , subjective or complex judgments affecting the application of these policies , and the likelihood that materially different amounts would be reported under different conditions , or using different assumptions , are described below . allowance for loan losses : we establish the allowance for loan losses through charges to earnings in the form of a provision for loan losses . loan losses are charged against the allowance when we believe that the collection of the principal is unlikely . subsequent recoveries of losses previously charged against the allowance are credited to the allowance . the allowance represents an amount that , in our judgment , will be adequate to absorb probable losses inherent in the loan portfolio . our judgment in determining the level of the allowance is based on evaluations of the collectibility of loans while taking into consideration such factors as trends in delinquencies and charge-offs for relevant periods of time , changes in the nature and volume of the loan portfolio , current economic conditions that may affect a borrower 's ability to repay and the value of collateral , overall portfolio quality and review of specific potential losses . this evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available . for more information see the section titled “ asset quality ” within item 7 . 29 allowance for indemnifications : the allowance for indemnifications is established through charges to earnings in the form of a provision for indemnifications , which is included in other noninterest expenses . a loss is charged against the allowance for indemnifications when a purchaser ( investor ) of a loan sold by c & f mortgage incurs a validated indemnified loss due to borrower misrepresentation , fraud , early default , or underwriting error . the allowance represents an amount that , in management 's judgment , will be adequate to absorb any losses that are probable of arising from valid indemnification requests for loans that have been sold by c & f mortgage . management 's judgment in determining the level of the allowance is based on the volume of loans sold , historical experience , current economic conditions and information provided by investors . this evaluation is inherently subjective , as it requires estimates that are susceptible to significant revision as more information becomes available . for more information see the section titled “ off-balance-sheet arrangements ” within item 7. impairment of loans : we consider a loan impaired when it is probable that the corporation will be unable to collect all interest and principal payments as scheduled in the loan agreement . we do not consider a loan impaired during a period of delay in payment if we expect the ultimate collection of all amounts due . we measure impairment on a loan-by-loan basis based on either the present value of expected future cash flows discounted at the loan 's effective interest rate , the loan 's obtainable market price , or the fair value of the collateral if the loan is collateral dependent . large groups of smaller balance homogeneous loans are collectively evaluated for impairment . we maintain a valuation allowance to the extent that the measure of the impaired loan is less than the recorded investment in the loan . all tdrs are also considered impaired loans and are evaluated individually . a tdr occurs when we agree to significantly modify the original terms of a loan by granting a concession due to the deterioration in the financial condition of the borrower . for more information see the section titled “ asset quality ” within item 7. loans acquired in a business combination : acquired loans are classified as either ( i ) purchased credit-impaired ( pci ) loans or ( ii ) purchased performing loans and are recorded at fair value on the date of acquisition . pci loans are those for which there is evidence of credit deterioration since origination and for which it is probable at the date of acquisition that the corporation will not collect all contractually required principal and interest payments . when determining fair value , pci loans are aggregated into pools of loans based on common risk characteristics as of the date of acquisition such as loan type , date of origination , and evidence of credit quality deterioration such as internal risk grades and past due and nonaccrual status . the difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the “ nonaccretable difference. ” any excess of cash flows expected at acquisition over the estimated fair value is referred to as the “ accretable yield ” and is recognized as interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows . on a quarterly basis , we evaluate our estimate of cash flows expected to be collected on pci loans . estimates of cash flows for pci loans require significant judgment . subsequent decreases to the expected cash flows will generally result in a provision for loan losses resulting in an increase to the allowance for loan losses . subsequent significant increases in cash flows may result in a reversal of post-acquisition provision for loan losses or a transfer from nonaccretable difference to accretable yield that increases interest income over the remaining life of the loan , or pool ( s ) of loans . disposals of loans , which may include sale of loans to third parties , receipt of payments in full or in part from the borrower or foreclosure of the collateral , result in removal of the loan from the pci loan portfolio at its carrying amount . the corporation 's pci loans currently consist of loans acquired in connection with the acquisition of cvb . story_separator_special_tag pci loans that were classified as nonperforming loans by cvb are no longer classified as nonperforming so long as , at quarterly re-estimation periods , we believe we will fully collect the new carrying value of the pools of loans . the corporation accounts for purchased performing loans using the contractual cash flows method of recognizing discount accretion based on the acquired loans ' contractual cash flows . purchased performing loans are recorded at fair value , including a credit discount . the fair value discount is accreted as an adjustment to yield over the estimated lives of the loans . there is no allowance for loan losses established at the acquisition date for purchased performing loans . a provision for loan losses may be required for any deterioration in these loans in future periods . impairment of securities : impairment of securities occurs when the fair value of a security is less than its amortized cost . for debt securities , impairment is considered other-than-temporary and recognized in its entirety in net 30 income if either ( i ) we intend to sell the security or ( ii ) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis . if , however , we do not intend to sell the security and it is not more-likely-than-not that we will be required to sell the security before recovery , we must determine what portion of the impairment is attributable to a credit loss , which occurs when the amortized cost basis of the security exceeds the present value of the cash flows expected to be collected from the security . if there is no credit loss , there is no other-than-temporary impairment . if there is a credit loss , other-than-temporary impairment exists , and the credit loss must be recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income . we regularly review unrealized losses in our investments in securities based on criteria including the extent to which market value is below amortized cost , the duration of that market decline , the financial health of and specific prospects for the issuer , our best estimate of the present value of cash flows expected to be collected from debt securities , our intention with regard to holding the security to maturity and the likelihood that we would be required to sell the security before recovery . other real estate owned ( oreo ) : assets acquired through , or in lieu of , foreclosure are held for sale and are initially recorded at the fair value less estimated costs to sell at the date of foreclosure . subsequent to foreclosure , management periodically performs valuations of the foreclosed assets based on updated appraisals , general market conditions , recent sales of similar properties , length of time the properties have been held , and our ability and intention with regard to continued ownership of the properties . the corporation may incur additional write-downs of foreclosed assets to fair value less estimated costs to sell if valuations indicate a further deterioration in market conditions . goodwill : the corporation 's goodwill was recognized in connection with the corporation 's acquisition of cvbk in october 2013 and c & f bank 's acquisition of c & f finance company in september 2002. the corporation reviews the carrying value of goodwill at least annually or more frequently if certain impairment indicators exist . in testing goodwill for impairment , the corporation may first consider qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount . if , after assessing the totality of events and circumstances , we conclude that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount , then no further testing is required and the goodwill of the reporting unit is not impaired . if the corporation elects to bypass the qualitative assessment or if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount , then the fair value of the reporting unit is compared with its carrying value to determine whether an impairment exists . in the fourth quarter of 2018 and 2017 , the corporation evaluated goodwill for impairment at the retail banking segment and the consumer finance segment and concluded that no impairment existed based on an assessment of qualitative factors . retirement plan : c & f bank maintains a non-contributory , defined benefit pension plan for eligible full-time employees as specified by the plan . plan assets , which consist primarily of mutual funds invested in marketable equity securities and corporate and government fixed income securities , are measured at fair value . the projected benefit obligation and net periodic pension cost or income are actuarially determined using a number of key assumptions , which may include discount rates , rates of return on plan assets , employee compensation and mortality and interest crediting rates . changes in these assumptions in the future , if any , or in the method under which benefits are calculated may affect the projected benefit obligation in the year of the change , and may affect net periodic pension cost or income in the year of the change or in future periods . derivative financial instruments : the corporation uses derivatives primarily to manage risk associated with changing interest rates and to assist customers with their risk management objectives .
| table 1 : average balances , income and expense , yields and rates replace_table_token_2_th 36 interest income and expense are affected by fluctuations in interest rates , by changes in the volume of earning assets and interest-bearing liabilities , and by the interaction of rate and volume factors . the following table shows the direct causes of the year-to-year changes in the components of net interest income on a taxable-equivalent basis . the corporation calculates the rate and volume variances using a formula prescribed by the sec . rate/volume variances , the third element in the calculation , are not shown separately in the table , but are allocated to the rate and volume variances in proportion to the absolute dollar amounts of each . table 2 : rate-volume recap replace_table_token_3_th 2018 compared to 2017 net interest income , on a taxable-equivalent basis , for 2018 increased to $ 82.3 million , compared to $ 81.7 million for 2017. the net interest margin decreased 19 basis points to 5.80 percent , compared to 5.99 percent for 2017. the net interest margin decline resulted from an 11 basis point decline in the yield on interest-earning assets coupled with a 12 basis point increase in the cost of interest-bearing liabilities for the year ended december 31 , 2018 , compared to the year ended december 31 , 2017. the decline in yield on interest-earning assets was primarily attributable to a decrease in the yields on the loan and investment securities portfolios for 2018 compared to 2017 , partially offset by an increase in the yield on interest-earning deposits in other banks . the decrease in the net interest margin was offset in part by average earning asset growth of $ 52.5 million for 2018 , compared to 2017. average loans , which includes both loans held for investment and loans held for sale , increased $ 31.4 million to $ 1.07 billion for the year ended december 31 , 2018 , compared to 2017. average loans held for investment of the retail banking segment increased $ 27.4 million ,
| 13,500 |
sabre manufacturing , llc , which is located in knox , indiana , manufactures a comprehensive line of specialized mobile tanks for liquid and solid storage and containment solutions with capacities from 8,000 to 21,000 gallons . its mobile tanks are sold to specialized independent tank rental companies and through the company 's existing dealer network . the tanks are used in a variety of end markets such as petrochemical , waste management and oil and gas drilling . crane and machinery , inc. ( “ c & m ” ) is a distributor of the company 's products as well as terex 's rough terrain and truck cranes . crane and machinery leasing , inc. 's ( “ c & m leasing ” ) rents equipment manufactured by the company as well limited amount of equipment manufactured by third parties . although c & m is a distributor of terex rough terrain and truck cranes , c & m 's primary business is the distribution of products manufactured by the company . c & m leasing 's primary business is the facilitation of sales of products manufactured by the company through its rent to own program . as c & m and c & m leasing 's primary business is the facilitation of company manufactured product sales , discrete financial information is not available . consolidated variable interest entity even though it has no ownership interest in svw crane & equipment company ( together with its wholly owned subsidiary , rental consulting service company , “ svw ” ) , the company has the power to direct the activities that most significantly impact svw 's economic performance . additionally , the company was the primary beneficiary of the svw relationship . svw obtained third party financing , which was effectively guaranteed by the company , on specific cranes the company manufactured and remitted the loan proceeds to the company . other than its business transactions described herein , svw had no other substantial business operations . the company has determined that svw is a variable interest entity ( ” vie ” ) that under current accounting guidance needs to be consolidated in the company 's financial results . income and losses related to vie 's are typically shown in a company 's financial statements as being attributed to a non-controlling interest . other than its transactions between svw and the company , svw had no other substantial business operations . furthermore , the company exercised control and absorbed all losses and received all the income from svw operations . therefore , the company has concluded that income and losses related to the vie are attributable to the shareholders of the company . economic conditions in 2015 , the company continued to aggressively pursue other markets for its boom trucks including the tree industry , utility industry , and the general construction markets . this focus offset and mitigated the impact of the energy market decline . while oil prices continued to decline and the u.s. oil rig count dropped from 1,600 in january 2015 to just over 500 at end of the year we noted that the energy companies began selling excess equipment into our other markets . this combined impact lower energy market sales combined with the selling off of excess equipment – resulted in a significant decrease in boom truck revenues during the year . 21 in 2016 , we noted that this selloff of excess equipment continued through much of th e year . this selloff dampened demand for new equipment in both the energy market and the other markets we serve with our boom trucks . we did note that oil prices did begin to increase and by the beginning of june were approaching $ 50 per barrel . addition ally , the oil rig count began to increase again and by year end totaled 525 oil rigs . late in the year , orders received began to increase and included orders for a number of cranes in a multitude of markets that the company serves . the company continues to aggressively pursue multiple markets including the tree , utility , general construction and , energy markets . during 2017 , oil prices remained relatively stable through the first nine months of the year , before the prices began to strengthen considerably during the fourth quarter of the year . oil prices at the end of 2017 topped $ 61 per barrel . the oil rig count declined during the first half of the year to 431 before rebounding to 658 by the end of 2017. in early 2018 , the oil rig count continued to increase and at the end of march 2018 increased to over 800. the sell-off of used equipment continued through most of the year but the effects diminished throughout the year . the market for boom trucks continued to improve throughout the year but remained below normal levels . orders , however , increased significantly in the fourth quarter of 2017 and going into 2018 demand for boom trucks continues to increase . the market for pm knuckle boom cranes have not been significantly affected by decrease in oil prices . the markets for these products have been more stable . the north american market for knuckle boom cranes is growing . pm currently has a small share of the market for knuckle boom cranes in north america . the company has started to manufacture knuckle boom cranes on a limited basis in the united states and is marketing them through the company 's current distribution channels . the company currently has a strong presence in north america for its boom trucks . the company believes that it can significantly increase the company 's share for knuckle boom cranes in north america . the company believes this is an immediate opportunity that will continue to grow over time . in 2017 , the demand for knuckle boom cranes was up modestly in all the markets that pm sells into except for the middle east . story_separator_special_tag the demand from the middle east market was consistent with the prior year but remains significantly depressed . during 2017 , demand from western and north europe , were pm largest markets . although there was growth in the other pm markets , the demand from these markets have not returned to levels achieved in the past . factors affecting revenues and gross profit the company derives most of its revenue from purchase orders from dealers and distributors . the demand for the company 's products depends upon the general economic conditions of the markets in which the company competes . the company 's sales depend in part upon its customers ' replacement or repair cycles . adverse economic conditions , including a decrease in commodity prices , may cause customers to forego or postpone new purchases in favor of repairing existing machinery . gross profit varies from period to period . factors that affect gross profit include product mix , production levels and cost of raw materials . margins tend to increase when production is skewed towards larger capacity cranes . the following table sets forth certain financial data for the three years ended december 31 , 2017 , 2016 and 2015 : 22 story_separator_special_tag recorded in current earnings as a currency gain or loss . a substantial portion of the 2017 loss is attributable to exchange losses related to the argentinian peso . as previously stated , the company has not been able to identify a strategy to effectively hedge currency risks related to the argentinian peso . the 2016 currency loss also reflects the recognition of deferred loss of $ 0.2 million related to an intercompany receivable . the loss had been previously deferred in other comprehensive income as there was an intercompany receivable that was not expected to be repaid . the repayment of the receivable resulted in the recognition of the previously deferred loss . other income ( loss ) — for the years ended december 31 , 2017 and 2016 , the company had other income of $ 0.4 million and $ 0.9 million , respectively . for the year ended december 31 , 2017 , other income is the result of revaluing a contingent acquisition liability related to an option to acquire certain pm bank debt . the fair market value of the contingent acquisition liability is subject to revaluation on a recurring basis . the revaluation that will be performed for march 31 , 2018 will take into account the effect of pm debt restructuring that happened in the first quarter of 2018 . 24 during 2016 , the fair value of this liability was recalculated based on updated 2017 ebitda projections . this revaluation resulted in a gain of approximately $ 0.9 million . income tax — on december 22 , 2017 , the tax cuts and jobs act ( the “ act ” ) was enacted into law . the act makes comprehensive changes to the u.s. tax code , including , but not limited to , reducing the u.s. federal corporate tax rate from 35 % to 21 % , changes to the rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after december 31 , 2017 , immediate expensing of certain qualified property , creation of a new limitation on deductible interest expense , repeal of the u.s. corporate minimum tax ( “ amt ” ) , and changes in the manner in which international operations are taxed in the u.s. although the majority of the changes resulting from the act are effective beginning in 2018 , u.s. gaap requires that certain impacts of the act be recognized in the income tax provision in the period of enactment . in response to the enactment of the act , the sec issued staff accounting bulletin ( “ sab ” ) 118 , which provides guidance on accounting for the tax effects of the act . sab 118 provides a measurement period that should not extend beyond one year from the act enactment date for companies to complete the accounting under asc 740. to the extent that a company 's accounting for certain income tax effects of the act is incomplete but is able to determine a reasonable estimate , it must record a provisional estimate in the financial statements . at december 31 , 2017 , we have not completed our accounting for the tax effects of the enactment of the act ; however , in certain cases , as described in note 14 , income taxes , we have made a reasonable estimate of the effects on our existing deferred tax balances and one-time transition tax . income tax ( benefit ) from continuing operations was $ ( 0.1 ) million and $ ( 0.6 ) million for the years ended december 31 , 2017 and 2016 , respectively . the income tax benefit is attributed to a pre-tax loss of $ 7.2 million and $ 23.8 million from continuing operations for the years ended december 31 , 2017 and december 31 , 2016 , respectively . the company 's effective rate decreased to 1.64 % for 2017 from 2.38 % for 2016. the decrease in the effective tax rate is due primarily to the tax effects related to the tax cuts and jobs act , a decrease in the valuation allowance , a decrease in deferred tax liabilities related to indefinite lived intangible assets as well as the mix of domestic and foreign earnings . income ( loss ) in equity investments — the company had income ( loss ) related to its equity investment of $ 0.4 million and ( $ 5.8 ) million for the years ended december 31 , 2017 and 2016 , respectively . income for the year ended december 31 , 2017 was from earnings from our equity investment in asv holdings . the loss in 2016 is result of recognizing an impairment charge of $ 5.6 million to write off our entire investment in lift ventures llc during 2016. see note 26 to the financial statements for additional information related this impairment .
| gross profit as a percent of sales was 17.3 % for the year ended december 31 , 2017. for the year ended december 31 , 2016 , net revenue and gross profit were $ 173.2 million and $ 29.9 million , respectively . gross profit as a percent of sales was 17.3 % for the year ended december 31 , 2016. for 2017 revenues increased $ 39.9 million or 23.0 % from $ 173.2 million for 2016 to $ 213.1 million for 2017. the increase is primarily due to an increase in straight mast cranes revenues . the increase is due to an improvement in market conditions addressed above under the heading “ economic conditions ” . the revenues for the year ended december 31 , 2017 were also favorably impacted by a stronger euro , which accounted for approximately $ 1.0 million of the increase in revenue . gross profit as a percent of net revenues was 17.3 % for the year ended december 31 , 2017 , which is equal to the gross profit for the year ended december 31 , 2016 year . the gross margin percent for the year ended december 31 , 2017 was affected by $ 1.7 million in inventory reserve adjustments in the third and fourth quarters of 2017. research and development —research and development for the year ended december 31 , 2017 was $ 2.6 million compared to $ 2.9 million for the comparable period in 2016. research and development expenditures were relatively consistent with the prior period . the company 's research and development spending continues to reflect our commitment to develop and introduce new products that give the company a competitive advantage . selling , general and administrative expense —selling , general and administrative expense for the year ended december 31 , 2017 was $ 34.5 million compared to $ 37.0 million for the comparable period in 2016 , a decrease of $ 2.4 million . the three months ended march 31 , 2017 included expenses of $ 0.5 million incurred in connection with our participation at the 2017 con expo trade show . the con expo show , which is held every three years , was
| 13,501 |
these changes did not impact the incurrence or timing of our expenses , and there was no corresponding expense reduction to offset the lower revenue , resulting in operating losses for fiscal 2010 , 2011 and 2012. by fiscal 2013 , the number of license arrangements renewed on the aspenone licensing model resulted in ratable revenue sufficient to generate an operating profit . the revenue transition will not be fully completed until fiscal 2016. the revenue transition will not be complete until the remaining term license agreements executed under our upfront revenue model reach the end of their original term . many of our license arrangements were five or six years in duration when the aspenone licensing model was introduced at the start of fiscal 2010 , and consequently , a number of agreements executed under the upfront revenue model will not reach the end of their original term until fiscal 2016. since fiscal 2010 , the sms component of our services and other revenue ( `` legacy sms revenue '' ) has decreased , and been offset by a corresponding increase in subscription and software revenue as customers have transitioned to our aspenone licensing model . under our aspenone licensing model and for point product arrangements with premier plus sms included for the full contract term , the entire arrangement fee , including the sms component , is included within subscription and software revenue . 29 legacy sms revenue is no longer significant in relation to our total revenue due to the number of our term license arrangements that have been converted to the aspenone licensing model . as a result , beginning with fiscal 2014 , legacy sms revenue is included within subscription and software revenue in our consolidated statements of operations . prior to fiscal 2014 , legacy sms revenue was included within services and other revenue in our consolidated statements of operations . for further information , please refer to the `` revenue reclassification '' section below . legacy sms revenue is expected to continue to decrease until the remaining active license arrangements are converted to our aspenone licensing model with sms included for the full contract term . installment payments from aspenone agreements and from point product arrangements with sms included for the contract term are not considered fixed or determinable , and as a result , are not included in installments receivable . accordingly , our installments receivable balance has , and is expected to continue to , decrease as licenses previously executed under our upfront revenue model reach the end of their terms . the amount of our deferred revenue has increased as license agreements have renewed on the aspenone licensing model . introduction of our premier plus sms offering beginning in fiscal 2012 , we introduced our premier plus sms offering to provide more value to our customers . as a part of this offering , customers receive 24x7 support , faster response times , dedicated technical advocates and access to web-based training modules . the premier plus sms offering is only provided to customers that commit to sms for the entire term of the arrangement . our annually renewable legacy sms offering continues to be available to customers with legacy term and perpetual license agreements . the introduction of our premier plus sms offering in fiscal 2012 resulted in a change to the revenue recognition of point product arrangements that include premier plus sms for the term of the arrangement . since we do not have vendor-specific objective evidence of fair value , or vsoe , for our premier plus sms offering , the sms element of our point product arrangements is not separable , resulting in revenue being recognized ratably over the term of the arrangement , once the other revenue recognition criteria have been met . prior to fiscal 2012 , license revenue was recognized on the due date of each annual installment , provided all revenue recognition criteria were met . the introduction of our premier plus sms offering did not change the revenue recognition for our aspenone licensing arrangements . segments re-alignment prior to fiscal 2014 , we had three operating and reportable segments : license ; sms , training and other ; and professional services . as our customers have transitioned to our aspenone licensing model , legacy sms revenue has decreased and been offset by a corresponding increase in revenue from aspenone licensing arrangements and from point product arrangements with premier plus . as a result , legacy sms revenue is no longer significant in relation to our total revenue and no longer represents a significant line of business . we manage legacy sms as a part of our broader software licensing business and assess business performance on a combined basis . our president and chief executive officer evaluates software licensing and maintenance on an aggregate basis in deciding how to assess performance . effective july 1 , 2013 , we re-aligned our operating and reportable segments into i ) subscription and software and ii ) services . 30 the subscription and software segment is engaged in the licensing of process optimization software solutions and associated support services . the services segment includes professional services and training . for additional information on segment revenues and their operating results , please refer to note 10 `` segment and geographic information '' to our consolidated financial statements included under `` item 8. financial statements and supplementary data '' of this form 10-k. our prior period reportable segment information has been reclassified to reflect the current segment structure and conform to the current period presentation . revenue we generate revenue primarily from the following sources : subscription and software . we provide integrated process optimization software solutions designed specifically for process industries . we license our software products , together with sms , primarily on a term basis , and we offer extended payment options for our term license agreements that generally require annual payments , which we also refer to as installments . story_separator_special_tag we provide customers technical support , access to software fixes and updates and the right to any new unspecified future software products and updates that may be introduced into the licensed aspenone software suite . our technical support services are provided from our customer support centers throughout the world , as well as via email and through our support website . services and other . we provide training and professional services to our customers . our professional services are focused on implementing our technology in order to improve customers ' plant performance and gain better operational data . customers who use our professional services typically engage us to provide those services over periods of up to 24 months . we charge customers for professional services on a time-and-materials or fixed-price basis . we provide training services to our customers , including on-site , internet-based and customized training . four basic criteria must be satisfied before software license revenue can be recognized : persuasive evidence of an arrangement between us and an end user ; delivery of our product has occurred ; the fee for the product is fixed or determinable ; and collection of the fee is probable . persuasive evidence of an arrangement we use a signed contract as evidence of an arrangement for software licenses and sms . for professional services we use a signed contract and a work proposal to evidence an arrangement . in cases where both a signed contract and a purchase order are required by the customer , we consider both taken together as evidence of the arrangement . delivery of our product software and the corresponding access keys are generally delivered to customers via disk media with standard shipping terms of free carrier , our warehouse ( i.e. , fca , named place ) . our software license agreements do not contain conditions for acceptance . fee is fixed or determinable we assess whether a fee is fixed or determinable at the outset of the arrangement . significant judgment is involved in making this assessment . under our upfront revenue model , we are able to demonstrate that the fees are fixed or determinable for all arrangements , including those for our term licenses that contain extended payment terms . we have an established history of collecting under the terms of these contracts without providing concessions to customers . in addition , we also assess whether a contract modification to an existing term arrangement constitutes a concession . in making this assessment , significant analysis is performed to ensure that no concessions are given . our software license agreements do not include a right of return or exchange . for license arrangements executed under the upfront revenue model , we recognize 31 license revenue upon delivery of the software product , provided all other revenue recognition requirements are met . we can not assert that the fees under our aspenone licensing model and point product arrangements with premier plus sms are fixed or determinable because the rights provided to customers , and the economics of the arrangements , are not comparable to our transactions with other customers under the upfront revenue model . as a result , the amount of revenue recognized for these arrangements is limited by the amount of customer payments that become due . collection of fee is probable we assess the probability of collecting from each customer at the outset of the arrangement based on a number of factors , including the customer 's payment history , its current creditworthiness , economic conditions in the customer 's industry and geographic location , and general economic conditions . if in our judgment collection of a fee is not probable , revenue is recognized as cash is collected , provided all other conditions for revenue recognition have been met . vendor-specific objective evidence of fair value we have established vsoe for certain sms offerings , professional services , and training , but not for our software products or our premier plus sms offering . we assess vsoe for sms , professional services , and training based on an analysis of standalone sales of these offerings using the bell-shaped curve approach . we do not have a history of selling our premier plus sms offering to customers on a standalone basis , and as a result are unable to establish vsoe for this deliverable . as of july 1 , 2014 , we are no longer able to establish vsoe for legacy sms offerings sold with our perpetual license arrangements . as a result , all perpetual license agreements that include legacy sms entered into subsequent to june 30 , 2014 will be recognized ratably over the legacy sms service period . loss of vsoe on legacy sms offerings sold with our perpetual license arrangements is not expected to have a material impact on our revenue in fiscal 2015. we allocate the arrangement consideration among the elements included in our multi-element arrangements using the residual method . under the residual method , the vsoe of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue upon delivery of the software , assuming all other revenue recognition criteria are met . if vsoe does not exist for an undelivered element in an arrangement , revenue is deferred until such evidence does exist for the undelivered elements , or until all elements are delivered , whichever is earlier . under the upfront revenue model , the residual license fee is recognized upon delivery of the software provided all other revenue recognition criteria were met . arrangements that qualified for upfront recognition during fiscal 2014 and prior periods included sales of perpetual licenses , amendments to existing legacy term arrangements and renewals of legacy term arrangements .
| the transition will not be complete until fiscal 2016 since many of our license arrangements were five or six years in duration when the aspenone licensing model was introduced at the start of fiscal 2010. fiscal 2013 compared to fiscal 2012 the increase in subscription and software revenue during fiscal 2013 as compared to fiscal 2012 was primarily the result of a larger base of arrangements being recognized on a ratable basis during fiscal 2013 as customers renewed expiring contracts formerly on the upfront revenue model . services and other revenue replace_table_token_12_th services and other revenue consists primarily of revenue related to professional services and training . fiscal 2014 compared to fiscal 2013 the increase in services and other revenue of $ 6.2 million during fiscal 2014 as compared to the prior fiscal year was attributable to higher professional services revenue of $ 5.3 million and higher training revenue of $ 0.9 million . 44 the year-over-year increase in professional services revenue of $ 5.3 million was primarily attributable to the recognition of $ 2.7 million of previously deferred professional services revenue on the significant customer arrangement noted above and a revenue increase of $ 2.3 million from professional service arrangements bundled with and recognized over the term of aspenone transactions . under the aspenone licensing model , revenue from committed professional service arrangements that are sold as a single arrangement with , or in contemplation of , a new aspenone licensing transaction is deferred and recognized on a ratable basis over the longer of ( a ) the period the services are performed or ( b ) the term of the related software arrangement . as our typical contract term approximates five years , professional services revenue on these types of arrangements will usually be recognized over a longer period than the period over which the services are performed . fiscal 2013 compared to fiscal 2012 the increase in services and other revenue of $ 5.1 million during fiscal 2013 as compared to fiscal 2012 was attributable to higher professional services revenue of $ 4.4 million and higher training revenue of $ 0.7
| 13,502 |
partially offsetting these increases is $ 35 million of higher commodity costs , $ 32 million of higher freight and distribution expenses , $ 9 million of higher other product costs , $ 4 million from lower equity method income , $ 3 million from unfavorable foreign exchange rates , and $ 1 million from higher sg & a . 20 commercial heating & cooling the following table presents our commercial heating & cooling segment 's net sales and profit for 2018 and 2017 ( dollars in millions ) : replace_table_token_8_th commercial heating & cooling net sales increased 7 % in 2018 compared to 2017. sales volume increased 5 % and price and mix combined increased 2 % . segment profit in 2018 increased $ 2 million compared to 2017 due to $ 15 million from higher sales volume , $ 11 million of combined price and mix , and $ 4 million from sourcing and engineering-led cost reductions . partially offsetting these increases is $ 9 million of higher commodity costs , $ 8 million of higher other product costs , $ 5 million of higher freight and distribution expense , $ 3 million of lower factory productivity , $ 2 million of higher sg & a expense , and $ 1 million of lower equity method income . refrigeration the following table presents our refrigeration segment 's net sales and profit for 2018 and 2017 ( dollars in millions ) : replace_table_token_9_th net sales decreased 15 % in 2018 compared to 2017. the loss of sales from the divested australia , asia and south america businesses contributed 16 % and price and mix combined was 1 % lower partially offset by sales volume increases of 1 % and 1 % from foreign currency exchange rates . segment profit in 2018 decreased $ 7 million compared to 2017 due to $ 6 million of higher commodity costs , $ 6 million of lower profit due to the divested australia , asia and south america businesses , $ 2 million of lower factory productivity , $ 2 million of higher freight and distribution expense , $ 2 million of lower equity method income , and $ 1 million of higher other product costs . partially offsetting these decreases is $ 6 million of sourcing and engineering-led cost reductions , $ 2 million from selling refrigerant allocations in europe , $ 2 million of lower sg & a expense , $ 1 million from higher sales volume , and $ 1 million of favorable foreign currency exchange rates . corporate and other corporate and other expenses decreased by $ 5 million in 2018 primarily due to $ 2 million of non-recurring discretionary expenses in 2017 , $ 2 million of pension expense that was reclassified out of operating income due to a change in accounting rules , and $ 1 million of lower health and welfare expense . year ended december 31 , 2017 compared to year ended december 31 , 2016 - consolidated results net sales net sales increased 5.4 % in 2017 compared to 2016 , primarily driven by volume increases . the increase in volume was primarily due to market growth in our residential heating and cooling and commercial heating and cooling segments . changes in foreign currency exchange rates and the effects of price and mix also had positive impacts on net sales . 21 gross profit gross profit margins for 2017 decreased 30 basis points ( “ bps ” ) to 29.3 % compared to 29.6 % in 2016. we saw margin decreases of 80 bps from higher commodity costs , 50 bps for investments in distribution expansion , and 40 bps from other product costs . these decreases were offset by increases of 100 bps from sourcing and engineering-led cost reductions and 40 bps from favorable price and mix . selling , general and administrative expenses sg & a expenses increased by $ 17 million in 2017 compared to 2016. as a percentage of net sales , sg & a expenses decreased 50 bps from 17.1 % to 16.6 % in the same periods . sg & a increased due to general wage inflation , increased healthcare costs and increased investment in information technology and research and development partially offset by decreases in incentive compensation . losses ( gains ) and other expenses , net losses ( gains ) and other expenses , net for 2017 and 2016 included the following ( in millions ) : replace_table_token_10_th the realized gains on settled futures contracts in 2017 was attributable to changes in commodity prices relative to our settled futures contract prices , as commodity prices have increased in 2017 relative to 2016. additionally , the change in unrealized losses , net on unsettled futures contracts was due to lower commodity prices relative to the unsettled futures contract prices . foreign currency exchange gains increased in 2017 primarily due to improvement in foreign exchange rates in our primary markets . the special legal contingency charges increased primarily due to costs associated with the matter reported to the securities and exchange commission and department of justice . the asbestos-related litigation relates to known and estimated future asbestos matters . the environmental liabilities relate to estimated remediation costs for contamination at some of our facilities . the contractor tax payments relate to a charge for underpaid contractor taxes at one of our non-u.s. subsidiaries . refer to note 11 in the notes to the consolidated financial statements for more information on litigation , including the asbestos-related litigation , and the environmental liabilities . restructuring charges restructuring charges were $ 3.2 million in 2017 compared to $ 1.8 million in 2016. the charges in 2017 and 2016 were primarily for projects to realign resources and enhance distribution capabilities . goodwill we performed a qualitative impairment analysis and noted no indicators of goodwill impairment through december 31 , 2017. also , we did not record any goodwill impairments in 2016. refer to note 5 in the notes to the consolidated financial statements for more information on goodwill . story_separator_special_tag 22 pension settlement in 2016 our unfunded pension liability declined by $ 33 million to $ 89 million as the favorable impact of our $ 50 million discretionary contribution was partially offset by lower discount rates across all plans . in addition , we recorded a pension settlement charge of $ 31 million in the fourth quarter of 2016. we did not have similar funding or pension buyout activity in 2017. income from equity method investments investments over which we do not exercise control but have significant influence are accounted for using the equity method of accounting . income from equity method investments was $ 18 million in 2017 compared to $ 18 million in 2016 due to flat earnings from our joint ventures . interest expense , net net interest expense of $ 31 million in 2017 increased from $ 27 million in 2016 primarily due to an increase in our average borrowings . income taxes the income tax provision was $ 157 million in 2017 compared to $ 124 million in 2016 , and the effective tax rate was 34 % in 2017 compared to 31 % in 2016. the 2017 effective tax rate was negatively impacted by recent changes in u.s. tax legislation that reduced the value of our deferred tax assets by $ 31.8 million , partially offset by the benefit from the impact of excess tax benefits of $ 23.6 million . the 2016 effective tax rate was not impacted by either u.s. tax rate changes or the impact of excess tax benefits . loss from discontinued operations the $ 2 million of pre-tax losses incurred in 2017 and $ 1 million of pre-tax losses in 2016 primarily relate to changes in retained product liabilities and general liabilities for the service experts business sold in 2013 and the hearth business sold in 2012. year ended december 31 , 2017 compared to year ended december 31 , 2016 - results by segment residential heating & cooling the following table presents our residential heating & cooling segment 's net sales and profit for 2017 and 2016 ( dollars in millions ) : replace_table_token_11_th residential heating & cooling net sales increased 7 % in 2017 compared to 2016. sales volume increased by 7 % primarily due to market growth . segment profit in 2017 increased $ 25 million due to $ 39 million from higher sales volume , $ 21 million from sourcing and engineering-led cost reductions , $ 15 million from favorable price , $ 5 million from favorable foreign currency , $ 2 million from lower warranty expense , and $ 1 million from higher income from equity method investments . partially offsetting these increases was $ 20 million in higher commodity costs , $ 15 million in sg & a expenses to support investments in technology and research and development , incremental headcount and higher personnel costs , $ 12 million in freight and distribution investments , $ 6 million from unfavorable mix , and $ 5 million from increases in other product costs . 23 commercial heating & cooling the following table presents our commercial heating & cooling segment 's net sales and profit for 2017 and 2016 ( dollars in millions ) : replace_table_token_12_th commercial heating & cooling net sales increased 6 % in 2017 compared to 2016. sales volume increased by 5 % primarily due to market growth and 1 % from favorable foreign currency . segment profit in 2017 increased $ 8 million compared to 2016 due to $ 14 million from higher sales volume , $ 7 million from sourcing and engineering-led cost reductions , and $ 1 million in favorable foreign currency . partially offsetting these increases was $ 5 million from warranty and other product costs , $ 4 million of higher commodity costs , $ 3 million from factory inefficiencies , $ 1 million in higher sg & a expenses , and $ 1 million in freight and distribution investments . refrigeration the following table presents our refrigeration segment 's net sales and profit for 2017 and 2016 ( dollars in millions ) : replace_table_token_13_th net sales in 2017 were flat compared to 2016. favorable foreign currency increased sales by 1 % offset by lower sales volume of 1 % primarily from our north america supermarket business . segment profit in 2017 increased $ 4 million compared to 2016 due to $ 9 million from sourcing and engineering-led cost reductions , $ 3 million from favorable price and mix , and $ 3 million in lower other product costs . partially offsetting these increases was $ 5 million from factory inefficiencies , $ 2 million from freight and distribution , $ 2 million from higher commodity costs , and $ 2 million from higher sg & a expense . corporate and other corporate and other expenses decreased by $ 8 million in 2017 primarily due from lower incentive compensation with a partial offset from general wage inflation and information technology investments . accounting for futures contracts realized gains and losses on settled futures contracts are a component of segment profit ( loss ) . unrealized gains and losses on unsettled futures contracts are excluded from segment profit ( loss ) as they are subject to changes in fair value until their settlement date . both realized and unrealized gains and losses on futures contracts are a component of losses ( gains ) and other expenses , net in the accompanying consolidated statements of operations . see note 9 of the notes to consolidated financial statements for more information on our derivatives and note 20 of the notes to the consolidated financial statements for more information on our segments and for a reconciliation of segment profit to operating income . 24 liquidity and capital resources our working capital and capital expenditure requirements are generally met through internally generated funds , bank lines of credit and an asset securitization arrangement . working capital needs are generally greater in the first and second quarters due to the seasonal nature of our business cycle .
| gross profit gross profit margins for 2018 decreased 70 basis points ( “ bps ” ) to 28.6 % compared to 29.3 % in 2017. we saw margin decreases of 120 bps from higher commodity costs , 100 bps from higher freight and distribution costs , and 50 bps from other product costs . these decreases were offset by increases of 130 bps from favorable price and mix and 70 bps from sourcing and engineering-led cost reductions . 18 selling , general and administrative expenses sg & a expenses decreased by $ 30 million in 2018 compared to 2017. as a percentage of net sales , sg & a expenses decreased 90 bps from 16.6 % to 15.7 % in the same periods . sg & a decreased primarily due to the sale of our divested businesses in australia , asia and south america . losses ( gains ) and other expenses , net losses ( gains ) and other expenses , net for 2018 and 2017 included the following ( in millions ) : replace_table_token_6_th the realized gains on settled futures contracts in 2018 was attributable to changes in commodity prices relative to our settled futures contract prices , as commodity prices have increased in 2018 relative to 2017. additionally , the change in unrealized losses , net on unsettled futures contracts was due to lower commodity prices relative to the unsettled futures contract prices . for more information on our derivatives , see note 9 in the notes to the consolidated financial statements . foreign currency exchange losses increased in 2018 primarily due to weakening in foreign exchange rates in our primary markets . the special legal contingency charges decreased primarily due to lower legal costs associated with outstanding legal settlements . the asbestos-related litigation relates to known and estimated future asbestos matters . the environmental liabilities relate to estimated remediation costs for contamination at some of our facilities . refer to note 11 in the notes to the consolidated financial statements for more information on litigation , including the asbestos-related litigation , and the
| 13,503 |
acquisition as previously mentioned , on may 24 , 2017 , we completed the acquisition of ambrell by acquiring all of its outstanding capital stock . ambrell is a manufacturer of precision induction heating systems used to conduct fast , efficient , repeatable non-contact heating of metals or other electrically conductive materials , in order to transform raw materials into finished parts . the ambrell acquisition complements our current thermal technologies and broadens our diverse customer base , allowing expansion within many non-semiconductor related markets , such as consumer product packaging , fiber-optics , automotive and other markets . this acquisition has been accounted for as a business combination using purchase accounting . the purchase price for ambrell was $ 22 million in cash paid at closing , subject to a customary post-closing working capital adjustment , and additional contingent consideration of up to $ 18 million in the form of earnouts paid based upon a multiple of adjusted ebitda for 2017 and 2018. the first earnout paid after calendar year 2017 was completed was an amount equal to 8x ambrell 's adjusted ebitda for 2017 minus the $ 22 million paid at closing ; this amount was $ 5.8 million and was paid in april 2018. the second earnout , which we expect to pay in april 2019 , will be an amount equal to 8x ambrell 's adjusted ebitda for 2018 minus the sum of the $ 22 million paid at closing and $ 5.8 million earnout paid with respect to 2017. as of december 31 , 2018 , we had accrued $ 12.2 million in earnout payable based on ambrell 's actual adjusted ebitda for 2018. for further discussion of the acquisition , see notes 3 and 4 to our consolidated financial statements . orders and backlog the following table sets forth , for the periods indicated , a breakdown of the orders received by product segment and market ( in thousands ) . replace_table_token_4_th total consolidated orders for the year ended december 31 , 2018 were $ 78.2 million compared to $ 69.0 million for the same period in 2017. during the year ended december 31 , 2018 , we recorded $ 26.3 million in orders attributable to ambrell , of which $ 18.1 million were attributable to the industrial market , which is a non-semiconductor market . during the year ended december 31 , 2017 , we recorded $ 14.9 million in orders attributable to ambrell , of which $ 13.8 million were attributable to the industrial market , which is a non-semiconductor market . when adjusted to eliminate the impact of orders attributable to ambrell , our consolidated orders for the year ended december 31 , 2018 would have been $ 51.9 million and would have decreased $ 2.2 million , or 4 % , as compared to the same period in 2017. the decrease primarily reflects lower levels of demand experienced by our ems segment from its customers within the ate market . when adjusted to eliminate the orders attributable to ambrell , orders from customers in non-semiconductor markets for the year ended december 31 , 2018 were $ 14.2 million , or 27 % of total consolidated orders , compared to $ 16.0 million , or 30 % of total consolidated orders for the same period in 2017. the reduction in demand was primarily from certain customers in the telecommunications market , which was partially offset by an increase from customers in the industrial market . the level of our orders in these non-semiconductor markets has varied in the past , and we expect it will vary significantly in the future as we build our presence in these markets and establish new markets for our products . at december 31 , 2018 , our backlog of unfilled orders for all products was approximately $ 13.4 million compared with approximately $ 13.7 million at december 31 , 2017. at december 31 , 2018 and 2017 , our backlog included $ 5.3 million and $ 5.5 million , respectively , attributable to ambrell . our backlog includes customer orders which we have accepted , substantially all of which we expect to deliver in 2019. while backlog is calculated on the basis of firm purchase orders , a customer may cancel an order or accelerate or postpone currently scheduled delivery dates . our backlog may be affected by the tendency of customers to rely on short lead times available from suppliers , including us , in periods of depressed demand . in periods of increased demand , there is a tendency towards longer lead times that has the effect of increasing backlog . as a result , our backlog at a particular date is not necessarily indicative of sales for any future period . - 20 - net revenues the following table sets forth , for the periods indicated , a breakdown of the net revenues by product segment and market ( in thousands ) . replace_table_token_5_th total consolidated net revenues for the year ended december 31 , 2018 were $ 78.6 million compared to $ 66.8 million for the same period in 2017. during the year ended december 31 , 2018 , we recorded $ 26.4 million in net revenues attributable to ambrell , of which $ 19.1 million were attributable to the industrial market , which is a non-semiconductor market . during the year ended december 31 , 2017 , we recorded $ 13.6 million in net revenues attributable to ambrell , of which $ 13.2 million were attributable to the industrial market , which is a non-semiconductor market . when adjusted to eliminate the impact of the net revenues attributable to ambrell , our net revenues for the year ended december 31 , 2018 , would have been $ 52.1 million and would have decreased $ 1.1 million or 2 % as compared to the same period in 2017. the decrease in net revenues primarily reflects the aforementioned reduction in demand experienced by our ems segment from its customers in the ate market . story_separator_special_tag when adjusted to eliminate the net revenues attributable to ambrell , net revenues from customers in non-semiconductor markets for the year ended december 31 , 2018 were $ 14.0 million , or 27 % of total consolidated net revenues , compared to $ 15.8 million , or 30 % of total consolidated net revenues for the same period in 2017. the decrease in net revenues was primarily from customers in the telecommunications markets which was partially offset by increases from customers in the defense/aerospace and industrial markets . the level of our net revenues in these non-semiconductor markets has varied in the past , and we expect it will vary significantly in the future as we build our presence in these markets and establish new markets for our products . product/customer mix both of our product segments each have multiple products that we design , manufacture and market to our customers . due to a number of factors , our products have varying levels of gross margin . the mix of products we sell in any period is ultimately determined by our customers ' needs . therefore , the mix of products sold in any given period can change significantly from the prior period . as a result , our consolidated gross margin can be significantly impacted in any given period by a change in the mix of products sold in that period . we sell most of our products to semiconductor manufacturers and third-party test and assembly houses ( end user sales ) and to ate manufacturers ( oem sales ) who ultimately resell our equipment with theirs to both semiconductor manufacturers and third-party test and assembly houses . our thermal segment also sells into a variety of other markets , including the automotive , consumer electronics , defense/aerospace , energy , industrial and telecommunications markets . as a result of the acquisition of ambrell , we now also sell into the consumer products packaging , fiber optics and other markets within the broader industrial market . the mix of customers during any given period will affect our gross margin due to differing sales discounts and commissions . for the years ended december 31 , 2018 and 2017 , our oem sales as a percentage of net revenues were 13 % and 9 % , respectively . oem sales generally have a lower gross margin than end user sales , as oem sales historically have had a more significant discount . our current net operating margins on most oem sales , however , are only slightly less than margins on end user sales because of the payment of third party sales commissions on most end user sales . we have also continued to experience demands from our oem customers ' supply chain managers to reduce our sales prices to them . if we can not further reduce our manufacturing and operating costs , these pricing pressures will negatively affect our gross and operating margins . - 21 - story_separator_special_tag 10pt ; padding-bottom : 1px ; ' > 201 8 201 7 cash and cash equivalents $ 17,861 $ 13,290 working capital $ 14,203 $ 16,580 as of december 31 , 2018 , $ 3.9 million of our cash and cash equivalents was held by our foreign subsidiaries . we currently expect our cash and cash equivalents and projected future cash flow to be sufficient to support our short term working capital requirements , the 2018 earnout payable payment for ambrell and other corporate requirements . however , we may need additional financial resources , which could include debt or equity financings , to consummate a significant acquisition if the consideration in such a transaction would require us to utilize a substantial portion of , or an amount equal to or in excess of , our available cash . we do not currently have any credit facilities under which we can borrow to help fund our working capital or other requirements . cash flows operating activities . net cash provided by operations for the year ended december 31 , 2018 was $ 11.0 million . during 2018 , we recorded net earnings of $ 3.0 million which included non-cash charges of $ 6.9 million for an increase in the fair value of our contingent consideration liability related to the acquisition of ambrell , $ 1.9 million for depreciation and amortization , $ 653,000 for amortization of deferred compensation expense related to stock-based awards , and $ 285,000 as a provision for excess and obsolete inventory . approximately $ 1.0 million of our amortization expense was related to the intangible assets acquired as part of the acquisition of ambrell in may 2017 , which is discussed further in the overview and note 3 to our consolidated financial statements . accounts receivable decreased $ 1.4 million during 2018 , reflecting decreased net revenue levels for our ems segment during the second half of 2018 , while inventory increased $ 1.8 million , primarily reflecting increased order activity for our thermal segment during 2018. investing activities . in april 2018 , we paid $ 5.8 million which was the final amount due for the 2017 earnout related to the acquisition of ambrell , as discussed further in the overview and note 3 to our consolidated financial statements . of this amount , $ 4.1 million had been accrued at the time of the acquisition as a part of the purchase price for ambrell , and , accordingly , is included in investing activities on our consolidated statement of cash flows for the year ended december 31 , 2018. the balance of the payment is included in operating activities .
| gross margin was 50 % for the year ended december 31 , 2018 compared to 52 % for the same period in 2017. our fixed operating costs increased $ 2.4 million in 2018 as compared to 2017. when adjusted to eliminate the impact of the costs attributable to ambrell in both 2018 and 2017 , our fixed operating costs would have increased $ 457,000 for the year ended december 31 , 2018 as compared to the same period in 2017. the $ 457,000 increase in our fixed operating costs primarily reflects higher salary and benefits expense for our thermal segment as a result of increased production activity . selling expense . selling expense was $ 9.6 million for the year ended december 31 , 2018 compared to $ 8.1 million for the same period in 2017 , an increase of $ 1.5 million or 19 % . when adjusted to eliminate the impact of the costs attributable to ambrell in both 2018 and 2017 , our selling expense would have decreased $ 226,000 for the year ended december 31 , 2018 as compared to the same period in 2017. the $ 226,000 decrease primarily reflects lower levels of salary and benefits expense for our thermal segment , a reduction in commission expense , reflecting changes in product mix as well as the lower net revenues of our ems segment , and a decrease in travel costs for our thermal segment . these decreases were partially offset by an increase in warranty expense for our thermal segment . engineering and product development expense . engineering and product development expense was $ 4.9 million for the year ended december 31 , 2018 compared to $ 4.3 million for the same period in 2017 , an increase of $ 607,000 , or 14 % . when adjusted to eliminate the impact of the costs attributable to ambrell in both 2018 and 2017 , our engineering and product development expense would have increased $ 15,000 for the year ended december 31 , 2018 as compared to the same period in 2017. increases in spending on legal matters related to our intellectual property were partially offset by decreased spending on materials used in new product development , primarily for our thermal segment , and lower salary and benefits expense for our ems product segment . general and administrative expense . general and administrative expense was $ 12.8 million for the year ended december 31 , 2018 compared to $ 11.7 million for the same period in 2017 , an increase of $ 1.1 million , or 10 % .
| 13,504 |
a different regulatory environment for billboards and competitive bidding for street furniture and transit display contracts , which constitute a larger portion of our business internationally , may result in higher site lease costs in our international business . macroeconomic indicators our advertising revenue for our americas and international segments is highly correlated to changes in gross domestic product ( “ gdp ” ) as advertising spending has historically trended in line with gdp , both domestically and internationally . internationally , our results are impacted by fluctuations in foreign currency exchange rates as well as the economic conditions in the foreign markets in which we have operations . relationship with iheartcommunications there are several agreements which govern our relationship with iheartcommunications , inc. ( “ iheartcommunications ” ) , including a master agreement , a corporate services agreement , an employee matters agreement , a tax matters agreement , a trademark license agreement and a number of other agreements with iheartcommunications setting forth various matters governing our relationship with iheartcommunications while it remains a significant stockholder in us ( collectively , the `` intercompany agreements '' ) . iheartcommunications has the right to terminate these agreements in various circumstances . as of the date of the filing of this annual report on form 10-k , no notice of termination of any of these agreements has been received from iheartcommunications . our agreements with iheartcommunications continued under the same terms and conditions subsequent to iheartcommunications ' merger . on march 14 , 2018 , iheartmedia , inc. the indirect parent of the company and certain of its subsidiaries ( “ iheartmedia ” ) , including iheartcommunications ( collectively , the “ debtors ” ) , filed voluntary petitions for reorganization ( the “ iheart chapter 11 cases ” ) under chapter 11 of the united states bankruptcy code ( the “ bankruptcy code ” ) in the united states bankruptcy court for the southern district of texas , houston division ( the “ bankruptcy court ” ) . the company and its direct and indirect subsidiaries did not file voluntary petitions for relief under the bankruptcy code and are not debtors in the iheart chapter 11 cases . the iheart chapter 11 cases are being jointly administered under the caption in re : iheartmedia , inc. et al. , case no . 18-31274 ( mi ) . the debtors continue to operate their businesses as “ debtors-in-possession ” under the jurisdiction of the bankruptcy court and in accordance with the applicable provisions of the bankruptcy code and orders of the bankruptcy court . iheartmedia 's modified fifth amended plan of reorganization ( the “ iheart plan of reorganization ” ) was confirmed by the bankruptcy court on january 22 , 2019 the iheart plan of reorganization contemplates a restructuring of the debtors whereby our business is proposed to be separated from iheartcommunications upon consummation of the plan and the conclusion of the iheart chapter 11 cases ( the “ separation ” ) . effectiveness of the iheart plan of reorganization and consummation of the separation is subject to certain conditions , including the receipt of certain governmental approvals . although the timing of when and if all such conditions will be satisfied or otherwise waived is inherently uncertain , iheartmedia currently anticipates the iheart plan of reorganization will become effective and iheartmedia will emerge from chapter 11 during the second quarter of 2019 . 38 our board of directors established the special committee to consider , review and negotiate certain transactions between iheartcommunications and us in connection with the iheart chapter 11 cases . see item 1 “ business -- the iheart chapter 11 cases and the separation ” for more information about the iheart plan of reorganization and the separation . in accordance with the master agreement , our branch managers follow a corporate policy allowing iheartcommunications to use , without charge , americas ' displays they believe would otherwise be unsold . iheartcommunications bears the cost of producing the advertising and we bear the costs of installing and removing this advertising . under the corporate services agreement , iheartcommunications provides management services to us . these services are charged to us based on actual direct costs incurred or allocated by iheartcommunications based on headcount , revenue or other factors on a pro rata basis . for the years ended december 31 , 2018 , 2017 and 2016 , we recorded approximately $ 68.0 million , $ 68.7 million and $ 36.0 million , respectively , as a component of corporate expenses for these services . the trademark and license agreement entitles us to use ( 1 ) on a nonexclusive basis , the `` clear channel '' trademark and the clear channel `` outdoor '' trademark logo with respect to day-to-day operations of our business worldwide and on the internet , and ( 2 ) certain other clear channel marks in connection with our business . on february 9 , 2017 , we entered into a binding option and letter of intent with iheartmedia granting us a binding option to purchase at fair value the registered trademarks and domain names owned by iheartmedia and its subsidiaries that incorporate one or more of the words `` clear '' and or `` channel , '' and any translations or derivations of any of the foregoing , together with any goodwill associated therewith . this option was exercisable in our sole and absolute discretion at any time between february 23 , 2018 and february 23 , 2019. for the year ended december 31 , 2018 and 2017 , management service expenses included $ 38.7 million and $ 36.8 million , respectively , pursuant to the trademark license agreement . these agreements will be terminated in connection with the consummation of the separation . executive summary the key developments in our business for the year ended december 31 , 2018 are summarized below : consolidated revenue increased $ 133.0 million during 2018 compared to 2017 . excluding a $ 30.5 million impact from movements in foreign exchange rates , consolidated revenue increased $ 102.5 story_separator_special_tag million during 2018 compared to 2017 . on june 1 , 2018 , clear channel outdoor , inc. ( `` cco '' ) , a subsidiary of ours , refinanced the company 's senior revolving credit facility with a receivables-based credit facility that provides for revolving credit commitments of up to $ 75.0 million . on june 29 , 2018 , cco entered into an amendment providing for a $ 50.0 million incremental increase of the facility , bringing the aggregate revolving credit commitments to $ 125.0 million . the facility has a five-year term , maturing in 2023. revenues and expenses “ excluding the impact of foreign exchange movements ” in this management 's discussion and analysis of financial condition and results of operations is presented because management believes that viewing certain financial results without the impact of fluctuations in foreign currency rates facilitates period to period comparisons of business performance and provides useful information to investors . revenues and expenses “ excluding the impact of foreign exchange movements ” are calculated by converting the current period 's revenues and expenses in local currency to u.s. dollars using average foreign exchange rates for the prior period . 39 results of operations consolidated results of operations the comparison of our historical results of operations for the year ended december 31 , 2018 to the year ended december 31 , 2017 is as follows : replace_table_token_7_th consolidated revenue consolidated revenue increased $ 133.0 million during the year ended december 31 , 2018 compared to 2017 . excluding a $ 30.5 million impact from movements in foreign exchange rates , consolidated revenue increased $ 102.5 million during 2018 compared to 2017 . the increase in consolidated revenue is primarily due to higher revenue from our international business , driven by growth across our european and asian businesses . revenue was also higher in our americas business . consolidated direct operating expenses consolidated direct operating expenses increased $ 60.9 million during the year ended december 31 , 2018 compared to 2017 . excluding the $ 23.1 million impact from movements in foreign exchange rates , consolidated direct operating expenses increased $ 37.8 million during 2018 compared to 2017 . higher direct operating expenses in our international business , driven by revenue growth in various countries , was partially offset by lower direct operating expenses in our americas business , primarily as a result of the sale of our business in canada in august 2017. consolidated selling , general and administrative ( “ sg & a ” ) expenses consolidated sg & a expenses increased $ 23.7 million during the year ended december 31 , 2018 compared to 2017 . excluding the $ 6.7 million impact from movements in foreign exchange rates , consolidated sg & a expenses increased $ 17.0 million during 2018 compared to 2017 . the increase in our sg & a expenses resulted primarily from higher expenses in our international business . 40 corporate expenses corporate expenses increased $ 8.4 million during the year ended december 31 , 2018 compared to 2017 . excluding the $ 1.0 million impact from movements in foreign exchange rates , corporate expenses increased $ 7.4 million during 2018 compared to 2017 , primarily as a result of higher employee-related expenses , including variable incentive compensation resulting from higher profitability at both of our segments , as well as employee benefits expense . these increases were partially offset by lower management fees . depreciation and amortization depreciation and amortization decreased $ 7.0 million during the year ended december 31 , 2018 compared to 2017 primarily due to assets becoming fully depreciated or fully amortized . impairment charges we perform our annual impairment test on our goodwill , billboard permits , and other intangible assets as of july 1 of each year . in addition , we test for impairment of property , plant and equipment whenever events and circumstances indicate that depreciable assets might be impaired . as a result of these impairment tests , we recorded an impairment charge of $ 7.8 million related to permits in one market in our americas segment during the year ended december 31 , 2018 . during the year ended december 31 , 2017 , we recognized a $ 4.2 million impairment related to goodwill in one international business . please see note 3 to the consolidated financial statements included in item 8 of part ii of this annual report on form 10-k for a further description of the impairment charges . other operating income , net other operating income , net was $ 2.5 million for 2018 . other operating income , net of $ 26.4 million in 2017 primarily related to the sale in the first quarter of 2017 of the americas ' indianapolis market in exchange for cash and certain assets in atlanta , georgia , resulting in a net gain of $ 28.9 million , and the $ 6.8 million gain recognized on the sale of our ownership interest in a joint venture in belgium during the second quarter of 2017. these gains were partially offset by the $ 12.1 million loss on the sale in the third quarter 2017 of our canada business . interest expense , net interest expense , net increased $ 8.4 million in 2018 compared to 2017 , primarily due to the issuance by clear channel international b.v. ( `` ccibv '' ) , our indirect subsidiary , of $ 150.0 million in aggregate principal amount of 8.75 % senior notes due 2020 ( the `` ccibv senior notes '' ) as additional notes under the indenture governing ccibv 's existing ccibv senior notes during the third quarter of 2017. interest income on due from iheartcommunications interest income on due to/from iheartcommunications , net decreased $ 68.5 million during the year ended december 31 , 2018 , compared to 2017 as we ceased recording interest income on the pre-petition balance due from iheartcommunications as the collectability of the interest was not considered probable .
| consolidated results of operations the comparison of our historical results of operations for the year ended december 31 , 2017 to the year ended december 31 , 2016 is as follows : replace_table_token_10_th 43 consolidated revenue consolidated revenue decreased $ 91.1 million during 2017 compared to 2016. excluding an $ 8.6 million impact from movements in foreign exchange rates , consolidated revenue decreased $ 99.7 million during 2017 compared to 2016. the decrease in consolidated revenue is primarily due to the sales of our businesses in australia and turkey in 2016 and canada in 2017 , which generated revenue of $ 13.7 million and $ 149.4 million in the years ended december 31 , 2017 and 2016 , respectively . this decrease was partially offset by revenue growth in our international business as a result of new contracts and digital expansion . consolidated direct operating expenses consolidated direct operating expenses decreased $ 8.6 million during 2017 compared to 2016. excluding the $ 4.0 million impact from movements in foreign exchange rates , consolidated direct operating expenses decreased $ 12.6 million during 2017 compared to 2016 due to the sales of our businesses in australia and turkey in 2016 and canada in 2017. this decrease was partially offset by higher site lease expense related to new contracts . consolidated sg & a expenses consolidated sg & a expenses decreased $ 16.2 million during 2017 compared to 2016. excluding the $ 2.8 million impact from movements in foreign exchange rates , consolidated sg & a expenses decreased $ 19.0 million during 2017 compared to 2016. sg & a expenses were lower primarily due to the sales of our businesses in australia and turkey in 2016 and canada in 2017. corporate expenses corporate expenses increased $ 26.2 million during 2017 compared to 2016. excluding the $ 1.4 million impact from movements in foreign exchange rates , corporate expenses increased $ 27.6 million during 2017 compared to 2016 primarily due to the $ 36.7 million trademark license fee paid to iheartmedia , inc. ( see note 7 to our consolidated financial statements located in part ii of this annual report on form 10-k ) . the increase in corporate expenses is partially offset by a decrease in executive and share-based compensation expense . depreciation and amortization depreciation and amortization decreased $ 18.1 million during 2017 compared to 2016 primarily due to the sale of the australia and turkey businesses and assets becoming fully depreciated or fully amortized . impairment charges we perform our annual impairment test on our goodwill , billboard permits , and other
| 13,505 |
46 on december 4 , 2017 , we entered into a membership interest purchase agreement ( the “ acquisition agreement ” ) with alternative solutions to acquire the outstanding equity interests in three of its subsidiaries ( collectively , the “ oasis llcs ” ) , serenity wellness center llc d/b/a/ oasis medical cannabis , serenity wellness growers llc , and serenity wellness products lls . pursuant to the acquisition agreement , as amended , we paid a non-refundable deposit of $ 250,000 upon signing , which was followed by an additional payment of $ 1,800,000 on february 5 , 2018 , for an initial 10 % of alternative solutions and each of the subsidiaries . at the closing of our purchase of the remaining 90 % of the ownership interests in alternative solutions and the oasis llcs , which occurred on june 27 , 2018 , we paid the following consideration : $ 6,200,000 in cash , a $ 4.0 million promissory note due in december 2019 , and $ 6,000,000 in shares of our common stock . the oasis llcs collectively own and operate a vertically integrated cannabis business , including one dispensary , in las vegas , nevada . our ownership of the oasis llcs is subject to the approval of state and local regulators . we have already received such approvals for our initial acquisition of the 10 % interest in alternative solutions and the oasis llcs and expect to receive the approvals for the remaining ownership interests in due course . the change of ownership in the oasis llcs to us will be recorded upon receipt of such regulatory approvals . on january 4 , 2018 , the attorney general of the united states issued new written guidance concerning the enforcement of federal laws relating to marijuana . the attorney general 's memorandum stated that previous doj guidance specific to marijuana enforcement , including the memorandum issued by former deputy attorney general james cole on august 29 , 2013 ( as amended on february 14 , 2014 , the “ cole memo ” ) is unnecessary and is rescinded , effective immediately . the cole memo told federal prosecutors that in states that had legalized marijuana , they should use their prosecutorial discretion to focus not on businesses that comply with state regulations , but on illicit enterprises that create harms like selling drugs to children , operating with criminal gangs , and selling across state lines . in addition , since 2014 , the federal budget has prohibited the doj from using federal funds to prosecute medical cannabis businesses pursuant to a budget rider , which must be renewed annually and is presently set to expire on january 19 , 2018. the attorney general has now advised that it will be left to the discretion of the local us attorneys in the various districts to decide how and when to enforce the federal marijuana laws . as a result of the attorney general 's recent guidance , it is unclear whether and how us attorneys in states with medical and or recreational marijuana laws will enforce federal laws relating to the prohibition of the possession , ownership or sale of marijuana , among other things . it is also unclear whether any states will challenge the attorney general 's new pronouncement in the applicable courts . however , as a result of the attorney general 's new guidance , some banks , clearing brokers and other businesses may cease or limit how they do business with companies in the marijuana business to avoid a possible violation of federal law . it is also possible that some us attorneys may begin enforcing federal laws to prevent marijuana businesses that are otherwise validly operating under state laws , from conducting business . thus , regardless of whether the attorney general 's new pronouncement is enforced or found to be lawful , it could have a material adverse impact on the marijuana industry , including our business . we incurred a net loss of $ 9,577,484 for the year ended may 31 , 2018 , resulting in an accumulated deficit as of may 31 , 2018 of $ 18,569,094. these conditions raise substantial doubt about our ability to continue as a going concern . results of operations for the years ended may 31 , 2018 and may 31 , 2017. story_separator_special_tag extinguishment of debt in the amount of $ 989,032. this loss is related to the exchange of the 8 % note for our common stock . there was no comparable transaction during the prior year . 48 prepayment penalty during the year ended may 31 , 2018 , we incurred a prepayment penalty in the amount of $ 137,000 related to the redemption of the firefire note payable . there was no comparable transaction during the prior year . change in fair value of derivative liability during the years ended may 31 , 2018 and 2017 , we had outstanding convertible promissory notes that contained conversion price reset features , which require us to value and record a derivative liability related to this provision on a quarterly basis . we revalued the derivative liability at may 31 , 2018 at $ 1,265,751 , which resulted in a loss of $ 195,725. we also revalued the derivative liability at may 31 , 2017 , at $ 95,276 , which resulted in a gain of $ 310,975. in both cases , we included the applicable loss or gain in the results of operations for the applicable year . management utilizes a lattice model to estimate the fair value of derivative liabilities . net loss for the reasons stated above , our net loss for the year ended may 31 , 2018 was $ 9,577,484 compared to $ 4,865,724 for the year ended may 31 , 2017 , an increase of 4,711,760 , or 97 % . story_separator_special_tag the net loss per diluted share for the year ended may 31 , 2018 was $ 0.24 , compared to a net loss per diluted share of $ 0.23 for the year ended may 31 , 2017. these amounts were computed based on the weighted average of 39,224,613 and 20,778,765 shares outstanding during the fiscal years ended may 31 , 2018 and 2017 , respectively . liquidity and capital resources the following table summarizes our current total assets , liabilities and working capital at may 31 , 2018 and 2017 : replace_table_token_1_th at may 31 , 2018 and may 31 , 2017 , we had a working capital deficit of $ 2,634,774 and $ 1,746,758 , respectively . this working capital deficit occurred primarily because we had not yet commenced earning revenues as of may 31 , 2018. on june 27 , 2018 , when we closed on the acquisition of the oasis cannabis companies , we also commenced earning revenues , because such revenues do not currently exceed the expenses of the oasis cannabis , we are likely to maintain a working capital deficit for the foreseeable future . during the year ended may 31 , 2018 , we obtained loans from our officers and directors and issued convertible loans to cover operating expenses . we also issued convertible debt and sold equity to raise the funds required to acquire oasis cannabis . we are presently seeking to expand the oasis cannabis and related city trees businesses and nevada and are considering other potential acquisitions . this working capital deficit will likely continue to increase until we complete at least the first phase of our expansion plan at oasis cannabis . we have operated at a loss since inception . cash flows used in operations were $ 1,425,298 during the year ended may 31 , 2018 , an increase of $ 242,993 or 21 % , compared to $ 1,182,305 during the year ended may 31 , 2017. although our net loss for the year ended may 31 , 2018 increased by $ 4,711,760 , or 97 % , from the year ended may 31 , 2017 , most of this increase was due to non-cash expenses , such as the amortization of debt discount of $ 2,534,103 , loss on extinguishment of debt of $ 989,032 , and share based compensation of $ 794,607. cash used in operations increased by only $ 242,993 , or approximately 21 % for the year . cash used in investing activities were $ 2,050,000 for the year ended may 31 , 2018 , an increase of $ 2,014,987 , or 5,755 % , compared to $ 35,013 during the year ended may 31 , 2017. during the year ended may 31 , 2018 , we made cash payments in the amount of $ 2,050,000 for our investment in alternative solutions . cash flows provided by financing activities were $ 3,449,952 during the year ended may 31 , 2018 , an increase of $ 2,242,568 or 186 % compared to $ 1,207,384 provided during the year ended may 31 , 2016. during the year ended may 31 , 2018 , we borrowed approximately $ 1,655,000 by issuing convertible notes payable to firstfire , darling capital , efrat investments , and ya ii pn , and an additional $ 761,829 by issuing convertible notes payable to related parties . we also raised $ 410,000 from the issuance of notes payable , and $ 1,460,917 from the sale of equity in the westpark offering . in addition , we made principal payments in the amount of $ 500,000 , $ 237,794 , and $ 100,000 under convertible notes payable , convertible notes payable to related parties , and notes payable , respectively . during the year ended may 31 , 2017 , we borrowed approximately $ 1,597,550 from our officers and directors , and made principal payments in the amounts of $ 329,166 and $ 61,000 on convertible notes payable and convertible notes payable to related parties , respectively . 49 third party debt the table below summarizes the status of our third party debt and reflects whether such debt remains outstanding , has been repaid , or has been converted into or exchanged for our common stock : replace_table_token_2_th april 2015 note on april 29 , 2015 , we issued a convertible promissory note ( the `` april 2015 note '' ) to an unaffiliated individual in the amount of $ 200,000. interest accrued on the april 2015 note at a rate of 15 % per annum . on the first anniversary of the april 2015 note , all then-accrued interest was due thereunder . thereafter , principal together with accrued interest was due in eight ( 8 ) equal quarterly payments , in arrears , commencing on july 1 , 2016. all outstanding principal and any accumulated unpaid interest thereon was due and payable on the third anniversary of note . at the holder 's election , at any time prior to payment or prepayment of the april 2015 note in full , all principal and accrued interest under the april 2015 note could be converted in whole , but not in part , into our securities . for each dollar converted , the holder would receive two shares of common stock and a three-year warrant to purchase 1.33 shares of common stock at $ 0.75 per share . during the year ended may 31 , 2017 , we repaid principal in the amount of $ 100,000 and interest in the amount of $ 53,837 on this note . on september 20 , 2017 , we entered into an exchange agreement , whereby we agreed to exchange the april 2015 note for 1,500,000 shares of our common stock . the holder of the april 2015 note had previously sold it for $ 105,219 , which represented the balance due by us , to starforce media , inc. , an entity that is not affiliated with us .
| interest expense our interest expense was $ 4,709,940 for the year ended may 31 , 2018 , an increase of 2,138,769 , or 83 % , compared to $ 2,571,171 for the year ended may 31 , 2017. for the year ended may 31 , 2018 , interest expense consisted of $ 2,534,103 of amortization of discounts on convertible notes payable to third parties , $ 1,919,042 of interest on third party debt , $ 96,720 of interest on related party debt , $ 33,000 of original issue discount amortization associated with third party debt , and $ 1,076 of imputed interest associated with $ 17,930 due to related parties . the increase in interest expense for the year ended may 31 , 2018 compared to the prior fiscal year was primarily due to the increase in the derivative financial liability recorded in connection with the convertible notes and warrants that we issued during the year ended may 31 , 2018. these new convertible notes , in the aggregate original principal amount of $ 1,688,000 , together with , in some cases , our issuance of warrants , accounted for $ 1,188 , 996 of this increase in interest expense . in addition , interest expense increased due to an increase in the amortization of discounts on convertible notes payable that is attributable to the beneficial conversion feature of these notes by $ 259,585 during the year ended may 31 , 2018 compared to the prior fiscal year . interest expense also increased by $ 126,000 due to deferred financing expenses associated with the issuance of convertible debt during the year ended may 31 , 2018. gain on settlement of debt during the year ended may 31 , 2018 , we recognized a gain on the settlement of accounts payable in the amount of $ 3,480 because we repaid an account using our common stock . there was no comparable transaction during the prior year . loss on modification of debt related party debt . during the year ended may 31 , 2017 , we recognized a loss on the modification of related party debt in the amount of $ 951,239. there was no such gain or loss during the year ended may 31 , 2018. effective may 31 , 2017 , pursuant to the omnibus loan
| 13,506 |
professional fees : the decrease of $ 452 thousand , or 9.5 % , principally is due to a decrease in attorney fees of $ 527 thousand , advisor services of $ 452 thousand and regulatory assessments of $ 32 thousand , partially offset by an increase in accounting fees of $ 418 thousand and consulting fees of $ 141 thousand . 67 other real estate owned : as detailed in “ note 5 – other real estate owned ” in the notes to consolidated financial statements , other real estate owned expenses , including provision for unrealized losses , were $ 3.3 million , partially offset by gains on the sale of other real estate of $ 835 thousand and gains on the sale of other assets of $ 201 thousand , for the year ended december 31 , 2020. for the year ended december 31 , 2019 , other real estate owned expenses , including provision for unrealized losses , were $ 904 thousand and loss on sale of other real estate owned was $ 10 thousand , partially offset by gains on initial evaluation of other real estate properties of $ 191 thousand and gains on the sale of other assets of $ 15 thousand . other : other non-interest expenses consist of subscriptions , memberships and dues , employee expenses including travel , meals , entertainment and education , supplies , printing , insurance , account related losses , correspondent bank fees , customer program expenses , losses net of gains on the sale of fixed assets , losses net of gains on the sale of repossessed assets other than real estate and other operating expenses such as settlement of claims . merger expenses : merger expenses include legal , advisory and accounting fees associated with services to facilitate the acquisition of other banks . merger expenses also include data processing conversion costs and costs associated with the integration of personnel , processes , facilities and employee bonuses . for the year ended december 31 , 2020 , merger expenses of $ 299 thousand are related to the almena acquisition . for the year ended december 31 , 2019 , merger expenses of $ 915 thousand are related to the midfirst acquisition . efficiency ratio the efficiency ratio is a supplemental financial measure utilized in the internal evaluation of our performance and is not defined under gaap . our efficiency ratio is computed by dividing non-interest expense , excluding goodwill impairment , merger expenses and loss on debt extinguishment , by the sum of net interest income and non-interest income , excluding net gains on sales of and settlement of securities and gain on acquisition . generally , an increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income , while a decrease would indicate a more efficient allocation of resources . the ratio defined under gaap that is most comparable to the efficiency ratio is non-interest expense to net interest income plus non-interest income which is discussed in “ results of operations – non-gaap financial measures. ” the company 's non-interest expense , less goodwill impairment , to net interest income plus non-interest income decreased from year ended december 31 , 2019 , to december 31 , 2020 , primarily due to net interest income plus non-interest income increasing at a higher rate than non-interest expense less goodwill impairment , as discussed in “ results of operations – non-gaap financial measures. ” the efficiency ratio increased slightly during the same time period due to non-interest expense , excluding goodwill impairment and merger expenses , increasing in a slightly higher proportional rate than net interest income and non-interest income , excluding net gains on security transactions and gain on acquisition , as discussed in “ results of operations – net interest income and net interest margin analysis ” and “ results of operations – non-interest income. ” income taxes the amount of income tax expense is influenced by the amount of pre-tax income , the amount of tax-exempt income , the amount of non-deductible expenses and available tax credits . year ended december 31 , 2020 , compared with year ended december 31 , 2019 the effective income tax rate for the year ended december 31 , 2020 , was ( 0.5 ) % as compared to the u.s. statutory rate of 21.0 % . the effective income tax rate for the year ended december 31 , 2019 , was 22.2 % as compared to the u.s. statutory rate of 21.0 % . as detailed in “ note 15 – income taxes ” in the notes to consolidated financial statements , the income tax rates differed from the u.s. statutory rates primarily due to non-taxable income , non-deductible expenses , non-deductible goodwill and tax credits . impact of inflation our consolidated financial statements and related notes included elsewhere in this annual report have been prepared in accordance with gaap . these require the measurement of financial position and operating results in terms of historical dollars , without considering changes in the relative value of money over time due to inflation or recession . unlike many industrial companies , substantially all our assets and liabilities are monetary in nature . as a result , interest rates have a more significant impact on our performance than the effects of general levels of inflation . interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services . however , other operating expenses do reflect general levels of inflation . 68 financial condition story_separator_special_tag roman ; font-size:10pt ; font-style : normal ; text-transform : none ; font-variant : normal ; '' > loan maturity and sensitivity to changes in interest rates replace_table_token_11_th replace_table_token_12_th 71 nonperforming assets the following table presents information regarding nonperforming assets at the dates indicated . story_separator_special_tag nonperforming assets replace_table_token_13_th nonperforming assets ( “ npas ” ) include loans on nonaccrual status , accruing loans 90 or more days past due , restructured loans , other real estate acquired through foreclosure and other repossessed assets . the nonperforming loans at december 31 , 2020 , consisted of 232 separate credits and 158 separate borrowers . we had eight nonperforming loan relationships each with outstanding balances exceeding $ 1.0 million as of december 31 , 2020. of the increase in nonperforming assets , $ 8.7 million was a result of the almena acquisition . there are several procedures in place to assist us in maintaining the overall quality of our loan portfolio . we have established underwriting guidelines to be followed by lenders and we also monitor delinquency levels for any negative or adverse trends . there can be no assurance , however , that our loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general economic conditions . potential problem loans we categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as : current financial information , historical payment experience , credit documentation , public information and current economic trends , among other factors . loans are analyzed individually and classified based on credit risk . consumer loans are considered pass credits unless downgraded due to payment status or reviewed as part of a larger credit relationship . we use the following definitions for risk ratings : pass : loans classified as pass include all loans that do not fall under one of the three following categories . these loans are considered unclassified . special mention : loans classified as special mention have a potential weakness that deserves management 's close attention . if left uncorrected , these potential weaknesses may result in deterioration of the repayment prospects for the loan or of our credit position at some future date . these loans are considered classified . substandard : loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged , if any . loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt . they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected . these loans are considered classified . doubtful : loans classified as doubtful have all the weaknesses inherent in those classified as substandard , with the added characteristic that the weaknesses make collection or liquidation in full , based on currently existing facts , conditions and values , highly questionable and improbable . these loans are considered classified . potential problem loans consist of loans that are performing in accordance with contractual terms , but for which management has concerns about the borrower 's ability to comply with repayment terms because of the borrower 's potential financial difficulties . potential problem loans are assigned a grade of special mention or substandard . at december 31 , 2020 , the company had $ 52.3 million in potential problem loans which were not included in either non-accrual or 90 days past due categories , compared to $ 27.2 million at december 31 , 2019 . 72 the risk category of loans by class of loans is as follows for december 31 , 2020 , and december 31 , 2019. risk category of loans by class replace_table_token_14_th replace_table_token_15_th at december 31 , 2020 , loans considered unclassified decreased to 96.3 % of total loans from 97.4 % of total loans at december 31 , 2019. at december 31 , 2020 , the company had $ 60.9 million , or 2.6 % , of total loans excluding ppp loans participating in the payment deferral program . for additional information see “ note 4 – loans and allowance for loan losses ” in the notes to consolidated financial statements . in accordance with applicable regulation , appraisals or evaluations are required to independently value real estate and , as an important element , to consider when underwriting loans secured in part or in whole by real estate . the value of real estate collateral provides additional support to the borrower 's credit capacity . with respect to potential problem loans , all monitored and under-performing loans are reviewed and evaluated to determine if they are impaired . if we determine that a loan is impaired , then we evaluate the borrower 's overall financial condition to determine the need , if any , for possible write downs or appropriate additions to the allowance for loan losses based on the unlikelihood of full repayment of principal and interest in accordance with the contractual terms or the net realizable value of the pledged collateral . allowance for loan losses please see “ critical accounting policies – allowance for loan losses ” for additional discussion of our allowance policy . 73 in connection with our review of the loan portfolio , risk elements attributable to particular loan types or categories are considered when assessing the quality of individual loans . for additional information see “ note 1 – nature of operations and summary of significant accounting policies ” in the notes to consolidated financial statements . purchased credit impaired loans : please see “ critical accounting policies – allowance for loan losses ” for additional discussion of our purchased credit impaired loans policy . for additional information about our purchased credit impaired loans see “ note 4 – loans and allowance for loan losses ” in the notes to consolidated financial statements . analysis of allowance for loan and lease losses : at december 31 , 2020 , the allowance for loan losses totaled $ 33.7 million , or 1.30 % of total loans . at december 31 , 2019 , the allowance for loan losses aggregated $ 12.2 million , or 0.48 % of total loans .
| we also had an increase in loans classified as held for sale of $ 6.5 million , or 108.9 % , from december 31 , 2019 , to december 31 , 2020. our loan portfolio consists of various types of loans , most of which are made to borrowers located in the wichita , kansas city and tulsa msas , as well as various community markets throughout arkansas , kansas , missouri and oklahoma . although the portfolio is diversified and generally secured by various types of collateral , the majority of our loan portfolio consists of commercial and industrial and commercial real estate loans and a substantial portion of our borrowers ' ability to honor their obligations is dependent on local economic conditions in arkansas , kansas , missouri and oklahoma . as of december 31 , 2020 , there was no concentration of loans to any one type of industry exceeding 10 % of total loans . at december 31 , 2020 , gross total loans were 75.5 % of deposits and 64.9 % of total assets . at december 31 , 2019 , gross total loans were 83.6 % of deposits and 64.9 % of total assets . the organic , or non-acquired , growth in our loan portfolio is attributable to our ability to attract new customers from other financial institutions and overall growth in our markets . our lending staff has been successful in building banking relationships with new customers . several new lenders have been hired in our markets and these employees have been successful in transitioning their former clients and attracting new clients . lending activities originate from the efforts of our lenders with an emphasis on lending to individuals , professionals , small to medium-sized businesses and commercial companies located in the wichita , kansas city and tulsa msas , as well as community markets in arkansas , kansas , missouri and oklahoma . 69 the following table summarizes our loan portfolio by type of loan as of the dates indicated . composition of loan portfolio replace_table_token_10_th commercial and industrial : commercial and industrial loans include loans used to purchase fixed assets , to provide working capital or meet other financing needs of the business . of the $ 142.4 million in growth during 2020 , $
| 13,507 |
the financial information contained within our statements is , to a significant extent , financial information that is based on measures of the financial effects of transactions and events that have already occurred . we use historical loss data and the economic environment as factors , among others , in determining the inherent loss that may be present in our loan and lease portfolio . actual losses could differ significantly from the factors that we use . in addition , gaap itself may change from one previously acceptable method to another method . although the economics of our transactions would be the same , the timing of events that would impact our transactions could change . allowance for loan and lease losses the allowance for loan and lease losses is an estimate of probable credit losses inherent in the company 's credit portfolio that have been incurred as of the balance-sheet date . the allowance is based on two basic principles of accounting : ( 1 ) “ accounting for contingencies , ” which requires that losses be accrued when it is probable that a loss has occurred at the balance sheet date and such loss can be reasonably estimated ; and ( 2 ) the “ receivables ” topic , which requires that losses be accrued on impaired loans based on the differences between the value of collateral , present value of future cash flows or values that are observable in the secondary market and the loan balance . the allowance for loan and lease losses is determined based upon estimates that can and do change when the actual risk , loss events , or changes in other factors , occur . the analysis of the allowance uses a historical loss view as an indicator of future losses and as a result could differ from the actual losses incurred in the future . if the allowance for loan and lease losses falls below that deemed adequate ( by reason of loan and lease growth , actual losses , the effect of changes in risk factors , or some combination of these ) , the company has a strategy for supplementing the allowance for loan and lease losses , over the short-term . for further information regarding our allowance for loan and lease losses , see “ allowance for loan and lease losses activity. ” stock-based compensation the company recognizes compensation expense over the service period in an amount equal to the fair value of all share-based payments which consist of stock options and restricted stock awarded to directors and employees . the fair value of each stock option award is estimated on the date of grant and amortized over the service period using a black-scholes-merton based option valuation model that requires the use of assumptions . critical assumptions that affect the estimated fair value of each award include expected stock price volatility , dividend yields , option life and the risk-free interest rate . the fair value of each restricted award is estimated on the date of award and amortized over the service period . goodwill business combinations involving the company 's acquisition of equity interests or net assets of another enterprise or the assumption of net liabilities in an acquisition of branches constituting a business may give rise to goodwill . goodwill represents the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed . the value of goodwill is ultimately derived from the company 's ability to generate net earnings after the acquisition and is not deductible for tax purposes . a decline in net earnings could be indicative of a decline in the fair value of goodwill and result in impairment . for that reason , goodwill is assessed for impairment at least annually . impairment exists when a reporting unit 's carrying value of goodwill exceeds its fair value . at december 31 , 2015 , the company 's reporting unit had positive equity and the company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of the reporting unit exceeded its carrying value , including goodwill . the qualitative assessment indicated that it was more likely than not that the fair value of the reporting unit exceeded its carrying value , resulting in no impairment . income taxes the company files its income taxes on a consolidated basis with its subsidiaries . the allocation of income tax expense ( benefit ) represents each entity 's proportionate share of the consolidated provision for income taxes . 34 the company accounts for income taxes using the balance sheet method , under which deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the reported amounts of assets and liabilities and their tax bases . deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment . on the consolidated balance sheet , net deferred tax assets are included in accrued interest receivable and other assets . deferred tax assets are reduced by a valuation allowance when , in the opinion of management , it is more likely than not that some or all of the deferred tax assets will not be realized . the company conducted an analysis to assess the need for a valuation allowance at december 31 , 2015 , and determined that no valuation allowance was required . as part of this assessment , all available evidence , including both positive and negative , was considered to determine whether based on the weight of such evidence , a valuation allowance on the company 's deferred tax assets was needed . a valuation allowance is deemed to be needed when , based on the weight of the available evidence , it is more likely than not ( a likelihood of more than 50 percent ) that some portion or all of a deferred tax asset will not be realized . story_separator_special_tag the future realization of the deferred tax asset depends on the existence of sufficient taxable income within the carryback and carry forward periods . the benefit of a tax position is recognized in the financial statements in the period during which , based on all available evidence , management believes it is more likely than not that the position will be sustained upon examination , including the resolution of appeals or litigation processes , if any . tax positions taken are not offset or aggregated with other positions . tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority . the portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination . only tax positions that meet the more-likely-than-not recognition threshold are recognized . the election has been made to record interest expense related to tax exposures in tax expense , if applicable , and the exposure for penalties related to tax exposures in tax expense , if applicable . overview the company recorded net income in 2015 of $ 5,268,000 , an increase of $ 907,000 ( 20.8 % ) from $ 4,361,000 in 2014. diluted earnings per share were $ 0.70 for 2015 and $ 0.54 for 2014. for 2015 , the company realized a return on average equity of 6.03 % and a return on average assets of 0.85 % , as compared to 4.98 % and 0.72 % , respectively , in 2014. net income for 2014 increased $ 1,304,000 ( 42.7 % ) from $ 3,057,000 in 2013. diluted earnings per share for 2013 were $ 0.34. for 2013 , the company realized a return on average equity of 3.38 % and return on average assets of 0.52 % . table one below provides a summary of the components of net income for the years indicated ( dollars in thousands ) : table one : components of net income replace_table_token_4_th * fully taxable equivalent basis ( fte ) under accounting principles generally accepted in the united states of america all share and per share data is adjusted for stock dividends and stock splits . there were no stock dividends or stock splits in 2015 , 2014 or 2013 . 35 during 2015 , total assets of the company increased $ 16,886,000 ( 2.7 % ) from $ 617,754,000 at december 31 , 2014 to $ 634,640,000 at december 31 , 2015. at december 31 , 2015 , net loans totaled $ 289,102,000 , up $ 31,045,000 ( 12.0 % ) from the ending balance of $ 258,057,000 at december 31 , 2014. deposits increased $ 19,997,000 or 3.9 % from $ 510,693,000 at december 31 , 2014 to $ 530,690,000 at december 31 , 2015. shareholders ' equity decreased $ 3,572,000 or 4.0 % from $ 89,647,000 at december 31 , 2014 to $ 86,075,000 at december 31 , 2015. the company ended 2015 with a leverage capital ratio of 11.0 % and a total risk-based capital ratio of 20.6 % compared to a leverage capital ratio of 11.6 % and a total risk-based capital ratio of 22.9 % at the end of 2014. story_separator_special_tag ( 2 ) includes taxable-equivalent adjustments that primarily relate to income on certain loans and securities that is exempt from federal income taxes . the effective federal statutory tax rate was 34 % in 2015 , 2014 and 2013 . ( 3 ) net interest margin is computed by dividing net interest income by total average earning assets . 38 table three : analysis of volume and rate changes on net interest income and expenses year ended december 31 , 2015 over 2014 ( dollars in thousands ) increase ( decrease ) in interest income and expense due to change in : replace_table_token_6_th year ended december 31 , 2014 over 2013 ( dollars in thousands ) increase ( decrease ) in interest income and expense due to change in : replace_table_token_7_th ( 1 ) the average balance of non-accruing loans and leases is immaterial as a percentage of total loans and leases and has been included in net loans and leases . ( 2 ) loan and lease fees of $ 322,000 , $ 307,000 and $ 119,000 for the years ended december 31 , 2015 , 2014 and 2013 , respectively , have been included in the interest income computation . ( 3 ) includes taxable-equivalent adjustments that primarily relate to income on certain loans and securities that is exempt from federal income taxes . the effective federal statutory tax rate was 34 % in 2015 , 2014 and 2013 . ( 4 ) the rate/volume variance has been included in the rate variance . provision for loan and lease losses the company experienced net loan and lease losses of $ 326,000 or 0.12 % of average loans and leases during 2015 compared to net loan and lease recoveries of $ 496,000 or 0.20 % of average loans and leases during 2014. as a result of the improving credit quality over the past several years and a reduction in historical loan loss rates the company did not require any loan or lease loss provision in 2015. as a result of the recoveries in 2014 , the company reduced the allowance for loan and lease losses by recording a negative provision for loan and lease losses of $ 541,000. the level of non-performing loans and leases , which began to increase during the economic cycle of 2007 through 2010 , reached a high of $ 22,571,000 at december 31 , 2010 , but has decreased to $ 1,643,000 at december 31 , 2015. for additional information see the “ nonaccrual , past due and restructured loans and leases.
| this increase in investment income due to rates can be attributed to a slowdown in the mortgage refinance market . as mortgage refinancing slows it also reduces the principal prepayments that the company receives on the mortgage backed securities , which reduces the premium amounts amortized on the bonds . a lower amount of amortized premium results in higher interest income . the volume increase of $ 1,383,000 was primarily from the increase in average loans mentioned above ( $ 1,466,000 ) and partially offset by a decrease in investments ( $ 83,000 ) . when compared to 2014 , average investment securities decreased $ 3,092,000 ( 1.1 % ) from $ 284,436,000 in 2014 compared to $ 281,344,000 in 2015. the fully taxable equivalent interest income component increased from $ 19,170,000 in 2013 to $ 20,235,000 in 2014 , representing a 5.6 % increase . the increase in the fully taxable equivalent interest income for 2014 compared to the same period in 2013 is comprised of two components - rate ( up $ 591,000 ) and volume ( up $ 474,000 ) . the rate increase primarily occurred in the investment portfolio which can be attributed to a slowdown in the mortgage refinance market . as mortgage refinancing slows it also reduces the principal prepayments that the company receives on the mortgage backed securities , which reduces the premium amounts amortized on the bonds . a lower amount of amortized premium results in higher interest income . investment securities added $ 1,211,000 in additional interest income related to rate . the average yield on investments increased from 1.93 % in 2013 to 2.32 % in 2014. the increase in interest income created from the investment portfolio was partially offset by a decrease in rates on the loan balances . the average yield on loans decreased from 5.61 % to 5.37 % and was caused by principal reductions from normal payments and paydowns from loans being loaned out at lower market rates . the volume increase of $ 474,000 was also primarily related to
| 13,508 |
the performance of new stores may vary depending on various factors such as the store opening date , the time of year of a particular opening , the amount of store opening costs , the amount of store occupancy costs and the location of the new store , including whether it is located in a new or existing market . for example , we typically incur higher than normal employee costs at the time of a new store opening associated with set-up and other opening costs . in addition , in response to the interest and excitement generated when we open a new store , the new stores generally experience higher net sales during the initial period of one to three months after which the new store 's net sales will begin to normalize as it reaches maturity within six months of opening , as further discussed below . our planned store expansion will place increased demands on our operational , managerial , administrative and other resources . managing our growth effectively will require us to continue to enhance our inventory management and distribution systems , financial and management controls and information systems . we will also be required to hire , train and retain store management and store personnel which , together with increased marketing costs , can affect our operating margins . a new store typically reaches maturity , meaning the store 's annualized targeted sales volume has been reached , within six months of opening . new stores are included in the comparable store base during the sixteenth full fiscal month following the store 's opening , which we believe represents the most appropriate comparison . we also periodically explore opportunities to relocate a limited number of existing stores to improve location , lease terms , store layout or customer experience . relocated stores typically achieve a level of operating profitability comparable to our company-wide average for existing stores more quickly than new stores . infrastructure investment . our historical operating results reflect the impact of our ongoing investments to support our growth . in the past six fiscal years , we have made significant investments in our business that we believe have laid the foundation for continued profitable growth . we believe that our strengthened management team , new brand identity , upgraded and automated distribution center and enhanced information systems , including our warehouse management and pos systems , enable us to replicate our profitable store format and differentiated shopping experience . in addition , we implemented a merchandise planning system and upgraded our inventory allocation system to better manage inventory for each store and corresponding customer base , and made investments relating to our second distribution center that we opened in the beginning of fiscal year 2020. we expect these infrastructure investments to support our successful operating model over a significantly expanded store base . pricing strategy . we are committed to providing our products at everyday low prices . we value engineer products in collaboration with our suppliers to recreate the “ look ” that we believe our customer wants while eliminating the costly construction elements that our customer does not value . we believe our customer views shopping at home as an in-person experience through which our customer can see and feel the quality of our products and physically assemble a desired aesthetic . this design approach allows us to deliver an attractive value to our customer , as our products are typically less expensive than other branded products with a similar look . we employ a simple everyday low pricing strategy that consistently delivers savings to our customer without the need for extensive promotions , as evidenced by over 80 % of our net sales occurring at full price . our ability to source and distribute products effectively . our net sales and gross profit are affected by our ability to purchase our products in sufficient quantities at competitive prices . while we believe our vendors have adequate capacity to meet our current and anticipated demand , our level of net sales could be adversely affected in the event of constraints in our supply chain , including the inability of our vendors to produce sufficient quantities of some merchandise in a manner that is able to match market demand from our customers , leading to lost sales . recently enacted tariffs could also impact our or our vendors ' ability to source product efficiently or create other supply chain disruptions . while we believe the direct effect of the recently enacted tariffs would not have a material impact on our business due to 37 a combination of supplier negotiations , direct sourcing and strategic price increases , gross profit could be adversely affected if these initiatives are not successful or if new or proposed tariffs are adopted . fluctuation in quarterly results . our quarterly results have historically varied depending upon a variety of factors , including our product offerings , promotional events , store openings and shifts in the timing of holidays , among other things . as a result of these factors , our working capital requirements and demands on our product distribution and delivery network may fluctuate during the year . inflation and deflation trends . our financial results can be expected to be directly impacted by substantial increases in product costs due to commodity cost increases or general inflation , including with respect to freight costs , which could lead to a reduction in our sales as well as greater margin pressure as costs may not be able to be passed on to consumers . to date , changes in commodity prices and general inflation have not materially impacted our business . currently , we are facing inflationary pressure on freight costs , which we believe are being heightened by tariff-related shipment surges and port congestion . in response to increasing commodity prices , freight costs or general inflation , we seek to minimize the impact of such events by sourcing our merchandise from different vendors , changing our product mix or increasing our pricing when necessary . story_separator_special_tag how we assess the performance of our business in assessing our performance , we consider a variety of performance and financial measures . the key measures include net sales , gross profit and gross margin , and selling , general and administrative expenses . in addition , we also review other important metrics such as adjusted ebitda , store-level adjusted ebitda and adjusted net income . net sales net sales are derived from direct retail sales to customers in our stores , net of merchandise returns and discounts . growth in net sales is impacted by opening new stores and increases in comparable store sales . new store openings the number of new store openings reflects the new stores opened during a particular reporting period , including any relocations of existing stores during such period . before we open new stores , we incur pre-opening costs , as described below . the total number of new stores per year and the timing of store openings has , and will continue to have , an impact on our results as described above in “ —trends and other factors affecting our business ” . comparable store sales a store is included in the comparable store sales calculation on the first day of the sixteenth full fiscal month following the store 's opening , which is when we believe comparability is achieved . when a store is being relocated or remodeled , we exclude sales from that store in the calculation of comparable store sales until the first day of the sixteenth full fiscal month after it reopens . in addition , when applicable , we adjust for the effect of the 53rd week . there may be variations in the way in which some of our competitors and other retailers calculate comparable or “ same store ” sales . as a result , data in this report regarding our comparable store sales may not be comparable to similar data made available by other retailers . comparable store sales allow us to evaluate how our store base is performing by measuring the change in period-over-period net sales in stores that have been open for the applicable period . various factors affect comparable store sales , including : · consumer preferences , buying trends and overall economic trends ; · our ability to identify and respond effectively to customer preferences and trends ; 38 · our ability to provide an assortment of high quality and trend-right product offerings that generate new and repeat visits to our stores ; · the customer experience we provide in our stores ; · our ability to source and receive products accurately and timely ; · changes in product pricing , including promotional activities ; · the number of items purchased per store visit ; · weather ; and · timing and length of holiday shopping periods . opening new stores is an important part of our growth strategy . as we continue to pursue our growth strategy , we anticipate that an increasing percentage of our net sales will come from stores not included in our comparable store sales calculation . accordingly , comparable store sales are only one measure we use to assess the success of our growth strategy . gross profit and gross margin gross profit is determined by subtracting cost of sales from our net sales . gross margin measures gross profit as a percentage of net sales . cost of sales consists of various expenses related to the cost of selling our merchandise . cost of sales consists of the following : ( 1 ) cost of merchandise , net of inventory shrinkage , damages and vendor allowances ; ( 2 ) inbound freight and internal transportation costs such as distribution center-to-store freight costs ; ( 3 ) costs of operating our distribution center , including labor , occupancy costs , supplies , and depreciation ; and ( 4 ) store occupancy costs including rent , insurance , taxes , common area maintenance , utilities , repairs and maintenance and depreciation . the components of our cost of sales expenses may not be comparable to other retailers . selling , general and administrative expenses selling , general and administrative expenses ( “ sg & a ” ) consist of various expenses related to supporting and facilitating the sale of merchandise in our stores . these costs include payroll , benefits and other personnel expenses for corporate and store employees , including stock-based compensation expense , consulting , legal and other professional services expenses , marketing and advertising expenses , occupancy costs for our corporate headquarters and various other expenses . sg & a includes both fixed and variable components and , therefore , is not directly correlated with net sales . in addition , the components of our sg & a expenses may not be comparable to those of other retailers . we expect that our sg & a expenses will increase in future periods due to our continuing store growth . in particular , we have expanded our marketing and advertising spend as a percentage of net sales in each of the fiscal years since our initial public offering and expect that marketing and advertising spend will continue to increase as a percentage of net sales in future fiscal years . for fiscal year 2019 , total marketing and advertising expense increased to approximately 3.1 % of net sales . in addition , any increase in future stock option or other stock-based grants or modifications will increase our stock-based compensation expense included in sg & a .
| capital expenditures of $ 357.5 million for the fiscal year ended january 26 , 2019 consisted of $ 310.4 million invested in new store growth and approximately $ 13.0 million invested in the second distribution center with the remaining $ 34.1 million primarily related to investments in information technology , maintenance expenditures and existing stores . net cash used in investing activities was $ 170.3 million for the fiscal year ended january 27 , 2018 compared to $ 62.7 million for the fiscal year ended january 28 , 2017. the $ 107.6 million increase in cash used in investing activities was primarily driven by an increase in net capital expenditures of $ 108.1 million . capital expenditures of $ 232.7 million for the fiscal year ended january 27 , 2018 consisted of $ 206.4 million invested in new store growth with the remaining $ 26.3 million primarily related to investments in information technology , our existing distribution center and existing stores . net cash provided by financing activities net cash provided by financing activities was $ 127.7 million for the fiscal year ended january 26 , 2019 compared to $ 65.2 million for the fiscal year ended january 27 , 2018 , an increase of $ 62.5 million primarily due to a $ 50.0 million increase in borrowings under our term loan and an $ 11.3 million increase in proceeds from the exercise of stock options . net cash provided by financing activities was $ 65.2 million for the fiscal year ended january 27 , 2018 compared to $ 21.3 million for the fiscal year ended january 28 , 2017 , an increase of $ 43.9 million primarily due to a 50 $ 35.5 million increase in net borrowings under our abl facility and $ 10.4 million in proceeds from the exercise of stock options for the fiscal year ended january 27 , 2018. financing obligations in some cases , the assets we lease require construction in order to ready the space for
| 13,509 |
increased expenditures for sales and marketing and product acquisition and development may not yield desired results when expected , or at all . while we have taken steps to control these risks , there are certain risks that may be outside of our control , and there is no assurance that steps we have taken will succeed . seasonality/quarterly results there are no significant seasonal aspects to our business . we can experience fluctuations in net sales as a result of variations in the ordering patterns of our largest customers , which may be driven more by production scheduling and their inventory levels , and less by seasonality . our expenses often do not fluctuate in the same manner as net sales , which may cause fluctuations in operating income that are disproportionate to fluctuations in our revenue . 31 recent acquisitions on february 1 , 2017 , we acquired 100 % interest in fannin ( uk ) limited ( `` fannin '' ) for total consideration of approximately $ 1.5 million . fannin provides infusion therapy consumable products to the healthcare sector in the united kingdom and ireland . on february 3 , 2017 , we acquired 100 % interest in pfizer 's his business for total consideration of approximately $ 260.0 million in cash ( net of estimated working capital adjustments paid at closing ) and the issuance of 3.2 million shares of our common stock . we partially funded the cash portion of the consideration paid with a $ 75 million three-year interest-only seller note . the fair value of the common shares issued to pfizer was determined based on the closing price of our common shares on the issuance date , discounted to reflect a contractual lock-up period whereby pfizer can not transfer the shares , subject to certain exceptions , until the earlier of ( i ) the expiration of pfizer 's services to us in the related transitional services agreement or ( ii ) eighteen months . pfizer also may be entitled up to an additional $ 225 million in cash contingent consideration based on the achievement of performance targets for the combined company for the three years ending december 31 , 2019. on november 29 , 2017 , we acquired 100 % interest in medical australia limited for total consideration of $ 9.0 million . medical australia limited manufactures and distributes quality medical devices and equipment for the healthcare industry . in october 2015 , we acquired excelsior medical corporation 's swabcap disinfecting cap for needlefree iv connectors to enhance our direct and oem infusion therapy product offerings and to open new customer opportunities globally . see note 2 to the consolidated financial statements in part ii , item 8 of this form 10-k for further details of our acquisitions . five-year revolving credit facility ( `` credit facility '' ) on november 8 , 2017 , we entered into a five-year revolving credit facility ( `` credit facility '' ) with various lenders for $ 150 million , with wells fargo bank , n.a . as the administrative agent . the credit facility has an accordion feature that would enable us to increase the borrowing capacity of the credit facility by the greater of ( i ) $ 100 million and ( ii ) 2.00x total leverage ( as defined in our credit facility ) . under the terms of the facility we will be subject to certain financial covenants pertaining to leverage and fixed charge coverage ratios , see below under `` liquidity and capital resources '' for further details . borrowings under the credit facility will bear interest , at our option , based on the base rate plus applicable margin or libor plus an applicable margin , both tied to the leverage ratio in effect . the unused portion of the credit facility will be subject to a per annum commitment fee which is also calculated using the leverage ratio in effect . the credit facility was entered into in order to provide us with flexible funding for future acquisition and operational needs . in connection with the credit facility , for the year ended december 31 , 2017 , we incurred $ 1.4 million in financing costs , which will be amortized to interest expense over the remaining term of the credit facility . see note 12 to the consolidated financial statements in part ii , item 8 of this form 10-k for further information regarding the credit facility . 32 story_separator_special_tag style= '' vertical-align : top ; line-height:120 % ; font-size:7pt '' > tm 2-in-1 hemodynamic monitoring system , which received fda 510 ( k ) clearance during 2016 . 35 restructuring and strategic transaction expenses restructuring and strategic transaction expenses were $ 78.0 million , $ 15.3 million and $ 8.5 million in 2017 , 2016 and 2015 , respectively . restructuring charges in 2017 , restructuring charges were $ 18.8 million . these charges were related to ( i ) severance costs from the reduction in our workforce needed to eliminate duplicative positions created as a result of the his acquisition and ( ii ) we are also in the process of closing our dominican republic manufacturing facilities and have incurred expenses associated with the closure and transfer of assets and production to our costa rica and mexico manufacturing facilities . we have $ 0.9 million in unpaid restructuring charges related to the year-ended december 31 , 2017. in 2016 , restructuring charges were $ 1.0 million . these charges were primarily related to residual expenses for the closure of our slovakian manufacturing facility and we incurred $ 0.2 million related to other restructuring activities . in 2015 , restructuring charges were $ 6.7 million . story_separator_special_tag these charges were related to : ( i ) an agreement with dr. lopez , a member of our board of directors and a former employee in our research and development department , pursuant to which we bought out dr. lopez 's right to employment under his then-existing employment agreement ; ( ii ) the reorganization of our corporate infrastructure , resulting in one-time employee termination benefits and other associated costs ; and ( iii ) a commitment to a plan to sell our slovakia manufacturing facility . strategic transaction and integration expenses in 2017 , we incurred $ 59.2 million in strategic transaction and integration expenses primarily related to our acquisition of the his business . in 2016 , we incurred $ 14.3 million in strategic transaction expenses related to our acquisition of the his business , our second quarter 2016 acquisition of tangent and expenses related to our acquisition of exc . in 2015 , we incurred $ 1.8 million in strategic transaction expenses related to the acquisition of exc . change in fair value of contingent earn-out in 2017 , the fair value revaluation of our his contingent earn-out liability resulted in a loss of $ 8.0 million . gain on sale of building we recognized a gain of $ 1.1 million in 2015 from the sale of one of our buildings in san clemente to dr. lopez , a member of our board of directors . legal settlements during 2015 , we recorded a net settlement charge of $ 1.8 million , less than 1 % of revenues , due to the following claims : an arbitrator ruled on a breach of contract claim between us and a service provider , awarding us a gross settlement of $ 8.8 million . our legal counsel for this matter represented us under a contingency fee agreement . we recorded a settlement award , net of legal fees and costs , of $ 5.3 million ; and an arbitrator ruled on a breach of contract claim between us and a customer , hospira , awarding hospira a settlement and that we pay 75 % of hospira 's legal fees and expenses , resulting in a $ 7.1 million legal settlement charge . impairment of assets held-for-sale during 2016 , we completed the closure of our slovakia manufacturing facility and sold the land and building held-for-sale for $ 3.3 million , net of costs to sell , resulting in an additional impairment loss of $ 0.7 million . 36 during 2015 , our board of directors authorized us to close our vrable , slovakia manufacturing facility . the closure was to enable for greater efficiency of our ensenada , mexico facility . after receiving the board of director 's authorization , we reclassified the assets related to the slovakia facility as held-for-sale , and recorded the value of those assets at the lower of their carrying value or their estimated fair value , less costs to sell , which was based on a third party fair market valuation . as the estimated fair value , less cost to sell was lower than the carrying value of the assets held-for-sale we recorded an impairment charge of $ 4.1 million . bargain purchase gain in 2017 , in connection with the his acquisition , we recognized a bargain purchase gain of $ 70.9 million . the bargain purchase gain represented the excess of the estimated fair market value of the identifiable tangible and intangible assets acquired and liabilities assumed , net of deferred tax liabilities over the total purchase consideration . we determined that the bargain purchase gain was primarily attributable to expected restructuring costs as well as a reduction to the initially agreed upon transaction price caused primarily by revenue shortfalls across all market segments of the his business , negative manufacturing variance due to the drop in revenue and higher operating and required stand up costs , when compared to forecasts of the his business at the time that the purchase price was agreed upon . in 2016 , we recognized a bargain purchase gain of $ 1.5 million in connection with the tangent acquisition . the bargain purchase gain represented the excess of the estimated fair market value of the identifiable tangible and intangible assets acquired and liabilities assumed , net of deferred tax assets over the total purchase consideration . the bargain purchase was driven by our ability to realize acquired deferred tax assets . interest expense interest expense was $ 2.0 million , $ 0.1 million and $ 0.0 million in 2017 , 2016 and 2015 , respectively . in 2017 , the interest expense was related to ( i ) the $ 75 million seller note from pfizer as part of the his business acquisition and ( ii ) the per annum commitment fee charged on the unused portion of our revolver under the new five-year $ 150 million credit facility . the three-year interest only seller note bore interest based on the london interbank offered rate ( `` libor '' ) plus ( i ) 2.25 % per year for the first 12 months , and ( ii ) 2.50 % per annum thereafter . on november 8 , 2017 , we fully repaid the $ 75 million in outstanding principal under the senior note payable to pfizer . the per annum commitment fee is based on consolidated total leverage ratio in effect and can range between 0.15 % to 0.30 % on the unused portion of the credit facility . other ( expense ) income other ( expense ) income was $ ( 2.5 ) million , $ 0.9 million and $ 1.2 million in 2017 , 2016 and 2015 , respectively . income taxes income taxes were accrued at an estimated annual effective tax rate of ( 34 % ) , 26 % and 35 % in 2017 , 2016 and 2015 , respectively .
| infusion systems the following table summarizes our total infusion systems revenue ( in millions , except percentages ) : replace_table_token_12_th * not applicable the infusion systems revenue is a result of the acquisition of the his business . the year-to-date revenue represents approximately eleven months of revenue from the point of closing of the transaction to the end of the current year . critical care the following table summarizes our total critical care revenue ( in millions , except percentages ) : replace_table_token_13_th in 2017 , critical care revenue , as compared to 2016 , slightly decreased due to timing of orders . in 2016 , critical care revenue decreased , as compared to 2015 , due to temporary production constraints that impacted the first part of 2016. revenue from deferred close entities as part of the his business acquisition , the closing of certain foreign jurisdictions were deferred , as such , we entered into a net economic benefit agreement with pfizer ( see note 2 to the consolidated financial statements in part ii , item 8 of this form 10-k for additional information ) . the revenue data related to these deferred closing entities is not available by product line , therefore our revenue by product line above does not include amounts related to these entities for the year ended december 31 , 2017. the following table summarizes our revenue from our deferred close entities ( in millions ) : replace_table_token_14_th * not meaningful . 34 gross margins gross margins for 2017 , 2016 and 2015 were 33.0 % , 53.1 % , and 52.9 % , respectively . the decrease in gross margin in 2017 , as compared to 2016 , was primarily due to the integration of his , which has historically had lower gross margins than our legacy business . additionally , there was an impact of approximately five percentage points related to the step-up of inventory from our purchase accounting and also a temporary negative impact on absorption due to our planned inventory reduction . the 20 basis point increase in gross margin in 2016 , as compared to 2015 , was primarily due to favorable foreign exchange
| 13,510 |
333-221533 ) , as filed with the sec on november 27 , 2017 ) 3.2 bylaws of the company ( incorporated herein by reference to exhibit 3.2 to the company 's registration statement on form s-1 ( file no . 333-221533 ) , as filed with the sec on november 27 , 2017 ) 10.1+ limited liability company operating agreement of odonate holdings , llc ( incorporated herein by reference to exhibit 10.1 to the company 's annual report on form 10-k ( file no . 001-38318 ) , as filed with the sec on february 14 , 2018 ) 10.2+ odonate therapeutics , inc. 2017 stock option plan ( incorporated herein by reference to exhibit 10.2 to the company 's annual report on form 10-k ( file no . 001-38318 ) , as filed with the sec on february 14 , 2018 ) 10.3+ form of stock option award ( incorporated herein by reference to exhibit 10.3 to the company 's annual report on form story_separator_special_tag financial condition and results of operations you should read the following discussion and analysis of our financial condition and results of operations together with our audited financial statements and the related notes and other financial information included elsewhere in this annual report on form 10-k. some of the information contained in this discussion and analysis or elsewhere in this annual report on form 10-k , including information with respect to our plans and strategy for our business , include forward-looking statements that involve risks and uncertainties . you should review the “ risk factors ” set forth in this annual report on form 10-k for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . overview we are a pharmaceutical company dedicated to the development of best-in-class therapeutics that improve and extend the lives of patients with cancer . our initial focus is on the development of tesetaxel , an investigational , orally administered chemotherapy agent that belongs to a class of drugs known as taxanes , which are widely used in the treatment of cancer . tesetaxel has several pharmacologic properties that make it unique among taxanes , including : oral administration with a low pill burden ; a long ( ~8-day ) terminal plasma half-life in humans , enabling the maintenance of adequate drug levels with relatively infrequent dosing ; no history of hypersensitivity ( allergic ) reactions ; and significant activity against chemotherapy-resistant tumors . in patients with metastatic breast cancer , tesetaxel was shown to have significant , single-agent antitumor activity in two multicenter , phase 2 studies . we are conducting a multinational , multicenter , randomized , phase 3 study in patients with locally advanced or metastatic breast cancer , known as contessa , and we expect to report top-line results from this study in 2020. our goal for tesetaxel is to develop an effective chemotherapy choice for patients that provides quality-of-life advantages over current alternatives . story_separator_special_tag until december 31 , 2023 unless , prior to that time , we : ( i ) have more than $ 1.07 billion in annual gross revenue ; ( ii ) have a market value for our common stock held by non-affiliates of more than $ 700 million as of the last day of our second quarter of any year ; or ( iii ) issue more than $ 1.0 billion of non-convertible debt over a three-year period . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of financial condition and results of operations is based on our audited financial statements , which have been prepared in accordance with generally accepted accounting principles in the u.s. ( “ gaap ” ) . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported expenses during the reporting periods . these items are monitored and analyzed by us for 59 changes in facts and circumstances , and material changes in these estimates could occur in the future . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances , the results of whi ch form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . changes in estimates are reflected in reported results for the period in which they become known . actual results may differ materially from these estimates under different assumptions or conditions . while our significant accounting policies are more fully described in the notes to our audited financial statements elsewhere in this annual report on form 10-k , we believe that the following accounting policies related to accrued expenses and equity-based compensation are most critical to understanding and evaluating our reported financial results . accrued expense s as part of the process of preparing our financial statements , we are required to estimate our accrued expenses . this process involves reviewing open contracts and purchase orders , communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost . the majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met . story_separator_special_tag we make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time . we periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary . examples of estimated accrued expenses include costs associated with conducting our development and regulatory activities , including fees paid to third-party professional consultants and service providers , and costs to develop and manufacture clinical study materials . we base our accrued expenses on our estimates of the services received and efforts expended pursuant to our contractual arrangements . the financial terms of these agreements are subject to negotiation , vary from contract to contract and may result in uneven payment flows . there may be instances in which payments made to our service providers will exceed the level of services provided and result in a prepayment of the expense . in accruing service fees , we estimate the time period over which services will be performed and the level of effort to be expended in each period . if the actual timing of the performance of services or the level of effort varies from our estimate , we adjust the accrual or prepayment accordingly . although we do not expect our estimates to be materially different from amounts actually incurred , if our estimates of the status and timing of services performed differs from the actual status and timing of services performed , we may report amounts that are too high or too low in any particular period . to date , there have been no material differences from our estimates to the amount actually incurred . equity-based compensation expense equity-based compensation expense represents the grant-date fair value of employee awards recognized over the requisite service period of the awards ( usually the vesting period ) on a straight-line basis . we account for awards to non-employees using the fair value approach . non-employee awards are subject to periodic revaluation over their vesting terms . following the conversion , we adopted the odonate therapeutics , inc. 2017 stock option plan ( the “ 2017 plan ” ) in order to grant stock options to our employees , officers , directors and consultants . recipients of stock options are eligible to purchase shares of our common stock at an exercise price equal to the fair market value of such stock on the date of grant . the maximum term of options granted under the 2017 plan is 10 years . the options generally vest over a 4-year period from either the date of grant or the commencement of service . 60 following the conversion , we adopted the odonate therapeutics , inc. 2017 employee stock purchase plan ( the “ espp ” ) in order to provide a means for eligible employees to accumulate shares of our commo n stock over time through regular payroll deductions . under the espp , eligible employees may purchase shares of our common stock twice per month at a price equal to 85 % of the closing price of our common stock on the date of each purchase . eligible employe es purchasing shares under the espp are subject to an annual cap equal to the lesser of $ 25,000 or 10 % of the employee 's annual cash compensation . shares purchased under the espp can not be sold for a period of one year following the purchase date ( or such shorter period of time if the participating employee 's employment terminates before this one-year anniversary ) . prior to the conversion , we , through odonate management holdings , llc ( “ management holdings ” ) , issued an aggregate of 2,931,402 incentive units under the odonate management holdings equity incentive plan ( the “ management plan ” ) . the incentive units were issued to certain of our directors , officers , employees and consultants in consideration for bona fide services provided to us . pursuant to the management plan , the incentive units are considered “ profits interests ” within the meaning of u.s. federal and state tax rules . incentive units do not entitle their holders to receive distributions if we were to be liquidated immediately after the grant . instead , the incentive unitholders are entitled to receive an allocation of a portion of our profits arising after the date of the grant and , subject to vesting conditions , distributions made out of a portion of our profits arising after the grant date of the incentive units . accordingly , the financial benefits of incentive units to the awardee , and the costs to the issuing company , are substantially similar to a stock option grant . the incentive units generally vest over a 4-year period from either the date of grant or the commencement of service . following the conversion , we have not granted , and will no longer grant , incentive units under the management plan . following the conversion , the outstanding incentive units of management holdings remain outstanding , but represent an indirect interest in shares of our common stock on vesting of the awards . as part of the conversion , the shares of common stock underlying the outstanding incentive units were issued to a newly formed entity , odonate holdings , llc ( “ odonate holdings ” ) . while odonate holdings holds the shares of common stock underlying outstanding incentive units , it has no other operations . in addition , odonate holdings granted us a proxy directing us to vote all shares of common stock underlying outstanding incentive units held by odonate holdings in the same proportion as the votes cast by all other stockholders , which is sometimes called “ mirrored voting. ” in the event that any incentive units in management holdings are forfeited , the shares of common stock underlying such forfeited incentive units will be transferred from
| we expect our general and administrative expense to r emain consistent in the future as we continue to support our research and development of tesetaxel . results of operations the following table summarizes our results of operations for each of the periods below ( in thousands ) : replace_table_token_1_th research and development expense the following table summarizes our research and development expense for each of the periods below ( in thousands ) : replace_table_token_2_th research and development expense was $ 79.9 million and $ 27.9 million for the years ended december 31 , 2018 and 2017 , respectively . the increase of $ 52.0 million was primarily due to increased activities in connection with our tesetaxel clinical development program , resulting in increased clinical development costs of $ 34.4 million , increased personnel and related costs of $ 14.2 million and increased equity-based compensation expense of $ 3.0 million . general and administrative expense the following table summarizes our general and administrative expense for each of the periods below ( in thousands ) : replace_table_token_3_th general and administrative expense was $ 10.8 million and $ 4.8 million for the years ended december 31 , 2018 and 2017 , respectively . the increase of $ 6.0 million was due to increased administrative support costs in connection with our tesetaxel clinical development program , including increased personnel , professional and other general administrative costs of $ 5.5 million and increased equity-based compensation expense of $ 0.5 million . 57 interest income interest income was $ 1.8 million for the year ended december 31 , 2018 and consists of income generated from cash held in savings accounts . no interest income was generated for the year ended december 31 , 2017. liquidity and capital resources as of december 31 , 2018 and 2017 , we had cash in the amount of $ 139.1 million and $ 198.1 million , respectively . we believe that our existing cash as of december 31 , 2018 will be sufficient to meet our anticipated cash requirements through at least one year from the date this annual report on form 10-k is filed with the
| 13,511 |
the following table shows our revenues as prime contractor and as subcontractor as a percentage of our total revenues for the following periods : replace_table_token_8_th 33 our prime contract revenues as a percentage of our total revenues increased from 2009 to 2010 largely due to the acquisition of sti , in which we gained access as a prime contractor to the strategic services sourcing ( s3 ) vehicle . our prime contract revenues as a percentage of our total revenues increased from 2008 to 2009 largely due to our receipt of a sole source prime contract award in 2008 to continue and expand our support for the route clearance family of vehicle contracts as well as expansion of our support for mrap vehicles and growth in our cyber security efforts . revenues substantially all of our revenue is derived from services and solutions provided to the federal government or to prime contractors supporting the federal government , including services provided by our employees , our subcontractors and through solutions that include third-party hardware and software that we purchase and integrate as a part of our overall solutions . these requirements may vary from period-to-period depending on specific contract and client requirements . since we earn higher profits from labor services that our employees provide compared with subcontracted efforts and other reimbursable items such as hardware and software purchases for clients , we seek to optimize our labor services on all of our engagements . cost of services cost of services primarily includes direct costs incurred to provide our services and solutions to customers . the most significant portion of these costs are direct labor costs , including salaries and wages , plus associated fringe benefits of our employees directly serving customers , in addition to the related management , facilities and infrastructure costs . cost of services also includes other direct costs , such as the costs of subcontractors and outside consultants and third-party materials , including hardware or software that we purchase and provide to the customer as part of an integrated solution . since we earn higher profits on our own labor services , we expect the ratio of cost of services as a percent of revenues to decline when our labor services mix increases relative to subcontracted labor or third-party materials . conversely , as subcontracted labor or third-party material purchases for customers increase relative to our own labor services , we expect the ratio of cost of services as a percent of revenue to increase . changes in the mix of services and equipment provided under our contracts can result in variability in our contract margins . general and administrative expenses general and administrative expenses include the salaries and wages , plus associated fringe benefits of our employees not performing work directly for clients , and associated facilities costs . among the functions covered by these costs are corporate business development , bid and proposal , contracts administration , finance and accounting , legal , corporate governance and executive and senior management . in addition , we included stock-based compensation , as well as depreciation and amortization expense related to the general and administrative function for the year ended december 31 , 2010. depreciation and amortization expenses include the depreciation of computers , furniture and other equipment , the amortization of third party software we use internally , leasehold improvements and intangible assets . identifiable intangible assets include customer relationships and contract backlogs acquired in business combinations , and are amortized over their estimated useful lives . interest expense interest expense is primarily related to interest expense incurred or accrued under our outstanding borrowings , our 7.25 % senior secured notes and deferred financing charges . interest income interest income is primarily from cash on hand and notes receivable . 34 story_separator_special_tag 2009 , compared to $ 1.87 billion for the same period in 2008. the increase was primarily due to our contracts supporting forward deployments in iraq , afghanistan and other areas around the world and our acquisitions of emerging technologies group , inc. ( etg ) in august 2008 , ewa services , inc. ( ewa ) in november 2008 and ddk in march 2009. revenue growth of $ 171.2 million came from contracts for the installation , sustainment and repair of communication systems and heavily armored vehicles designed to counter or clear mines and ieds , such as the route clearance family of vehicles supporting u.s. army tacom . significant cyber security contracts contributed revenue growth of $ 42.0 million , including $ 13.4 million from contracts transferred through the acquisitions of etg and ddk . the acquisition of ewa contributed a revenue increase of $ 11.6 million . these increases were partially offset by a decline in certain space related work and other . cost of services cost of services increased 6.6 % to $ 1.67 billion for the year ended december 31 , 2009 , compared to $ 1.57 billion for the same period in 2008. the increase in cost of services is primarily due to direct labor , which includes applicable fringe benefits and overhead related to our ied and cyber security contracts and our recent acquisitions of ewa and ddk . as a percentage of revenues , cost of services decreased to 82.6 % for the year 2009 as compared to 83.7 % for the same period in 2008. direct labor costs increased by 8.6 % over the period in 2008 primarily due to growth in staff supporting global logistics and supply chain management and acquisitions . story_separator_special_tag as a percentage of revenues , direct labor costs increased to 38.7 % for the year ended december 31 , 2009 , as compared to 38.5 % for the same period in 2008. other direct costs , which include subcontractors and third party equipment and materials used in the performance of our contracts , increased by 4.9 % over the same period in 2008. the increase in other direct costs was primarily due to an increase in purchases of equipment and materials on our contracts for installation and repair of systems designed to counter or clear mines and ieds . as a percentage of revenues , other direct costs decreased from 45.2 % for the year ended december 31 , 2008 to 43.9 % for the same period in 2009. the decrease of other direct costs as a percentage of revenues can be attributed to the ied programs gradual transition of materials procurement to the government procurement offices . 37 general and administrative expenses general and administrative expenses increased 13.2 % to $ 172.5 million for the year ended december 31 , 2009 , compared to $ 152.3 million for the same period in 2008. as a percentage of revenues , general and administrative expenses increased to 8.5 % from 8.1 % for the years ended december 31 , 2009 and 2008 , respectively . the increase as a percentage of revenues was due to systems and staff requirements needed to support increased demands for materials and services , business development and system improvements costs . we have increased expense for internal compliance monitoring and process improvement costs due to the current trend of amplified government regulation and review . interest expense interest expense decreased to $ 1.1 million for the year ended december 31 , 2009 , compared to $ 4.0 million for the same period in 2008. the decrease in interest expense is due to a decrease in our average outstanding debt balance . our average outstanding debt balance for the year ended december 31 , 2009 was $ 43.9 million as compared to $ 122.3 million for the year ended december 31 , 2008. the interest rate we incur on our credit facility is impacted by changes in the federal funds rate or london interbank offer rate ( libor ) . changes in these lending rates could lead to fluctuations in our interest expense in future periods . interest income interest income decreased $ 0.6 million to $ 0.2 million for the year ended december 31 , 2009 , compared to $ 0.8 million for the same period in 2008. the fluctuation is due to a reduction in the interest rate related to our cash accounts for the year ended december 31 , 2009 , as compared to the same period in 2008. provision for income taxes the provision for income taxes increased $ 7.0 million to $ 66.7 million for the year ended december 31 , 2009 , compared to $ 59.7 million for the same period in 2008. our effective income tax rates were 37.4 % and 39.8 % for the years ended december 31 , 2009 and 2008 , respectively . the decrease in our effective tax rate from december 31 , 2008 was largely due to the impact of deductible gains related to our employee supplemental savings plan . net income net income increased 23.8 % to $ 111.8 million for the year ended december 31 , 2009 , compared to $ 90.3 million for the same period in 2008. the increase is a result of higher revenues and improved margins primarily driven by increased demand for direct labor projects . backlog for the years ended december 31 , 2010 , 2009 and 2008 our backlog was $ 4.9 billion , $ 3.8 billion and $ 4.0 billion , respectively , of which $ 1.6 billion , $ 1.1 billion and $ 1.2 billion , respectively , was funded backlog . backlog represents estimates that we calculate on a consistent basis . for additional information on how we compute backlog , see backlog in item 1. at december 31 , 2010 , sti , s & is and mtcsc contributed approximately $ 1.4 billion in backlog combined . significant wins for the year ended december 31 , 2010 include contracts from : the u.s. air force launch and range systems wing ( lrsw ) to provide systems engineering and integration services to support current and future space launch operations ; the u.s. army to provide base expeditionary target surveillance systems-combined ( betss-c ) operators and related support services in iraq ; 38 the department of homeland security to provide program management office support services ( pmoss ) in support of the secure border initiative ( sbi ) effort ; the federal bureau of investigation ( fbi ) to provide cyber security services , including intrusion detection monitoring , security engineering , cyber threat analysis , vulnerability assessment and penetration testing ; the u.s. army to provide integrated logistics support services for elevated sensors systems in south west asia ; the u.s. navy naval warfare centers to provide engineering , programmatic , training and technical support services ; and the u.s. army to provide expeditionary cellular communications service ( eccs ) in afghanistan . effects of inflation inflation and uncertainties in the macroeconomic environment , such as conditions in the financial markets , could impact our labor rates beyond the predetermined escalation factors . however , we generally have been able to price our contracts in a manner to accommodate the rates of inflation experienced in recent years . under our time-and-materials contracts , labor rates are usually adjusted annually by predetermined escalation factors . our cost-reimbursable contracts automatically adjust for changes in cost . under our fixed-price contracts , we include a predetermined escalation factor , but generally , we have not been adversely affected by near-term inflation . purchases of equipments and materials directly for contracts are usually cost-reimbursable . in addition , inflation or inflationary concerns could prompt the federal reserve to begin increasing the federal funds rate .
| as a percentage of revenues , cost of services increased to 84.8 % for the year 2010 as compared to 82.6 % for the same period in 2009. direct labor costs , which include applicable fringe benefits and overhead , increased 15.9 % over the period in 2009 primarily due to growth in staff supporting global logistics , supply chain management and isr programs , as well as our acquisitions . as a percentage of revenues , direct labor costs decreased to 34.8 % for the year ended december 31 , 2010 , as compared to 38.7 % for the same period in 2009. the decrease in direct labor as a percentage of revenue is primarily due to the relative mix of direct labor and other direct costs . other direct costs , which include subcontractors and third party equipment and materials used in the performance of 35 our contracts , increased by 46.9 % over the same period in 2009. the increase in other direct costs was primarily due to subcontractors related to sti contracts . as a percentage of revenues , other direct costs increased from 43.9 % for the year ended december 31 , 2009 to 50.0 % for the same period in 2010. the increase of other direct costs as a percentage of revenues is primarily due to the relative mix of direct labor and other direct costs . we expect cost of services in fiscal year 2011 to be relatively consistent with 2010 as a percentage of revenues . general and administrative expenses general and administrative expenses increased 4.5 % to $ 180.3 million for the year ended december 31 , 2010 , compared to $ 172.5 million for the same period in 2009. the increase is primarily due to the amortization of intangible assets from our acquisitions . as a percentage of revenues , general and administrative expenses decreased to 6.9 % from 8.5 % for the years ended december 31 , 2010 and 2009 , respectively due to the leveraging of our general and administrative expense over a
| 13,512 |
corporate services , eliminations and other — in addition to operating in our principal operating segments described above , our “ corporate services , eliminations and other ” category includes non-operating activity , certain inter-segment eliminations and the cost of providing corporate and other administrative services to the operating segments , including most share-based compensation expense . these services are not directly identifiable with our reportable operating segments . opportunities and challenges our expansion plans and opportunities are focused on eight primary areas : increasing the number of atms in our independent atm networks ; increasing transactions processed on our network of owned and operated atms and pos devices ; signing new outsourced atm and pos terminal management contracts ; expanding value added services in our eft processing segment , including the sale of dcc services to banks and retailers ; expanding our epay processing network and portfolio of electronic payment products ; expanding our money transfer services , cross-currency payments products and bill payment network ; expanding our cash management solutions and foreign currency risk management services ; and developing our credit and debit card outsourcing business . eft processing segment — the continued expansion and development of our eft processing segment business will depend on various factors including , but not necessarily limited to , the following : the impact of competition by banks and other atm operators and service providers in our current target markets ; the demand for our atm outsourcing services in our current target markets ; our ability to develop products or services , including value added services , to drive increases in transactions and revenues ; the expansion of our various business lines in markets where we operate and in new markets ; our entry into additional card acceptance and atm management agreements with banks ; our ability to obtain required licenses in markets we intend to enter or expand services ; our ability to enter into and renew atm network cash supply agreements with financial institutions ; the availability of financing for expansion ; our ability to efficiently install atms contracted under newly awarded outsourcing agreements ; our ability to renew existing contracts at profitable rates ; our ability to maintain pricing at current levels or mitigate price reductions in certain markets ; 40 the impact of reductions in atm interchange fees ; our ability to expand and sign additional customers for the cross-border merchant processing and acquiring business ; and the continued development and implementation of our software products and their ability to interact with other leading products . we consistently evaluate and add prospects to our list of potential atm outsource customers . however , we can not predict the increase or decrease in the number of atms we manage under outsourcing agreements because this depends largely on the willingness of banks to enter into outsourcing contracts with us . due to the thorough internal reviews and extensive negotiations conducted by existing and prospective banking customers in choosing outsource vendors , the process of entering into or renewing outsourcing agreements can take several months . the process is further complicated by the legal and regulatory considerations of local countries . these agreements tend to cover large numbers of atms , so significant increases and decreases in our pool of managed atms could result from acquisition or termination of one or more of these management contracts . therefore , the timing of both current and new contract revenues is uncertain and unpredictable . software products are an integral part of our product lines , and our investment in research , development , delivery and customer support reflects our ongoing commitment to an expanded customer base . epay segment — the continued expansion and development of the epay segment business will depend on various factors , including , but not necessarily limited to , the following : our ability to maintain and renew existing agreements , and to negotiate new agreements in additional markets with mobile operators , digital content providers , agent financial institutions and retailers ; our ability to use existing expertise and relationships with mobile operators , digital content providers and retailers to our advantage ; the continued use of third-party providers such as ourselves to supply electronic processing solutions for existing and additional digital content ; the development of mobile phone networks in the markets in which we do business and the increase in the number of mobile phone users ; the overall pace of growth in the prepaid mobile phone and digital content market , including consumer shifts between prepaid and postpaid services ; our market share of the retail distribution capacity ; the development of new technologies that may compete with pos distribution of prepaid mobile airtime and other products ; the level of commission that is paid to the various intermediaries in the electronic payment distribution chain ; our ability to fully recover monies collected by retailers ; our ability to add new and differentiated products in addition to those offered by mobile operators ; our ability to develop and effectively market additional value added services ; our ability to take advantage of cross-selling opportunities with our eft processing and money transfer segments , including providing money transfer services through our distribution network ; and the availability of financing for further expansion . in all of the markets in which we operate , we are experiencing significant competition which will impact the rate at which we may be able to grow organically . competition among prepaid mobile airtime and digital content distributors results in the increase of commissions paid to retailers and increases in retailer attrition rates . to grow , we must decrease our reliance on prepaid mobile top up , capture market share from distribution of other digital content , offer a superior product offering and demonstrate the value of a global network . story_separator_special_tag in certain markets in which we operate , many of the factors that may contribute to rapid growth ( growth in electronic payment products , expansion of our network of retailers and access to mobile operators ' and other content providers ' products ) remain present . 41 money transfer segment — the continued expansion and development of our money transfer segment business will depend on various factors , including , but not necessarily limited to , the following : the continued growth in worker migration and employment opportunities ; the mitigation of economic and political factors that have had an adverse impact on money transfer volumes , such as changes in the economic sectors in which immigrants work and the developments in immigration policies in the countries in which we operate ; the continuation of the trend of increased use of electronic money transfer and bill payment services among high-income individuals , immigrant workers and the unbanked population in our markets ; our ability to maintain our agent and correspondent networks ; our ability to offer our products and services or develop new products and services at competitive prices to drive increases in transactions ; the development of new technologies that may compete with our money transfer network ; the expansion of our services in markets where we operate and in new markets ; our ability to strengthen our brands ; our ability to fund working capital requirements ; our ability to recover from agents funds collected from customers and our ability to recover advances made to correspondents ; our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or plan to operate ; our ability to take advantage of cross-selling opportunities with our epay segment , including providing prepaid services through our stores and agents worldwide ; our ability to leverage our banking and merchant/retailer relationships to expand money transfer corridors to europe , asia and africa , including high growth corridors to central and eastern european countries ; the availability of financing for further expansion ; the ability to maintain banking relationships necessary for us to service our customers ; our ability to successfully expand our agent network in europe using our payment institution licenses under the payment services directive and in the united states ; and our ability to provide additional value-added products under the xe brand . the accounting policies of each segment are the same as those referenced in the summary of significant accounting policies ( see note 3 , summary of significant accounting policies and practices , to the consolidated financial statements ) . for all segments , our continued expansion may involve additional acquisitions that could divert our resources and management time and require integration of new assets with our existing networks and services . our ability to effectively manage our growth has required us to expand our operating systems and employee base , particularly at the management level , which has added incremental operating costs . an inability to continue to effectively manage expansion could have a material adverse effect on our business , growth , financial condition or results of operations . inadequate technology and resources would impair our ability to maintain current processing technology and efficiencies , as well as deliver new and innovative services to compete in the marketplace . 42 segment revenues and operating income for the years ended december 31 , 2016 , 2015 and 2014 replace_table_token_7_th story_separator_special_tag increase in salaries and benefits was primarily attributable to additional headcount to support an increase in the number of atms and pos devices under management . as a percentage of revenues , these costs decreased slightly to 11.2 % for 2016 from 12.0 % for 2015 , primarily due to growth in revenues earned from dcc and other value added service transactions on our atms under management , which require minimal incremental support costs . selling , general and administrative selling , general and administrative expenses for 2016 were $ 30.4 million , an increase of $ 4.6 million or 18 % as compared to 2015 . the increase was primarily due to the additional support costs as a result of the increase in the number of atms under management . as a percentage of revenues , these expenses decreased to 6.5 % for 2016 from 6.8 % for 2015 . depreciation and amortization depreciation and amortization expense increased $ 8.3 million for 2016 compared to 2015 . the increase was primarily attributable to the deployment of additional atms , including more expensive cash recycling atms , and software assets . as a percentage of revenues , depreciation and amortization expense was essentially flat at 8.6 % for 2016 and 8.4 % for 2015 . operating income eft processing segment operating income for 2016 was $ 117.2 million , an increase of $ 22.8 million or 24 % as compared to 2015 . operating income for 2016 increased primarily due to higher revenues from the additional number of atms under management and growth in revenues earned from dcc and other value added service transactions . operating income as a percentage of revenues ( “ operating margin ” ) was 25.2 % for 2016 compared to 24.9 % for 2015 . operating income per transaction remained at $ 0.06 for 2016 and 2015 . operating margin and operating income per transaction were essentially flat for 2016 when compared to 2015. this is primarily attributable to higher operating revenues , partially offset by low margin atm transactions in india and higher costs incurred to support the additional atms under management . 46 2015 compared to 2014 the following table summarizes the results of operations for our eft processing segment for the years ended december 31 , 2015 and 2014 : replace_table_token_10_th revenues our revenues for 2015 increased when compared to 2014 , primarily due to an increase in the number of atms and pos devices under management being partially offset by the impact of the u.s. dollar strengthening against key foreign currencies .
| net income attributable to euronet for 2016 , 2015 and 2014 was $ 174.4 million , or $ 3.23 per diluted share , $ 98.8 million , or $ 1.83 per diluted share , and $ 101.6 million , or $ 1.89 per diluted share , respectively . impact of changes in foreign currency exchange rates our revenues and local expenses are recorded in the functional currencies of our operating entities , and then are translated into u.s. dollars for reporting purposes ; therefore , amounts we earn outside the u.s. are negatively impacted by a stronger u.s. dollar and positively impacted by a weaker u.s. dollar . considering the results by country and the associated functional currency , our 2016 consolidated operating income was not significantly influenced by the changes in foreign currency exchange rates when compared to 2015 . we estimate that our reported consolidated operating income for 2015 was 14 % less due to changes in foreign currency exchange rates when compared to 2014 . if significant , in our discussion we will refer to the impact of fluctuations in foreign currency exchange rates in our comparison of operating segment results . to provide further perspective on the impact of foreign currency exchange rates , the following table shows the changes in values relative to the u.s. dollar during 2016 , 2015 and 2014 , of the currencies of the countries in which we have our most significant operations : 43 replace_table_token_8_th _ n/m - not meaningful . 44 comparison of operating results for the years ended december 31 , 2016 , 2015 and 2014 - by operating segment eft processing segment the following table summarizes the results of operations for our eft processing segment for the years ended december 31 , 2016 and 2015 : replace_table_token_9_th revenues eft processing segment total revenues for 2016 were $ 464.3 million , an increase of $ 84.7 million or 22 % as compared to 2015 . the
| 13,513 |
net revenue increased to $ 258.5 million , an increase of $ 4.4 million , from $ 254.1 million in 2015. our audience shares remain strong in the nation 's most densely populated hispanic markets , and we be lieve we are well positioned to benefit as the u.s. hispanic market continues to expand and advertisers increasingly recognize the importance of reaching our target audience . net revenue for our television segment increased to $ 159.5 million in 2016 , from $ 159.1 million in 2015. this increase of $ 0.4 million was primarily due to due to an increase in political revenue , which was not material in 2015 , and an increase in national advertising revenue . this increase was partially offset by a decrease of approximately $ 10.5 million of revenue associated with television station channel modifications made by the company in order to accommodate the operations of a telecommunications operator in 2015 , which did not recur in 2016. we generated a total of $ 29.6 million and $ 27.9 million in retransmission consent revenue in 2016 and 2015 , respectively . we anticipate that retransmission consent revenue for the full year 2017 will be greater than it was for the full year 2016 and will continue to be a growing source of net revenues in future periods . net revenue for our radio segment decreased to $ 75.8 million in 2016 , from $ 76.2 million in 2015. this decrease of $ 0.4 million was primarily due to a decrease in local advertising revenue , partially offset by an increase in political advertising revenue , which was not material in 2015. net revenue for our digital media segment increased to $ 23.1 million in 2016 , from $ 18.9 million in 2015. the increase was primarily attributable to increases in local and national advertising revenue . fcc auction for broadcast spectrum the fcc recently completed the reverse auction for broadcast spectrum , which resulted in anticipated proceeds of approximately $ 264 million for us . the anticipated proceeds reflect the fcc 's acceptance of one or more bids placed by us during the auction to modify and or relinquish spectrum usage rights for certain of our television stations . we do not expect that the modification and or relinquishment of the spectrum usage rights will result in material changes in our operations or results . proceeds are expected to be received in the second half of 2017. for a more complete discussion of the fcc auction , please see “ item 1. business – regulation of television and radio broadcasting ” above . relationship with univision substantially all of our television stations are univision- or unimás-affiliated television stations . our network affiliation agreements with univision provide certain of our owned stations the exclusive right to broadcast univision 's primary network and unimás network programming in their respective markets . these long-term affiliation agreements each expire in 2021 , and can be renewed for multiple , successive two-year terms at univision 's option , subject to our consent . under our univision network affiliation agreement , we retain the right to sell approximately six minutes per hour of the available advertising time on univision 's primary network , subject to adjustment from time to time by univision , but in no event less than four minutes . under our unimás network affiliation agreement , we retain the right to sell approximately four and a half minutes per hour of the available advertising time on the unimás network , subject to adjustment from time to time by univision . under the network affiliation agreements , univision acts as our exclusive third-party sales representative for the sale of national advertising on our univision- and unimás-affiliate television stations , and we pay certain sales representation fees to univision relating to sales of all advertising for broadcast on our univision- and unimás-affiliate television stations . we also generate revenue under two marketing and sales agreements with univision , which give us the right through 2021 to manage the marketing and sales operations of univision-owned unimás and univision affiliates in six markets – albuquerque , boston , denver , orlando , tampa and washington , d.c. in august 2008 , we entered into a proxy agreement with univision pursuant to which we granted to univision the right to negotiate the terms of retransmission consent agreements for our univision- and unimás-affiliated television station signals for a term of six years , which expired in december 2014 , and which univision and we have extended from time-to-time , most recently through march 31 , 2017. among other things , the proxy agreement provides terms relating to compensation to be paid to us by univision with respect to retransmission consent agreements entered into with mvpds . during the years ended december 31 , 2016 and 2015 , retransmission consent revenue accounted for approximately $ 29.6 million and $ 27.9 million , respectively . the term of the proxy agreement extends with respect to any mvpd for the length of the term of any retransmission consent agreement in effect before the expiration of the proxy agreement . we have entered into multiple short-term extensions of the proxy agreement since its december 2014 expiration , and it is our current intention to negotiate with univision one or more further extensions of the current proxy agreement or a new proxy agreement ; however , no assurance can be given regarding the terms of any such extension or new agreement or that any such extension or new agreement will be entered into . 43 univision currently owns approximately 10 % of our common stock on a fully-converted basis . our class u common stock held by univision has limited voting rights and does not include the right to elect directors . story_separator_special_tag as the holder of all of our issued and outstanding class u common stock , so long as univision holds a certain number of shares , we may not , without the consent of univision , merge , consolidate or enter into another business combination , dissolve or liquidate our company or dispose of any interest in any federal communications commission , or fcc , license for any of our univision-affiliated television stations , among other things . ea ch share of class u common stock is automatically convertible into one share of class a common stock ( subject to adjustment for stock splits , dividends or combinations ) in connection with any transfer to a third party that is not an affiliate of univision . acquisitions and dispositions on june 18 , 2014 , we completed the acquisition of 100 % of the common stock of pulpo , a leading provider of digital advertising services and solutions focused on hispanics in the u.s. and mexico . we acquired pulpo in order to acquire an additional digital media platform that we believe will enhance our offerings to the u.s. hispanic market . the transaction was funded from the cash on hand , for an aggregate cash consideration of $ 15.0 million , net of cash acquired of $ 0.7 million , and contingent consideration with a fair value of $ 1.4 million as of the acquisition date . the fair value of the contingent consideration recognized on the acquisition date was estimated by applying the real options approach . the following is a summary of the purchase price allocation for the acquisition of pulpo ( in millions ) : accounts receivable $ 1.6 prepaids and other assets 0.1 property and equipment 0.5 intangible assets subject to amortization 3.4 goodwill 14.1 current liabilities ( 1.8 ) deferred income taxes ( 1.5 ) the acquisition of pulpo includes a contingent consideration arrangement that requires additional consideration to be paid by us to pulpo if certain annual performance benchmarks are achieved over a three-year period . any such additional consideration is payable 90 days after each fiscal year end beginning december 31 , 2014. the range of the total undiscounted amounts that we could pay under the contingent consideration agreement over the three-year period is between $ 0 and $ 3.0 million . as of december 31 , 2014 , we determined that pulpo was less likely to earn the full amount of the contingent consideration for the years 2015 and 2016. therefore , we adjusted the fair value of the contingent consideration in the fourth quarter of 2014 to $ 1.3 million . performance targets were achieved for the year ended december 31 , 2014 , and , accordingly , a payment of $ 1.0 million was made to the sellers in the first quarter of 2015. in the second quarter of 2015 , we determined that pulpo was not likely to earn any amount of the contingent consideration for the fiscal year 2015. therefore , we adjusted the fair value of the contingent consideration in the second quarter of 2015 to $ 0.1 million . in the fourth quarter of 2015 , we determined that pulpo was not likely to earn any amount of the contingent consideration for the fiscal year 2016. therefore , we further adjusted the fair value of the contingent consideration in the fourth quarter of 2015 to $ 0. the adjustments are included in corporate expense in the accompanying consolidated statements of operations . the fair value of the assets acquired includes trade receivables of $ 1.6 million . the gross amount due under contract is $ 1.7 million , of which $ 0.1 million is expected to be uncollectable . the goodwill , which is not expected to be deductible for tax purposes , is assigned to the digital media segment and is attributable to pulpo 's workforce and expected synergies from combining pulpo 's operations with ours . pro forma results of operations for this acquisition have not been presented because the effect of this acquisition was not material to our financial position or results of operations for any of the periods presented . in a strategic effort to focus our resources on strengthening existing clusters and expanding into new u.s. hispanic markets and subject to limitations contained in our 2013 credit agreement , we periodically review our portfolio of media properties and , from time to time , consider divesting assets in markets where we do not see the opportunity to grow to scale and build out media clusters . please see “ liquidity and capital resources ” below . 44 story_separator_special_tag income tax expense or benefit . income tax expense for the year ended december 31 , 2016 was $ 13.1 million or 39 % of our pre-tax income . income tax expense for the year ended december 31 , 2015 was $ 16.4 million or 39 % of our pre-tax income . our management periodically evaluates the realizability of the deferred tax assets and , if it is determined that it is more likely than not that the deferred tax assets are realizable , adjusts the valuation allowance accordingly . valuation allowances are established and maintained for deferred tax assets on a “ more likely than not ” threshold . the process of evaluating the need to maintain a valuation allowance for deferred tax assets and the amount maintained in any such allowance is highly subjective and is based on many factors , several of which are subject to significant judgment calls . based on our analysis we determined that it was more likely than not that our deferred tax assets would be realized . 48 segment operations television net revenue . net revenue in our television segment increased to $ 159.5 million for the year ended december 31 , 2016 from $ 159.1 million for the year ended december 31 , 2015 , an increase of $ 0.4 million .
| the total net leverage ratio , or the ratio of consolidated total debt ( net of up to $ 20.0 million of unrestricted cash ) to trailing-twelve-month consolidated adjusted ebitda , affects both our ability to borrow from our 2013 credit facility and our applicable margin for the interest rate calculation . under our 2013 credit facility , our maximum total leverage ratio may not exceed 6.50 to 1 in the event that the revolving credit facility is drawn . the total leverage ratio was as follows ( in each case as of december 31 ) : 2016 , 3.9 to 1 ; 2015 , 3.9 to 1. therefore , we were in compliance with this covenant at each of those dates . while many in the financial community and we consider consolidated adjusted ebitda to be important , it should be considered in addition to , but not as a substitute for or superior to , other measures of liquidity and financial performance prepared in accordance with accounting principles generally accepted in the united states of america , such as cash flows from operating activities , operating income and net income . as consolidated adjusted ebitda excludes non-cash gain ( loss ) on sale of assets , non-cash depreciation and amortization , non-cash impairment charge , non-cash stock-based compensation expense , net interest expense , other income ( loss ) , gain ( loss ) on debt extinguishment , income tax ( expense ) benefit , equity in net income ( loss ) of nonconsolidated affiliate , non-cash losses and syndication programming amortization and includes syndication programming payments , consolidated adjusted ebitda has certain limitations because it excludes and includes several important non-cash financial line items . therefore , we consider both non-gaap and gaap measures when evaluating our business . consolidated adjusted ebitda is also used to make executive compensation decisions . 46 consolidated adjusted ebitda is a non-gaap measure . the most directly comparable gaap financial measure to consolidated adjusted ebitda is ca sh flows from operating activities . a reconciliation of this non-gaap measure to cash flows from operating activities follows ( in thousands ) : replace_table_token_7_th ( footnotes on preceding page ) year ended december 31 , 2016 compared to year ended december 31 , 2015 consolidated operations net revenue . net revenue increased to $ 258.5 million for the year ended december 31 , 2016 from $ 254.1 million for
| 13,514 |
2014 strategic transactions during 2014 , we completed the following strategic transactions that had an impact and will continue to have an impact on our results of operations : acquisition of euroscan group on march 11 , 2014 , we completed the acquisition of the euroscan group for an aggregate consideration of ( i ) $ 29.2 million , subject to net working capital adjustments and net cash ( on a debt free , cash free basis ) ; ( ii ) issuance of 291,230 shares of the company 's common stock , valued at $ 7.70 per share , which reflected the company 's closing price on the acquisition date ; and ( iii ) additional contingent considerations of up to $ 6.5 million . the acquisition allows us to complement our north american 37 operations in m2m and iot by adding a significant distribution ch annel in europe and other key geographies where euroscan has market share . for additional information regarding the euroscan acquisition , refer to “ note 3 — acquisitions ” in the accompanying “ notes to consolidated financial statements ” in this annual repor t. january 2014 public offering on january 17 , 2014 , we completed a public offering of 6,325,000 shares of common stock including 825,000 shares sold upon full exercise of the underwriters ' over-allotment option at a price of $ 6.15 per share . we received net proceeds of approximately $ 36.6 million after deducting underwriters ' discounts and commissions and offering costs . og2 satellite launch on july 14 , 2014 , we launched six of our og2 satellites aboard a spacex falcon 9 launch vehicle . on september 15 , 2014 , following an in-orbit testing period , we initiated commercial service for the six og2 satellites . the satellites provide both m2m and iot messaging and ais service for our global customers . in june 2015 , we lost communication with one of our og2 satellites . see “ note 6 – satellite network and other equipment , net ” in the accompanying “ notes to consolidated financial statements ” in this annual report for additional information . macquarie credit agreement on september 30 , 2014 , we entered into a credit agreement with macquarie which refinanced our senior notes . pursuant to the credit agreement , the lender provided secured credit facilities in an aggregate amount of $ 160 million comprised of ( i ) an initial term loan facility term loan facility in an aggregate principal amount of up to $ 70 million ; ( ii ) a $ 10 million revolving credit facility ; ( iii ) a term b2 facility in an aggregate principal amount of up to $ 10 million , the proceeds of which were drawn on january 16 , 2015 and used to partially finance the insync acquisition ; and ( iv ) a term b3 facility in an aggregate principal amount of up to $ 70 million , the proceeds of which were drawn on december 30 , 2014 and used to partially finance the skywave acquisition . the secured credit facilities mature five years after the initial fund date of the initial term loan facility , but are subject to mandatory prepayments in certain circumstances . the secured credit facilities will bear interest , at the company 's election , of a per annum rate equal to either ( a ) a base rate plus 3.75 % or ( b ) libor plus 4.75 % , with a libor floor of 1.00 % . proceeds of the initial term loan facility and revolving credit facility were used to repay in full our senior notes and pay certain related fees , expenses and accrued interest , as well as for general corporate purposes . on september 30 , 2014 , in connection with entering into the credit agreement , we issued notice to the holder of the senior notes regarding our election to redeem in full the aggregate $ 45 million principal amount . on october 10 , 2014 we made borrowings of $ 70 million under the initial term loan facility , a portion of which was used to repay in full our senior notes , and $ 10 million under the revolving credit facility . the redemption of the senior notes resulted in an early termination penalty of $ 1.8 million and an additional expense associated with the remaining unamortized debt issuance cost . november 2014 public offering on november 10 , 2014 we completed a public offering of 14,785,714 shares of common stock , including 1,928,571 shares sold upon full exercise of the underwriters ' over-allotment option at a price of $ 5.60 per share . we received net proceeds of approximately $ 78.1 million , after deducting underwriters ' discounts and commissions and offering costs . 2013 strategic transactions during 2013 , we completed the following strategic transactions that had an impact and will continue to have an impact on our results of operations : acquisition of sens on october 1 , 2013 , we completed the sens acquisition for total cash consideration of $ 2.0 million . the acquisition gave us access to a customer base that includes military , international , government and commercial customers , as well as expanded reach in growing regions , such as the middle east , asia and south america . for additional information regarding the sens acquisition , refer to “ note 3 — acquisitions ” in the accompanying “ notes to consolidated financial statements ” in this annual report . 38 acquisition of globaltrak on april 3 , 2013 , we completed the globaltrak acquisition for total consideration of $ 2.9 million , net of a working capital adjustment of $ 0.1 million . the acquisition gave us access to a customer base that includes military , international , government and commercial customers as well as expanded reach in growing regions , such as the middle east , asia and south america . story_separator_special_tag for additional information regarding the globaltrak acquisition , refer to “ note 3 — acquisitions ” in the accompanying “ notes to consolidated financial statements ” in this annual report . acquisition of mobilenet , inc. on april 1 , 2013 , we completed the mobilenet acquisition for total consideration of $ 6.4 million , consisting of cash , shares of common stock and contingent considerations . the acquisition of mobilenet enabled us to offer mobilenet 's complete fleet management solution directly to original equipment manufacturers , dealers and fleet owners . for additional information regarding the mobilenet acquisition , refer to “ note 3 — acquisitions ” in the accompanying “ notes to consolidated financial statements ” in this annual report . revenues we derive service revenues mostly from monthly fees for m2m and iot connectivity services that consist of subscriber-based and recurring monthly usage fees for each subscriber communicator or sim activated for use on our satellite network and the other satellite networks and cellular wireless networks that we resell to our customers ( i.e. , our vars , ivars , sps , dps , international licensees and country representatives and direct customers ) . usage fees are generally based upon the data transmitted by a customer and the overall number of subscriber communicators and sims activated by each customer and whether we provide services through our value-added portal . service revenues are recognized on an accrual basis , as services are rendered , or on a cash basis , if collection from the customer is not reasonably assured at the time the service is provided . in addition , we earn service revenues from extended warranty service agreements extending beyond the initial warranty period of one year , royalty fees from third parties for the use of our proprietary communications protocol charged on a one-time basis for each subscriber communicator connected to our m2m and iot data communications system and fees from providing engineering , technical and management support services to customers . we derive product revenues primarily from sales of complete m2m and iot telematics devices , modems and cellular wireless sims ( for our terrestrial-communication services ) to our resellers ( i.e. , our vars , ivars , sps , dps , international licensees and country representatives ) and direct customers . revenues generated from product revenues are either recognized when the products are shipped or when customers accept the product depending on the specific contractual terms . shipping costs billed to customers are included in product sales revenues and the related costs are included as costs of product sales . amounts received prior to the performance of services under customer contracts are recognized as deferred revenues and revenue recognition is deferred until such time that all revenue recognition criteria have been met . costs and expenses direct costs we operate a 41 leo satellite network and accompanying ground equipment , including fifteen gateway earth stations , three ais data reception earth stations , and three regional gateway control centers . our proprietary satellite-based communications system is typically characterized by high initial capital expenditures and relatively low marginal costs for providing service . we also resell network connectivity for two other satellite networks and seven terrestrial network partners . reselling network connectivity typically involves a cost for each device connected to the network system and the amount paid to each provider will vary . we primarily sell m2m and iot telematics devices and modems that we design and build with contract manufacturers . each m2m and iot device and modem will have engineering costs , manufacturing costs , warehousing and shipping costs and inventory management costs . acquisition-related and integration costs acquisition-related and integration costs include professional services expenses and identifiable integration costs directly attributable to our acquisitions . these costs were expensed as incurred and are reflected in acquisition-related and integration costs on our consolidated statement of operations . 39 operating expenses we incur expenses associated with sales , marketing and administrative expenses related to the operation of our business , including significant charges for depreciation and amortization of our satellite communications system and other acquired intellectual property and intangible assets we acquired or developed . we also incur engineering expenses developing and supporting the operation of our communications system and the development and support of new applications . results of operations for the years ended december 31 , 2015 and 2014 revenue the table below presents our revenues for the years ended december 31 , 2015 and 2014 , together with the percentage of total revenue represented by each revenue category ( in thousands ) : replace_table_token_6_th total revenues for the year ended december 31 , 2015 increased $ 82.1 million , or 85 % , to $ 178.3 million in 2015 from $ 96.2 million in 2014. service revenues year ended december 31 , change ( in thousands ) 2015 2014 dollars % service revenues $ 99,973 $ 59,695 $ 40,278 67.5 % the increase in service revenue for the year ended december 31 , 2015 was primarily due to revenue generated from increases in core service revenues from growth in billable subscriber communicators and by the companies we acquired in 2015. as of december 31 , 2015 , we had approximately 1,569,000 billable subscriber communicators compared to approximately 976,000 billable subscriber communicators as of december 31 , 2014 , an increase of 60.8 % . service revenue growth can be impacted by the customary lag between subscriber communicator activations and recognition of service revenue from these units . product sales year ended december 31 , change ( in thousands ) 2015 2014 dollars % product sales $ 78,320 $ 36,547 $ 41,773 114.3 % the increase in product revenues for the year ended december 31 , 2015 , compared to the prior year period , was primarily attributable to increases in the volume of products sold by our core business , as well as the inclusion of products sold by the companies we acquired .
| cash provided by our operating activities in 2014 was $ 3.2 million resulting from a net loss of $ 4.5 million , offset by non-cash items including $ 10.9 million for depreciation and amortization , $ 0.6 million for a satellite network impairment loss and $ 3.6 million for stock-based compensation . these non-cash items are offset by a decrease of $ 2.1 million in the fair values of acquisitions-related contingent consideration . working capital activities primarily consisted of a net uses of cash of $ 6.9 million for an increase in accounts receivable primarily due to the increase in revenues and timing of payments , $ 5.3 million in inventories , as a result of our increased business activities , and $ 5.4 million from a decrease in accounts payable and accrued expenses primarily related to timing for payments for professional fees . cash provided by our operating activities in 2013 was $ 8.8 million resulting from net income of $ 4.8 million , supplemented by non-cash items including $ 6.0 million for depreciation and amortization and $ 3.0 million for stock-based compensation , offset by a decrease of $ 1.0 million in the fair values of acquisitions-related contingent consideration . working capital activities primarily consisted of net uses of cash of $ 2.7 million for an increase in accounts receivable primarily due to the increase in revenues , $ 1.4 million from a decrease in accounts payable and accrued expenses primarily related to timing for payments for professional fees , and $ 1.0 million from a decrease in deferred revenue primarily related to recognizing prepaid product revenues on the acquisition date of globaltrak into revenues upon customer acceptance . investing activities cash used in our investing activities in 2015 was $ 88.6 million , resulting primarily from $ 141.6 million in cash consideration paid in connection with the skywave , insync and wam acquisitions and capital expenditures of $ 70.0 million , offset , in part , by cash released from escrow for the skywave acquisition of $ 123.0 million . cash used
| 13,515 |
¡ the company evaluates goodwill and other intangible assets . goodwill is recorded at the time of an acquisition and is calculated as the difference between the total consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired . the company tests goodwill and other intangible assets for impairment on an annual basis or more frequently if the company believes indicators of impairment exist . impairment evaluations involve management 's assessment of qualitative factors to determine whether it is more likely than not that goodwill and other intangible assets are impaired . if management concludes from its assessment of qualitative factors that it is more likely than not that impairment exists , then a quantitative impairment test will be performed involving management estimates of asset useful lives and future cash flows . significant management judgment is required in the forecasts of future operating results that are used in these evaluations . if our actual results , or the plans and estimates used in future impairment analyses , are lower than the original estimates used to assess the recoverability of these assets , we could incur additional impairment charges in a future period . the company has recorded no goodwill impairments in fiscal years 2016 , 2015 , and 2014. there were no material intangible asset impairments in fiscal years 2016 , 2015 , and 2014 . ¡ we are subject to the possibility of loss contingencies for various legal matters . see note 13 legal matters of the notes to consolidated financial statements contained in item 8. we regularly evaluate current information available to us to determine whether any accruals should be made based on the status of the case , the results of the discovery process and other factors . if we ultimately determine that page 27 of 80 an accrual should be made for a legal matter , this accrual could have a material effect on our operating results and financial position and the ultimate outcome may be materially different than our estimate . recently issued accounting pronouncements in may 2014 , the financial accounting standards board ( fasb ) issued accounting standards update ( asu ) no . 2014-09 , revenue from contracts with customers ( asc topic 606 ) . the purpose of this asu is to converge revenue recognition requirements per gaap and international financial reporting standards ( ifrs ) . the core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . in august 2015 , the fasb issued asu 2015-14 , revenue from contracts with customers ( topic 606 ) : deferral of the effective date after public comment respondents supported a proposal to delay the effective date of this asu to annual reporting periods beginning after december 15 , 2017 , including interim reporting periods within that reporting period . the company is currently evaluating the impact of this asu . in august 2014 , the fasb issued asu no . 2014-15 , presentation of financial statements going concern ( subtopic 205-40 ) : disclosure of uncertainties about an entity 's ability to continue as a going concern . the amendments in this asu provide guidance in gaap about management 's responsibility to evaluate whether there is substantial doubt about an entity 's ability to continue as a going concern and to provide related footnote disclosures . the amendments are effective for the annual period ending after december 15 , 2016 , and for annual periods and interim periods thereafter . early application is permitted . the company is currently evaluating this asu and expects no material modifications to its financial statements . in april 2015 , the fasb issued asu no . 2015-03 , interest imputation of interest ( subtopic 835-30 ) : simplifying the presentation of debt issuance costs . the amendments in this update require that debt issuance costs related to a recognized debt liability are presented in the balance sheet as a direct deduction from the carrying amount of that debt liability and that the amortization of debt issuance costs is reported as interest expense . asu 2015-03 is to be applied retrospectively and represents a change in accounting principle . in august 2015 , the fasb issued fasb asu no . 2015-15 , interest imputation of interest ( subtopic 835-30 ) : presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements . asu 2015-15 clarified the presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements . debt issuance costs related to a line-of-credit arrangement may be presented in the balance sheet as an asset and subsequently amortized ratably over the term of the arrangement regardless of whether there are any outstanding borrowings . both asu 2015-03 and asu 2015-15 are effective for fiscal years beginning after december 15 , 2015 , including interim periods within those fiscal years . earlier adoption is permitted for financial statements that have not been previously issued . the company is currently evaluating and plans to adopt these asus in the first quarter of fiscal year 2017. in april 2015 , the fasb issued asu no . 2015-04 , compensation retirement benefits ( topic 715 ) : practical expedient for the measurement date of an employer 's defined benefit obligation and plan assets . the asu is part of the fasb 's simplification initiative to reduce complexity in accounting standards . the fasb decided to permit entities to measure defined benefit plan assets and obligations as of the month-end that is closest to their fiscal year-end . an entity is required to disclose the accounting policy election and the date used to measure defined benefit plan assets and obligations in accordance with the amendments in this update . story_separator_special_tag the amendments in this update are effective for public business entities for financial statements issued for fiscal years beginning after december 15 , 2015 , and interim periods within those fiscal years , with earlier application permitted . the company is currently evaluating the likelihood of adoption and expects no material modifications to its financial statements . in july 2015 , asu no . 2015-11 , inventory ( topic 330 ) : simplifying the measurement of inventory was issued . this asu requires companies to subsequently measure inventory at the lower of cost and net realizable value versus the previous lower of cost or market . the amendments in this update are effective for fiscal years beginning after december 15 , 2016 , including interim periods within those fiscal years , to be applied prospectively . early application is permitted . the company is currently evaluating this asu and expects no material modifications to its financial statements as a result . page 28 of 80 in september 2015 , the fasb issued asu no . 2015-16 , business combinations ( topic 805 ) : simplifying the accounting for measurement-period adjustments . this asu requires an acquirer in a business combination to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined . the effect on earnings of changes in depreciation , amortization or other income effects , as a result of the change in provisional amounts , are to be included in the same period 's financial statements , calculated as if the accounting had been completed at the acquisition date . the amendments in this update are effective for fiscal years beginning after december 15 , 2015 , including interim periods within those fiscal years and shall be applied prospectively to adjustments to provisional amounts that occur after the effective date of this asu . earlier application is permitted for financial statements that have not been issued . the company adopted this asu in the fourth quarter of fiscal year 2016 , with no material impact to its financial statements as a result . in november 2015 , the fasb issued asu no . 2015-17 , income taxes ( topic 740 ) : balance sheet classification of deferred taxes . the fasb determined that the current practice of separating deferred tax liabilities and assets into current and noncurrent amounts in the balance sheet resulted in little to no benefit to financial statement users . effective for financial statements issued for annual periods beginning after december 15 , 2016 and interim periods therein , this asu will require that deferred tax liabilities and assets be classified as noncurrent . earlier application is permitted as of the beginning of an interim or annual reporting period and can be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented . the company early adopted this asu on a prospective basis in the fourth quarter of fiscal year 2016. prior periods were not retrospectively adjusted . in february 2016 , the fasb issued asu no . 2016-02 , leases ( topic 842 ) . the fasb issued this update to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key leasing arrangement details . lessees would recognize operating leases on the balance sheet under this asu with the lease payment recognized as a liability , measured at present value , and the right-of-use asset recognized for the lease term . a single lease cost would be recognized over the lease term . for terms less than twelve months , a lessee would be permitted to make an accounting policy election to recognize lease expense for such leases generally on a straight-line basis over the lease term . this asu is effective for fiscal years beginning after december 15 , 2018 , including interim periods within those fiscal years . early adoption is permitted . the company is currently evaluating the impact of this asu . in march 2016 , the fasb issued asu 2016-09 , compensation stock compensation ( topic 718 ) : improvements to employee share-based payment accounting . this asu requires the following : ¡ all excess tax benefits and deficiencies to be recognized as income tax expense / benefit in the income statement and presented as an operating activity in the statement of cash flows ; ¡ forfeitures can be calculated based on either the estimated number of awards that are expected to vest ( current guidance ) or when forfeitures actually occur ; and ¡ cash paid by an employer for directly withheld shares for tax purposes is to be classified as a financing activity within the statement of cash flows . this asu is effective for annual periods beginning after december 15 , 2016 , and interim periods within those annual periods . early adoption is permitted , but all of the described amendments must be adopted in the same period and any adjustments should be reflected as of the beginning of the fiscal year if adopted in an interim period . the company is currently evaluating the impact of this asu . page 29 of 80 overview cirrus logic develops high-precision analog and mixed-signal ics for a broad range of innovative customers . we track operating results in one reportable segment , but report revenue performance by product line , currently portable audio and non-portable audio and other products . in fiscal year 2016 , the company grew its product portfolio with smart codecs , amplifiers and mems microphones and diversified our customer base , while increasing content and share with key customers . the company continued to invest in research and development , with a 36 percent increase over prior year , discussed below . fiscal year 2016 fiscal year 2016 net sales of $ 1.2 billion represented a 28 percent increase over fiscal year 2015 net sales of $ 916.6 million .
| the portable audio products group experienced an increase in net sales attributable to wolfson contributions of $ 83.9 million , as well as significant increases in the sales of certain portable audio products for fiscal year 2014. non-portable audio and other product line sales of $ 176.3 million represented a 16 percent increase from fiscal year 2014 sales of $ 151.6 million , which was attributable to wolfson contributions of $ 14.4 million , a $ 5.6 million increase in custom computer products and a $ 4.6 million increase in dac products for the period . sales to foreign customers , principally located in asia , including sales to u.s.-based customers that manufacture products at plants overseas , were approximately $ 1.1 billion in fiscal year 2016 , $ 869.9 million in fiscal year 2015 , and $ 673.7 million in fiscal year 2014. sales to foreign customers located in asia were 89 percent in net sales in fiscal year 2016 and 92 percent of net sales in fiscal years 2015 and 2014. sales to foreign customers in all other regions represented 4 percent of net sales in fiscal year 2016 and 3 percent of net sales in each of fiscal years 2015 and 2014. our sales are denominated primarily in u.s. dollars . during fiscal year 2015 , we acquired foreign currency hedging contracts related to the acquisition . the contracts expired in fiscal year 2015. no foreign currency hedging contracts were entered into in fiscal year 2016 or 2014. gross margin overall gross margin of 47 percent for fiscal year 2016 reflects an increase from fiscal year 2015 gross margin of 46 percent . the increase was primarily attributable to the absence of the fair market adjustments related to the acquisition discussed below , in the current fiscal year versus prior year . this contributed an approximate 1 % favorable impact to gross margin in fiscal year 2016. changes in excess and obsolete inventory charges , including scrapped inventory , and
| 13,516 |
our business genius brands international , inc. is a global content and brand management company dedicated to providing entertaining and enriching “ content and products with a purpose ” for toddlers to tweens . led by industry veterans andrew heyward ( chief executive officer ) and amy moynihan heyward ( president ) , the company produces original content and licenses the rights to that content to a variety of partners . our licensees include ( i ) companies to which the audio-visual rights are licensed for exhibition in various formats such as pay television , free or broadcast television , video-on-demand ( “ vod ” ) , subscription on demand ( “ svod ” ) , dvds/cds and more and ( ii ) companies that develop and distribute products based on our content within different product categories such as toys , electronics , publishing , home goods , stationary , gifts , and more . 14 the company owns a portfolio of original children 's entertainment that is targeted at toddlers to teens including the award-winning baby genius , warren buffett 's secret millionaires club , thomas edison 's secret lab and stan lee 's mighty 7 , the first project from stan lee comics , llc , a joint venture with legendary stan lee 's pow ! entertainment . in addition to the company 's wholly-owned brands , it also acts as licensing agent for certain brands , leveraging its existing licensing infrastructure to expand these brands into new product categories , new retailers , and new territories . these include the best-selling children 's book series , llama llama ; psycho bunny , a luxury apparel line ; from frank , a humor greeting card and product line ; celessence technologies , the world 's leading microencapsulation company . strategic initiatives during 2014 and 2015 , the company began a series of strategic initiatives to restructure certain areas of business in an effort to operate more profitably in the long run . this included product sales , content distribution , production , and product development : 1 ) during the second quarter of 2014 , the company began phasing out the direct production and sale of physical products including dvds and cds and shifted to a licensing model whereby these functions were outsourced to industry experts and category leaders in their respective industries . on july 14 , 2014 , the company employed stone newman in the newly created position of president – global consumer products to manage all consumer products , licensing and merchandising sales for the company 's brands . 2 ) prior to the third quarter of 2014 , the company utilized an agency to license its content to international television broadcasters , home video , and digital distribution outlets . to exert greater control over the distribution of its expanding portfolio of content , during the second quarter of 2014 , the company formed a new global distribution division and appointed andrew berman to the newly created position of senior vice president - international sales to oversee the division and the appointment of regional agents to represent the company locally in key regions . 3 ) during the third and fourth quarter of 2014 , the company partnered with various pre-production , production , and animation companies to provide services to the company for the production of thomas edison 's secret lab in exchange for a certain percentage of the series ' forthcoming adjusted net revenues and the ability to distribute the series in certain languages in certain territories . this model helps to better manage the company 's cash flows while enabling it to exploit territories that would otherwise be challenging to manage and monetize . the company intends to replicate the model for future productions . 4 ) the infrastructure the company has put in place enables it to efficiently exploit a growing portfolio of brands . the company is actively developing a number of new brands , like space pop , to add to its growing portfolio and consistently looks for existing brands to acquire oract aslicensing agent , as with the best-selling line of books , llama llama which the company recently signed . thecompanyremains focused on brands that lend themselves to interactive exploitation in multiple areas and are consistentwith thecompany 's primary point of differentiation : providing multi-media “ content and products with apurpose ” that entertain and enrich kids . 5 ) consistent with the company 's strategy of securing widespread distribution for its content in a variety of formats and building awareness and engagement for its brands that in turn drives its consumer products business , the company has expanded its successful relationship with comcast beyond the already popular baby genius on-demand offering . the company has announced it launched a new kid genius channel in the fourth quarter of2015 , offering 24-hours of video on-demand content that will be consistent with the company 's `` content and products with a purpose '' mission . the new video on-demand channel will include the company 's own content , in addition to other content the company will curate , to offer a robust line-up for kids . the company 's senior vice president-international sales , andrew berman , will oversee the channel . recent events d istribution agreement with sony pictures home entertainment inc. on february 18 , 2016 , we entered into a distribution agreement with sony pictures home entertainment inc. ( “ sony ” ) , pursuant to which the company agreed to grant sony certain rights for the marketing and distribution of the company 's animated feature-length motion pictures and animated television series in the united states and in canada , and potentially additional countries . story_separator_special_tag in consideration for such rights , and subject to certain conditions , sony has paid the company an advance in the amount of $ 2.0 million , against future royalties . private placement on october 29 , 2015 , we conducted a private placement with certain accredited investors pursuant to which we sold an aggregate of 4,330,000 shares of its common stock , par value $ 0.001 per and warrants to purchase up to an aggregate of 4,330,000 shares of common stock for a purchase price of $ 1.00 per share and gross proceeds to us of $ 4,330,000 ( the “ 2015 private placement ” ) . the closing of the 2015 private placement was subject to certain customary closing conditions and closed on november 3 , 2015. stock offering costs were $ 502,218 . 15 the warrants are exercisable into shares of common stock for a period of five ( 5 ) years from issuance at an initial exercise price of $ 1.10 per share , subject to adjustment in the event of stock splits , dividends and recapitalizations . the company is prohibited from effecting an exercise of the warrants to the extent that as a result of such exercise , the holder would beneficially own more than 4.99 % ( subject to increase up to 9.99 % upon 61 days ' notice ) in the aggregate of the issued and outstanding shares of common stock , calculated immediately after giving effect to the issuance of shares of common stock upon exercise of the warrant . pursuant to the terms of the purchase agreements , beginning on the closing date of the 2015 private placement and ending sixty ( 60 ) days after the effective date ( as defined in the purchase agreements ) , the company shall not issue any securities , subject to certain exceptions . additionally , until the later of ( i ) such time as the investors in the 2015 private placement , in the aggregate , hold less than 50 % of the common stock originally purchased by them in the private placement and the average daily trading volume of the common stock for a period of ten ( 10 ) consecutive trading days is greater than $ 75,000 and ( ii ) the one year anniversary of the closing of the 2015 private placement , the company has agreed to not sell any securities , subject to certain exceptions , at an effective per share price of common stock less than the purchase price of the common stock sold in the 2015 private placement then in effect . the company has agreed to file a “ resale ” registration statement with the securities and exchange commission ( the “ sec ” ) covering all shares of common stock and shares of common stock underlying the warrants issued or issuable in the 2015 private placement within 45 days of the closing of the 2015 private placement and to maintain the effectiveness of the registration statement until all securities have been sold or are otherwise able to be sold pursuant to rule 144. the company has agreed to use its reasonable best efforts to have the registration statement declared effective within 90 days of the closing of the 2015 private placement ( or 120 days after such closing if the registration statement is subject to review by the sec . the company is obligated to pay to investors a fee of 1 % per month in cash for every thirty day period up to a maximum of six ( 6 % ) percent , ( i ) that the registration statement has not been filed after the required filing date , ( ii ) following the required effectiveness date that the registration statement has not been declared effective ; and ( iii ) as otherwise set forth in the registration rights agreement . chardan capital markets llc acted as sole placement agent in the 2015 private placement in consideration for which chardan received a cash fee of $ 300,000 and a five-year warrant to purchase up to 425,000 shares of common stock ( the “ placement agent warrant ” ) at an initial exercise price of $ 1.20 per share . the terms of the placement agent warrant are identical to the warrants issued in the 2015 private placement except with respect to the exercise price thereof . story_separator_special_tag justify '' > liquidity comparison of cash flows for the twelve months ended december 31 , 2015 and 2014 cash totaled $ 5,187,620 and $ 4,301,099 at december 31 , 2015 and 2014 , respectively . the change in cash is as follows : replace_table_token_5_th during the twelve months ended december 31 , 2015 , our primary source of cash was financing activity , specifically the collection of the second payment related to a long-term , exclusive supply chain services agreement and the receipt of funds related to the issuance of common stock . during the comparable period in 2014 , our primary source of cash was financing activity including the collection of the first payment related to a long-term , exclusive supply chain services contract and the receipt of funds related to the issuance of preferred stock . during both periods , these funds were primarily used to fund operations as well as investments in fixed assets , intangible assets , and capitalized product development . operating activities cash used in operating activities in the twelve months ended december 31 , 2015 was $ 3,396,581 as compared to cash used of $ 2,481,988 during the prior period , representing an increase in cash used in operating activities of $ 914,593 based on the operating results discussed above as well as increases in film and television costs related to the development and production of episodes of thomas edison 's secret lab and the development of space pop ( working title ) .
| during the twelve months ended december 31 , 2015 , television & home entertainment revenue increased $ 283,006 compared to the twelve months ended december 31 , 2014 , representing expanded distribution of our content given the strategic restructuring of the company in 2014 in addition to the commencement of deliveries of thomas edison 's secret lab . product sales represent physical products including dvds and cds in which the company holds intellectual property rights such as trademarks and copyrights to the characters and which are manufactured and sold by the company either directly at wholesale to retail stores or online retailers . during the twelve months ended december 31 , 2015 , product sales decreased by $ 482,100 compared to the twelve months ended december 31 , 2014 due to the change in business strategy whereby the company has transitioned from the direct production and sale of physical products to a licensing model in which these functions were outsourced to industry experts and category leaders . cost of sales and operating costs . replace_table_token_3_th cost of sales decreased $ 427,133 during the twelve months ended december , 2015 compared to the same period of 2014. the decrease was a result of the decrease in product sales discussed above as well as the elimination of the overhead associated with handling sales directly , replaced by a new model whereby these costs will be borne by our licensees . general and administrative expenses consist primarily of salaries , employee benefits , as well as other expenses associated with finance , legal , facilities , marketing , rent , and other professional services . general and administrative costs for the twelve months ended december , 2015 increased $ 235,699 compared to the same period in 2014. the aggregate increase for the category results primarily from increases in salaries and related expense of $ 411,512 related to the addition of several critical hires in sales functions and digital initiatives offset by decreases in professional fees of $ 273,295 and bad debt expense of $ 56,550. marketing and sales expenses increased $ 81,801 for the twelve months ended december 31 , 2015 compared to the twelve months
| 13,517 |
40 net loss was $ ( 97.6 ) million for the year ended december 31 , 2020 , representing a decrease of ( 256.0 ) % from net income of $ 62.5 million in the year ended december 31 , 2019 , which in turn increased by 121.2 % from $ 28.3 million in the year ended december 31 , 2018. adjusted ebitda was $ 69.5 million for the year ended december 31 , 2020 , representing an increase of 7.1 % from $ 64.9 million in the year ended december 31 , 2019 , which in turn increased by 107.4 % from $ 31.3 million in the year ended december 31 , 2018. information regarding use of adjusted ebitda , a non-gaap measure , and a reconciliation of adjusted ebitda to net income , the most comparable gaap measure , is included in “ non-gaap financial measures ” . highlights the table below summarizes the total dollar-value of insured loans we facilitated , the number of new contracts we signed with automotive lenders and the number of oem captive relationships we entered into for the years ended december 31 , 2020 , 2019 and 2018 : replace_table_token_0_th ( 1 ) value of insured loans are calculated as the total original loan amount with active institutions as of the end of each reporting period . key performance measures we review several key performance measures , discussed below , to evaluate business and results , measure performance , identify trends , formulate plans and make strategic decisions . we believe that the presentation of such metrics is useful to our investors and counterparties because they are used to measure and model the performance of companies such as open lending , with recurring revenue streams . automotive loans we refer to “ automotive loans ” as the number of loans facilitated through lpp during a given period . additionally , we refer to loans with a one-time upfront payment as “ single-pay ” loans and those paid over twelve months in monthly installments as “ monthly-pay ” loans . average program fee we define “ average program fee ” as the total program fee billed for a period divided by the number of certified loans in that period . insurers ' aggregate underwriting profit we define “ insurers ' aggregate underwriting profit ” as the total underwriting profit expected to be received by insurers over the expected life of the insured loans . insurers ' annual earned premium we define “ insurers ' annual earned premium ” as the total insurance premium earned by insurers in a given period . insurers ' average earned premium per loan we define “ insurers ' average earned premium per loan ” as the total single premium equivalent insurance premium written in a period by insurers divided by the number of certified loans in that period . recent developments underwritten public offering and share repurchase on december 14 , 2020 , we completed an underwritten public offering of 9,500,000 shares of our common stock at a public offering price of $ 28.00 per share . all shares were sold by existing stockholders , including nebula holdings , llc and its affiliates , bregal sagemount and certain executive officers of the company . the selling stockholders also granted the underwriters a 30-day option to 41 purchase up to 1,425,000 additional shares of common stock . we did not sell any shares and did not receive any of the proceeds of the offering . pursuant to a stock repurchase agreement , dated as of december 7 , 2020 , between open lending and the selling stockholders , we repurchased from the selling stockholders an aggregate number of 1,395,089 shares of our common stock totaling $ 37.5 million at the same per share price paid by the underwriters to the selling stockholders in the offering . business combination nebula , our predecessor , was originally incorporated in delaware on october 2 , 2017 as a special purpose acquisition company for the purpose of effecting a merger , capital stock exchange , asset acquisition , stock purchase , reorganization or similar business combination with one or more businesses . nebula consummated the business combination on june 10 , 2020. immediately upon the closing , open lending , llc became a direct wholly owned subsidiary of parentco , and parentco changed its name to open lending corporation . the company is now listed on nasdaq under the symbol “ lpro ” . the aggregate consideration for the business combination was $ 1.0 billion , consisting of $ 463.8 million in cash and 51,909,655 shares of our common stock valued at $ 10.00 per share totaling $ 519.1 million . the terms of the business combination agreement contain customary representations and warranties , covenants , closing conditions , termination fee provisions and other terms relating to the business combination and the other transactions contemplated . credit agreement on march 11 , 2020 , we entered into the credit agreement . the term loan in a principal amount of $ 170.0 million was funded on march 12 , 2020. the proceeds of the term loan were used to , among other things , finance a distribution to our equity investors prior to the consummation of the business combination . the term loan bears interest at libor plus 6.50 % ( subject to a 1 % libor floor ) or the base rate plus 5.50 % . our obligations under the credit agreement are guaranteed by all of our subsidiaries and secured by substantially all of the assets of open lending and its subsidiaries , in each case , subject to certain customary exceptions . the term loan has a maturity date of march 11 , 2027. subject to the terms and conditions set forth in the credit agreement , we may be required to make certain mandatory prepayments prior to maturity . voluntary prepayments and certain mandatory prepayments may be subject to certain prepayment premiums in the first year after the date thereof . story_separator_special_tag the credit agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities , including , among other things , customary limitations on the incurrence of indebtedness and liens , certain intercompany transactions and other investments , dispositions of assets , issuance of certain units , repayment of other indebtedness , redemptions of units and payment of dividends . the credit agreement also contains a maximum total net leverage ratio financial covenant that is tested quarterly and calculated based on the ratio of our adjusted ebitda ( as defined in the credit agreement ) to funded indebtedness . the maximum total net leverage ratio begins at 4.75 to 1.0 and then gradually decreases from year-to-year down to 2.5 to 1.0 on or after june 30 , 2026. the credit agreement also contains customary events of default , at times subject to thresholds and grace periods ( among others ) , including payment default , covenant default , cross default to other material indebtedness , and judgment defaults . non-liquidating cash distribution on march 24 , 2020 , open lending , llc 's board of managers approved a non-liquidating cash distribution to its unitholders ' in the amount of $ 135.0 million . see “ liquidity and capital resources—unitholders ' distribution . ” coronavirus outbreak the recent outbreak of the novel coronavirus covid-19 , which was declared a pandemic by the world health organization on march 11 , 2020 and declared a national emergency by the president of the united states on march 13 , 2020 , has led to adverse impacts on the u.s. and global economies and created uncertainty regarding potential impacts on our operating results , financial condition and cash flows . the extent of the impact of covid 19 on our operational and financial performance will depend on certain developments , including the duration and continued spread of the disease , the impact on our revenues which are generated with automobile lenders and insurance company partners and driven by consumer demand for automobiles and automotive loans , extended closures of businesses , continued high unemployment and the overall impact on our customer behavior , all of which are uncertain and can not be predicted . we have seen a reduction in loan applications and certified loans throughout most of 2020. as consumers and lenders have adjusted to the pandemic , application and certification levels have increased , but are not back to pre-pandemic levels when comparing existing lending institutions to the same lending institution 's prior year performance . lenders ' forbearance programs , government stimulus packages , extended unemployment benefits and other government assistance via the cares act passed on march 27 , 2020 have resulted in a reduction in expected defaults since the onset of the pandemic . as these programs ' accessibility diminishes , defaults may increase . the potential increase in defaults may impact our revenues and subsequent recovery as the automotive finance industry and overall economy recover . we continue to closely monitor the current macro environment , particularly the impact of the recent covid-19 pandemic on monetary and fiscal policies . 42 redemption of public warrants as of october 19 , 2020 , we redeemed all of our outstanding public warrants that had not been exercised as of october 13 , 2020 , which resulted in the exercise of 9,160,776 warrants for proceeds to us of $ 105.3 million and the redemption of 5,883 public warrants at a redemption price of $ 0.01 per warrant . key factors affecting operating results our future operating results and cash flows are dependent upon a number of opportunities , challenges and other factors , including the growth in the number of financial institutions and transaction volume , competition , profit share assumptions and industry trends and general economic conditions . key factors affecting our operating results include the following : growth in the number of financial institutions the growth trend in active automotive lenders using lpp is a critical variable directly affecting revenue and financial results . it influences the number of loans funded on lpp and , therefore , the fees that we earn and the cost of the services that we provide . growth in our active automotive lender relationships will depend on our ability to retain existing automotive lenders , add new automotive lenders and expand to new industry verticals . competition we face competition to enroll and maintain automotive lenders as well as competition to fund near-prime and non-prime auto loans . for lpp , which combines lending enablement , risk analytics , near-prime and non-prime auto loan performance data , real-time loan decisioning , risk-based pricing and auto loan default insurance , we do not believe there are any direct competitors . the emergence of direct competitors , providing risk , analytics and loss mitigation , which are core elements of our business , could materially impact our ability to sign and maintain automotive lenders ' customers . the near-prime and non-prime lending market is highly fragmented and competitive . we face competition from a diverse landscape of consumer lenders , including traditional banks and credit unions , as well as alternative technology-enabled lenders . the emergence of other insurers , in competition with our insurers , could materially impact our business . increased competition for loans , which reduce the ability of our automotive lenders to source loan application flow and or capture loans , could materially adversely impact our business . profit share assumptions we rely on assumptions to calculate the value of profit share revenue , which is our share of insurance partners ' underwriting profit . to the extent these assumptions change , our profit share revenue will be adjusted . please refer to “ critical accounting policies and estimates ” for more information on these assumptions . industry trends and general economic conditions our results of operations have in the past been fairly resilient to economic downturns but in the future may be impacted by the relative strength of the overall economy and its effect on unemployment , consumer spending and consumer demand for automotive products .
| this reduction in future profit share is a change in estimated variable consideration in accordance with asc 606. revenue from claims administration service fees , which represents 3.0 % of our insurance partners ' annual earned premium , increased by $ 1.4 million , or 43.4 % , for the year ended december 31 , 2020 as compared to 2019 due to a 44.2 % increase in total earned premium . cost of services , gross profit and gross margin 46 replace_table_token_4_th costs of services increased by $ 2.0 million , or 25.4 % , for the year ended december 31 , 2020 compared to the year ended december 31 , 2019 primarily driven by an increase in fees paid to resellers , an increase in employee compensation and benefits expense and an increase in costs for actuarial services . gross profit increased by $ 14.1 million , or 16.5 % , for the year ended december 31 , 2020 as compared to the year ended december 31 , 2019 , driven by an increase in anticipated profit share , programs fees and claims administration revenues on new originations . operating expenses , operating income and operating margin replace_table_token_5_th general and administrative expenses increased by $ 18.8 million , or 136.6 % , for the year ended december 31 , 2020 when compared to the year ended december 31 , 2019. the year ended december 31 , 2020 includes $ 9.1 million in transaction bonuses awarded to key employees and directors of open lending , llc and $ 2.2 million of non-cash charges incurred in connection with the accelerated vesting of share-based awards , which were incurred during the second quarter 2020 , as a result of the business combination . in connection with the underwritten public offering by the selling stockholders during the fourth quarter , we incurred approximately $ 0.7 million in legal and professional fees . general and administrative expenses also reflect an increase of $ 2.1 million in employee compensation and benefits and $ 2.4 million in directors and officers liability insurance , in addition to $ 2.7 million in professional service fees associated with public filings and our implementation of enhanced internal control
| 13,518 |
the work program will also advance the baseline environmental data collection in critical areas of hydrology and waste rock geochemical characterization needed to support future permitting as well as advance community engagement . the company remains open to a strategic alliance to help support the future development of the project while considering all other appropriate financing options . the size of the gold resource , the favorable location , and the proven team are some of the reasons the company would potentially attract a strategic partner with a long term development horizon who understands the project is highly leveraged to gold prices . results of operations story_separator_special_tag maintain its operations for the next twelve months . financing activities during the year ended december 31 , 2019 included the exercise of stock options . proceeds of $ 64,254 were received on the issuance of 121,174 shares pursuant to the exercise of stock options . financing activities during the year ended december 31 , 2018 included completion of a non-brokered private placement pursuant to which the company issued 24,000,000 common shares at $ 0.50 per share for gross proceeds of $ 12.0 million . share issuance costs included $ 111,379 related to the march 2018 private placement . following the resignation of director mark hamilton on november 6 , 2017 , the company recognized an obligation to issue 129,687 common shares , with a value of $ 63,593. on march 27 , 2018 , the company issued the common shares in full satisfaction of the obligation . as a result of the exercise of stock options , $ 181,026 in proceeds was received during the year in connection with the issuance of 468,000 common shares . investing activities of $ 101,692 during the year ended december 31 , 2019 were comprised of capitalized acquisition costs for land acquisitions of $ 31,189 that closed in the second quarter and $ 70,503 that closed in the third quarter . investing activities during the year ended december 31 , 2018 were comprised of capitalized acquisition costs for land acquisitions of $ 69,391 that closed in the third quarter and proceeds of $ 14,519 from the sale of marketable securities . as at december 31 , 2019 , the company had working capital of $ 6,840,418 compared to working capital of $ 9,884,979 at december 31 , 2018. the company expects that it will operate at a loss for the foreseeable future , but believes the current cash and cash equivalents will be sufficient for it to complete its anticipated 2020 work plan at the livengood gold project and satisfy its currently anticipated general and administrative costs through the 2021 fiscal year . 40 the company will require significant additional financing to continue its operations ( including general and administrative expenses ) in connection with advancing activities at the livengood gold project and the development of any mine that may be determined to be built at the livengood gold project , and there is no assurance that the company will be able to obtain the additional financing required on acceptable terms , if at all . in addition , any significant delays in the issuance of required permits for the ongoing work at the livengood gold project , or unexpected results in connection with the ongoing work , could result in the company being required to raise additional funds to advance permitting efforts . the company 's review of its financing options includes pursuing a future strategic alliance to assist in further development , permitting and future construction costs , although there can be no assurance that any such strategic alliance will , in fact , be realized . despite the company 's success to date in raising significant equity financing to fund its operations , there is significant uncertainty that the company will be able to secure any additional financing in the current or future equity markets . see “ risk factors – we will require additional financing to fund exploration and , if warranted , development and production . failure to obtain additional financing could have a material adverse effect on our financial condition and results of operation and could cast uncertainty on our ability to continue as a going concern. ” the quantity of funds to be raised and the terms of any proposed equity financing that may be undertaken will be negotiated by management as opportunities to raise funds arise . specific plans related to the use of proceeds will be devised once financing has been completed and management knows what funds will be available for these purposes . due to this uncertainty , if the company is unable to secure additional financing , it may be required to reduce all discretionary activities at the project to preserve its working capital to fund anticipated non-discretionary expenditures beyond the 2020 fiscal year . other than cash held by its subsidiaries for their immediate operating needs in the united states , all of the company 's cash reserves are on deposit with a major canadian chartered bank . the company does not believe that the credit , liquidity or market risks with respect thereto have increased as a result of the current market conditions . off-balance sheet arrangements the company does not have any off balance sheet arrangements . critical accounting policies mineral properties and exploration and evaluation expenditures the company 's mineral project is currently in the exploration and evaluation phase . mineral property acquisition costs are capitalized when incurred . mineral property exploration costs are expensed as incurred . at such time that the company determines that a mineral property can be economically developed , subsequent mineral property expenses will be capitalized during the development of such property . the company assesses interests in exploration properties for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount . impairment analysis includes assessment of the following circumstances : a significant decrease in the market price story_separator_special_tag the work program will also advance the baseline environmental data collection in critical areas of hydrology and waste rock geochemical characterization needed to support future permitting as well as advance community engagement . the company remains open to a strategic alliance to help support the future development of the project while considering all other appropriate financing options . the size of the gold resource , the favorable location , and the proven team are some of the reasons the company would potentially attract a strategic partner with a long term development horizon who understands the project is highly leveraged to gold prices . results of operations story_separator_special_tag maintain its operations for the next twelve months . financing activities during the year ended december 31 , 2019 included the exercise of stock options . proceeds of $ 64,254 were received on the issuance of 121,174 shares pursuant to the exercise of stock options . financing activities during the year ended december 31 , 2018 included completion of a non-brokered private placement pursuant to which the company issued 24,000,000 common shares at $ 0.50 per share for gross proceeds of $ 12.0 million . share issuance costs included $ 111,379 related to the march 2018 private placement . following the resignation of director mark hamilton on november 6 , 2017 , the company recognized an obligation to issue 129,687 common shares , with a value of $ 63,593. on march 27 , 2018 , the company issued the common shares in full satisfaction of the obligation . as a result of the exercise of stock options , $ 181,026 in proceeds was received during the year in connection with the issuance of 468,000 common shares . investing activities of $ 101,692 during the year ended december 31 , 2019 were comprised of capitalized acquisition costs for land acquisitions of $ 31,189 that closed in the second quarter and $ 70,503 that closed in the third quarter . investing activities during the year ended december 31 , 2018 were comprised of capitalized acquisition costs for land acquisitions of $ 69,391 that closed in the third quarter and proceeds of $ 14,519 from the sale of marketable securities . as at december 31 , 2019 , the company had working capital of $ 6,840,418 compared to working capital of $ 9,884,979 at december 31 , 2018. the company expects that it will operate at a loss for the foreseeable future , but believes the current cash and cash equivalents will be sufficient for it to complete its anticipated 2020 work plan at the livengood gold project and satisfy its currently anticipated general and administrative costs through the 2021 fiscal year . 40 the company will require significant additional financing to continue its operations ( including general and administrative expenses ) in connection with advancing activities at the livengood gold project and the development of any mine that may be determined to be built at the livengood gold project , and there is no assurance that the company will be able to obtain the additional financing required on acceptable terms , if at all . in addition , any significant delays in the issuance of required permits for the ongoing work at the livengood gold project , or unexpected results in connection with the ongoing work , could result in the company being required to raise additional funds to advance permitting efforts . the company 's review of its financing options includes pursuing a future strategic alliance to assist in further development , permitting and future construction costs , although there can be no assurance that any such strategic alliance will , in fact , be realized . despite the company 's success to date in raising significant equity financing to fund its operations , there is significant uncertainty that the company will be able to secure any additional financing in the current or future equity markets . see “ risk factors – we will require additional financing to fund exploration and , if warranted , development and production . failure to obtain additional financing could have a material adverse effect on our financial condition and results of operation and could cast uncertainty on our ability to continue as a going concern. ” the quantity of funds to be raised and the terms of any proposed equity financing that may be undertaken will be negotiated by management as opportunities to raise funds arise . specific plans related to the use of proceeds will be devised once financing has been completed and management knows what funds will be available for these purposes . due to this uncertainty , if the company is unable to secure additional financing , it may be required to reduce all discretionary activities at the project to preserve its working capital to fund anticipated non-discretionary expenditures beyond the 2020 fiscal year . other than cash held by its subsidiaries for their immediate operating needs in the united states , all of the company 's cash reserves are on deposit with a major canadian chartered bank . the company does not believe that the credit , liquidity or market risks with respect thereto have increased as a result of the current market conditions . off-balance sheet arrangements the company does not have any off balance sheet arrangements . critical accounting policies mineral properties and exploration and evaluation expenditures the company 's mineral project is currently in the exploration and evaluation phase . mineral property acquisition costs are capitalized when incurred . mineral property exploration costs are expensed as incurred . at such time that the company determines that a mineral property can be economically developed , subsequent mineral property expenses will be capitalized during the development of such property . the company assesses interests in exploration properties for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount . impairment analysis includes assessment of the following circumstances : a significant decrease in the market price
| at december 31 , 2019 , there was no unrecognized compensation expense related to non-vested options outstanding . share based payment charges were allocated as follows : replace_table_token_4_th excluding share-based payment charges of $ 89,140 and $ 183,429 , respectively , wages and benefits decreased to $ 689,084 for the year ended december 31 , 2019 from $ 1,706,182 for the year ended december 31 , 2018. the reduction of $ 1,017,098 is primarily due to staff reductions and one-time severance payments during the year ended december 31 , 2018. consulting costs , excluding share-based payment charges of $ 316,717 and $ 414,422 , respectively , were $ 167,829 for the year ended december 31 , 2019 compared to $ 138,870 for the year ended december 31 , 2018. the increase of $ 28,959 is primarily due to community and investor relations services being transferred to an external contractor ( increase of $ 66,600 ) , the board of directors reducing from nine members to seven members ( decrease of $ 34,367 ) , and reduced janitorial and it services ( decrease of $ 3,274 ) . insurance costs were $ 123,997 for the year ended december 31 , 2019 compared to $ 169,036 for the year ended december 31 , 2018. the decrease of $ 45,039 resulted after the company completed a review of coverage requirements . 39 professional fees were $ 192,339 for the year ended december 31 , 2019 compared to $ 227,082 for the year ended december 31 , 2018. the decrease of $ 34,743 is due primarily to decreased accounting and tax services ( decrease of $ 18,615 ) and decreased legal fees related to property matters ( decrease of $ 16,128 ) . travel costs were $ 33,045 for the year ended december 31 , 2019 compared to $ 59,192 for the year ended december 31 , 2018. the decrease of $ 26,147 is due primarily to reduced travel requirements . excluding share-based payments , all other operating expense categories reflected only moderate changes
| 13,519 |
on may 13 , 2014 , the independent directors of the company approved the amended and restated advisory agreement with ashford llc , effective as of january 1 , 2014. the amendments , among other things , permit ashford llc to have other advisory clients , extend the term of the advisory agreement and modify certain terms of the annual incentive fee and the termination fee . on october 27 , 2014 , our board of directors approved a share repurchase program under which the company may purchase up to $ 100 million of the company 's common stock from time to time . the repurchase program does not have an expiration date . the specific timing , manner , price , amount and other terms of the repurchases is at management 's discretion and depends on market conditions , corporate and regulatory requirements and other factors . the company is not required to repurchase shares under the repurchase program , and may modify , suspend or terminate the repurchase program at any time for any reason . under the repurchase program , we repurchased 927,915 shares of our common stock , for approximately $ 16.1 million , in the year ended december 31 , 2014. subsequent to december 31 , 2014 , we repurchased 471,064 shares of our common stock , for approximately $ 8.1 million . as of march 12 , 2015 , we had purchased a cumulative 1.4 million shares of our common stock , for approximately $ 24.2 million since the program 's inception on november 4 , 2014. on november 3 , 2014 , the independent directors of the company approved the second amended and restated advisory agreement with ashford llc , effective as of november 3 , 2014. the amendments , among other things , provide that the covenant restricting us from soliciting or hiring employees of ashford llc , in the event that the advisory agreement terminates does not apply if the agreement terminates due to an advisor change of control ( as defined in the advisory agreement ) . on november 7 , 2014 , we refinanced our $ 197.8 million mortgage loan , with an outstanding balance of $ 195.7 million due february 2018 with a $ 198.0 million mortgage loan from the same lender with a five-year initial term and two one-year extension options , subject to the satisfaction of certain conditions . the new loan provides for a floating interest rate of libor + 2.65 % . the mortgage loan is secured by the capital hilton in washington , dc and hilton la jolla torrey pines in la jolla , ca . ashford prime has a 75 % ownership interest in the properties , with hilton holding the remaining 25 % . on november 10 , 2014 , ahp sma entered into the investment management agreement with aim , pursuant to which aim serves as the investment manager for certain designated assets of ahp sma and is responsible for the investment and reinvestment of those assets in accordance with the investment guidelines set forth therein . on march 9 , 2015 , we refinanced our $ 69.0 million mortgage loan with an outstanding balance of $ 69.0 million due september 2015 , with a $ 70.0 million mortgage loan with credit agricole due march 2017 , with three one-year extension options , subject to the satisfaction of certain conditions . the new loan is interest only and provides for a floating interest rate of libor + 2.25 % , with no libor floor . the mortgage loan is secured by the pier house resort in key west , florida . 73 discussion of presentation the discussion below relates to the financial condition and results of operation of ashford prime . for periods prior to the spin-off , the combined consolidated historical financial statements have been prepared on a “ carve-out ” basis from ashford trust 's consolidated financial statements using the historical results of operations , cash flows , assets and liabilities attributable to the eight initial properties we acquired from ashford trust in connection with the spin-off and include allocations of income , expenses , assets and liabilities from ashford trust . these allocations reflect significant assumptions , and the financial statements do not fully reflect what our financial positions , results of operations and cash flows would have been had we been a stand-alone publicly traded company owning the eight initial properties during all periods presented . as a result , historical financial information is not necessarily indicative of our future results of operations , financial positions and cash flows . as an example of allocations relating to the “ carve out ” presentation , we note that corporate general and administrative expense and certain indirect costs have been allocated . corporate general and administrative expense represents an allocation of certain ashford trust corporate general and administrative costs including salaries and benefits , stock based compensation , legal and professional fees , rent expense and office expenses . any expenses that were determined to be directly related to any hotel property or specific transaction were allocated directly to the related hotel . however , any indirect costs were allocated pro rata across all hotels owned by ashford trust , including the eight initial properties contributed to us in the spin-off , based on the gross investment value for all such hotels . indirect costs are primarily attributable to certain ownership costs related to specific hotel properties but paid by ashford trust . indirect costs are included in “ other expenses ” in the consolidated and combined consolidated financial statements . additionally , interest income reflects earnings on amounts held as reserves by lenders and property managers . key indicators of operating performance we use a variety of operating and other information to evaluate the operating performance of our business . these key indicators include financial information that is prepared in accordance with gaap as well as other financial measures that are non-gaap measures . story_separator_special_tag in addition , we use other information that may not be financial in nature , including statistical information and comparative data . we use this information to measure the operating performance of our individual hotels , groups of hotels and or business as a whole . we also use these metrics to evaluate the hotels in our portfolio and potential acquisitions to determine each hotel 's contribution to cash flow and its potential to provide attractive long-term total returns . these key indicators include : occupancy-occupancy means the total number of hotel rooms sold in a given period divided by the total number of rooms available . occupancy measures the utilization of our hotels ' available capacity . we use occupancy to measure demand at a specific hotel or group of hotels in a given period . adr-adr means average daily rate and is calculated by dividing total hotel rooms revenues by total number of rooms sold in a given period . adr measures average room price attained by a hotel and adr trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels . we use adr to assess the pricing levels that we are able to generate . revpar-revpar means revenue per available room and is calculated by multiplying adr by the average daily occupancy . revpar is one of the commonly used measures within the hotel industry to evaluate hotel operations . revpar does not include revenues from food and beverage sales or parking , telephone or other non-rooms revenues generated by the property . although revpar does not include these ancillary revenues , it is generally considered the leading indicator of core revenues for many hotels . we also use revpar to compare the results of our hotels between periods and to analyze results of our comparable hotels ( comparable hotels represent hotels we have owned for the entire period ) . revpar improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs . revpar improvements attributable to increases in adr are generally accompanied by increases in limited categories of operating costs , such as management fees and franchise fees . revpar changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in adr . for example , an increase in occupancy at a hotel would lead to additional variable operating costs ( including housekeeping services , utilities and room supplies ) and could also result in increased other operating department revenue and expense . changes in adr typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs . occupancy , adr and revpar are commonly used measures within the lodging industry to evaluate operating performance . revpar is an important statistic for monitoring operating performance at the individual hotel level and across our entire business . we evaluate individual hotel revpar performance on an absolute basis with comparisons to budget and prior periods , as well as on a regional and company-wide basis . adr and revpar include only rooms revenue . rooms revenue comprised approximately 74 % of our total revenue for the year ended december 31 , 2014 and is dictated by demand ( as measured by occupancy ) , pricing ( as measured by adr ) and our available supply of hotel rooms . 74 we also use ffo , affo , ebitda , adjusted ebitda and hotel ebitda as measures of the operating performance of our business . see “ non-gaap financial measures. ” principal factors affecting our results of operations the principal factors affecting our operating results include overall demand for hotel rooms compared to the supply of available hotel rooms , and the ability of our third-party management companies to increase or maintain revenues while controlling expenses . demand . the demand for lodging , including business travel , is directly correlated to the overall economy ; as gdp increases , lodging demand increases . historically , periods of declining demand are followed by extended periods of relatively strong demand , which typically occurs during the growth phase of the lodging cycle . following the recession that commenced in 2008 , the lodging industry has experienced improvement in fundamentals , including demand , which has continued through 2014 . we believe improvements in the economy will continue to benefit the lodging industry and hotel operating results for several years to come . supply . the development of new hotels is driven largely by construction costs , the availability of financing and expected performance of existing hotels . we expect that our adr , occupancy and revpar performance will be impacted by macroeconomic factors such as national and local employment growth , personal income and corporate earnings , gdp , consumer confidence , office vacancy rates and business relocation decisions , airport and other business and leisure travel , new hotel construction , the pricing strategies of competitors and currency fluctuations . in addition , our adr , occupancy and revpar performance are dependent on the continued success of the marriott , hilton and sofitel brands . revenue . substantially all of our revenue is derived from the operation of hotels . specifically , our revenue is comprised of : rooms revenue-occupancy and adr are the major drivers of rooms revenue . rooms revenue accounts for the substantial majority of our total revenue . food and beverage revenue-occupancy and the type of customer staying at the hotel are the major drivers of food and beverage revenue ( i.e. , group business typically generates more food and beverage business through catering functions when compared to transient business , which may or may not utilize the hotel 's food and beverage outlets or meeting and banquet facilities ) . other hotel revenue-occupancy and the nature of the property are the main drivers of other ancillary revenue , such as telecommunications , parking and leasing services .
| million and $ 13.9 million as a result of the acquisitions of the sofitel chicago water tower and the pier house resort , respectively , during 2014. rooms revenue also increased ( i ) $ 4.1 million at the san francisco courtyard downtown primarily as a result of 12.7 % higher room rates at the hotel ; ( ii ) $ 2.7 million at the hilton la jolla torrey pines as a result of a major renovation at the hotel in 2013 ; ( iii ) $ 2.6 million at the seattle marriott waterfront as a result of 9.8 % higher room rates and a 187 basis point increase in occupancy at the hotel ; ( iv ) $ 2.0 million at the seattle courtyard downtown as a result of 11.9 % higher room rates and a 440 basis point increase in occupancy at the hotel ; ( v ) $ 1.1 million at the capital hilton as a result of 1.5 % higher room rates and a 111 basis point increase in occupancy at the hotel ; ( vi ) $ 1.1 million at the plano marriott legacy town center as a result of major renovations at the hotel in 2013 ; ( vii ) $ 1.0 million at the tampa renaissance as a result of 5.3 % higher room rates and a 275 basis point increase in occupancy at the hotel ; and ( viii ) $ 846,000 at the philadelphia courtyard as a result of a 285 basis point increase in occupancy and a 0.6 % increase in room rates at the hotel . food and beverage revenue . food and beverage revenues from our hotels in creased $ 17.0 million , or 33.5 % , to $ 67.9 million in 2014 . this in crease was primarily attributable to an increase in total food and beverage revenue of $ 9.6 million and $ 2.7 million as a result of the acquisitions of the sofitel chicago water tower and the pier house
| 13,520 |
we will continue to assess further potential consequences to our employees , business , supply chain and customers , and take actions to mitigate adverse outcomes . we took actions in 2020 to strengthen our liquidity and financial condition . in march 2020 , we issued $ 4 billion of fixed-rate notes to repay $ 2.5 billion of fixed- and floating-rate notes that matured in may 2020 and for general corporate purposes , including the repayment of a portion of our borrowings under our commercial paper program . in addition to this long-term borrowing , we renewed our access to $ 5 billion of credit facilities . while part of our pre-covid-19 planning , this liquidity preserves our financial flexibility during the pandemic . we believe that our cash flows from operations and borrowing capacity are sufficient to support our short- and long-term liquidity needs . our markets with approximately 70 % of our revenue from the u.s. government , government spending levels — particularly defense spending — influence our financial performance . on december 27 , 2020 , the fiscal year ( fy ) 2021 defense appropriations bill was signed into law . it totaled $ 696 billion , a modest increase over fy 2020 , and included $ 627 billion in the base budget in compliance with the previously established spending caps and $ 69 billion for overseas contingency operations . 30 the long-term outlook for our u.s. defense business is influenced by the u.s. military 's funding priorities , the diversity of our programs and customers , our insight into customer requirements stemming from our incumbency on core programs , our ability to evolve our products to address a fast-changing threat environment and our proven track record of successful contract execution . international demand for military equipment and technologies presents opportunities for our non-u.s. operations and exports from our north american businesses . while the revenue potential can be significant , there are risks to doing business in foreign countries , including changing budget priorities and overall spending pressures unique to each country . in our aerospace segment , we expect our investment in the development of new aircraft products and technologies to support the segment 's long-term growth . similarly , we believe the aircraft services business will be a source of steady revenue growth as the global business jet fleet continues to grow and the impact of the pandemic subsides . results of operations introduction an understanding of our accounting practices is necessary in the evaluation of our financial statements and operating results . the following paragraphs explain how we recognize revenue and operating costs in our operating segments and the terminology we use to describe our operating results . in the aerospace segment , we record revenue on contracts for new aircraft when the customer obtains control of the asset , which is generally upon delivery and acceptance by the customer of the fully outfitted aircraft . revenue associated with the segment 's custom completions of narrow-body and wide-body aircraft and the segment 's services businesses is recognized as work progresses or upon delivery of services . fluctuations in revenue from period to period result from the number and mix of new aircraft deliveries , progress on aircraft completions , and the level and type of aircraft services performed during the period . the majority of the aerospace segment 's operating costs relates to new aircraft production on firm orders and consists of labor , material , subcontractor and overhead costs . the costs are accumulated in production lots , recorded in inventory and recognized as operating costs at aircraft delivery based on the estimated average unit cost in a production lot . while changes in the estimated average unit cost for a production lot impact the level of operating costs , the amount of operating costs reported in a given period is based largely on the number and type of aircraft delivered . operating costs in the aerospace segment 's completions and services businesses are recognized generally as incurred . for new aircraft , operating earnings and margin are a function of the prices of our aircraft , our operational efficiency in manufacturing and outfitting the aircraft , and the mix of ultra-large-cabin , large-cabin and mid-cabin aircraft deliveries . aircraft mix can also refer to the stage of program maturity for our aircraft models . a new aircraft model typically has lower margins in its initial production lots , and then margins generally increase as we realize efficiencies in the production process . additional factors affecting the segment 's earnings and margin include the volume , mix and profitability of completions and services work performed , the volume of and market for pre-owned aircraft , and the level of general and administrative ( g & a ) and net research and development ( r & d ) costs incurred by the segment . 31 in the defense segments , revenue on long-term government contracts is recognized generally over time as the work progresses , either as products are produced or as services are rendered . typically , revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations . incurred cost represents work performed , which corresponds with , and thereby best depicts , the transfer of control to the customer . contract costs include labor , material , overhead and , when appropriate , g & a expenses . variances in costs recognized from period to period reflect primarily increases and decreases in production or activity levels on individual contracts . because costs are used as a measure of progress , year-over-year variances in cost result in corresponding variances in revenue , which we generally refer to as volume . operating earnings and margin in the defense segments are driven by changes in volume , performance or contract mix . performance refers to changes in profitability based on adjustments to estimates at completion on individual contracts . story_separator_special_tag these adjustments result from increases or decreases to the estimated value of the contract , the estimated costs to complete the contract or both . therefore , changes in costs incurred in the period compared with prior periods do not necessarily impact profitability . it is only when total estimated costs at completion on a given contract change without a corresponding change in the contract value ( or vice versa ) that the profitability of that contract may be impacted . contract mix refers to changes in the volume of higher- versus lower-margin work . higher or lower margins can result from a number of factors , including contract type ( e.g. , fixed-price/cost-reimbursable ) and type of work ( e.g. , development/production ) . contract mix can also refer to the stage of program maturity for our long-term production contracts . new long-term production contracts typically have lower margins initially , and then margins generally increase as we achieve learning curve improvements or realize other cost reductions . in the discussion that follows , prior-period information has been restated for the retrospective application of a change in accounting principle related to the amortization of actuarial gains and losses for our qualified u.s. government pension plans , which we adopted in the fourth quarter of 2020 as discussed in note t to the consolidated financial statements in item 8. consolidated overview 2020 in review outstanding operating performance in the face of a challenging business environment : ◦ revenue of $ 37.9 billion with sequential growth throughout the year . ◦ cash from operating activities of $ 3.9 billion , or 122 % percent of net earnings . record-high backlog of $ 89.5 billion increased $ 2.5 billion , or 2.9 % , from 2019 , supporting our long-term growth expectations : ◦ several significant contract awards received in 2020 in our defense segments , including $ 9.5 billion from the u.s. navy for the construction of the first two columbia-class submarines . replace_table_token_9_th 32 our consolidated revenue decreased in 2020 due to fewer aircraft deliveries and lower aircraft service activity in our aerospace segment . also in 2020 , revenue was impacted by lower information technology ( it ) services volume in our technologies segment . these decreases were driven by the impact of the covid-19 pandemic . higher volume on the virginia-class and columbia-class submarine programs in our marine systems segment helped offset some of these decreases . the combined revenue in our defense businesses was up approximately $ 300 compared with 2019. operating margin decreased in 2020 due primarily to reduced aircraft deliveries and related restructuring charges in our aerospace segment . operating margin was also negatively impacted by covid-related disruptions in our technologies segment , including a loss on a contract with a non-u.s. customer and non-fee bearing cost reimbursements by the u.s. government authorized under section 3610 of the cares act . review of operating segments following is a discussion of operating results and outlook for each of our operating segments . for the aerospace segment , results are analyzed by specific types of products and services , consistent with how the segment is managed . for the defense segments , the discussion is based on markets and the lines of products and services offered with a supplemental discussion of specific contracts and programs when significant to the results . additional information regarding our segments can be found in note s to the consolidated financial statements in item 8. aerospace replace_table_token_10_th operating results the change in the aerospace segment 's revenue in 2020 consisted of the following : aircraft manufacturing $ ( 1,426 ) aircraft services and completions ( 300 ) total decrease $ ( 1,726 ) in 2020 , quarantine and travel restrictions resulting from the covid-19 pandemic had a significant impact on the segment 's results . in an effort to de-risk elements of the supply chain and better align production with demand , in april we reduced our aircraft production and delivery rates for the year . as a result , aircraft manufacturing revenue decreased in 2020 due primarily to fewer deliveries of the ultra-large-cabin g650 aircraft , offset partially by additional deliveries of the large-cabin g600 and g500 aircraft . in addition , decreased flight activity due to the pandemic resulted in lower demand for maintenance work and reduced volume at our fixed-base operator ( fbo ) facilities in 2020 . 33 the change in the segment 's operating earnings in 2020 consisted of the following : aircraft manufacturing $ ( 590 ) aircraft services and completions ( 39 ) restructuring charges ( 59 ) g & a/other expenses 239 total decrease $ ( 449 ) aircraft manufacturing operating earnings were down in 2020 due to reduced aircraft production and delivery rates and a somewhat less favorable mix in aircraft deliveries . in 2020 , operating earnings were also down in aircraft services and completions due to lower volume . full-year results were negatively impacted by restructuring actions taken to adjust the workforce size to the revised 2020 production levels . these decreases were offset partially by lower net g & a/other expenses , including reduced r & d expenses . overall , r & d expenses have been trending downward with the completion of the g500 and g600 test programs . in total , the aerospace segment 's operating margin decreased 220 basis points to 13.4 % . the aerospace segment 's operating results progressively improved during 2020 following the initial disruption from the pandemic in the second quarter . fourth quarter revenue grew 23 % over third quarter and operating earnings grew 42 % on increased deliveries of all large-cabin models , as well as increased aircraft services activity . as a result , the segment 's operating margin increased 220 basis points in the fourth quarter compared with the third quarter and exceeded the fourth quarter of 2019 . 2021 outlook we expect the aerospace segment 's 2021 revenue to be around $ 8 billion .
| corporate corporate operating results consisted primarily of equity-based compensation expense and totaled $ 56 in 2020 and $ 54 in 2019. corporate operating costs are expected to be approximately $ 85 in 2021. other information product and service revenue and operating costs replace_table_token_15_th 36 the change in product revenue in 2020 consisted of the following : aircraft manufacturing $ ( 1,426 ) ship construction 620 other , net ( 136 ) total decrease $ ( 942 ) in 2020 , aircraft manufacturing revenue decreased due to the reduced production and delivery rates caused by the covid-19 pandemic . this decrease was offset partially by increased volume on the virginia-class and columbia-class submarine programs . in 2020 , product operating costs decreased at a lower rate than revenue due primarily to the mix of gulfstream aircraft deliveries . the change in service revenue in 2020 consisted of the following : it services $ ( 530 ) other , net 47 total decrease $ ( 483 ) in 2020 , it services revenue decreased due to the partial closure of some customer sites to all but mission critical personnel and a lower level of customer and program activity as a result of the covid-19 pandemic . in 2020 , the primary driver of the decrease in service operating costs was the change in volume of it services described above . g & a expenses as a percentage of revenue , g & a expenses were 5.8 % in 2020 and 6.1 % in 2019. we expect g & a expenses as a percentage of revenue in 2021 to be generally consistent with 2020. interest , net net interest expense was $ 477 in 2020 and $ 460 in 2019. see note k to the consolidated financial statements in item 8 for additional information regarding our debt obligations , including interest rates . we expect 2021 net interest expense to be approximately $ 420 , reflecting repayment of our scheduled debt maturities of $ 3 billion in 2021. other , net net other income was $ 82 in 2020 and $ 92 in 2019. other represents primarily the non-service components of pension and other post-retirement benefits , which were income in both periods . in 2021 , we expect net other income to be approximately $ 90. provision for income tax , net our effective tax rate was 15.3 % in 2020 and 17.1 % in 2019. the decrease is
| 13,521 |
furthermore , governments and other third party payors around the world facing tightening budgets could move to further reduce the reimbursement rates or the scope of coverage offered , which could adversely affect sales of our products . if the current adverse macroeconomic conditions continue , our business and prospects may be negatively impacted . in march 2010 , significant reforms to the healthcare system were adopted as law in the united states . the law includes provisions that , among other things , reduce and or limit medicare reimbursement , require all individuals to have health insurance ( with limited exceptions ) and imposes new and or increased taxes . specifically , the law requires the medical device industry to subsidize healthcare reform in the form of a 2.3 % excise tax on u.s. sales of certain medical devices beginning in 2013. we expect that our products will fall under the government classification requiring the excise tax . u.s. net product sales represented 76 % , 79 % and 80 % of our worldwide net product sales in fiscal 2011 , 2010 and 2009 , respectively . as we operate in a highly regulated industry , other governmental actions may adversely affect our business , operations or financial condition , including , without limitation : new laws , regulations or judicial decisions , or new interpretations of existing laws , regulations or decisions , related to health care availability , method of delivery and payment for health care products and services ; changes in the fda and foreign regulatory approval processes that may delay or prevent the approval of new products and result in lost market opportunity ; changes in fda and foreign regulations that may require additional safety monitoring , labeling changes , restrictions on product distribution or use , or other measures after the introduction of our products to market , which could increase our costs of doing business , adversely affect the future permitted uses of approved products , or otherwise adversely affect the market for our products and treatments ; new laws , regulations and judicial decisions affecting pricing or marketing practices ; and changes in the tax laws relating to our operations , including those associated with the recently adopted healthcare reform law discussed above . professional societies , government agencies , practice management groups , private health/science foundations , and organizations involved in healthcare issues may publish guidelines , recommendations or studies to the healthcare and patient communities from time to time . recommendations of government agencies or these other groups/organizations may relate to such matters as usage , cost-effectiveness , and use of related therapies . organizations like these have recently and in the past made recommendations about our products and those of our competitors . recommendations , guidelines or studies that are followed by patients and healthcare providers could result in decreased use of our products . a number of healthcare-related organizations and agencies have issued or proposed contrasting recommendations , and some of these current recommendations could significantly reduce the amount of screening using our thinprep , cervista hpv , selenia , dimensions and related products and 45 adversely affect the sale of those products . for example , in november 2009 , the american college of obstetricians and gynecologists ( acog ) changed their recommendations for pap smear screening , and the united states preventive services task force ( uspstf ) changed their recommendations for mammography screening , both of which recommended less frequent testing . however , in july 2011 , acog changed its breast cancer screening guidelines recommending that mammography screening be offered annually to women beginning at age 40 instead of 50. in october 2011 , the uspstf published draft guidelines for public comment on cervical cancer screening in which they have recommended less frequent testing and no hpv co-testing . recently , there have been periodic significant fluctuations in foreign currencies relative to the u.s. dollar . the ongoing fluctuations of the value of the u.s. dollar , including the recent strengthening of the u.s. dollar against the euro , may cause our products to be less competitive in international markets and may impact sales and profitability over time . historically , a majority of our capital equipment sales to international dealers have been denominated in u.s. dollars . however , we have seen a shift of more sales being denominated in the euro compared to the u.s. dollar for our euro zone dealers . in addition , we have international sales , principally in our diagnostics segment , that are denominated in foreign currencies . the value of these sales is also impacted by fluctuations in the value of the u.s. dollar . given the uncertainty in the worldwide financial markets , foreign currency fluctuations may be significant in the future , and if the u.s. dollar continues to strengthen , we may experience a material adverse effect on our international revenues and operating results . acquisitions fiscal 2011 acquisitions : tct international co. , ltd. on june 1 , 2011 , we acquired tct , a privately-held distributor of medical products , including our thinprep pap test , related instruments and other diagnostic and surgical products . tct 's operating subsidiaries are located in beijing , china . our acquisition of tct enabled us to obtain an established nationwide sales organization and customer support infrastructure in china as we execute on our strategy to expand internationally . the preliminary purchase price of $ 147.3 million is comprised of $ 135.0 million in cash , of which $ 100.0 million was paid up-front and $ 35.0 million plus a working capital adjustment , which has been preliminarily estimated to be $ 13.0 million , are deferred for one year . these amounts may be subject to further adjustment . the deferred payment has been recorded on a present value basis of $ 47.3 million in purchase accounting to reflect fair value and such payment is being accreted through interest expense over this one year period . story_separator_special_tag in addition , the majority of the former shareholders of tct will receive two annual contingent earn-out payments ( subject to adjustment ) not to exceed $ 200.0 million less the deferred payment . subsequent to the acquisition date , our results of operations include the results of tct , which are primarily reported within our diagnostics reporting segment and to a lesser extent within our gyn surgical reporting segment . we accounted for the tct acquisition as a purchase of a business under accounting standards codification ( asc ) 805 , business combinations . the allocation of the purchase price is based upon preliminary estimates of the fair value of assets acquired and liabilities assumed as of june 1 , 2011. the purchase price in excess of net tangible assets acquired was allocated to identifiable intangible assets comprised of customer relationships of $ 41.8 million , business licenses of $ 2.5 million and trade names of $ 1.9 million , based upon a detailed valuation that relies on projections and assumptions . the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed was allocated to goodwill of $ 77.9 million . the contingent earn-out payments are based on a multiple of incremental revenue growth for the one year periods beginning january 1 , 2011 and january 1 , 2012 as compared to the respective prior year periods , and are payable after the first and second anniversaries from the date of acquisition , respectively . since these payments are contingent on future employment , they are being recognized as compensation expense ratably over the required service periods , the first and second year anniversaries from the date of acquisition . based on our revenue projections for the tct business , we recorded compensation expense of $ 17.6 million in fiscal 2011 . 46 interlace medical , inc. on january 6 , 2011 , we acquired interlace , a privately-held company located in framingham , massachusetts . interlace is the developer , manufacturer and supplier of myosure . the purchase price was comprised of $ 126.8 million in cash ( initial consideration ) , which was net of certain adjustments , plus two annual contingent payments up to a maximum of an additional $ 225.0 million in cash . subsequent to the acquisition date , our results of operations include the results of interlace , which has been integrated within our gyn surgical reporting segment . we accounted for the interlace acquisition as a purchase of a business under asc 805. the allocation of the purchase price is based upon preliminary estimates of the fair value of assets acquired and liabilities assumed as of january 6 , 2011. the purchase price in excess of net tangible assets acquired was allocated to identifiable intangible assets comprised of developed technology of $ 158.7 million and trade names of $ 1.8 million , based upon a detailed valuation that relies on projections and assumptions . the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed was allocated to goodwill of $ 88.3 million . in addition to the initial consideration , $ 2.1 million was paid to certain employees upon the completion of three and six months of service from the date of acquisition . since these payments were contingent on future employment , they were recognized as compensation expense . the agreement includes an indemnification provision that provides for the reimbursement of a portion of legal expenses in defense of the interlace intellectual property . we have the right to collect certain amounts set aside in escrow from the initial consideration and , as applicable , offset contingent consideration payments of qualifying legal costs . the contingent payments are based on a multiple of incremental revenue growth during a two-year period following the completion of the acquisition . pursuant to asc 805 , we have recorded an estimate of the fair value of the contingent consideration liability based on future revenue projections of the interlace business under various potential scenarios and weighted probability assumptions of these outcomes . as of the date of acquisition , these cash flow projections were discounted using a rate of 15.6 % . the discount rate is based on the weighted-average cost of capital of the acquired business plus a credit risk premium for non-performance risk related to the liability pursuant to asc 820. this analysis resulted in an initial contingent consideration liability of $ 86.6 million , which will be adjusted periodically as a component of operating expenses based on changes in fair value of the liability driven by the accretion of the liability for the time value of money and changes in the assumptions pertaining to the achievement of the defined revenue growth milestones . this fair value measurement is based on significant inputs not observable in the market and thus represented a level 3 measurement as defined in asc 820 , fair value measurements . as of september 24 , 2011 , there were no significant changes in the estimated outcomes for the contingent consideration recognized . in connection with updating the fair value calculation for accretion as of september 24 , 2011 , we recorded a charge of $ 6.3 million in fiscal 2011 to record the liability at its fair value of $ 92.9 million . beijing healthcome technology company , ltd. on july 19 , 2011 , we completed our acquisition of healthcome , a privately-held manufacturer of medical equipment , including mammography equipment , located in beijing , china . the purchase price was $ 9.8 million in cash , subject to adjustment , which is estimated to include a working capital reduction of $ 1.7 million . in addition , we are obligated to make future payments to the shareholders , who remain employed , up to an additional $ 7.1 million over three years .
| in addition , we sold more selenia systems internationally as a percentage of total selenia systems and average selling prices are lower in our international markets compared to the domestic market . mostly offsetting these decreases was an increase in the number of units sold of our new 2d/3d dimensions products as these systems continue to gain traction . these systems also have higher average selling prices than our selenia systems . we expect the shift in sales from our selenia to our dimensions products to continue as we received fda approval of our 3d tomosynthesis capability in february 2011. diagnostics product sales increased 3 % in fiscal 2011 compared to fiscal 2010 primarily due to an increase in revenues from our cervista hpv tests , the inclusion of tct ( acquired in the third quarter of fiscal 2011 ) resulting in incremental revenues of approximately $ 10 million , a favorable foreign currency impact of $ 5.2 million and to a lesser extent an increase in the number of thinprep pap tests sold internationally , partially offset by a reduction in domestic sales . cervista hpv revenues have increased as we continue to gain new customer accounts and unit sales to existing customers increase . we believe the decline in the number of thinprep pap tests sold domestically is due to the decline in patient visits year over year attributable to the lagging effects of unemployment , continuing economic uncertainty , recent changes in cervical cancer screening guidelines to extend the recommended intervals between such screenings , and to a lesser extent laboratory consolidation . gyn surgical product sales increased 6 % in fiscal 2011 compared to fiscal 2010 due to an increase in the number of adiana systems sold and the inclusion of myosure system sales ( acquired in the second quarter of fiscal 2011 ) . novasure system sales were essentially flat year over year . while we experienced an increase in the number of novasure devices sold internationally and to a lesser extent a slight increase in average
| 13,522 |
aiv holdings is a closed-end , non-diversified management investment company that has elected to be treated as a bdc under the 1940 act . as such , aiv holdings is obligated to comply with certain regulatory requirements . aiv holdings has elected to be treated , and intends to comply with the requirements to continue to qualify annually , as a ric under the code . on may 19 , 2011 , nmfc priced its initial public offering ( the `` ipo '' ) of 7,272,727 shares of common stock at a public offering price of $ 13.75 per share . concurrently with the closing of the ipo and at the public offering price of $ 13.75 per share , nmfc sold an additional 2,172,000 shares of its common stock to certain executives and employees of , and other individuals affiliated with , new mountain capital in a concurrent private placement ( the `` concurrent private placement '' ) . additionally , 1,252,964 shares were issued to the partners of new mountain guardian partners , l.p. at that time for their ownership interest in the predecessor entities . in connection with nmfc 's ipo and through a series of transactions , the operating company owns all of the operations of the predecessor entities , including all of the assets and liabilities related to such operations . nmfc and aiv holdings are holding companies with no direct operations of their own , and their sole asset is their ownership in the operating company . nmfc and aiv holdings each entered into a joinder agreement with respect to the limited liability company agreement , as amended and restated , of the operating company , pursuant to which nmfc and aiv holdings were admitted as members of 73 the operating company . nmfc acquired from the operating company , with the gross proceeds of the ipo and the concurrent private placement , common membership units ( `` units '' ) of the operating company ( the number of units are equal to the number of shares of nmfc 's common stock sold in the ipo and the concurrent private placement ) . additionally , nmfc received units of the operating company equal to the number of shares of common stock of nmfc issued to the partners of new mountain guardian partners , l.p. guardian aiv was the parent of the operating company prior to the ipo and , as a result of the transactions completed in connection with the ipo , obtained units in the operating company . guardian aiv contributed its units in the operating company to its newly formed subsidiary , aiv holdings , in exchange for common stock of aiv holdings . aiv holdings has the right to exchange all or any portion of its units in the operating company for shares of nmfc 's common stock on a one-for-one basis at any time . since nmfc 's ipo , and through december 31 , 2013 , nmfc raised approximately $ 233.4 million in net proceeds from additional offerings of common stock and issued shares of its common stock valued at approximately $ 249.6 million on behalf of aiv holdings for exchanged units . nmfc acquired from the operating company units of the operating company equal to the number of shares of nmfc 's common stock sold in additional offerings . as of december 31 , 2013 , nmfc and aiv holdings owned approximately 94.4 % and 5.6 % , respectively , of the units of the operating company . the current structure was designed to generally prevent nmfc from being allocated taxable income with respect to unrecognized gains that existed at the time of the ipo in the predecessor entities ' assets , and rather such amounts would be allocated generally to aiv holdings . the result is that any distributions made to nmfc 's stockholders that are attributable to such gains generally will not be treated as taxable dividends but rather as return of capital . 74 the diagram below depicts the companies ' organizational structure as of december 31 , 2013 . * includes partners of new mountain guardian partners , l.p. * * these common membership units are exchangeable into shares of nmfc common stock on a one-for-one basis . * * * new mountain finance spv funding , l.l.c . ( `` nmf slf '' ) . the operating company 's investment objective is to generate current income and capital appreciation through the sourcing and origination of debt securities at all levels of the capital structure , including first and second lien debt , notes , bonds and mezzanine securities . in some cases , the operating company 's investments may also include equity interests . the primary focus is in the debt of defensive growth companies , which are defined as generally exhibiting the following characteristics : ( i ) sustainable secular growth drivers , ( ii ) high barriers to competitive entry , ( iii ) high free cash flow after capital expenditure and working capital needs , ( iv ) high returns on assets and ( v ) niche market dominance . as of december 31 , 2013 , the operating company 's net asset value was $ 688.5 million and its portfolio had a fair value of approximately $ 1,115.7 million in 59 portfolio companies , with a weighted average yield to maturity of approximately 10.6 % . this yield to maturity calculation assumes that all 75 investments not on non-accrual are purchased at fair value on december 31 , 2013 and held until their respective maturities with no prepayments or losses and exited at par at maturity . the actual yield to maturity may be higher or lower due to the future selection of the london interbank offered rate ( `` libor '' ) contracts by the individual companies in the operating company 's portfolio or other factors . story_separator_special_tag recent developments on january 27 , 2014 , nmfc announced that the u.s. small business administration ( `` sba '' ) issued a `` green light '' letter inviting nmfc to continue its application process to obtain a license to form and operate a small business investment company ( `` sbic '' ) subsidiary . if approved , a sbic license would provide nmfc with an incremental source of attractive long-term capital . receipt of a green light letter from the sba does not assure an applicant that the sba will ultimately issue an sbic license , and nmfc has received no assurance or indication from the sba that it will receive a sbic license , or of the timeframe in which it would receive a license , should one ultimately be granted . on february 3 , 2014 , nmfc completed an underwritten secondary public offering of 2,325,000 shares of its common stock on behalf of a selling stockholder , aiv holdings , at a public offering price of $ 14.70 per share . in connection with the underwritten secondary public offering , the underwriters purchased an additional 346,938 shares of nmfc 's common stock from aiv holdings with the exercise of the overallotment option to purchase up to an additional 346,938 shares of common stock . nmfc did not receive any proceeds from the sale of shares of nmfc 's common stock by aiv holdings . the operating company and nmfc did not bear any expenses in connection with this offering . the offering expenses were borne by the selling stockholder , aiv holdings . as of february 3 , 2014 , aiv holdings no longer owns any units of the operating company and nmfc owns 100.0 % of the outstanding units of the operating company . as a result , the companies ' current organizational structure may be collapsed or simplified in the future . on march 4 , 2014 , the operating company 's board of directors , and subsequently nmfc 's board of directors , declared a first quarter 2014 distribution of $ 0.34 per unit/share payable on march 31 , 2014 to holders of record as of march 17 , 2014. critical accounting policies the preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the united states ( `` gaap '' ) requires management 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 revenues and expenses during the periods reported . actual results could materially differ from those estimates . we have identified the following items as critical accounting policies . basis of accounting the operating company consolidates its wholly-owned subsidiary , nmf slf . nmfc and aiv holdings do not consolidate the operating company . nmfc and aiv holdings apply investment company master-feeder financial statement presentation , as described in accounting standards codification 946 , financial servicesinvestment companies , ( `` asc 946 '' ) to their interest in the operating company . nmfc and aiv holdings observe that it is industry practice to follow the presentation prescribed for a master fund-feeder fund structure in asc 946 in instances in which a master fund is owned by more than one feeder fund and that such presentation provides stockholders of nmfc and aiv holdings with a clearer depiction of their investment in the master fund . 76 valuation and leveling of portfolio investments at all times consistent with gaap and the 1940 act , the operating company conducts a valuation of assets , which impacts its net asset value , and , consequently , the net asset values of nmfc and aiv holdings . the operating company values its assets on a quarterly basis , or more frequently if required under the 1940 act . in all cases , the operating company 's board of directors is ultimately and solely responsible for determining the fair value of the portfolio investments on a quarterly basis in good faith , including investments that are not publicly traded , those whose market prices are not readily available and any other situation where its portfolio investments require a fair value determination . security transactions are accounted for on a trade date basis . the operating company 's quarterly valuation procedures are set forth in more detail below : ( 1 ) investments for which market quotations are readily available on an exchange are valued at such market quotations based on the closing price indicated from independent pricing services . ( 2 ) investments for which indicative prices are obtained from various pricing services and or brokers or dealers are valued through a multi-step valuation process , as described below , to determine whether the quote ( s ) obtained is representative of fair value in accordance with gaap . a. bond quotes are obtained through independent pricing services . internal reviews are performed by the investment professionals of the investment adviser to ensure that the quote obtained is representative of fair value in accordance with gaap and if so , the quote is used . if the investment adviser is unable to sufficiently validate the quote ( s ) internally and if the investment 's par value or its fair value exceeds the materiality threshold , the investment is valued similarly to those assets with no readily available quotes ( see ( 3 ) below ) ; and b. for investments other than bonds , the operating company looks at the number of quotes readily available and performs the following : i. investments for which two or more quotes are received from a pricing service are valued using the mean of the mean of the bid and ask of the quotes obtained ; ii . investments for which one quote is received from a pricing service are validated internally . the investment professionals of the investment adviser analyze the market quotes obtained using an array of valuation methods ( further described below ) to validate the fair value .
| 83 the following table for the operating company for the year ended december 31 , 2013 is adjusted to reflect the step-up to fair market value and the allocation of the incentive fees related to hypothetical capital gains out of the adjusted post-incentive fee net investment income . replace_table_token_15_th ( 1 ) for the year ended december 31 , 2013 , the operating company incurred total incentive fees of $ 19.7 million , of which $ 3.2 million related to capital gains incentive fees on a hypothetical liquidation basis . ( 2 ) includes expense waivers and reimbursements of $ 3.2 million . for the year ended december 31 , 2013 , the operating company had a $ 0.9 million adjustment to interest income for amortization , a decrease of $ 3.2 million to net realized gains and an increase of $ 4.1 million to net change in unrealized appreciation to adjust for the stepped-up cost basis of the transferred investments as discussed above . for the year ended december 31 , 2013 , total adjusted investment income of $ 114.0 million consisted of approximately $ 94.5 million in cash interest from investments , approximately $ 3.4 million in pik interest from investments , approximately $ 5.8 million in prepayment fees , net amortization of purchase premiums and discounts and origination fees of approximately $ 2.5 million , approximately $ 5.0 million in dividend income and approximately $ 2.8 million in other income . the operating company 's adjusted net investment income was $ 66.0 million for the year ended december 31 , 2013. in accordance with gaap , for the year ended december 31 , 2013 , the operating company accrued $ 3.2 million of hypothetical capital gains incentive fee based upon the cumulative net adjusted realized capital gains and adjusted realized capital losses and the cumulative net adjusted unrealized capital appreciation and adjusted unrealized capital depreciation on investments held at the end of each period . actual amounts paid to the investment adviser are consistent with the investment management agreement and are based only on actual adjusted realized capital gains computed net of all adjusted realized capital losses and adjusted unrealized capital depreciation on a cumulative basis from
| 13,523 |
product sale transactions are evidenced by customer purchase orders , customer contracts , invoices and or the related shipping documents . amounts collected from customers and remitted to governmental authorities , which represents value-added taxes related to elelyso sales in israel , are presented on a net basis in our consolidated statements of operations , in that taxes billed to customers are not included as a component of net product revenues . discontinued operations pursuant to the amended pfizer agreement , we sold to pfizer our share in the collaboration created under the initial pfizer agreement for the commercialization of elelyso . as part of the sale , we agreed to transfer our rights to elelyso in israel to pfizer while gaining full rights to elelyso in brazil . under the amended pfizer agreement , pfizer is responsible for 100 % of expenses , and entitled to all of the revenues , globally , for elelyso , excluding brazil where we are responsible for all expenses and retain all revenues . the amended pfizer agreement eliminates pfizer 's entitlement to annual payments of up to $ 12.5 million in relation to commercialization of elelyso in brazil . for further details please see notes 2 and 12 to the financial statements . we accounted for the sale of our share in the collaboration created under the initial pfizer agreement , including the transfer of our rights to elelyso in israel , in accordance with asu no . 2014-08. the following assets and liabilities associated with our share in the former collaboration , including our rights to elelyso in israel , have been segregated and classified as assets and liabilities of discontinued operations , as appropriate , in the consolidated balance sheets as of december 31 , 2014 and 2015 , respectively ( in thousands ) : 53 replace_table_token_4_th * during the years ended december 31 , 2014 and 2015 , we recorded approximately $ 1.6 million and $ 0 , respectively , for write-down of inventory under the cost of revenues . the following summarized financial information related to our share in the former collaboration , including our rights to elelyso in israel , have been segregated from continuing operations and have been reported as discontinued operations in our consolidated statements of operations ( in thousands ) : replace_table_token_5_th research and development expense we expect our research and development expense to remain our primary expense in the near future as we continue to develop our product candidates . research and development expense consists of : · internal costs associated with research and development activities ; · payments made to third party contract research organizations , investigative/clinical sites and consultants ; · manufacturing development costs ; · personnel-related expenses , including salaries , benefits , travel , and related costs for the personnel involved in research and development ; · activities relating to the advancement of product candidates through preclinical studies and clinical trials ; and · facilities and other allocated expenses , which include direct and allocated expenses for rent and maintenance of facilities , as well as laboratory and other supplies . the following table identifies our current major research and development projects : 54 project status expected near term milestones prx 102 – alpha-gal-a phase i/ii clinical trial , ongoing commence phase iii clinical trials in the first half of 2016 prx-110 – air dnase phase i clinical trial , ongoing initiate proof of concept efficacy study in mid-2016 oprx-106 – oral antitnf phase i clinical trial initiate proof of concept efficacy study in mid-2016 we anticipate incurring increasing costs in connection with the continued development of all of the product candidates in our pipeline . our internal resources , employees and infrastructure are not tied to any individual research project and are typically deployed across all of our projects . we currently do not record and maintain research and development costs per project . the costs and expenses of our projects are partially funded by grants we have received from the ocs . each grant is deducted from the related research and development expenses as the costs are incurred . for additional information regarding the grant process , see “ business—israeli government programs—encouragement of industrial research and development law , 1984 ” in item 1 of this annual report . there can be no assurance that we will continue to receive grants from the ocs in amounts sufficient for our operations , if at all . at this time , due to the inherently unpredictable nature of preclinical and clinical development processes and given the early stage of our preclinical product development programs , we are unable to estimate with any certainty the costs we will incur in the continued development of the product candidates in our pipeline for potential commercialization . clinical development timelines , the probability of success and development costs can differ materially from expectations . while we are currently focused on advancing each of our product development programs , our future research and development expenses will depend on the clinical success of each product candidate , 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 and capital requirements . see “ risk factors—if we are unable to develop and commercialize our product candidates , our business will be adversely affected ” and “ —we may not obtain the necessary u.s. , ema or other worldwide regulatory approvals to commercialize our drug candidates in a timely manner , if at all , which would have a material adverse effect on our business , results of operations and financial condition. story_separator_special_tag ” we expect our research and development expenses to continue to be our primary expense in the future as we continue the advancement of our clinical trials and preclinical product development programs for our product candidates . the lengthy process of completing clinical trials and seeking regulatory approval for our product candidates 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 revenue and cause our research and development expense to increase and , in turn , have a material adverse effect on our operations . due to the factors set forth above , we are not able to estimate with any certainty when we would recognize any net cash inflows from our projects . see “ risk factors—clinical trials are very expensive , time-consuming and difficult to design and implement and may result in unforeseen costs which may have a material adverse effect on our business , results of operations and financial condition. ” share-based compensation the discussion below regarding share-based compensation relates to our share-based compensation . in accordance with the guidance , we record the benefit of any grant to a non-employee and remeasure the benefit in any future vesting period for the unvested portion of the grants , as applicable . in addition , we use the straight-line accounting method for recording the benefit of the entire grant , unlike the graded method we use to record grants made to employees . we measure share-based compensation cost for all share-based awards at the fair value on the grant date and recognition of share-based compensation over the service period for awards that we expect will vest . the fair value of stock options is determined based on the number of shares granted and the price of our ordinary shares , and calculated based on the black-scholes valuation model . we recognize such value as expense over the service period , net of estimated forfeitures , using the accelerated method . 55 for purposes of determining the fair value of the restricted shares of common stock granted to employees during the fiscal year ended december 31 , 2013 , our management used the fair value of our common stock which was the closing sale price of our common stock on the nyse mkt on the date of grant . the guidance requires companies to estimate the expected term of the option rather than simply using the contractual term of an option . because of lack of data on past option exercises by employees , the expected term of the options could not be based on historic exercise patterns . accordingly , we adopted the simplified method , according to which companies may calculate the expected term as the average between the vesting date and the expiration date , assuming the option was granted as a “ plain vanilla ” option . in performing the valuation , we assumed an expected 0 % dividend yield in the previous years and in the next years . we do not have a dividend policy and given the lack of profitability , dividends are not expected in the foreseeable future , if at all . the guidance stipulates a number of factors that should be considered when estimating the expected volatility , including the implied volatility of traded options , historical volatility and the period that the shares of the company are being publicly traded . the risk-free interest rate used in the valuation of the options is based on the implied yield of u.s. federal reserve zero–coupon government bonds . the remaining term of the bonds used for each valuation was equal to the expected term of the grant . this methodology has been applied to all grants valued by us . the guidance requires the use of a risk–free interest rate based on the implied yield currently available on zero–coupon government issues of the country in whose currency the exercise price is expressed , with a remaining term equal to the expected life of the option being valued . this requirement has been applied for all grants valued as part of this report . year ended december 31 , 2015 compared to the year ended december 31 , 2014 revenues we recorded revenues of $ 4.4 million for the year ended december 31 , 2015 , an increase of approximately $ 841,000 , or 24 % , compared to revenues of $ 3.5 million for the year ended december 31 , 2014. revenues represent products sold in brazil . cost of revenues cost of revenues was $ 730,000 for the year ended december 31 , 2015 , an increase of $ 100,000 , or 16 % , compared to the cost of revenues of $ 630,000 for the year ended december 31 , 2014. cost of revenues consists primarily of products we sold in brazil for which revenues were recognized during the period and royalties payable to the ocs and to a certain academic institution in connection with such sales . research and development expenses research and development expenses were $ 24.9 million for the year ended december 31 , 2015 , a decrease of $ 2.5 million , or 9 % from $ 27.4 million for the year ended december 31 , 2014. the decrease resulted primarily from a decrease of $ 2.3 million in costs related to salaries expense , mainly due to higher bonuses that were paid during the year ended december 31 , 2014 and the devaluation of the new israeli shekel against the u.s. dollar during the period ended december 31 , 2015. we expect research and development expenses to continue to be our primary expense as we enter into a more advanced stage of preclinical and clinical trials for certain of our product candidates .
| under our current arrangement with pfizer , which was amended in october 2015 , pfizer has the rights to market elelyso globally except for brazil , where we have the sole marketing rights ; pfizer is responsible for 100 % of expenses , and entitled to all of the revenues , globally , for elelyso , excluding brazil , and we are responsible for all expenses and retain all revenues from sales in brazil . pfizer is no longer entitled to any payments with respect to sales of elelyso in brazil . for the first 10-year period after the execution of the amended pfizer agreement , we have agreed to sell drug substance to pfizer for the production of elelyso , and pfizer maintains the right to extend the supply period for up to two additional 30-month periods subject to certain terms and conditions . the amended pfizer agreement also includes provisions regarding cooperation for regulatory matters , supply of the drug substance to pfizer , including provisions addressing failure to supply , and patent enforcement , and contains customary provisions regarding termination , indemnification and insurance requirements . on october 12 , 2015 , we also entered into a stock purchase agreement with pfizer pursuant to which we issued 5,649,079 shares of our common stock for an aggregate purchase price equal to $ 10.0 million subject to certain other terms set forth in the stock purchase agreement . as part of the stock purchase agreement , pfizer agreed to a 180-day lock-up with respect to the purchased shares of common stock . on june 18 , 2013 , we entered into the brazil agreement with fiocruz . fiocruz 's purchases of uplyso to date have been significantly below certain agreed upon purchase milestones and , accordingly , we have the right to terminate the brazil agreement . notwithstanding the low purchase amounts , we are , at this time , continuing to supply uplyso to fiocruz under the brazil agreement , and patients continue to be treated with uplyso in brazil . we are discussing with fiocruz potential actions that fiocruz may take to comply with its purchase obligations and , based on such discussions , we will determine what we believe to be the course of action that is in the best interest of our company . 51 we are developing an innovative product pipeline
| 13,524 |
in addition to rent , our current lease agreements require our tenants to pay the following : ( 1 ) all facility maintenance ; ( 2 ) all insurance required in connection with the leased properties and the business conducted on the leased properties ; ( 3 ) taxes levied on or with respect to the leased properties ( other than taxes on our income ) ; and ( 4 ) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties . accordingly , due to the “ triple-net ” structure of our leases , we do not expect to incur significant property-level expenses . 55 table of content s discussion of operating results results of operations for the years ended december 31 , 2020 and december 31 , 2019 replace_table_token_1_th 56 table of content s revenue for the years ended december 31 , 2020 and 2019 , our revenue was comprised of the following items : replace_table_token_2_th leasing revenue the following table details the components of our income from sales-type , direct financing , operating and financing receivables leases : replace_table_token_3_th ( 1 ) represents portion of land separately classified and accounted for under the operating lease model associated with our investment in caesars palace las vegas and certain operating land parcels contained in the regional master lease agreement . upon the consummation of the eldorado transaction on july 20 , 2020 , the land component of caesars palace las vegas and certain operating land parcels were reassessed for lease classification and determined to be a sales-type lease . accordingly , subsequent to july 20 , 2020 , such income is recognized as income from sales-type and direct financing leases . ( 2 ) represents the mta properties and the jack cleveland/thistledown lease agreement , both of which were sale leaseback transactions . in accordance with asc 842 , since the lease agreements were determined to meet the definition of a sales-type lease and control of the asset is not considered to have transferred to us , such lease agreements are accounted for as financings under asc 310 . ( 3 ) amounts represent the non-cash adjustment to income from sales-type leases , direct financing leases and lease financing receivables in order to recognize income on an effective interest basis at a constant rate of return over the term of the leases . leasing revenue is generated from rent from our lease agreements . total leasing revenue increased $ 304.5 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. total contractual leasing revenue increased $ 264.3 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the increase was primarily driven by the addition of greektown , hard rock cincinnati , the century portfolio , jack cleveland/thistledown and the mta properties to our real estate portfolio in may 2019 , september 2019 , december 2019 , january 2020 and july 2020 , respectively , as well as the cplv additional rent acquisition and the hlv additional rent acquisition in july 2020. income from loans income from loans increased $ 15.7 million during the during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the increase was driven by the addition of the amended and restated rov loan , chelsea piers mortgage loan and forum convention center mortgage loan to our real estate portfolio in january 2020 , august 2020 and september 2020 , respectively . other income for the year ended december 31 , 2019 , other income was included net in general and administrative expenses . during the year ended december 31 , 2020 , we have re-classified other income to be presented gross with an offsetting amount within other expenses . additionally , during the year ended december 31 , 2020 , we recognized additional income and an offsetting expense as a result of the assumption of the hno ground lease , as further described in note 4 - property transactions , as part of the mta properties acquisitions . 57 table of content s golf course revenues revenues from golf operations decreased $ 5.1 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the decrease was primarily driven by the closure of our golf courses in mid-march until early to mid-may , as well as lower resort play at our las vegas courses as a result of the ongoing covid-19 pandemic , partially offset by an increase in the contractual fees paid to us by caesars for the use of our golf courses , pursuant to the golf course use agreement . operating expenses for the years ended december 31 , 2020 and 2019 , our operating expenses were comprised of the following items : replace_table_token_4_th general and administrative expenses general and administrative expenses increased $ 6.1 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the increase was primarily driven by an increase in compensation , including stock-based compensation . other expenses for the year ended december 31 , 2019 , other expenses were included net in general and administrative expenses . during the year ended december 31 , 2020 , we have re-classified other expenses to be presented gross with an offsetting amount within other income . additionally , during the year ended december 31 , 2020 , we recognized additional income and an offsetting expense as a result of the assumption of the hno ground lease , as further described in note 4 - property transactions , as part of the mta properties acquisitions . golf course expenses expenses from golf operations decreased $ 1.3 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the decrease was primarily driven by the closure story_separator_special_tag in addition to rent , our current lease agreements require our tenants to pay the following : ( 1 ) all facility maintenance ; ( 2 ) all insurance required in connection with the leased properties and the business conducted on the leased properties ; ( 3 ) taxes levied on or with respect to the leased properties ( other than taxes on our income ) ; and ( 4 ) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties . accordingly , due to the “ triple-net ” structure of our leases , we do not expect to incur significant property-level expenses . 55 table of content s discussion of operating results results of operations for the years ended december 31 , 2020 and december 31 , 2019 replace_table_token_1_th 56 table of content s revenue for the years ended december 31 , 2020 and 2019 , our revenue was comprised of the following items : replace_table_token_2_th leasing revenue the following table details the components of our income from sales-type , direct financing , operating and financing receivables leases : replace_table_token_3_th ( 1 ) represents portion of land separately classified and accounted for under the operating lease model associated with our investment in caesars palace las vegas and certain operating land parcels contained in the regional master lease agreement . upon the consummation of the eldorado transaction on july 20 , 2020 , the land component of caesars palace las vegas and certain operating land parcels were reassessed for lease classification and determined to be a sales-type lease . accordingly , subsequent to july 20 , 2020 , such income is recognized as income from sales-type and direct financing leases . ( 2 ) represents the mta properties and the jack cleveland/thistledown lease agreement , both of which were sale leaseback transactions . in accordance with asc 842 , since the lease agreements were determined to meet the definition of a sales-type lease and control of the asset is not considered to have transferred to us , such lease agreements are accounted for as financings under asc 310 . ( 3 ) amounts represent the non-cash adjustment to income from sales-type leases , direct financing leases and lease financing receivables in order to recognize income on an effective interest basis at a constant rate of return over the term of the leases . leasing revenue is generated from rent from our lease agreements . total leasing revenue increased $ 304.5 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. total contractual leasing revenue increased $ 264.3 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the increase was primarily driven by the addition of greektown , hard rock cincinnati , the century portfolio , jack cleveland/thistledown and the mta properties to our real estate portfolio in may 2019 , september 2019 , december 2019 , january 2020 and july 2020 , respectively , as well as the cplv additional rent acquisition and the hlv additional rent acquisition in july 2020. income from loans income from loans increased $ 15.7 million during the during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the increase was driven by the addition of the amended and restated rov loan , chelsea piers mortgage loan and forum convention center mortgage loan to our real estate portfolio in january 2020 , august 2020 and september 2020 , respectively . other income for the year ended december 31 , 2019 , other income was included net in general and administrative expenses . during the year ended december 31 , 2020 , we have re-classified other income to be presented gross with an offsetting amount within other expenses . additionally , during the year ended december 31 , 2020 , we recognized additional income and an offsetting expense as a result of the assumption of the hno ground lease , as further described in note 4 - property transactions , as part of the mta properties acquisitions . 57 table of content s golf course revenues revenues from golf operations decreased $ 5.1 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the decrease was primarily driven by the closure of our golf courses in mid-march until early to mid-may , as well as lower resort play at our las vegas courses as a result of the ongoing covid-19 pandemic , partially offset by an increase in the contractual fees paid to us by caesars for the use of our golf courses , pursuant to the golf course use agreement . operating expenses for the years ended december 31 , 2020 and 2019 , our operating expenses were comprised of the following items : replace_table_token_4_th general and administrative expenses general and administrative expenses increased $ 6.1 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the increase was primarily driven by an increase in compensation , including stock-based compensation . other expenses for the year ended december 31 , 2019 , other expenses were included net in general and administrative expenses . during the year ended december 31 , 2020 , we have re-classified other expenses to be presented gross with an offsetting amount within other income . additionally , during the year ended december 31 , 2020 , we recognized additional income and an offsetting expense as a result of the assumption of the hno ground lease , as further described in note 4 - property transactions , as part of the mta properties acquisitions . golf course expenses expenses from golf operations decreased $ 1.3 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the decrease was primarily driven by the closure
| million issued $ 2.5 billion of senior unsecured notes at a blended and weighted average interest rate of 3.83 % and used $ 500.0 million of those proceeds to redeem our 8 % second lien notes that were scheduled to mature in 2023. repriced our term loan b facility and lowered the interest rate from l + 2.00 % to l + 1.75 % . 51 table of content s summary of significant 2020 activities acquisition and investment activity caesars forum convention center mortgage loan . on september 18 , 2020 , we provided a $ 400.0 million mortgage loan to caesars that is secured by the caesars forum convention center . the loan bears interest at an initial rate of 7.7 % , has a term of five years and is prepayable beginning in year three , subject to certain conditions . the caesars forum convention center is subject to the a & r convention center put-call agreement between caesars and us , with our call option being accelerated to 2025 in connection with the entry into the mortgage loan . chelsea piers mortgage loan . on august 31 , 2020 , we entered into an $ 80.0 million mortgage loan agreement with chelsea piers new york ( “ chelsea piers ” ) secured by the chelsea piers complex in new york city , pursuant to which we provided an initial $ 65.0 million term loan and a $ 15.0 million delayed draw term loan ( which remains undrawn ) , subject to certain conditions . the loan bears interest at a rate of 7.0 % per annum and has a term of seven years . consummation of the eldorado transaction . on july 20 , 2020 , concurrent with the consummation of the eldorado/caesars merger , we consummated the eldorado transaction contemplated by the master transaction agreement and associated agreements . the closing of the eldorado transaction includes the consummation of the transactions contemplated by the below described agreements . refer to note
| 13,525 |
lease revenues and fees decreased primarily due to a 3.4 % decrease in same store revenues and the net reduction of 78 sales and lease ownership aaron 's stores during the 24 month period ended december 31 , 2016 . progressive . progressive segment revenues increased primarily due to a 35.6 % growth in active doors , which contributed to an increase in invoice volume . dami . dami segment revenues increased due to dami 's results being included for a full year compared to a partial year in 2015 from the october 15 , 2015 acquisition date . franchise . franchise segment revenues decreased primarily due to the net reduction of 83 franchised stores during the 24 month period ended december 31 , 2016 . year ended december 31 , 2015 versus year ended december 31 , 2014 sales and lease ownership . sales and lease ownership segment revenues decreased due to a $ 65.0 million decrease in lease revenues and fees and a $ 5.3 million decrease in retail sales , partially offset by a $ 26.4 million increase in non-retail sales . lease revenues and fees decreased partly due to the net reduction of 39 sales and lease ownership stores during the 24 month period ended december 31 , 2015 and a 4.2 % decline in same store revenues . in particular , the revenues of the stores located in texas , which represent approximately 18.0 % of our store-based revenues , were down considerably in 2015 due to the effects of contractions in the oil industry on that market . non-retail sales increased primarily due to higher demand for product by franchisees . progressive . progressive segment revenues increased partly due to progressive 's results being included for a full year compared to a partial year in 2014 from the april 14 , 2014 acquisition date . revenues also increased in 2015 due to increases in invoice volume at existing active doors as well as a net increase of approximately 941 active doors since the beginning of 2015 . 35 franchise . franchise segment revenues decreased primarily due to a 0.9 % decline in same store revenues of existing franchised stores and the impact of the net reduction of 47 franchised stores during the 24 month period ended december 31 , 2015 . operating expenses information about certain significant components of operating expenses is as follows : change year ended december 31 , 2016 vs. 2015 2015 vs. 2014 ( in thousands ) 2016 2015 2014 $ % $ % personnel costs $ 611,113 $ 619,557 $ 594,246 $ ( 8,444 ) ( 1.4 ) % $ 25,311 4.3 % occupancy costs 208,712 208,927 206,806 ( 215 ) ( 0.1 ) 2,121 1.0 provision for lease merchandise write-offs 134,104 136,380 99,942 ( 2,276 ) ( 1.7 ) 36,438 36.5 bad debt expense 128,333 122,184 60,514 6,149 5.0 61,670 101.9 shipping and handling 69,939 77,944 81,131 ( 8,005 ) ( 10.3 ) ( 3,187 ) ( 3.9 ) advertising 40,823 39,334 50,460 1,489 3.8 ( 11,126 ) ( 22.0 ) provision for loan losses 11,251 937 — 10,314 nmf 937 nmf other operating expenses 147,510 151,767 138,702 ( 4,257 ) ( 2.8 ) 13,065 9.4 operating expenses $ 1,351,785 $ 1,357,030 $ 1,231,801 $ ( 5,245 ) ( 0.4 ) % $ 125,229 10.2 % nmf—calculation is not meaningful year ended december 31 , 2016 versus year ended december 31 , 2015 operating expenses decreased $ 5.2 million during 2016 compared to the prior year . as a percentage of total revenues , operating expense decreased to 42.1 % in 2016 from 42.7 % in 2015 . personnel costs decreased primarily due to the disposition of the homesmart business in which the company sold all of its 82 homesmart stores on may 13 , 2016 and a reduction of corporate support staff . this was partially offset by hiring to support the growth of progressive and dami , the inclusion of a full year of dami personnel costs , and additional charges related to the retirement of the company 's former chief financial officer in 2016. the provision for lease merchandise write-offs decreased slightly during 2016 . progressive 's provision for lease merchandise write-offs as a percentage of progressive 's lease revenues improved from 7.0 % in 2015 to 5.7 % in 2016 due to continued operational improvements and enhancements to the lease decisioning process . the provision for lease merchandise write-offs as a percentage of lease revenues for our aaron 's business increased from 3.8 % in 2015 to 4.1 % in 2016 . although bad debt expense increased during 2016 due to higher progressive revenues , bad debt expense as a percentage of progressive 's revenues decreased to 10.3 % in 2016 from 11.6 % in 2015 due to continued operational improvements and enhancements to the lease decisioning process . shipping and handling expense decreased during 2016 due to lower delivery volumes as a result of the net reduction of 58 sales & lease ownership stores during the year as well as the disposition of the homesmart business on may 13 , 2016 . the provision for loan losses increased during 2016 due to the inclusion of dami 's results for a full year compared to a partial year in 2015 from the october 15 , 2015 acquisition date . other operating expenses during 2015 included $ 3.7 million of one-time transaction costs incurred by progressive in connection with the acquisition of dami . year ended december 31 , 2015 versus year ended december 31 , 2014 operating expenses increased $ 125.2 million in 2015 compared to 2014 . as a percentage of total revenues , operating expense decreased to 42.7 % during 2015 from 45.7 % during the comparable period in 2014 . operating expenses increased due primarily to the consolidation of progressive 's results from operations from the april 14 , 2014 acquisition date . personnel costs increased due to incurring a full year of progressive personnel cost in 2015 and hiring to support the growth of progressive . story_separator_special_tag the provision for lease merchandise write-offs increased due to higher progressive revenues stemming from progressive 's results being included for a full year compared to a partial year in 2014 from the april 14 , 2014 acquisition date and a net 36 increase of approximately 941 active doors since the beginning of 2015 . progressive 's provision for lease merchandise write-offs as a percentage of progressive 's lease revenues improved from 7.9 % in 2014 to 7.0 % in 2015 due to the timing of the april 2014 progressive acquisition ; customers often exercise the early purchase option in their lease agreements in the january through april time frame due to their receipt of federal and state income tax refunds , which results in a decrease to the provision during this period . as such , the 2014 results did not include the favorable impact to the provision that occurs in january through april . the provision for lease merchandise write-offs as a percentage of lease revenues for our aaron 's business increased from 3.4 % in 2014 to 3.8 % in 2015 . bad debt expense increased due to the increase in progressive revenues as a percentage of total revenues . progressive 's bad debt expense in 2015 was affected by the impact of a temporary interruption of certain data attributes used to make our approval decisions . we lost access to the attributes in february 2015 and replaced them in april 2015. leases generated during the period of interruption charged off at higher rates than originally anticipated during the second and third quarters of 2015 . nonetheless , progressive 's bad debt expense as a percentage of progressive 's revenues remained constant at approximately 12 % in both years . advertising expense decreased $ 11.1 million in 2015 compared to 2014 due primarily to expense reduction initiatives during 2015 and a net reduction of 39 sales and lease ownership stores during the 24 month period ended december 31 , 2015 . other operating expenses during 2015 includes $ 3.7 million of one-time transaction costs incurred by progressive in connection with the acquisition of dami . other costs and expenses year ended december 31 , 2016 versus year ended december 31 , 2015 depreciation of lease merchandise . depreciation of merchandise not on lease as a percentage of consolidated depreciation remained consistent year over year at approximately 5.8 % . as a percentage of total lease revenues and fees , depreciation of lease merchandise increased to 46.9 % from 45.2 % in the prior year , primarily due to a shift in product mix from our aaron 's business to progressive which is consistent with the increasing proportion of progressive revenue of total revenue . progressive generally experiences higher depreciation as a percentage of lease revenues because , among other factors , its merchandise has a shorter average life on lease , a higher rate of early buyouts , and the merchandise is generally purchased at retail prices compared to our aaron 's business , which procures merchandise at wholesale prices . retail cost of sales . retail cost of sales as a percentage of retail sales decreased to 63.2 % from 64.0 % primarily due to lower inventory purchase cost . non-retail cost of sales . non-retail cost of sales as a percentage of non-retail sales decreased to 89.4 % from 90.2 % primarily due to lower inventory purchase cost . restructuring expenses . in connection with the closure and consolidation of underperforming company-operated aaron 's stores and the optimization of our home office and field support staff , charges of $ 16.6 million and $ 3.5 million were recorded to the sales and lease ownership segment and other category , respectively , during the year ended december 31 , 2016 . these charges were principally comprised of $ 11.6 million related to losses on contractual lease obligations for closed stores , $ 4.5 million related to the write-off and impairment of store property , plant and equipment and $ 3.9 million related to workforce reductions . the company estimates it will incur an additional $ 13.0 million of restructuring charges in 2017 related to losses on contractual lease obligations for approximately 70 aaron 's stores that the company expects to close in the second quarter of 2017. year ended december 31 , 2015 versus year ended december 31 , 2014 depreciation of lease merchandise . depreciation of merchandise not on lease as a percentage of consolidated depreciation remained consistent year over year at approximately 5.8 % . as a percentage of total lease revenues and fees , depreciation of lease merchandise increased to 45.2 % in 2015 from 42.0 % in 2014 , primarily because of progressive 's continued growth relative to our aaron 's business . retail cost of sales . retail cost of sales as a percentage of retail sales have remained consistent at 64.0 % in both periods . non-retail cost of sales . non-retail cost of sales as a percentage of non-retail sales decreased slightly to 90.2 % from 90.8 % . financial advisory and legal costs . financial advisory and legal costs of $ 13.7 million were recorded to the other category in 2014 related to addressing now-resolved strategic matters , including an unsolicited acquisition offer , two proxy contests and certain other shareholder proposals . 37 restructuring expenses . in connection with the closure of 44 company-operated stores and restructuring of its home office and field support in 2014 , charges of $ 4.8 million and $ 4.3 million were recorded to the sales and lease ownership segment and other category , respectively . these changes principally consist of contractual lease obligations , the write-off and impairment of property , plant and equipment and workforce reductions . retirement charges . retirement charges of $ 9.1 million were recorded to the other category in 2014 due to the retirements of both the company 's former chief executive officer and former chief operating officer in 2014. progressive-related transaction costs .
| the company also announced plans to close or merge approximately 70 additional aaron 's stores in the second quarter of 2017. earnings before income taxes for the aaron 's sales and lease ownership segment decreased to $ 127.3 million for 2016 , compared to $ 163.0 million for 2015 , primarily due to the decrease in revenue and incurring $ 16.6 million in restructuring charges related to the store closing actions . key metrics the company 's franchised and company-operated store activity ( unaudited ) is summarized as follows : replace_table_token_7_th 1 in january 2014 , we sold our 27 company-operated rimco stores and the rights to five franchised rimco stores . 2 in may 2016 , we sold our 82 company-operated homesmart stores . 31 same store revenues . we believe that changes in same store revenues are a key performance indicator of our aaron 's business . for the year ended december 31 , 2016 , we calculated this amount by comparing revenues for the year ended december 31 , 2016 to revenues for the year ended december 31 , 2015 for all stores open for the entire 24-month period ended december 31 , 2016 , excluding stores that received lease agreements from other acquired , closed or merged stores . during the year ended december 31 , 2016 , the company revised the methodology for calculating same store revenues and same store customer counts to reflect a full lifecycle for customer retention after stores are closed . as a result , revenues for stores that have been consolidated/merged are now included in the comparable same store calculation 27 months after their consolidation/merger . previously , merged stores were included in the same store calculation after 24 months . the change in the same store calculation had an immaterial impact on comparable store revenues and customer counts . active doors . we believe that active doors are a key performance indicator of our progressive segment . active doors represent retail store locations at which at least one virtual lease-to-own transaction has been completed during the trailing three month period . the following table presents active doors
| 13,526 |
filed voluntary bankruptcy petitions seeking relief under chapter 11 of title 11 of the united states bankruptcy code in the united states bankruptcy court for the southern district of texas , houston division , to pursue a chapter 11 plan of reorganization . we filed a motion with the bankruptcy court seeking joint administration of the chapter 11 cases under the caption in re goodrich petroleum corporation , et al . ( case no . 16-31975 ) . the chapter 11 cases constituted an event of default that accelerated our obligations under all our outstanding debt instruments . the agreements governing our debt instruments at the time provided that as a result of the bankruptcy petitions , the principal and interest due thereunder was immediately due and payable . however , any efforts to enforce such payment obligations under the debt instruments were automatically stayed as a result of the chapter 11 cases , and the creditors ' rights of enforcement in respect of the debt instruments was subject to the applicable provisions of the bankruptcy code and orders of the bankruptcy court . we subsequently operated the company as a debtor-in-possession . we received bankruptcy court confirmation of our joint plan of reorganization on september 28 , 2016 and subsequently emerged from bankruptcy on october 12 , 2016. although we are no longer a debtor-in-possession , we were a debtor-in-possession through october 12 , 2016. as such , aspects of our bankruptcy proceedings and related matters are described below in order to provide context and explain a part of our financial condition and results of operations for the period presented . we are accounting for the bankruptcy in accordance with financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) 852 , “ reorganizations ” . we filed a series of first day motions with the bankruptcy court that allowed us to continue to conduct business without interruption . these motions are designed primarily to minimize the impact on our operations , customers and employees . on april 18 , 2016 , the bankruptcy court issued certain additional interim and final orders with respect to our first-day motions and other operating motions that allowed us to operate their businesses in the ordinary course . subject to certain exceptions under the bankruptcy code , the filing of the bankruptcy petitions automatically enjoined , or stayed , the continuation of any judicial or administrative proceedings or other actions against the us or their property to recover , collect or secure a claim arising prior to the filing of the bankruptcy petitions . thus , for example , most creditor actions to obtain possession of property from us , or to create , perfect or enforce any lien against the our properties , or to collect on monies owed or otherwise exercise rights or remedies with respect to a pre-petition claim were enjoined . during the chapter 11 cases , we conducted normal business activities and were authorized to continue to pay and have paid ( subject to limitations applicable to payments of certain pre-petition obligations ) pre-petition employee wages and benefits , pre-petition amounts owed to certain lienholders , critical vendors and other third parties , such as royalty holders and partners . on july 25 , 2016 we entered into and filed a motion with the bankruptcy court to approve a commitment letter ( the “ commitment letter ” ) with a group of investors for the new issuance of 13.50 % convertible senior secured second lien notes in the initial aggregate principal amount of $ 40.0 million ( the “ convertible second lien notes ” ) . the bankruptcy court approved the motion on august 4 , 2016 which allowed us to submit a revised plan of organization to the bankruptcy court . emergence from bankruptcy the company 's joint plan of reorganization ( the “ plan of reorganization ” ) was confirmed by the bankruptcy court on september 28 , 2016 and we emerged from bankruptcy on october 12 , 2016 ( the `` effective date '' ) . on october 12 , 2016 , we entered into an exit credit agreement ( including all amendments , the “ exit credit facility ” ) by which various lenders have agreed to provide us with a $ 20.0 million senior secured term loan credit facility , with an outstanding principal amount of $ 20.0 million . the commitment letter provided for the issuance of $ 40.0 million in convertible second lien notes that mature on the later of august 30 , 2019 or six months after the maturity of the exit credit agreement . a total of $ 20.0 million in proceeds from the issuance of the convertible second lien notes were used to repay amounts outstanding under the existing second amended and restated credit agreement ( including 44 all amendments , the “ senior credit facility ” ) and $ 20.0 million in proceeds will be used to fund the company 's haynesville shale trend drilling program . plan of reorganization the significant features of the plan of reorganization confirmed by the bankruptcy court are as follows : 1. each holder of an allowed priority claim ( other than a priority tax claim or administrative claim ) received either : ( a ) cash equal to the full allowed amount of its claim or ( b ) such other treatment as may otherwise be agreed to by such holder , the debtors , the holders of at least 50 % in principal amount of the second lien notes ( the “ majority consenting noteholders ” ) , and the purchasers of the new convertible second lien notes ( “ new 2l notes purchasers ” ) ; 2. each holder of a secured claim ( other than a priority tax claim , senior credit facility claim , or second lien notes claim ) received , at the debtors ' election and with the consent of the majority consenting noteholders , either : ( a ) cash equal to the full allowed amount of its claim , ( story_separator_special_tag b ) reinstatement of such holder 's claim , ( c ) the return or abandonment of the collateral securing such claim to such holder , or ( d ) such other treatment as may otherwise be agreed to by such holder , the debtors , the majority consenting noteholders , and the new 2l notes purchasers ; 3. the senior credit facility claims were paid cash in an amount sufficient to reduce the senior credit facility claims to a balance of $ 20.0 million while the remaining $ 20.0 million owed was refinanced into a new senior secured term loan credit facility ; 4. the second lien notes claims were deemed allowed in the aggregate amount of $ 175.0 million of principal plus accrued and unpaid interest through the petition date . except to the extent a holder of a second lien note claim agreed in writing to less favorable treatment , in full and final satisfaction , settlement , release , and discharge of , and in exchange for , each second lien notes claim , each holder of a second lien notes claim received their pro rata share of 98 % of the new equity interests in the reorganized company ( the “ new equity interests ” ) , subject to dilution on account of ( i ) the management incentive plan , ( ii ) the potential conversion of the convertible second lien notes , ( iii ) the warrants granted to the new 2l notes purchasers , and ( iv ) the out-of-the-money warrants equal to an aggregate of up to 10 % of the new equity interests with a maturity of 10 years and an equity strike price equal to $ 230.0 million ; 5. holders of unsecured notes claims received , pro rata with holders of other general unsecured claims , their pro rata share of the out-of-the-money warrants equal to an aggregate of up to 10 % of the new equity interests with a maturity of 10 years and an equity strike price equal to $ 230.0 million ; plus its pro rata share of 2 % of the new equity interests that are subject to dilution on account of ( i ) the management incentive plan , ( ii ) the potential conversion of the convertible second lien notes , ( iii ) the warrants granted to the new 2l notes purchasers , and ( iv ) the out-of-the-money warrants equal to an aggregate of up to 10 % of the new equity interests with a maturity of 10 years and an equity strike price equal of $ 230.0 million ; 6. holders of allowed general unsecured claims had the option to elect on their ballot to ( a ) receive , pro rata with holders of unsecured notes claims , its pro rata share of the out-of-the-money warrants equal to an aggregate of up to 10 % of the new equity interests with a maturity of 10 years and an equity strike price equal to $ 230.0 million ; plus its pro rata share of 2 % of the new equity interests that are subject to dilution on account of ( i ) the management incentive plan , ( ii ) the potential conversion of the convertible second lien notes , ( iii ) the warrants granted to the new 2l notes purchasers , and ( iv ) the out-of-the-money warrants equal to an aggregate of up to 10 % of the new equity interests with a maturity of 10 years and an equity strike price equal to $ 230.0 million , or ( b ) treat its allowed general unsecured claim as a convenience class claim by releasing any claims in excess of $ 10,000 ; 7. holders of convenience class claims received either : ( a ) cash equal to the full allowed amount of such holder 's claim or ( b ) such lesser treatment as may otherwise be agreed to by such holder , the debtors , the majority consenting noteholders and the new 2l notes purchasers ; 45 8. equity interests in the subsidiary were canceled and extinguished without further notice to , approval of , or action by any entity , and each holder of an equity interest in the subsidiary did not receive any distribution or retain any property on account of such equity interest in the subsidiary . equity interests in the company were canceled and extinguished without further notice to , approval of , or action by any entity , and each holder of an equity interest in the company did not receive any distribution or retain any property on account of such equity interest in the company . fresh start and full cost accounting upon our emergence from bankruptcy , we adopted fresh start accounting in accordance with the requirements of fasb asc 852 , `` reorganizations '' . this resulted in our becoming a new entity for financial reporting purposes . at that time , our assets and liabilities were recorded at their fair values as of the effective date . the effects of the plan of reorganization and our application of fresh start accounting are reflected in our consolidated financial statements as of december 31 , 2016. the related adjustments were recorded in our consolidated statement of operations as reorganization items for the year to date period ending october 12 , 2016. the application of fresh start accounting and the effects of the implementation of our plan of reorganization resulted in our consolidated financial statements on or after october 12 , 2016 not being comparable with the consolidated financial statements prior to that date . our financial results for future periods following our application of fresh start accounting will be different from historical trends and the differences may be material . all references made to `` successor '' or `` successor company '' relate to the company on and subsequent to the effective date .
| the fair value assigned to the successor 's oil and gas assets upon adoption of fresh start accounting was based upon a market participant fair value while the full cost ceiling test is based upon the value of oil and gas properties using sec reserve pricing . the sec pricing reflects a look back of 12 months and as of december 31 , 2016 , oil and gas prices were lower than the prospective prices used by a market participant fair value resulting in a full cost ceiling write down . the following table reflects our summary operating information for the periods presented in thousands except for price and volume data . because of normal production declines , increased or decreased drilling activity and the effects of acquisitions or divestitures , the historical information presented below should not be interpreted as indicative of future results . replace_table_token_12_th 48 oil and natural gas revenue natural gas , oil and condensate revenues on a pro forma basis decreased in 2016 compared to 2015 reflecting a decrease in our average realized sales prices for natural gas , oil and condensate and a reduction in natural gas , oil and condensate production . the decreases in natural gas , oil and condensate realized sales prices compared to 2015 contributed approximately $ 12.8 million to the decrease in natural gas , oil and condensate revenue , and the decrease in natural gas , oil and condensate production contributed approximately $ 38.7 million to the decrease in natural gas , oil and condensate revenue . the sale of our eagle ford shale trend properties in september 2015 contributed $ 22.9 million to the decrease in revenues attributed to decreased in volumes . the difference on a pro forma basis between our average realized prices inclusive of net cash derivative settlements in the years ended december 31 , 2016 and 2015 relates to our oil contracts . we had no natural gas derivative contract settlements during 2016 or
| 13,527 |
overview we are a blank check company incorporated as a delaware corporation and formed for the purpose of effecting a merger , capital stock exchange , asset acquisition , stock purchase , reorganization or similar business combination with one or more businesses or entities . we intend to effectuate our initial business combination using cash from the proceeds of our initial public offering and a sale of warrants in a private placement that occurred simultaneously with the completion of our initial public offering , our capital stock , debt or a combination of cash , stock and debt . in march 2016 , we consummated our initial public offering of 8,185,320 units ( including the units sold in connection with the exercise of the underwriter 's over-allotment option ) at $ 10.00 per unit , generating gross proceeds of approximately $ 81.9 million . offering costs associated with the initial public offering were approximately $ 2.6 million , inclusive of $ 2 million of underwriting commissions paid upon closing of the initial public offering and approximately $ 46,000 of underwriting commissions deferred until the completion of the initial business combination . simultaneously with the closing of the initial public offering , including the exercise of the over-allotment option , we consummated the private placement of 8,408,838 private placement warrants at a price of $ 0.75 per private placement warrant , of which 7,863,150 private placement warrants were sold to the sponsor , and 545,688 private placement warrants were sold to ebc and its designees , the representative of the underwriters in the initial public offering , generating gross proceeds of approximately $ 6.3 million . an aggregate of approximately $ 85.1 million ( $ 10.40 per unit ) from the net proceeds of the sale of the units in the initial public offering , the over-allotment units , and the private placement warrants was placed in the trust account at j.p. morgan chase bank maintained by continental stock transfer & trust company , acting as trustee , and is invested in u.s. government treasury bills , until the earlier of ( i ) the consummation of the initial business combination or ( ii ) the company 's failure to consummate a business combination by september 16 , 2017. one of our officers has agreed to be personally liable if we liquidate the trust account prior to the consummation of a business combination or upon mandatory liquidation to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to our company . however , such officer may not be able to satisfy those obligations should they arise . the remaining net proceeds ( not held in the trust account ) may be used to pay for business , legal and accounting due diligence on prospective merger or acquisition candidates and continuing general and administrative expenses . additionally , the interest earned on the trust account balance may be released to us for any amounts that are necessary to pay the company 's income tax obligations . our management has broad discretion with respect to the specific application of the net proceeds of the initial public offering and the private placement , although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination . on december 20 , 2016 , we entered into the business combination agreement with tema , pursuant to which we will acquire a portion of the equity of rosehill operating , a wholly-owned subsidiary of tema . pursuant to the terms of the business combination agreement , klre ( as managing member ) will control rosehill operating . rosehill operating is a newly formed entity created to receive and operate oil and gas properties contributed by tema . 41 we intend to finance the consideration for the proposed business combination through a combination of cash held in our trust account and the proceeds of a private placement of an aggregate amount of 75,000 series a preferred stock which will be convertible into shares of class a common stock at a conversion price of $ 11.50 per share ( subject to certain adjustments ) and ( b ) 5,000,000 warrants for aggregate gross proceeds of $ 75 million and 5,000,000 warrants to certain qualified institutional buyers and accredited investors . additionally , our sponsor agreed to contribute an aggregate of up to 734,704 shares of class a common stock to the purchasers in the private placement . the proceeds from the private placement will be used to fund the cash portion of the consideration required to effect the proposed business combination and for general corporate purposes , including to finance development and acquisition activities following the consummation of the proposed business combination . the private placement is conditioned upon , and is expected to close concurrently with , the proposed business combination . pursuant to the subscription agreements , purchasers of series a preferred stock and warrants in the private placement will be entitled to certain registration rights , subject to customary black-out periods , cutback provisions and other limitations as set forth therein . the proposed business combination also calls for various additional agreements , including a preferred subscription agreement , a side letter agreement , a shareholders ' and registration rights agreement , a waiver agreement , among others as outlined in the preliminary proxy statement filed with the securities and exchange commission on january 18 , 2017 and in the form 8-k filed with the securities and exchange commission on december 23 , 2016. critical accounting policy common stock subject to possible redemption we account for our common stock subject to possible redemption in accordance with the guidance in accounting standardscodification ( “ asc ” ) topic 480 “ distinguishing liabilities from equity . story_separator_special_tag ” common stock subject to mandatory redemption ( if any ) is classified as a liability instrument and is measured at fair value . conditionally redeemable common stock ( including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control ) is classified as temporary equity . at all other times , common stock is classified as stockholders ' equity . our common stock feature certain redemption rights that is considered to be outside of our control and subject to occurrence of uncertain future events . accordingly , at december 31 , 2016 , the class a common stock that is subject to possible redemption at the redemption amount is presented as temporary equity , outside of the stockholders ' equity section of our balance sheet . story_separator_special_tag text-indent : 14.3pt '' > our sponsor , executive officers and directors , or any of their respective affiliates , will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf , including but not limited to identifying potential target businesses and performing due diligence on suitable business combinations . our audit committee reviews on a quarterly basis all payments that were made to the sponsor , executive officers , directors or affiliates and determines which expenses and the amount of expenses that may be reimbursed . there is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf , provided , however , that to the extent such expenses exceed the available proceeds not deposited in the trust account , such expenses may not be reimbursed by us unless we consummate an initial business combination . as of december 31 , 2016 , the total out-of-pocket expense incurred by klr group , llc , an affiliate of our sponsor , was approximately $ 215,000 and for directors and officers was approximately $ 81,000. in connection with the consummation of our business combination , or thereafter , we may retain klr group , llc to provide certain financial advisory , underwriting , capital raising , and other services for which they may receive fees . the amount of fees we may pay to klr group , llc will be based upon the prevailing market for similar services rendered by comparable investment banks for such transactions at such time , and will be subject to the review of our audit committee pursuant to the audit committee 's policies and procedures relating to transactions that may present conflicts of interest . we also pay ms. thom , our chief financial officer , an annual salary of $ 200,000 until december 31 , 2016. upon the consummation of the business combination , ms. thom will be eligible to receive a bonus equal to the amount of salary from january 2017 through the business combination date . in addition , we agreed to reimburse klr group , llc for certain expenses incurred in connection with the employment of mr. hanna , our chief executive officer , and ms. thom , including employment related taxes ( paid in connection with ms. thom 's annual salary ) , parking , and health benefits , including 50 % of each 's health insurance premiums . the total amount of expenses reimbursed as of december 31 , 2016 was approximately $ 215,000 . 43 recent accounting pronouncements in august 2014 , the fasb issued asu 2014-15 , “ disclosure of uncertainties about an entity 's ability to continue as a going concern ” ( “ asu 2014-15 ” ) . asu 2014-15 provides guidance on management 's responsibility in evaluating whether there is substantial doubt about a company 's ability to continue as a going concern and about related footnote disclosures . for each reporting period , management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company 's ability to continue as a going concern within one year from the date the financial statements are issued . the amendments in asu 2014-15 are effective for annual reporting periods ending after december 15 , 2016 , and for annual and interim periods thereafter . early adoption is permitted . the company has adopt the methodologies prescribed by asu 2014-15 the adoption of asu 2014-15 had no material effect on its financial position or results of operations . management does not believe that any recently issued , but not effective , accounting standards , if currently adopted , would have a material effect on the company 's financial statements . commitments service agreements in september 2016 , we entered into an agreement with a legal firm to assist us with the proposed business combination . the vendor agreed to defer their fees until closing of the proposed business combination . if such business combination is not successful , the vendor agreed to give us a 30 % discount . as of december 31 , 2016 the 30 % discount on legal fees to be paid on the close of the acquisition were approximately $ 342,000. the 30 % discount is an unrecognized contingent liability , as closing of a potential business combination was not considered probable as of december 31 , 2016. off-balance sheet arrangements we did not have any off-balance sheet arrangements as of december 31 , 2016. jobs act on april 5 , 2012 , the jobs act was signed into law . the jobs act contains provisions that , among other things , relax certain reporting requirements for qualifying public companies . we will qualify as an ‘ ‘ emerging growth company '' and under the jobs act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private ( not publicly traded ) companies . we are electing to delay the adoption of new or revised accounting
| through december 31 , 2016 , our liquidity needs were satisfied through receipt of approximately $ 735,000 held outside of the trust account from the sale of units upon closing of the initial public offering , $ 25,000 from the sale of the insider shares , and proceeds from notes payable from the sponsor in an aggregate amount of $ 275,000. in order to meet our ongoing working capital needs , the sponsor , or its affiliates , or certain executive officers and directors , may , but are not obligated to , loan us funds as may be required . the loans would either be repaid upon consummation of our initial business combination , or , at the lender 's discretion , up to $ 1.5 million of such loans ( including $ 275,000 in loans currently outstanding as of december 31 , 2016 ) may be converted upon consummation of our business combination into additional private placement warrants at a price of $ 0.75 per warrant . if we do not complete a business combination , the loans would be repaid only out of funds held outside of the trust account . in october 2016 , the sponsor provided a commitment to loan us up to an additional of $ 100,000 for working capital purpose . we have not borrowed any amount under this commitment as of december 31 , 2016 . 42 the accompanying financial statements have been prepared assuming we will continue as a going concern , which contemplates , among other things , the realization of assets and satisfaction of liabilities in the normal course of business . as of december 31 , 2016 , we had approximately $ 228,000 in cash and cash equivalents held outside trust account , approximately $ 197,000 in interest income available from our investments in the trust account to pay our income tax obligations , and a working deficit of approximately $ 842,000. further , we have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans . our plans to raise capital or to consummate the initial business combination may not be successful . these matters , among others , raise substantial doubt about our ability to continue as a going concern . based on the foregoing , we currently do not have sufficient working capital to meet our needs through the earlier of consummation of a business combination or september
| 13,528 |
we believe that the accounts receivable from the wsc are fully collectible and therefore have not provided any allowance for possible non-payment of these receivables as of december 31 , 2014. belize cw-belize was acquired on july 21 , 2000 , and consists of one reverse osmosis seawater conversion plant on ambergris caye , belize , capable of producing 600,000 gallons per day . we sell water to one customer , belize water services limited , which then distributes the water through its own distribution system to residential , commercial and tourist properties on ambergris caye . in 2009 , the minister of public utilities of the government of belize published a declaratory order designating cw-belize as a public utility provider . with this order the public utilities commission of belize ( “ puc ” ) has the authority to regulate cw-belize 's activities . in 2011 , the puc issued a second order that requires cw-belize to take various actions mandated by the puc that would be significant to its operations . hearings on this matter have been conducted in a belize court and the ruling on the matter is pending . see further discussion of this matter at item 1a . risk factors . critical accounting estimates the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the united states of america requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period . our actual results could differ significantly from such estimates and assumptions . certain of our accounting estimates or assumptions constitute “ critical accounting estimates ” for us because : the nature of these estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change ; and 29 the impact of the estimates and assumptions on financial condition and results of operations is material . our critical accounting estimates relate to the valuation of our ( i ) equity investment in our affiliate , oc-bvi ; and ( ii ) goodwill and intangible assets . valuation of investment in oc-bvi . we account for our investment in oc-bvi under the equity method of accounting for investments in common stock . this method requires recognition of a loss on an equity investment that is other than temporary , and indicates that a current fair value of an equity investment that is less than its carrying amount may indicate a loss in the value of the investment . we evaluate the possible impairment of our investment in oc-bvi as part of our reporting process for the fourth quarter of each fiscal year . as a quoted market price for oc-bvi 's stock is not available , to test for possible impairment of our investment in oc-bvi , we estimate its fair value through the use of the discounted cash flow method , which relies upon projections of oc-bvi 's operating results , working capital and capital expenditures . the use of this method requires us to estimate oc-bvi 's cash flows from ( i ) its water supply agreement with the bvi government for its bar bay plant ( the “ bar bay agreement ” ) ; and ( ii ) the pending amount awarded by the eastern caribbean court of appeals for the value of the baughers bay plant previously transferred by oc-bvi to the bvi government ( see further discussion of the baughers bay litigation at item 8 . - notes to the consolidated financial statements – note 8 ) . we estimate the cash flows oc-bvi will receive from its bar bay agreement by ( i ) identifying various possible future scenarios for this agreement , which include the cancellation of the agreement after its initial seven-year term , and the exercise by the bvi government of the seven-year extension in the agreement ; ( ii ) estimating the cash flows associated with each possible scenario ; and ( iii ) assigning a probability to each scenario . we similarly estimate the cash flows oc-bvi will receive from the bvi government for the amount due under the ruling by the eastern caribbean court of appeals for the value of the baughers bay plant at the date it was transferred to the bvi government by assigning probabilities to different valuation scenarios . the resulting probability-weighted sum represents the expected cash flows , and our best estimate of future cash flows , to be derived by oc-bvi from its bar bay agreement and the pending court award . the identification of the possible scenarios for the bar bay plant agreement and the baughers bay plant valuation , the projections of cash flows for each scenario , and the assignment of relative probabilities to each scenario all represent significant estimates made by us . while we use our best judgment in identifying these possible scenarios , estimating the expected cash flows for these scenarios and assigning relative probabilities to each scenario , these estimates are by their nature highly subjective and are also subject to material change by our management over time based upon new information or changes in circumstances . during the fourth quarter of 2014 , after reassessing and revising our probability-weighted estimates of oc-bvi 's future cash flows and our resulting estimate of the fair value of our investment in oc-bvi , we determined that the carrying value of our investment in oc-bvi exceeded its fair value and recorded an impairment loss on this investment of $ 860,000. the resulting $ 5.2 million carrying value of our investment in oc-bvi as of december 31 , 2014 assumes that the bvi government will honor its obligations under the bar bay agreement and also assumes ( on a probability-weighted basis ) that ( i ) the bvi government will exercise its option to extend the bar bay agreement for seven years beyond story_separator_special_tag its initial term , which expires in february 2017 and ( ii ) oc-bvi will receive the pending amount ( based upon our estimate ) awarded by the eastern caribbean court of appeals for the value of the baughers bay plant previously transferred by oc-bvi to the bvi government . the $ 5.2 million carrying value of our investment in oc-bvi as of december 31 , 2014 exceeds our underlying equity in oc-bvi 's net assets by approximately $ 2.0 million . we account for this excess as goodwill . the bvi government is oc-bvi 's sole customer and substantially all of oc-bvi 's revenues are generated from its bar bay plant . as the bar bay agreement matures to its february 2017 expiration date and oc-bvi receives ( or is determined by the court to not be entitled to receive ) the pending court award amount assumed due for the value of the baughers bay plant , oc-bvi 's expected future cash flows , and therefore its fair value computed under the discounted cash flow method , will decrease . unless oc-bvi obtains an expansion or other modification of its bar bay agreement that results in a significant increase in the estimated future cash flows from its bar bay plant , we will be required to record impairment losses in 2015 and 2016 to reduce the carrying value of our investment in oc-bvi to its then current fair value . these impairment losses will , in the aggregate , at least equal the underlying $ 2.0 million in goodwill reflected in the carrying value of our investment in oc-bvi . the losses we record for our investment in oc-bvi in the future will exceed this $ 2.0 million if oc-bvi ultimately ceases operations at its bar bay plant , as oc-bvi will be required to record an impairment loss to reduce the carrying value of its bar bay plant to its then estimated fair value . oc-bvi 's aggregate carrying value of the assets that comprise its bar bay plant was approximately $ 5.1 million as of december 31 , 2014. future impairment losses for our investment in oc-bvi and our equity in any future operating losses incurred by oc-bvi could have a material adverse impact on our consolidated results of operations . 30 goodwill and intangible assets . goodwill represents the excess cost over the fair value of the assets of an acquired business . goodwill and intangible assets acquired in a business combination accounted for as a purchase and determined to have an indefinite useful life are not amortized , but are tested for impairment at least annually . intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed periodically for impairment . we evaluate the possible impairment of goodwill annually as part of our reporting process for the fourth quarter of each fiscal year . management identifies our reporting units and determines the carrying value of each reporting unit by assigning the assets and liabilities , including the existing goodwill and intangible assets , to those reporting units . we determine the fair value of each reporting unit and compare the fair value to the carrying amount of the reporting unit . to the extent the carrying amount of the reporting unit exceeds the fair value of the reporting unit , we are required to perform the second step of the impairment test , as this is an indication that the reporting unit goodwill may be impaired . in this step , we compare the implied fair value of the reporting unit goodwill with the carrying amount of the reporting unit goodwill . the implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all the assets ( recognized and unrecognized ) and liabilities of the reporting unit in a manner similar to a purchase price allocation . the residual fair value after this allocation is the implied fair value of the reporting unit goodwill . if the implied fair value is less than its carrying amount , the impairment loss is recorded . for each of the years in the three-year period ended december 31 , 2014 , we estimated the fair value of our reporting units by applying the discounted cash flow method , the subject company stock price method , the guideline public company method , the mergers and acquisitions method and , on an exception basis and where necessary and appropriate , the net asset value method . the discounted cash flow method relied upon seven-year discrete projections of operating results , working capital and capital expenditures , along with a terminal value subsequent to the discrete period . these seven-year projections were based upon historical and anticipated future results , general economic and market conditions , and considered the impact of planned business and operational strategies . the discount rates for the calculations represented the estimated cost of capital for market participants at the time of each analysis . in preparing these seven-year projections for our retail unit we ( i ) identified possible outcomes of our on-going negotiations with the cayman islands government for the renewal of our retail license ; ( ii ) estimated the cash flows associated with each possible outcome ; and ( iii ) assigned a probability to each outcome and associated estimated cash flows . the weighted average estimated cash flows were then summed to determine the overall fair value of the retail unit under this method . the possible outcomes used for the discounted cash flow method for the retail unit included the implementation of a rate of return on invested capital model , the methodology proposed by cayman islands government representatives for the new retail license .
| these increases were partially offset by decreases in ( i ) non-mexico related business development costs of approximately $ 108,000 ; and ( ii ) research and development costs of approximately $ 91,000. interest income increased to $ 1,440,631 for 2014 from $ 826,570 in 2013 due to interest on past due accounts receivables from the wsc . we recognized earnings and profit sharing on our investment in oc-bvi for 2014 and 2013 of $ 414,755 and $ 1,337,352 , respectively . our earnings from oc-bvi decreased from 2014 to 2013 due to the receipt by oc-bvi during 2013 of approximately $ 2 million for the remaining unpaid balance awarded in the baughers bay litigation . see further discussion of oc-bvi and the baughers bay litigation at note 8 of our consolidated financial statements at item 8 of this annual report . results by segment retail segment : the retail segment contributed $ 910,938 and $ 1,182,525 to our income from operations for 2014 and 2013 , respectively . revenues generated by our retail water operations were $ 24,104,932 and $ 23,018,498 for 2014 and 2013 , respectively . the additional retail revenues we generated in 2014 are attributable to an increase in the gallons of water sold of 3 % from 2013 to 2014 for our cayman water retail operations and an increase of approximately $ 328,000 in revenues generated by cw- bali . 32 retail segment gross profit was $ 12,094,669 ( 50 % of retail revenues ) and $ 11,995,402 ( 52 % of retail revenues ) for 2014 and 2013 , respectively . the decline in gross profit as a percentage of revenues from 2013 to 2014 is due to higher plant and pipeline maintenance costs for our cayman operations and a negative gross profit for our bali operations . consistent with prior periods , we record all non-direct g & a expenses in our retail segment and do not allocate any of these non-direct costs to our other two business segments . retail g & a expenses for 2014 and 2013 were $ 11,183,731 and $ 10,812,877 , respectively . g & a expenses increased from 2013 to 2014 principally as a result of increases of approximately
| 13,529 |
inventories inventories are stated at the lower of ( i ) standard cost , which approximates actual cost on a first-in-first-out basis , or ( ii ) market value . our standard cost revision policy is to continuously monitor manufacturing variances and quarterly revise standard costs . because of the cyclical nature of the market , inventory levels , obsolescence of technology , and product life cycles , we generally write-down inventories to net realizable value based on forecasted product demand . actual demand and market conditions may be lower than those projected by us . this difference could have a material adverse effect on our gross margin should inventory write-downs beyond those initially recorded become necessary . alternatively , should actual demand and market conditions be more favorable than those estimated by us , gross margin could be favorably impacted . historically , such differences have not been material . during fiscal years 2013 , 2012 and 2011 , we had inventory write-downs of $ 19.2 million , $ 26.1 million and $ 13.8 million , respectively . long-lived assets we evaluate the recoverability of property , plant and equipment in accordance with accounting standards codification ( `` asc '' ) no . 360 , accounting for the property , plant , and equipment ( `` asc 360 '' ) . we perform periodic reviews to determine whether facts and circumstances exist that would indicate that the carrying amounts of property , plant and equipment might not be fully recoverable . if facts and circumstances indicate that the carrying amount of property , plant and equipment might not be fully recoverable , we compare projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful lives against their respective carrying amounts . in the event that the projected undiscounted cash flows are not sufficient to recover the carrying value of the assets , the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the assets . evaluation of impairment of property , plant and equipment requires estimates in the forecast of future operating results that are used in the preparation of the expected future undiscounted cash flows . actual future operating results and the remaining economic lives of our property , plant and equipment could differ from our estimates used in assessing the recoverability of these assets . these differences could result in impairment charges , which could have a material adverse impact on our results of operations . we recorded impairment charges of $ 24.9 million , $ 30.1 million , and zero during fiscal years 2013 , 2012 and 2011 , respectively . intangible assets and goodwill we account for intangible assets in accordance with asc 350. we review goodwill and purchased intangible assets with indefinite lives for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable , such as when reductions in demand or significant economic slowdowns in the semiconductor industry are present . intangible asset reviews are performed when indicators exist that could indicate the carrying value may not be recoverable based on comparisons to undiscounted expected future cash flows . if this comparison indicates that there is impairment , the impaired asset is written down to fair value , which is typically calculated using : ( i ) quoted market prices or ( ii ) discounted expected future cash flows utilizing a discount rate consistent with the guidance provided in fasb concepts statement no . 7 , using cash flow information and present value in accounting measurements . impairment is based on the excess of the carrying amount over the fair value of those assets . during fiscal years 2013 , 2012 and 2011 , we had intangible assets impairments of $ 2.8 million , $ 1.6 million and zero , respectively . goodwill is recorded as the difference , if any , between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired . in accordance with asc no . 350 , intangibles-goodwill and other ( `` asc 350 '' ) , we test goodwill for impairment at the reporting unit level ( operating segment or one level below an operating segment ) on an annual basis in the first quarter or more frequently if we believe indicators of impairment exist . the performance of the test involves a two-step process . the first step of the impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values , including goodwill . we generally determine the fair value of our reporting units using the income approach methodology of valuation that includes the discounted cash flow method as well as the market approach which includes the guideline company method . if the carrying amount of a reporting unit exceeds the reporting unit 's fair value , we perform the second step of the goodwill impairment test to determine the amount of impairment loss . the second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit 's goodwill with the carrying value of that goodwill . no impairment charges were recorded associated with our goodwill during fiscal years 2013 , 2012 and 2011 . 23 stock-based compensation we account for stock-based compensation in accordance with asc 718 , compensation in stock compensation ( `` asc 718 '' ) . asc 718 requires the recognition of the fair value of stock-based compensation for all stock-based payment awards , including grants of stock options and other awards made to our employees and directors in exchange for services , in the income statement . it also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity 's equity instruments or that may be settled by the issuance of those equity instruments . story_separator_special_tag accordingly , stock-based compensation cost is measured at the grant date , based on the fair value of the awards ultimately expected to vest and is recognized as an expense , on a straight-line basis , over the requisite service period . we use the black-scholes valuation model to measure the fair value of our stock-based awards utilizing various assumptions with respect to expected holding period , risk-free interest rates , stock price volatility and dividend yield . asc 718 also requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures or vesting differ from those estimates . such revisions could have a material effect on our operating results . the assumptions we use in the valuation model are based on subjective future expectations combined with management judgment . if any of the assumptions used in the black-scholes model changes significantly , stock-based compensation for future awards may differ materially compared to the awards granted previously . accounting for income taxes we must make certain estimates and judgments in the calculation of income tax expense , determination of uncertain tax positions , and in the determination of whether deferred tax assets are more likely than not to be realized . the calculation of our income tax expense and income tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations . asc 740-10 , income taxes ( `` asc 740-10 '' ) , prescribes a recognition threshold and measurement framework for financial statement reporting and disclosure of tax positions taken or expected to be taken on a tax return . under asc 740-10 , a tax position is recognized in the financial statements when it is more likely than not , based on the technical merits , that the position will be sustained upon examination , including resolution of any related appeals or litigation processes . a tax position that meets the recognition threshold is then measured to determine the largest amount of the benefit that has a greater than 50 % likelihood of being realized upon settlement . although we believe that the company 's computation of tax benefits to be recognized and realized are reasonable , no assurance can be given that the final outcome will not be different from what was reflected in our income tax provisions and accruals . such differences could have a material impact on our net income and operating results in the period in which such determination is made . see note 16 to the consolidated financial statements accompanying this annual report for further information related to asc 740-10. we evaluate our deferred tax asset balance and record a valuation allowance to reduce the net deferred tax assets to the amount that is more likely than not to be realized . in the event it is determined that the deferred tax assets to be realized in the future would be in excess of the net recorded amount , an adjustment to the deferred tax asset valuation allowance would be recorded . this adjustment would increase income , or additional paid in capital , as appropriate , in the period such determination was made . likewise , should it be determined that all or part of the net deferred tax asset would not be realized in the future , an adjustment to increase the deferred tax asset valuation allowance would be charged to income in the period such determination is made . in assessing the need for a valuation allowance , historical levels of income , expectations and risks associated with estimates of future taxable income and ongoing prudent and practicable tax planning strategies are considered . realization of our deferred tax asset is dependent primarily upon future u.s. taxable income . our judgments regarding future profitability may change due to future market conditions , changes in u.s. or international tax laws and other factors . these changes , if any , may require material adjustments to the net deferred tax asset and an accompanying reduction or increase in net income in the period in which such determinations are made . litigation and contingencies from time to time , we receive notices that our products or manufacturing processes may be infringing the patent or other intellectual property rights of others , notices of stockholder litigation or other lawsuits or claims against us . we periodically assess each matter in order to determine if a contingent liability in accordance with asc no . 450 , accounting for contingencies ( `` asc 450 '' ) , should be recorded . in making this determination , management may , depending on the nature of the matter , consult with internal and external legal counsel and technical experts . we expense legal fees associated with consultations and defense of lawsuits as incurred . based on the information obtained , combined with management 's judgment regarding all of the facts and circumstances of each matter , we determine whether a contingent loss is probable and whether the amount of such loss can be estimated . should a loss be probable and estimable , we record a contingent loss in accordance with asc 450. in determining the amount of a contingent loss , we take into consideration advice received from experts in the specific matter , current status of legal proceedings , settlement negotiations which may be ongoing , prior case history and other factors . should the judgments and estimates made by management 24 be incorrect , we may need to record additional contingent losses that could materially adversely impact our results of operations . alternatively , if the judgments and estimates made by management are incorrect and a particular contingent loss does not occur , the contingent loss recorded would be reversed thereby favorably impacting our results of operations . pursuant to the company 's charter documents and separate written indemnification agreements , we have certain indemnification obligations to our current officers and directors , as well as certain former officers and directors .
| while more than 95 % of our sales are denominated in u.s. dollars , the company enters into foreign currency forward contracts to mitigate its risks on firm commitments and net monetary assets denominated in foreign currencies . the impact of changes in foreign exchange rates on net revenues and the company 's results of operations for fiscal years 2013 , 2012 and 2011 were immaterial . gross margin our gross margin as a percentage of net revenue was 61.3 % in fiscal year 2013 compared to 60.4 % in fiscal year 2012 . the gross margin as a percentage of net revenue increased primarily due to improved manufacturing efficiencies as well as lower inventory reserves of 0.3 % as a percentage of revenue . the gross margin also benefited from lower miscellaneous period costs , none of which were individually significant . our gross margin as a percentage of net revenue was 60.4 % in fiscal year 2012 compared to 61.9 % in fiscal year 2011 . the year over year decrease in gross margin as a percentage of revenue was primarily attributable to lower factory utilization and higher inventory reserves of 0.6 % as a percentage of revenue . research and development research and development expenses were $ 534.8 million and $ 552.4 million for fiscal years 2013 and 2012 , respectively , which represented 21.9 % and 23.0 % of net revenues , respectively . the decrease in research and development expenses was primarily attributable to a reduction in salaries and stock-based compensation expenses of $ 17.2 million as a result of a decrease in average headcount due to fiscal year 2012 restructuring and divestitures and fiscal year 2012 being a 53-week fiscal year compared to fiscal year 2013 being a 52-week fiscal year . research and development expenses were $ 552.4 million and $ 525.3 million for fiscal years 2012 and 2011 , respectively , which represented 23.0 % and 21.2 % of net
| 13,530 |
consolidated revenue totaled $ 1,559.8 million for the year ended december 31 , 2020 , an increase of $ 23.1 million compared to the same period in 2019 as growth in the it services and hardware segment more than offset declines in the entertainment and communications segment . entertainment and communications legacy revenue decreased $ 35.0 million in 2020 compared to the prior year . decline in video revenue due to fewer video subscribers and lower nonrecurring revenue due to participation in the keep americans connected pledge ( “ pledge ” ) also contributed to the decline year over year . it services and hardware revenue increased $ 47.3 million in 2020 compared to 2019. revenue growth in the consulting and communications practices more than offset decreased revenue contributed by the cloud and infrastructure solutions practices . cloud revenue declined in 2020 due to general electric company ( “ ge ” ) revenue related to certain programs still included in the first quarter of 2019 that did not recur in 2020 . 27 form 10-k part ii cincinnati bell inc. operating income in 2020 was $ 66.0 million , down $ 7.1 million compared to the same period in 2019. the decrease in operating income was primarily due to h igher transaction and integration charges , including the termination fee of $ 24.8 million paid to an affiliate of brookfield in the first quarter of 2020 , as well as restructuring and severance related charges related to the voluntary severance program ( “ vsp ” ) finalized in the three months ended march 31 , 2020. these increased costs were partially offset by lower depreciation and amortization expense of $ 11.5 million and by cost savings in sg & a due to reduced travel and entertainment and lower advertising and promotional expense compared to 2019. loss before income taxes totaled $ 81.1 million for the year ended december 31 , 2020 , resulting in an increase in the loss of $ 3.9 million as compared to the comparable period in 2019. the increase in the loss primarily due to the factors impacting operating income was partially offset by a decrease in interest expense . impact of covid-19 on our business the covid-19 pandemic has resulted , and is expected to continue to result , in significant economic disruption and has adversely affected , and is expected to continue to adversely affect , our business . significant uncertainty continues to exist concerning the magnitude of the impact , the duration of the covid-19 pandemic and the macroeconomic effects even once the pandemic has subsided . on march 13 , 2020 , in response to the covid-19 pandemic , the federal communications commission ( “ fcc ” ) called on broadband and telephone service providers to keep americans connected as the country reacts to the serious disruptions caused by the coronavirus outbreak . cincinnati bell , on behalf of all of its affiliates , including hawaiian telecom , signed on to the pledge and committed to waive late fees for , and not terminate service to , any of our consumer or small business customers who did not pay their bills timely due to an inability to pay caused by the covid-19 crisis . the pledge expired on june 30 , 2020 , and the company started to collect late payment fees and reactivation fees starting in august 2020. in accordance with regulatory orders in hawaii , the pledge continues to be honored for certain regulated services . the company proactively worked with customers in an effort to avoid deactivations , but not all accounts could be cured and approximately 4,000 customer accounts in the cincinnati market were disconnected during the third and fourth quarters of 2020. balances associated with accounts that have been disconnected are fully reserved as of december 31 , 2020 and are expected to be written off during the first quarter of 2021. in response to the number of households that must provide remote schooling either full or part-time as a result of the covid-19 pandemic , the company partnered with several community organizations to provide free internet to qualifying students through the “ connect our students ” program . as of december 31 , 2020 , the company has delivered internet to approximately 4,900 households through this program . the majority of our operations have continued as usual as the services that we provide and the networks that we maintain are considered critical by local and state authorities in the geographies in which we operate . the company started executing its business continuity plan in march and transitioned employees who could execute their work remotely to work from home with little disruption and has implemented additional safety protocols for customer facing employees . in states in which employees are allowed to return to the office , the company has implemented updated safety policies to ensure the safety of our employees and customers . as of december 31 , 2020 , a significant portion of our workforce continues to work from home and are expected to continue to work from home for most of 2021. with respect to liquidity , we continue to evaluate and take actions to reduce costs and spending across our organization . this includes reducing hiring activities , adjusting pay programs , limiting discretionary spending , significantly reducing non-essential travel until further notice and re-evaluating the timing of capital projects . story_separator_special_tag additionally , we have leveraged certain benefits included in the u.s. coronavirus aid , relief , and economic security act ( “ cares act ” ) that was enacted on march 27 , 2020 , including deferral of 2020 required pension plan contributions to the fourth quarter of 2020 and deferral of employer social security tax payments for wage payments subsequent to march 12 , 2020 of approximately $ 5.0 million in the second , third and fourth quarters of 2020 to be paid equally in the fourth quarters of 2021 and 2022. we expect the ultimate significance of the impact on our financial condition , results of operations , or cash flows will be dictated by the length of time that such circumstances continue , which will depend on the currently unknowable extent and duration of the covid-19 pandemic , effectiveness of the vaccine and timeliness that individuals receive the vaccine . covid-19 also makes it more challenging for management to estimate future performance of our businesses , particularly over the near term . we will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal , state or local authorities or that we determine are in the best interests of our employees , customers , suppliers and shareholders . the programs put in place and efforts by employees to manage and reduce expenses have more than offset the negative impacts caused by covid-19 since the start of the pandemic due to revenue loss and incremental spend for personal protective equipment , employee compensation programs and bad debt expense . to reward employees for their continued efforts during covid-19 , a one-time bonus was recorded in the third quarter of $ 5.7 million that was paid in the fourth quarter . while we are unable to determine or predict the nature , duration or scope of the overall impact the covid-19 pandemic will have on our business , results of operations , liquidity or capital resources , we believe that it is important to share where we stand today , how our response to covid-19 is progressing and how our operations and financial condition may change as the fight against covid-19 progresses . 28 form 10-k part ii cincinnati bell inc. consolidated results of operations revenue replace_table_token_5_th entertainment and communications revenue decreased in 2020 compared to the prior year primarily due to the decline in legacy revenue . in addition to legacy revenue decline , video revenue declined due to 7,100 fewer subscribers in cincinnati and 2,100 fewer subscribers in hawaii as well as decline of certain nonrecurring revenue as a result of the company suspending late payment fees and reactivation fees as part of the pledge . partially offsetting the revenue decline , consumer data increased $ 18.2 million compared to 2019 with internet subscriber growth in both the cincinnati and hawaii markets . entertainment and communications revenue increased in 2019 compared to 2018 due to the acquisition of hawaiian telcom , which contributed revenue of $ 306.6 million and $ 155.1 million in 2019 and 2018 , respectively . in cincinnati , fioptics revenue was up 4 % in 2019 compared to the comparable period in the prior year partially mitigating the decline in legacy revenue . it services and hardware revenue increased in 2020 compared to the prior year due to revenue growth in the consulting and communications practices . cloud revenue declined due to lower revenue resulting from ge insourcing certain cloud services . lower infrastructure solutions revenue in 2020 compared to 2019 is due to a decline in hardware sales partially due to the impacts of covid-19 and customers migrating to managed services . it services and hardware revenue increased in 2019 compared to 2018 primarily due to the acquisition of hawaiian telcom which contributed revenue of $ 40.1 million and $ 19.9 million in 2019 and 2018 , respectively . in addition to the impact of the acquisition , increased revenue from the communications and consulting practices was partially offset by lower revenue in the cloud and infrastructure solutions practices . cloud revenue decline in 2019 is primarily due to lower revenue contributed by ge of $ 20.6 million compared to the prior year due to ge insourcing certain cloud services . operating costs replace_table_token_6_th entertainment and communications costs decreased in 2020 compared to the prior year primarily due to decreases in payroll related costs , video content costs , operating taxes and contract services . lower payroll related costs are due to headcount reductions made during restructuring initiatives that were executed in the first quarter of 2020 and throughout 2019. in addition to restructuring initiatives , payroll related costs declined due to lower expense for healthcare and workers compensation benefits in 2020 compared to 2019. lower operating taxes are due to the release of a sales and use tax reserve in 2020 of $ 4.2 million due to favorable audit results in addition to a decrease in general excise tax . the decrease in contract services is driven by a one-time project for $ 1.6 million recognized in the fourth quarter of 2019. entertainment and communications costs increased in 2019 compared to the same period in 2018 primarily due to the acquisition of hawaiian telcom which contributed costs of $ 150.9 million and $ 80.1 million in 2019 and 2018 , respectively . excluding the impact associated with the acquisition , costs of services and products decreased $ 9.9 million for the year ended december 31 , 2019 , as compared to the comparable period in the prior year . the decrease in 2019 compared to 2018 is due to lower contract services costs and lower payroll related costs due to headcount reductions made during restructuring initiatives that were executed in 2018. it services and hardware costs increased in 2020 and 2019 compared to the same periods in the prior year primarily due to increases in payroll related costs and contractor costs associated with additional resources to support the growth in the consulting and communications practices .
| the company is able to deliver speeds of up to 30 megabits or more to approximately 75 % of greater cincinnati and up to 20 megabits or more to approximately 50 % of hawaii 's total addressable market . enterprise fiber products include metro-ethernet , dedicated internet access , wavelength , iru contracts , and wireless backhaul to macro-towers and small cells . hawaiian telcom enterprise fiber also includes revenue from the sea-us cable . as enterprise customers migrate from legacy products and copper-based technology , our metro-ethernet product becomes the preferred method of transport due to its ability to support multiple applications on a single physical connection . legacy products include traditional voice lines , consumer long distance , switched access , digital trunking , dsl , ds0 , ds1 , ds3 and other value-added services such as caller identification , voicemail , call waiting and call return . replace_table_token_12_th 33 form 10-k part ii cincinnati bell inc. entertainment and communications , continued replace_table_token_13_th * fiber to the premise ( fttp ) , fiber to the node ( fttn ) 34 form 10-k part ii cincinnati bell inc. entertainment and communications , continued replace_table_token_14_th * fiber to the premise ( fttp ) , fiber to the node ( fttn ) * * includes units passed for both consumer and business on oahu and neighbor islands 35 form 10-k part ii cincinnati bell inc. entertainment and communications , continued replace_table_token_15_th * represents fioptics in cincinnati . cincinnati fioptics and hawaii consumer/smb fiber ( collectively , `` consumer/smb fiber '' ) consumer/smb fiber revenue increased $ 6.0 million in 2020 compared to the same period in 2019 as the increase in the subscriber base for internet more than offset the decline in video and voice subscribers . the internet subscriber base continues to increase as we focus our attention on growing the internet fttp subscriber base . favorable churn in 2020 compared to 2019 has also contributed to the increased internet subscriber base . in addition , the average revenue per user ( “ arpu ” ) for 2020 increased for internet in both cincinnati and hawaii
| 13,531 |
despite challenging weather events in the northeast region of the united sates in the third quarter of 2011 , for the year ended december 31 , 2011 , we generated $ 2,666.2 million in total operating revenue , and $ 803.1 million in operating income compared to total operating revenue of $ 2,555.0 million , and $ 728.1 million in operating income in 2010. our regulated businesses , our largest operating segment , generated $ 2,368.9 million in operating revenue , representing 88.8 % of our consolidated operating revenue compared to $ 2,285.7 in operating revenues representing 89.5 % of our consolidated operating revenue in 2010. this increase of 3.6 % in operating revenues , when compared to 2010 , was primarily driven by rate increases offset by decrease in sales volume in all customer classes in 2011. additionally , for the year ended december 31 , 2011 , our market-based operations generated $ 327.8 million in operating revenue , compared to $ 294.7 million in operating revenues in 2010 , an increase of 11.2 % . for the year ended december 31 , 2011 , we reported net income of $ 309.6 million , or diluted earnings per share of $ 1.75 compared to net income of $ 267.8 million , or diluted eps of $ 1.53 for the comparable period in 2010. net income for 2011 includes a benefit of $ 15.1 million , or $ 0.09 diluted earnings per share , as a result of the benefit from the cessation of depreciation on property , plant and equipment and a charge of $ 25.1 million or $ 0.14 diluted earnings , per share , to reduce the net asset values , of certain of our discontinued operations , which include associated parent company goodwill , to their net realizable values . net income from continuing operations was $ 304.9 million for the year ended december 31 , 2011 compared to net income from continuing operations of $ 255.1 million for the year ended december 31 , 2010. diluted earnings from continuing operations per average common share was $ 1.73 for the year ended december 31 , 2011 as compared to $ 1.46 for year ended december 31 , 2010. in addition , we generated increased cash flow from operations during 2011 of $ 808.4 million , compared to $ 774.9 million in 2010. the primary drivers contributing to the increase in net income from continuing operations for the year ended december 31 , 2011 were increased revenues resulting from rate increases as well as slightly higher revenues in our market-based operations segment partially offset by higher operation and maintenance expense , depreciation and amortization expense and general taxes . see consolidated results of operations and variances and segment results below for further detailed discussion of the consolidated results of operations , as well as our business segments . implementation of portfolio optimization initiative in 2011 , we continued to execute our plan for optimizing our portfolio . as part of a strategic review of our business activities , the company completed its acquisition of 11 water and 48 wastewater systems in missouri in may 2011 for a purchase price of $ 3.3 million , leveraging the strength of our large-scale operations in that state . the acquisition adds an additional 1,700 water customers and nearly 2,000 wastewater customers to our regulated operations . under a separate agreement , the sale of the texas subsidiary assets was completed in june 2011. in january 2011 , we announced that we had entered into an agreement with epcor water ( usa ) inc. to sell 100 percent of the stock of our regulated water and wastewater operating companies located in arizona and new mexico . on january 31 , 2012 , we received approximately $ 461.0 million of sales proceeds as a result completing the divestiture of these regulated operating companies . we plan to use the proceeds from the sale to reduce equity financing requirements and to pay down commercial paper . on july 8 , 2011 , we entered into an agreement to purchase seven regulated water systems in new york for approximately $ 71 million , adding approximately 50,000 customers to new york regulated operations . in a separate agreement , american water will sell its eight regulated water systems and one wastewater system in 43 ohio for approximately $ 89 million , plus assumed liabilities of approximately $ 31 million for an enterprise value of approximately $ 120 million . ohio american water serves approximately 58,000 customers . the completion of both transactions is subject to customary closing conditions , including regulatory approval by public utility commissions in both new york and ohio . we expect the closing on these transactions to occur in the first half of 2012. on december 31 , 2011 , we completed the sale of awm which was part of our contract operations line of business within our market-based segment , in two separate transactions for combined proceeds of approximately $ 3.0 million . also in 2011 , we continued to bring new water solutions to challenged water and wastewater systems by acquiring several smaller systems in pennsylvania , missouri and new jersey . capital investments we invested approximately $ 925 million and $ 766 million in company-funded capital improvements in 2011 and 2010 , respectively . these capital investments are needed on an ongoing basis to comply with existing and new regulations , renew aging treatment and network assets , provide capacity for new growth and ensure system reliability , security and quality of service . the need for continuous investment presents a challenge due to the potential for regulatory lag , or the delay in recovering our operating expenses and earning an appropriate rate of return on our invested capital and a return of our invested capital . in conjunction with our capital program , management continued its focus on reducing regulatory lag during 2011. for 2012 we anticipate spending approximately $ 900 million on companyfunded capital investments , including expenditures associated with our business transformation project . story_separator_special_tag during 2011 , we continued to move forward with our business transformation project to enhance processes and upgrade antiquated legacy systems in order to generate efficiencies and to better meet our customer needs in a more cost effective manner . also , during 2011 , we decided to accelerate the timeline of this project due to its criticality to the business . since the inception of the project , we completed our evaluation of appropriate software solutions and selected our software vendor as well as our system integrator . we worked with the system integrator to analyze our current processes and to design a blueprint for business processes and new systems that will enable business transformation . during 2011 , we completed the detailed design and build of the enterprise resource planning ( erp ) application . also , in 2011 , we began the design of the customer information and enterprise asset management systems . we expect the erp application to go-live in august 2012 and the new customer information system and enterprise asset management systemimplemented by the end of 2013. total expenditures spent for our business transformation project through december 31 , 2011 approximates $ 139.7 million with $ 105.3 million of that amount spent in 2011. rate cases and regulatory matters in 2011 , we received authorizations for additional annualized revenues from general rate cases , totaling $ 78.8 million . in april 2011 , we received final orders in our tennessee and west virginia rate cases , both of which were filed in 2010. on august 1 , 2011 , our virginia rate case , which was filed in 2010 and for which interim rates had been in effect under bond subject to refund since the third quarter of 2010 , was approved . in november 2011 , we received final authorizations in our pennsylvania rate case and our hawaii rate case , both of which were filed in 2011. additionally settlements have been reached , in our general rate cases in missouri and new york , which could provide approximately $ 30 million in additional annualized revenues if approved in accordance with the settlement agreement . there is no assurance that the settlement amounts , or any portion thereof , will be approved as they are pending regulatory approvals and are all subject to change . details of this case will be released upon final approval . 44 on february 23 , 2012 , the iowa utilities board approved an additional $ 2.8 million of annualized revenues for our iowa subsidiary . the increase approximates what we had been collecting since july 29 , 2011 under interim rates and the partial settlement that was reached in october 2011. on february 6 , 2012 , we filed a general rate case in virginia requesting additional annualized revenues for jurisdictional and non-jurisdictional customers of $ 6.0 million . as of february 23 , 2012 , we are awaiting final orders in seven states where we have continuing operations , including missouri and new york , where settlement agreements are pending , requesting additional annualized revenues of $ 245.5 million . of the outstanding cases , only one was filed in 2010 , five cases were filed in 2011 and the virginia case was filed in 2012. there is no assurance that all , or any portion thereof , of any requested increases will be granted . also , in 2011 , we were granted $ 26.2 million in additional annualized revenues , assuming constant sales volumes from infrastructure charges in several of our states . in january 2012 , additional annualized revenue of $ 1.7 million resulting from infrastructure charges in our illinois subsidiary became effective . in addition to our general rate case filings and infrastructure charge filings , during 2011 we made other filings including cost of capital , pre-construction cost , and interim rates true-ups . we do not expect these filings to have a material impact on our results of operations , financial condition or cash flows . as disclosed in more detail under item 3 , legal proceedings in this report , our subsidiary , california- american water company ( cawc ) filed an application with the california public utilities commission ( cpuc ) in september , 2010 to seek approval for a project to reroute the carmel river and remove the san clemente dam in monterey , california . the dam is owned by cawc . as part of the application , cawc is seeking recovery of certain historical costs , totaling approximately $ 26.9 million , related to studies to determine whether the dam could withstand significant flooding and severe earthquakes meeting defined criteria , efforts to develop a project to address seismic issues , the identification and analysis of possible alternative project options , and activities undertaken pursuant to the directives of federal and state government agencies , including the california department of water resources , division of safety of dams ( dsod ) , the lead agency under the state and federal environmental review laws . on november 10 , 2011 , a proposed decision ( pd ) was issued by the administrative law judge assigned to the matter . in the pd , the administrative law judge recommended that recovery of virtually all of the historical costs should be denied . cawc has filed comments with the cpuc contending that the pd is unreasonable , unsupported by and contrary to the evidence , and contrary to law and policy . the pd is currently under review by the cpuc , which has delayed issuing a decision on several occasions and most recently has indicated that it will not vote on a decision until april 19 , 2012. at december 31 , 2011 , most of the historical charges related to the dam are recorded as regulatory assets on our consolidated balance sheet .
| depreciation and amortization expense increased by $ 21.6 million , or 6.5 % , for the year ended december 31 , 2011 compared to the same period in the prior year as a result of additional utility plant placed in service . general taxes . general taxes expense , which includes taxes for property , payroll , gross receipts , and other miscellaneous items , increased by $ 4.9 million , or 2.4 % , for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. this increase was principally due to higher gross receipts taxes of $ 4.6 million , primarily in our new jersey regulated subsidiary . impairment charge . no impairment charge was recorded for our continuing operations in 2011 or 2010. other income ( expenses ) . other income and ( expenses ) increased $ 0.8 million or 0.3 % for the year ended december 31 , 2011 compared to the same period in the prior year . this increase is attributable to an increase in allowance for funds used during construction ( afudc ) of $ 4.2 million resulting from increased construction activity and a decrease in interest expense , net of interest income , of $ 1.4 million partially offset by a decrease in other , net . the decrease in other , net of $ 5.8 million is mainly due to the inclusion in 2010 , the release of the remaining balance of a loss reserve amounting to $ 1.3 million , resulting from the resolution of the outstanding issues and uncertainties , incremental rental revenues of $ 2.6 million and the recognition of funds received related to the methyl tertiary butyl ether ( mtbe ) legal settlement for $ 1.9 million resulting from the outcome of a subsidiary 's rate order . provision for income taxes . our consolidated provision for income taxes increased $ 24.4 million , or 14.0 % , to $ 198.8 million for the year ended december 31 , 2011. the effective tax rates for the years ended december 31 , 2011 and 2010 were 39.5 % and
| 13,532 |
the ultimate losses and loss adjustment expenses will depend on the actual costs to resolve claims . acquisition costs consist principally of commissions and premium taxes that are typically a percentage of the premiums on the insurance policies the company writes , net of ceding commissions earned from reinsurers . other underwriting expenses consist primarily of personnel expenses and general operating expenses related to underwriting activities . corporate and other operating expenses are comprised primarily of outside legal fees , other professional and accounting fees , directors ' fees , management fees & advisory fees , and salaries and benefits for company personnel whose services relate to the support of corporate activities . interest expense is primarily comprised of amounts due on outstanding debt . critical accounting estimates and policies the company 's consolidated financial statements are prepared in conformity with gaap , which require it to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods . see note 2 of the notes to consolidated financial statements contained in item 8 of part ii of this report . actual results could differ from those estimates and assumptions . the company believes that of the company 's significant accounting policies , the following may involve a higher degree of judgment and estimation . liability for unpaid losses and loss adjustment expenses although variability is inherent in estimates , the company believes that the liability for unpaid losses and loss adjustment expenses reflects management 's best estimate for future amounts needed to pay losses and related loss adjustment expenses and the impact of its reinsurance coverage with respect to insured events . in developing losses and loss adjustment expense ( `` loss '' or `` losses '' ) reserve estimates for the u.s. insurance operations , the company 's actuaries perform detailed reserve analyses each quarter . to perform the analysis , the data is organized at a `` reserve category '' level . a reserve category can be a line of business such as commercial automobile liability , or it can be a particular type of claim such as construction defect . the reserves within a reserve category level are characterized as long-tail or short-tail . for long-tail business , it will generally be several years between the time the business is written and the time when all claims are settled . the company 's long-tail exposures include general liability , professional liability , products liability , commercial automobile liability , and excess and umbrella . short-tail exposures include property , commercial automobile physical damage , and equine mortality . to manage its insurance operations , the company differentiates by product classifications , which are penn-america , united national , diamond state , american reliable , collectibles , and vacant express . for further discussion about the company 's product classifications , see “ general – business segments – insurance operations ” in item 1 of part i of this report . each of the company 's product classifications contain both long-tail and short-tail exposures . every reserve category is analyzed by the company 's actuaries each quarter . management is responsible for the final determination of loss reserve selections . 47 loss reserve estimates for the company 's reinsurance operations are developed by independent , external actuaries ; at least annually ; however , management is responsible for the final determination of loss reserve selections . the data for this analysis is organized by treaty and treaty year . as with the company 's reserves for its insurance operations , reserves for its reinsurance operations are characterized as long-tail or short-tail . long-tail exposures include workers compensation , professional liability , and excess and umbrella liability . short-tail exposures are primarily catastrophe exposed property and marine accounts . in addition to the company 's internal reserve analysis , independent external actuaries perform a full , detailed review of the insurance and reinsurance operations ' reserves annually . the company reviews both the internal and external actuarial analyses in determining its reserve position . the actuarial methods used to project ultimate losses for both long-tail and short-tail reserve categories include , but are not limited to , the following : paid development method ; incurred development method ; expected loss ratio method ; bornhuetter-ferguson method using premiums and paid loss ; bornhuetter-ferguson method using premiums and incurred loss ; and average loss method . the paid development method estimates ultimate losses by reviewing paid loss patterns and applying them to accident years with further expected changes in paid loss . selection of the paid loss pattern requires analysis of several factors including the impact of inflation on claims costs , the rate at which claims professionals make claim payments and close claims , the impact of judicial decisions , the impact of underwriting changes , the impact of large claim payments and other factors . claim cost inflation requires evaluation of changes in the cost of repairing or replacing property , changes in the cost of medical care , changes in the cost of wage replacement , judicial decisions , legislative changes and other factors . because this method assumes that losses are paid at a consistent rate , changes in any of these factors can impact the results . since the method does not rely on case reserves , it is not directly influenced by changes in the adequacy of case reserves . for many reserve categories , paid loss data for recent periods may be too immature or erratic for reliable loss projections . this situation often exists for long-tail exposures . in addition , changes in the factors described above may result in inconsistent payment patterns . finally , estimating the paid loss pattern subsequent to the most mature point available in the data analyzed often involves considerable uncertainty for long-tail reserve categories . story_separator_special_tag the incurred development method is similar to the paid development method , but it uses case incurred losses instead of paid losses . since this method uses more data ( case reserves in addition to paid losses ) than the paid development method , the incurred development patterns may be less variable than paid development patterns . however , selection of the incurred loss pattern requires analysis of all of the factors listed in the description of the paid development method . in addition , the inclusion of case reserves can lead to distortions if changes in case reserving practices have taken place and the use of case incurred losses may not eliminate the issues associated with estimating the incurred loss pattern subsequent to the most mature point available . the expected loss ratio method multiplies premiums by an expected loss ratio to produce ultimate loss estimates for each accident year . this method may be useful if loss development patterns are inconsistent , losses emerge very slowly , or there is relatively little loss history from which to estimate future losses . the selection of the expected loss ratio requires analysis of loss ratios from earlier accident years or pricing studies and analysis of inflationary trends , frequency trends , rate changes , underwriting changes , and other applicable factors . 48 the bornhuetter-ferguson method using premiums and paid losses is a combination of the paid development method and the expected loss ratio method . this method normally determines expected loss ratios similar to the method used for the expected loss ratio method and requires analysis of the same factors described above . the method assumes that only future losses will develop at the expected loss ratio level . the percent of paid loss to ultimate loss implied from the paid development method is used to determine what percentage of ultimate loss is yet to be paid . the use of the pattern from the paid development method requires consideration of all factors listed in the description of the paid development method . the estimate of losses yet to be paid is added to current paid losses to estimate the ultimate loss for each accident year . this method will react very slowly if actual ultimate loss ratios are different from expectations due to changes not accounted for by the expected loss ratio calculation . the bornhuetter-ferguson method using premiums and incurred losses is similar to the bornhuetter-ferguson method using premiums and paid losses except that it uses case incurred losses . the use of case incurred losses instead of paid losses can result in development patterns that are less variable than paid development patterns . however , the inclusion of case reserves can lead to distortions if changes in case reserving practices have taken place . the method requires analysis of all the factors that need to be reviewed for the expected loss ratio and incurred development methods . the average loss method multiplies a projected number of ultimate incurred claims by an estimated ultimate average loss for each accident year to produce ultimate loss estimates . since projections of the ultimate number of claims are often less variable than projections of ultimate loss , this method can provide more reliable results for reserve categories where loss development patterns are inconsistent or too variable to be relied on exclusively . in addition , this method can more directly account for changes in coverage that impact the number and size of claims . however , this method can be difficult to apply to situations where very large claims or a substantial number of unusual claims result in volatile average claim sizes . projecting the ultimate number of claims requires analysis of several factors including the rate at which policyholders report claims to the company , the impact of judicial decisions , the impact of underwriting changes and other factors . estimating the ultimate average loss requires analysis of the impact of large losses and claim cost trends based on changes in the cost of repairing or replacing property , changes in the cost of medical care , changes in the cost of wage replacement , judicial decisions , legislative changes and other factors . for many reserve categories , especially those that can be considered long-tail , a particular accident year may not have a sufficient volume of paid losses to produce a statistically reliable estimate of ultimate losses . in such a case , the company 's actuaries typically assign more weight to the incurred development method than to the paid development method . as claims continue to settle and the volume of paid losses increases , the actuaries may assign additional weight to the paid development method . for most of the company 's reserve categories , even the case incurred losses for accident years that are early in the claim settlement process will not be of sufficient volume to produce a reliable estimate of ultimate losses . in these cases , the company will not assign any weight to the paid and incurred development methods and will use the bornhuetter-ferguson and expected loss ratio methods . for short-tail exposures , the paid and incurred development methods can often be relied on sooner primarily because the company 's history includes a sufficient number of accident years to cover the entire period over which paid and incurred losses are expected to change . however , the company may also assign weights to the expected loss ratio , bornhuetter-ferguson and average loss methods for short-tail exposures when developing estimates of ultimate losses . generally , reserves for long-tail lines give more weight to the expected loss ratio method in the more recent immature years . as the accident years mature , weight shifts to the bornhuetter-ferguson methods and eventually to the incurred and or paid development method . claims related to umbrella business are usually reported later than claims for other long-tail lines .
| gross written premiums increased by 16.2 % for year ended december 31 , 2019 as compared to 2018. gross written premiums include business written by american reliable that is ceded to insurance entities owned by assurant under a 100 % quota share reinsurance agreement in the amount of ( $ 0.3 ) million and ( $ 2.1 ) million for the years ended december 31 , 2019 and 2018 , respectively . excluding the business that is ceded 100 % to insurance entities owned by assurant , gross written premiums increased by 15.9 % for the year ended december 31 , 2019 as compared to 2018. the increase is mainly due to several new programs and increases in excess & surplus lines submissions within commercial specialty , rate increases within specialty property and farm , ranch , & stable , new agents appointments within farm , ranch , & stable , and growth in the reinsurance operation 's property catastrophe book primarily driven by rate increases as well as a new casualty treaty . this new casualty treaty contributed $ 26.9 million in gross written premiums during the year ended december 31 , 2019. this growth in premiums was partially offset by a continued reduction of catastrophe exposed business within both commercial specialty and specialty property . 56 gross written premiums increased by 6.1 % for year ended december 31 , 2018 as compared to 2017. gross written premiums include business written by american reliable that is ceded to insurance entities owned by assurant under a 100 % quota share reinsurance agreement in the amount of ( $ 2.1 ) million and ( $ 1.3 ) million for the years ended december 31 , 2018 and 2017 , respectively . excluding the business that is ceded 100 % to insurance entities owned by assurant , gross written premiums increased by 6.2 % for the year ended december 31 , 2018 as compared to 2017. the increase is mainly due to the premium growth within the company 's commercial specialty segment and the company 's farm , ranch , & stable segment partially offset by a reduction in premiums written within the company 's specialty property segment and reinsurance operations . the growth experienced in commercial specialty is primarily being driven by rate increases mainly due to catastrophes experienced in the prior year , new programs , and increased interactions with agents . the increase in gross written premiums within
| 13,533 |
in light of current market conditions and other factors , our current efforts to optimize shareholder value creation are also focused on operational improvements , reducing structural costs , lowering capital intensity , reducing debt , and growth in targeted business lines . financial results for the year ended december 31 , 2020 consolidated revenues were $ 15,379 million , a decrease of $ 2,071 million , or 12 % , for the year ended december 31 , 2020. the primary driver of the decrease is from lower sales volume of $ 1,810 million , largely attributable to the effects of covid-19 . the remaining decrease is attributable to a decrease in revenues of $ 106 million , or less than 1 % , related to the net effects of acquisitions and divestitures , the unfavorable effects of foreign currency exchange of $ 89 million , and the net unfavorable effects of other of $ 66 million . cost of sales was $ 13,402 million , a decrease of $ 1,510 million , or 10 % , for the year ended december 31 , 2020. the primary driver of the decrease is from lower sales volume of $ 1,212 million , largely attributable to the effects of covid-19 . the remaining decrease is attributable to a decrease in cost of sales of $ 96 million , or less than 1 % , related to the net effects of acquisitions and divestitures , the favorable effects of materials sourcing of $ 87 million , the favorable effects of foreign currency exchange of $ 60 million , and the net favorable effects of other costs of $ 137 million . this was partially offset by a non-cash charge of $ 82 million related to the write-down of inventory in the motorparts segment in connection with its initiative to rationalize its supply chain and distribution network . included in other costs of $ 137 million , is $ 9 million of margin on discontinued product that was previously written-down . net loss increased by $ 1,240 million to $ 1,460 million for the year ended december 31 , 2020 compared to $ 220 million for the year ended december 31 , 2019. the increase was primarily driven by : an increase in restructuring charges , net and non-cash asset impairment charges of $ 496 million primarily related to the impairment of long-lived asset groups triggered by the effects of covid-19 on the company 's projected financial information , global headcount and cost reduction initiatives , and other actions to optimize our distribution footprint and warehousing locations ; a net increase in non-cash goodwill and intangible impairment charges of $ 142 million , which was comprised of an increase of $ 159 million in goodwill impairment charges , an increase of $ 65 million in definite-lived intangible asset impairments , and a decrease of $ 82 million in indefinite-lived intangible asset impairments ; and an increase in income tax expense of $ 440 million primarily attributable to the $ 507 million in non-cash charges to tax expense relating to the full valuation allowances established for the u.s. deferred taxes for the year ended december 31 , 2020 and $ 98 million in non-cash charges to tax expense for changes in valuation allowance for deferred taxes relating to non-u.s. jurisdictions . this is partially offset by the federal and state tax benefits and foreign rate differential on the change of the loss before income taxes and noncontrolling interests of $ 186 million for the year ended december 31 , 2020 . 45 these unfavorable effects were partially offset by : a decrease in selling , general , and administrative costs of $ 249 million , primarily due to $ 88 million in lower acquisition and expected separation costs , and the favorable effects of cost reduction initiatives implemented in response to the effects of covid-19 , including unpaid furloughs , net pay decreases , temporary support programs , and other compensation related expenses ; a decrease in engineering , research , and development of $ 51 million primarily due to the effects of covid-19 and cost reduction initiatives ; and a decrease in interest expense of $ 45 million primarily attributable to lower interest rates on variable rate debt , which was partially offset by higher interest expense on higher average outstanding borrowings on the revolver . this also includes a decrease of $ 11 million in financing charges on sales of accounts receivable for the year ended december 31 , 2020. recent trends and market conditions there is inherent uncertainty in the continuation of the trends discussed below . in addition , there may be other factors or trends that can have an effect on our business . our business and operating results are affected by the relative strength of : general economic conditions our oe business is directly related to automotive vehicle production by our customers . automotive production levels depend on a number of factors , including global and regional economic conditions , and policies . demand for aftermarket products is driven by four primary factors : the number of vehicles in operation ; the average age of vehicles ; vehicle usage trends ( primarily miles driven ) ; and component failure and wear rates . in late 2019 , a novel strain of coronavirus , covid-19 , was first detected in wuhan , china . in march 2020 , the world health organization declared covid-19 a global pandemic and governmental authorities around the world have implemented measures to reduce the spread of covid-19 . covid-19 has resulted in suspension or reduction of operations , supply chain disruptions , restrictions on domestic and international travel , and a decrease in consumer traffic . these measures have adversely affected workforces , customers , economies , and financial markets , and , along with decreased consumer spending , reductions in revenue , and delays in payments from customers and partners , have led to an economic downturn in many of our markets . story_separator_special_tag the decline in value-add revenue for the year ended december 31 , 2020 was $ 2,399 million which is largely attributable to the effects of covid-19 . we expect the effects of the covid-19 global pandemic will likely continue during 2021 , the extent of which will depend on a number of factors , including the duration and severity . therefore , there are many uncertainties that remain related to covid-19 that could negatively affect our results of operations , financial position , and cash flows . as customer demand increases , we expect to face periods where payments will become due to suppliers for our existing and additional inventories to support renewed production before we have generated new receivables from customers from that renewed production . it is our intent to maintain a consistent balance between our payables and receivables during this time . cost reductions and other responses to covid-19 we have implemented a range of actions aimed at temporarily reducing costs and preserving liquidity in response to the effects and anticipated effects to our business resulting from covid-19 as described under “ liquidity and capital resources - liquidity and financing arrangements ” . the company will continue to evaluate further ways to manage costs in line with reduced revenue . global vehicle production levels light vehicle production ( according to ihs markit , february 2021 ) for the year ended december 31 , 2020 , global light vehicle production was down across all major markets in which we operate and down 16 % overall compared to 2019. light vehicle production was down 20 % in north america , 22 % in europe , 32 % in south america , 4 % in china and 23 % in india . global light vehicle production in 2021 is expected to improve across all major markets in which we operate and an improvement of 13 % overall compared to 2020. current projections show a 24 % improvement in north america , 14 % improvement in europe , 33 % improvement in south america , 6 % improvement in china , and 23 % improvement in india . 46 commercial truck production ( according to ihs markit , february 2021 ) global commercial truck production decreased by 6 % for the year ended december 31 , 2020 compared to 2019. north america commercial truck production declined 31 % , brazil was down 24 % , europe declined 18 % , and india fell 59 % . commercial truck production in china grew 27 % in 2020 when compared to 2019. global commercial truck production is expected to improve in most major markets in which we operate during 2021 , however production overall is projected to be down 8 % compared to 2020 as the expected decline in china production more than offsets the projected improvements in other regions . current 2021 projections show north america up 28 % , brazil up 20 % , europe up 11 % , india up 63 % , and china down 30 % over 2020. fuel efficiency , powertrain evolution , and vehicle electrification various jurisdictions around the world have announced plans to limit the production of new diesel and gasoline powered vehicles in the future . major vehicle manufacturers have announced their intention to reduce and phase out production of diesel and gasoline powered vehicles during the next two decades . however , for the foreseeable future , it is expected that the majority of the powertrains for light and commercial vehicles will be gasoline and diesel engines ( including hybrids , which combine a battery electric drive with a combustion engine ) . while we see similar electrification trends for light vehicle and commercial vehicle , we expect light vehicles will experience those trends in advance of commercial vehicles . we expect to monitor those trends and adopt our business strategy accordingly . 47 results of operations this section discusses our consolidated results of operations and results of operations by segment for the year ended december 31 , 2020 compared to december 31 , 2019. a detailed discussion of our consolidated results of operations and results of operations by segment for the year ended december 31 , 2019 compared to december 31 , 2018 can be found under item 7 , “ management 's discussion and analysis of financial condition and results of operations ” in our annual report on form 10-k for the year ended december 31 , 2019 , which was filed with the securities and exchange commission on march 2 , 2020. year ended december 31 , 2020 compared to year ended december 31 , 2019 story_separator_special_tag roman ' , sans-serif ; font-size:10pt ; font-style : italic ; font-weight:700 ; line-height:120 % '' > goodwill and intangible impairment charges goodwill and intangible impairment charges increased by $ 142 million to $ 383 million as compared to $ 241 million for the year ended december 31 , 2019. the increase is primarily attributable to $ 267 million of non-cash goodwill impairment charges , $ 65 million of non-cash definite-lived intangible asset impairments , and $ 51 million of non-cash indefinite-lived intangible asset impairments during the year ended december 31 , 2020 , which was the result of the effects of covid-19 on the projected financial information during the first quarter of 2020. this compared to $ 108 million of goodwill impairment charges recognized for three of our reporting units for the year ended december 31 , 2019. these non-cash goodwill impairment charges included $ 69 million in the ride performance segment as a result of our reporting unit reorganization and a $ 21 million impairment charge in the motorparts segment , and an $ 18 million impairment charge in the powertrain segment as a result of our goodwill impairment assessment in the fourth quarter of 2019. in addition , as a result of our indefinite-lived intangible asset impairment assessment in the fourth quarter of 2019 , non-cash intangible asset impairment charges of $ 133 million were recorded for two reporting units in the motorparts segment .
| the following table lists the primary drivers behind the change in cost of sales ( amounts in millions ) : replace_table_token_9_th selling , general , and administrative ( sg & a ) sg & a decreased by $ 249 million to $ 889 million compared to $ 1,138 million in the year ended december 31 , 2019. the decrease was primarily due to $ 88 million in lower acquisition and expected separation costs , and the favorable effects of cost reduction initiatives implemented in response to the effects of covid-19 , including unpaid furloughs , net pay decreases , temporary support programs , and other compensation related expenses during the year ended december 31 , 2020. in addition , sg & a includes a reduction of $ 9 million recognized for a non-income tax refund received in the year ended december 31 , 2020. depreciation and amortization depreciation and amortization expense decreased by $ 34 million to $ 639 million compared to $ 673 million for the year ended december 31 , 2019 , primarily attributable to the effects of the impairments on property , plant , and equipment recognized in the first quarter of 2020. engineering , research , and development engineering , research , and development decreased by $ 51 million to $ 273 million as compared to $ 324 million for the year ended december 31 , 2019. the decrease was due primarily to the effects of covid-19 and the favorable effects of cost reduction initiatives . 49 restructuring charges , net and asset impairments restructuring charges , net and asset impairments increased by $ 496 million to $ 622 million as compared to $ 126 million for the year ended december 31 , 2019. the increase is primarily attributable to non-cash property , plant , and equipment asset impairments in the ride performance segment of $ 455 million ; non-cash asset impairment charges in the motorparts segment of $ 25 million related to its initiative to rationalize its supply chain and distribution network ; and a non-cash asset impairment charge of $ 17 million
| 13,534 |
we have made several modifications to our fee structure during the fiscal periods presented in this form 10-k. since 2017 , our fee structure evolved gradually from a per transaction fee plus a percentage of the food sale amount to one based exclusively on a percentage of the food sale amount , which applied to substantially all restaurant partners in most markets since november 2017. in early 2018 , we also established a new multi-tier fee structure , allowing new restaurant partners to elect a higher fee rate in lieu of paying the one-time set-up and integration fee . as a result of these changes , which progressively resulted in modestly higher fees , our revenue and operating margins may not be comparable between periods , and future changes in fee structure could impact the comparability of results with future periods . seasonality and holidays . our business tends to follow restaurant closure and diner behavior patterns . in many of our markets , we generally experience a relative increase in diner activity from september to may and a relative decrease in diner activity from june to august due to school summer breaks and other vacation periods . in addition , restaurants tend to close on certain holidays , including thanksgiving and christmas eve-day , in our key markets . further , diner activity may be impacted by unusually cold , rainy , or warm weather . cold weather and rain typically drive increases in order volume , while unusually warm or sunny weather typically drives decreases in orders . consequently , our results between quarters , or between periods that include prolonged periods of unusually cold , warm , inclement , or otherwise unexpected weather , may vary . acquisition pipeline . we actively maintain and evaluate a pipeline of potential acquisitions and expect to be acquisitive in the future . potentially significant future business acquisitions may impact the comparability of our results in future periods with those for prior periods . key factors affecting our performance efficient market expansion . our continued revenue growth and path to improved cash flow and profitability is dependent on successful penetration of our target markets and achieving our targeted scale in current and future markets . once a target market is identified , our market launch playbook calls for hiring a city/market manager to interview , hire , and onboard new drivers , while our corporate and business development team is simultaneously deployed in-market to onboard an appropriate selection of strategically located and diverse restaurants . a local awareness and marketing campaign is typically commenced ahead of launch and temporarily ramped up simultaneously with operational launch , which is driven by the acquisition of a targeted number of restaurant partners and drivers . delay or failure in achieving positive market-level margins ( exclusive of indirect and corporate overhead costs ) could adversely affect our working capital , which in turn , could slow our growth plans . we typically target markets that we estimate could achieve sustainable , positive market-level margins that support market operating cash flows and profits , improve efficiency , and appropriately leverage the scale of our advertising , marketing , research and development , and other corporate resources . historically , we estimate that we have reached positive market-level margins ( exclusive of indirect and corporate overhead costs ) approximately six months , on average , following market launch . our financial condition , cash flows , and results of operations depend , in significant part , on our ability to achieve and sustain our target profitability thresholds in our markets . 35 waitr 's restaurant and diner network . our continued growth is driven in significant part by our ability to successfully expand our network of restaurant partners and diners using the platform s . w e believe that our restaurant partner retention strategy , combining a modest restaurant partner set-up and integration fee investment with our differentiated , value-added services fosters res taurant partner loyalty and incentivizes restaurant partners to drive business toward the platform s . w e also believe that our brand recognition , driven by our strong regional presence and employee delivery drivers , accessible customer service , and flat d in er fee further contributes to diner loyalty . we had approximately 8,500 , 3,600 and 1,000 restaurant partners on the waitr platform at december 31 , 2018 , 2017 and 2016 , respectively . the acquisition of bite squad on january 17 , 2019 added more than 11,800 r estaurants to our operations . key business metrics defined below are the key business metrics that we use to analyze our business performance , determine financial forecasts , and help develop long-term strategic plans : active diners . the number of diner accounts from which an order has been placed through the waitr platform during the past twelve months ( as of the end of the relevant period ) . average daily orders . the number of orders during the period divided by the number of days in that period . gross food sales . the total food and beverage sales , sales taxes , prepaid gratuities , and diner fees processed through the waitr platform during a given period . gross food sales are different than the order value upon which we charge our fee to restaurant partners , which excludes gratuities and diner fees . we currently also charge a diner fee of $ 5 per delivery order in most of our markets , which is included in our revenue . prepaid gratuities , which are not included in our revenue , are determined by diners and may differ from order to order . gratuities other than prepaid gratuities , such as cash tips , are not included in gross food sales . average order size . gross food sales for a given period divided by the number of orders during the same period . replace_table_token_2_th basis of presentation revenue we generate revenue primarily when diners place an order on our platforms . story_separator_special_tag under the waitr platform , we engage a third-party payment processor to collect the total amount of the order from the diner , who must use a credit or debit card to pay for their meal , and remit the net proceeds , less our fee , the diner fee and any gratuity amount , to the restaurant partner on a daily basis . because we are acting as an agent of the restaurant partner in the transaction , we recognize as revenue only our fees ( which are assessed as a percentage of the total food sales and related sales taxes , exclusive of diner fees and gratuities for delivery orders , net of any diner promotions or refunds to diners ) and diner fees . gratuities are not included in revenue because they are passed through to delivery drivers . revenues from diner orders are recognized when orders are delivered . we also generate revenue from setup and integration fees collected from restaurant partners to onboard them onto the waitr platform ( these are recognized on a straight-line basis over the anticipated period of benefit , currently determined to be two years ) and subscription fees from restaurant partners that opt to pay a monthly fee in lieu of a lump sum setup and integration fee . revenue also includes , to a significantly lesser extent , grocery diner fees ( since the launch of this service in select markets in march 2017 ) , and fees for restaurant marketing and data services . waitr generally presents relevant restaurants on its applications in order of proximity to the diner and does not allow restaurants to pay to promote themselves within the waitr platform . cost and expenses operations and support . operations and support expenses consist primarily of salaries , benefits , stock-based compensation , and bonuses for employees and contractors engaged in operations and customer service , including drivers , who are mainly full-time and part-time employees and comprise a substantial majority of our employee base , as well as city/market managers , restaurant onboarding , photography , and driver logistics personnel , and payment processing costs for customer orders . 36 sales and marketing . sales and marketing expenses consist primarily of salaries , commissions , benefits , stock-based compensation and bonuses for sales and sales support personnel , including restaurant business development managers , marketing employees and contractors , and third - party marketing expenses such as social media and search engine marketing , online display , team sponsorships ( the costs of which are recognized on a straight line basis over the useful period of the contract ) and print marketing . research and development . research and development expenses consist primarily of salaries , benefits , stock-based compensation and bonuses for employees and contractors engaged in the design , development , maintenance and testing of the platforms . general and administrative . general and administrative expenses consist primarily of salaries , benefits , stock-based compensation and bonuses for executive , finance and accounting , human resources and administrative employees , third-party legal , accounting , and other professional services , insurance ( including workers ' compensation , auto liability and general liability ) , travel , facilities rent , and other corporate overhead costs . depreciation and amortization . depreciation and amortization expenses consist primarily of amortization of capitalized software development and depreciation of leasehold improvements , furniture , and equipment , primarily tablets deployed in restaurants . we do not allocate depreciation and amortization expense to other line items . impairment of intangible assets . impairment of intangible assets consists primarily of write-downs of intangible assets , which relate primarily to technology acquired as a result of our acquisition of requested , inc. , resulting from a shift in our strategy that impacted the expected usage of the acquired technology , as well as minor impairments related to the replacement of internally developed software code . other expenses ( income ) and losses ( gains ) , net . other expenses ( income ) and losses ( gains ) , net , primarily includes interest expense on outstanding debt , which in relevant periods consisted principally of accrued interest from convertible promissory notes . story_separator_special_tag normal ; '' > research and development 2018 compared to 2017 research and development expense increased by $ 2,327 , or 147 % , to $ 3,913 in the year ended december 31 , 2018 from $ 1,586 in the year ended december 31 , 2017 , primarily due to the addition of personnel focused on research and development activities and increased stock-based compensation . 38 2 017 compared to 2016 research and development expense increased by $ 1,191 , or 302 % , to $ 1,586 in the year ended december 31 , 2017 from $ 395 in the year ended december 31 , 2016 , reflecting efforts to improve application functionality and an increase in stock-based compensation expense for research and development employees . general and administrative 2018 compared to 2017 general and administrative expense increased by $ 21,711 , or 230 % , to $ 31,148 in the year ended december 31 , 2018 from $ 9,437 in the year ended december 31 , 2017 , due primarily to business combination-related professional and other costs of $ 6,245 , increased auto liability and workers ' compensation insurance premiums related to increased headcount and business volume . additionally , stock-based compensation increased by $ 8,593 , the majority of which was attributable to the accelerated vesting of certain management stock-based awards upon the consummation of the landcadia business combination . as a percentage of revenue , general and administrative expense increased to 45 % in 2018 compared to 41 % in 2017. without transaction costs and stock-based compensation incurred in 2018 , general and administrative expense would have been $ 15,613 , or 23 % of revenue .
| operations and support 2018 compared to 2017 operations and support expenses increased by $ 30,458 , or 145 % , to $ 51,428 in the year ended december 31 , 2018 from $ 20,970 in the year ended december 31 , 2017 , due to increased business volume . as a percentage of revenue , operations and support expenses decreased to 74 % in 2018 from 92 % in 2017 , primarily due to improved scale , as customer service and certain in-market support costs tend to increase more slowly than the increase in revenue growth in growing markets . 2017 compared to 2016 operations and support expenses increased by $ 16,185 , or 338 % , to $ 20,970 in the year ended december 31 , 2017 from $ 4,785 in the year ended december 31 , 2016 , primarily due to the increased scope and scale of operations , including ramp-up expenses in anticipation of continued volume increases in existing markets combined with planned geographical expansion . as a percentage of revenue , operations and support expenses increased to 92 % in 2017 from 85 % in 2016. sales and marketing 2018 compared to 2017 sales and marketing expense increased by $ 10,034 , or 177 % , to $ 15,695 in the year ended december 31 , 2018 from $ 5,661 in the year ended december 31 , 2017 , primarily due to increased digital marketing spend of approximately $ 3,153 , increased stock-based compensation of $ 1,665 and increased headcount and sales commissions for business development managers attributable to our entry into new markets . as a percentage of revenue , sales and marketing expense decreased to 23 % in 2018 from 25 % in 2017 , due to improved scale . 2017 compared to 2016 sales and marketing expense increased by $ 4,302 , or 317 % , to $ 5,661 in the year ended december 31 , 2017 from $ 1,359 in the year ended december 31 , 2016 , primarily due to market expansion and entry into new sponsorship contracts . as a percentage
| 13,535 |
we launched a third smart bed model ( the p6 ) in december 2017. in april 2018 , we introduced the sleep number 360 p5 and i8 smart beds , our two most popular models . our c4 and c2 bed models completed the transition in june and july 2018 , respectively . the sleep number 360 smart bed won 13 awards at ces 2017 , including being named the best of innovation honoree in the home appliance category . it also received the 2018 edison silver award for breakthrough product design and innovation in the wellness technology category . sleep number was ranked # 1 in customer satisfaction with mattresses by j.d . power in 2018 and the best in six out of seven categories ( support , durability , comfort , features , value and warranty ) . gross profit gross profit for 2018 of $ 928 million increased by $ 31 million , or 3 % compared with $ 897 million in 2017. the 2018 gross profit rate decreased to 60.6 % of net sales , compared with 62.1 % for the prior-year period . the 1.5 ppt . decrease in the gross profit rate was primarily due to : ( i ) significant costs associated with transitioning to all 360 smart beds , including excess freight , storage and product handling ; ( ii ) inefficiencies related to operating two product lines for most of 2018 ; ( iii ) close-out sales of our prior line of beds ; and ( iv ) a higher mix of lower-margin products , including our flexfit adjustable bases . in addition , our gross profit rate can fluctuate from year to year due to a variety of other factors , including warranty expenses , sales return and exchange costs , and performance-based incentive compensation . sales and marketing expenses sales and marketing expenses in 2018 increased $ 37 million to $ 687 million , compared with $ 650 million last year . the sales and marketing expense rate decreased slightly to 44.9 % of net sales compared with 45.0 % for the same period one year ago due to : ( i ) the expense leverage from the 6 % increase in net sales ; partially offset by ( ii ) an increase in media and promotional expenses that drove additional customer traffic to our sales channels , including stores , online and phone . general and administrative expenses general and administrative ( g & a ) expenses decreased $ 8 million to $ 119 million in 2018 , compared with $ 127 million in the prior year and decreased to 7.8 % of net sales , compared with 8.8 % of net sales one year ago . the $ 8 million decrease in g & a expenses consisted of the following major components : ( i ) a $ 7.0 million reduction in employee compensation resulting from a year-over-year decrease in company-wide performance-based incentive compensation ; and ( ii ) $ 1.0 million decrease in miscellaneous other expenses . the g & a expense rate decreased by 1.0 ppt . in 2018 compared with the same period one year ago due to the decrease in expenses discussed above and the leveraging impact of the 6 % net sales increase . other expense , net other expense , net increased to $ 6 million for the year ended december 29 , 2018 compared with $ 1 million for the same period one year ago . the increase was driven by increased interest expense from a higher average debt balance on our revolving line of credit and an increase in the weighted-average interest rate on borrowings outstanding . income tax expense income tax expense was $ 17 million for the year ended december 29 , 2018 , compared with $ 26 million for the same period one year ago . the effective tax rate for the year ended december 29 , 2018 decreased to 19.6 % compared with 28.5 % for 2017 reflecting the changes associated with the “ tax cuts and jobs act ” ( tcja ) , including a reduction in the federal income tax rate to 21 % from 35 % . tax expense for 2017 included a $ 1.7 million provisional tax benefit from revaluing deferred taxes in accordance with the tcja . tax expense for 2018 included a $ 2.9 million increase in the 2017 provisional tax benefit based on new information , including a tax planning analysis . both periods ' tax expense and effective tax rates included stock-based compensation excess tax benefits . see note 12 , income taxes , for further information . 29 comparison of 2017 and 2016 net sales net sales in 2017 increased 10 % to $ 1.44 billion , compared with $ 1.31 billion for the same period one year ago . the sales increase was driven by a 4 % comparable sales increase in our company-controlled channel and 7 percentage points ( ppt . ) of growth from sales generated by 16 net new retail stores opened in the past 12 months , partially offset by a decrease in wholesale/other channel sales . the $ 133 million net sales increase compared with the same period one year ago was primarily comprised of : ( i ) a $ 91 million increase resulting from net store openings ; and ( ii ) a $ 54 million sales increase from company-controlled comparable sales ; partially offset by ( iii ) a $ 12 million decrease in wholesale/other channel sales . company-controlled mattress units increased 5 % compared to the prior-year period . average revenue per mattress unit in our company-controlled channel increased by 6 % . gross profit gross profit of $ 897 million increased by $ 87 million , or 11 % , compared with $ 810 million for the same period one year ago . the gross profit rate increased to 62.1 % of net sales for 2017 , compared with 61.8 % for the prior-year period . story_separator_special_tag the prior-year gross profit rate was negatively impacted by actions taken to manage operating issues associated with our erp implementation during the first six months of 2016. the current-year gross profit rate improvement of 0.3 ppt . benefited from manufacturing and supply chain efficiencies , including lean initiatives , and lower sales return and exchange costs compared with the same period one year ago . in addition , our gross profit rate can fluctuate from year to year due to a variety of other factors , including warranty expenses , product mix changes and performance-based incentive compensation . sales and marketing expenses sales and marketing expenses in 2017 increased 9 % to $ 650 million , compared with $ 596 million last year . the sales and marketing expense rate decreased to 45.0 % of net sales compared with 45.4 % for the same period one year ago due to : ( i ) leveraging our media spending , which increased by 2 % compared with the prior year , while net sales increased by 10 % ; partially offset by ( ii ) an increase in customer financing expenses , as a larger percentage of our customers took advantage of promotional financing offers ; and ( iii ) an increase in selling compensation expense , including higher performance-based incentive compensation resulting from the strong 2017 net sales growth and financial performance . general and administrative expenses general and administrative ( g & a ) expenses increased $ 18 million to $ 127 million in 2017 , compared with $ 110 million in the prior year and increased to 8.8 % of net sales , compared with 8.4 % of net sales one year ago . the $ 18 million increase in g & a expenses consisted of the following major components : ( i ) a $ 12.2 million increase in employee compensation , including a year-over-year increase in company-wide performance-based incentive compensation , enhanced digital marketing capabilities , and salary and wage rate increases that were in line with inflation ; ( ii ) $ 2.6 million of additional depreciation and amortization expense , including incremental depreciation expense from capital expenditures that support the growth of our business ; and ( iii ) a $ 2.8 million increase in miscellaneous other expenses . the g & a expense rate increased by 0.4 ppt . in 2017 compared with the same period one year ago due to the increase in expenses discussed above , partially offset by the leveraging impact of the 10 % net sales increase . research and development expenses research and development expenses for the year ended december 30 , 2017 were $ 28 million , consistent with the same period one year ago . the expense rate for the year ended december 30 , 2017 decreased to 1.9 % of net sales compared to 2.1 % of net sales for the prior year . the spending level is consistent with our long-term consumer innovation strategy . income tax expense income tax expense was $ 26 million for the year ended december 30 , 2017 , compared with $ 25 million for the same period one year ago . the effective tax rate for the year ended december 30 , 2017 was 28.5 % compared with 32.3 % for the prior-year period . the effective tax rates for 2016 reflects tax benefits associated with our acquisition of bam labs , inc. including higher research and development tax credits . the effective tax rate for 2017 benefited from : ( i ) a provisional tax benefit resulting from revaluing deferred taxes in accordance with the `` tax cuts and jobs act '' ; ( ii ) stock-based compensation excess tax benefits in accordance with new financial accounting standards board ( fasb ) guidance effective for us beginning in 2017 ; and ( iii ) the recognition of additional tax credits . under previous fasb guidance , stock-based compensation excess tax benefits or deficiencies were recognized in additional paid-in capital in our consolidated balance sheet . 30 liquidity and capital resources managing our liquidity and capital resources is an important part of our commitment to deliver superior shareholder value . our primary sources of liquidity are cash flows provided by operating activities and cash available under our $ 450 million revolving credit facility ( increased in february 2019 from $ 300 million ) . the cash generated from ongoing operations , and cash available under our revolving credit facility are expected to be adequate to maintain operations and fund anticipated expansion and strategic initiatives for the foreseeable future . as of december 29 , 2018 , cash and cash equivalents totaled $ 2 million compared with $ 4 million as of december 30 , 2017. the main components of the $ 2 million change in cash and cash equivalents were $ 132 million of cash provided by operating activities and $ 182 million increase in short-term borrowings , which were more than offset by $ 46 million of cash used to purchase property and equipment and $ 272 million of cash used to repurchase our common stock ( based on settlement , we repurchased $ 282 million based on trade date ) . the following table summarizes our cash flows ( dollars in millions ) . amounts may not add due to rounding differences : replace_table_token_13_th cash provided by operating activities for the fiscal year ended december 29 , 2018 was $ 132 million compared with $ 173 million for the fiscal year ended december 30 , 2017. significant components of the $ 41 million year-over-year change in cash from operating activities included : ( i ) a $ 4 million increase in net income in 2018 compared with 2017 ; ( ii ) a $ 32 million fluctuation in accounts payable with both years impacted by business changes and timing of payments ; ( iii ) ) a $ 22 million fluctuation in the amount accrued and timing of compensation and benefits payments due to year-over-year changes in company-wide performance-based incentive compensation ; and ( iv ) an $ 18 million fluctuation in prepaid expenses and
| 2018 operating income of $ 92 million increased 1 % compared with the prior year despite significant gross margin costs associated with transitioning to all 360 smart beds , including excess freight , storage , product handling , operating inefficiencies and close-out sales of our prior line of beds . our 2018 operating income rate decreased to 6.0 % of net sales , compared with 6.4 % of net sales in 2017. the increase in operating income was attributable to : ( i ) the 6 % increase in net sales ; ( ii ) the operating expense leverage resulting from the 6 % increase in net sales and reduced corporate incentive compensation ; partially offset by ( iii ) a 1.5 ppt . decrease in our gross profit rate primarily due to the product transition costs noted above . net income in 2018 increased 7 % to $ 70 million compared with net income of $ 65 million in 2017. net income per diluted share increased 24 % to $ 1.92 versus $ 1.55 per diluted share in 2017. net income per diluted share in 2018 benefited from a lower income tax rate ( tax cuts and jobs act ) and a reduction in diluted average shares outstanding ( share repurchases ) . we achieved a return on invested capital ( roic ) of 16.0 % in 2018 , compared with our high-single digit weighted average cost of capital . cash provided by operating activities in 2018 decreased to $ 132 million , compared with $ 173 million for the prior year . purchases of property and equipment for 2018 decreased to $ 46 million , compared with $ 60 million in 2017. we ended 2018 with $ 200 million of borrowings under our revolving credit facility ( as planned ) , compared with $ 25 million at the end of 2017. we utilize our credit facility for general corporate purposes , to meet our seasonal working capital requirements and to repurchase our stock . in february 2019 , we amended our revolving credit facility to increase our net aggregate availability to $ 450 million . in 2018 , we repurchased 8.3 million shares of our common stock at a cost of $ 279 million ( $ 33.60
| 13,536 |
the deposits and loans from first south have been consolidated into the bank 's branch located at 1213 lady street , columbia , south carolina . the premium paid of $ 714 thousand plus fair value adjustments recorded on loans and deposits acquired resulted in a core deposit intangible of $ 365.9 thousand and other identifiable intangible assets in the amount of $ 538.6 thousand being recorded related to this transaction . critical accounting policies we have adopted various accounting policies that govern the application of accounting principles generally accepted in the united states and with general practices within the banking industry in the preparation of our financial statements . our significant accounting policies are described in the notes to our consolidated financial statements in this report . certain accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of certain assets and liabilities . we consider these accounting policies to be critical accounting policies . the judgment and assumptions we use are based on historical experience and other factors , which we believe to be reasonable under the circumstances . because of the nature of the judgment and assumptions we make , actual results could differ from these judgments and estimates that could have a material impact on the carrying values of our assets and liabilities and our results of operations . we believe the allowance for loan losses is the critical accounting policy that requires the most significant judgment and estimates used in preparation of our consolidated financial statements . some of the more critical judgments supporting the amount of our allowance for loan losses include judgments about the credit worthiness of borrowers , the estimated value of the underlying collateral , the assumptions about cash flow , determination of loss factors for estimating credit losses , the impact of current events , and conditions , and other factors impacting the level of probable inherent losses . under different conditions or using different assumptions , the actual amount of credit losses incurred by us may be different from management 's estimates provided in our consolidated financial statements . refer to the portion of this discussion that addresses our allowance for loan losses for a more complete discussion of our processes and methodology for determining our allowance for loan losses . income taxes are provided for the tax effects of the transactions reported in our consolidated financial statements and consist of taxes currently due plus deferred taxes related to differences between the tax basis and accounting basis of certain assets and liabilities , including available-for-sale securities , allowance for loan losses , write downs of oreo properties , accumulated depreciation , net operating loss carry forwards , accretion income , deferred compensation , intangible assets , and pension plan and post-retirement benefits . the deferred tax assets and liabilities represent the future tax return consequences of those differences , which will either be taxable or deductible when the assets and liabilities are recovered or settled . deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled . a valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized . as changes in tax laws or rates are enacted , deferred tax assets and liabilities are adjusted through the provision for income taxes . we file a consolidated federal income tax return for our bank . at december 31 , 2015 , we are in a net deferred tax asset position . 35 we evaluate securities for other-than-temporary impairment at least on a quarterly basis . consideration is given to ( 1 ) the length of time and the extent to which the fair value has been less than cost , ( 2 ) the financial condition and near-term prospects of the issuer , ( 3 ) the outlook for receiving the contractual cash flows of the investments , ( 4 ) the anticipated outlook for changes in the general level of interest rates , and ( 5 ) our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that the company will be required to sell the debt security prior to recovering its fair value ( see note 4 to the consolidated financial statements ) . story_separator_special_tag style= '' font : 10pt times new roman , times , serif '' > net interest margin increased 22 basis points in 2014 as compared to 2013. the yield on earning assets increased by seven basis points while our cost of funds decreased by 19 basis points in 2014 as compared to 2013. the lower cost of funds was primarily a result of the cost of time deposits decreasing by 21 basis points in 2014 as compared to 2013. during 2014 , the average balance in the lower cost deposit funding , as described above , represented 71.8 % of total deposits whereas in 2013 they represented 65.5 % . our average borrowings , increased $ 1.1 million in 2014 as compared to 2013 , while the cost of these funds on average decreased 16 basis points in 2014 as compared to 2013 . 37 average balances , income expenses and rates . the following table depicts , for the periods indicated , certain information related to our average balance sheet and our average yields on assets and average costs of liabilities . such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities . average balances have been derived from daily averages . replace_table_token_3_th ( 1 ) all loans and deposits are domestic . average loan balances include non-accrual loans and loans held for sale . ( 2 ) the computation includes federal funds sold , securities purchased under agreement to resell and interest bearing deposits . story_separator_special_tag ( 3 ) based on 32.5 % marginal tax rate . 38 the following table presents the dollar amount of changes in interest income and interest expense attributable to changes in volume and the amount attributable to changes in rate . the combined effect related to volume and rate which can not be separately identified , has been allocated proportionately , to the change due to volume and the change due to rate . replace_table_token_4_th market risk and interest rate sensitivity market risk reflects the risk of economic loss resulting from adverse changes in market prices and interest rates . the risk of loss can be measured in either diminished current market values or reduced current and potential net income . our primary market risk is interest rate risk . we have established an asset/liability management committee ( alco ) to monitor and manage interest rate risk . the alco monitors and manages the pricing and maturity of its assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have on our net interest income . the alco has established policy guidelines and strategies with respect to interest rate risk exposure and liquidity . a monitoring technique employed by us is the measurement of our interest sensitivity gap , which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given period of time . also , asset/liability modeling is performed to assess the impact varying interest rates and balance sheet mix assumptions will have on net interest income . interest rate sensitivity can be managed by repricing assets or liabilities , selling securities available-for-sale , replacing an asset or liability at maturity or by adjusting the interest rate during the life of an asset or liability . managing the amount of assets and liabilities repricing in the same time interval helps to hedge the risk and minimize the impact on net interest income of rising or falling interest rates . neither the gap analysis or asset/liability modeling are precise indicators of our interest sensitivity position due to the many factors that affect net interest income including , the timing , magnitude and frequency of interest rate changes as well as changes in the volume and mix of earning assets and interest-bearing liabilities . 39 the following table illustrates our interest rate sensitivity at december 31 , 2015. interest sensitivity analysis replace_table_token_5_th ( 1 ) loans classified as non-accrual as of december 31 , 2015 are not included in the balances . ( 2 ) securities based on amortized cost . through simulation modeling , we monitor the effect that an immediate and sustained change in interest rates of 100 basis points and 200 basis points up and down will have on net-interest income over the next 12 months . based on the many factors and assumptions used in simulating the effect of changes in interest rates , the following table estimates the hypothetical percentage change in net interest income at december 31 , 2015 and 2014 over the subsequent 12 months . at december 31 , 2015 , we are asset sensitive . as a result , our modeling reflects modest improvement in our net interest income in a rising rate environment . in a declining rate environment , the model reflects a decline in net interest income . this primarily results from the current level of interest rates being paid on our interest bearing transaction accounts as well as money market accounts . the interest rates on these accounts are at a level where they can not be repriced in proportion to the change in interest rates . the increase and decrease of 100 and 200 basis points , reflected in the table below assume a simultaneous and parallel change in interest rates along the entire yield curve . our simulation modeling also includes estimating the impact on net interest income in a variety of other interest rate environments , such as a flattening and steepening of the yield curve . we also periodically stress certain assumptions such as prepayment and interest rate betas to evaluate our overall sensitivity to changes in interest rates . 40 net interest income sensitivity replace_table_token_6_th we perform a valuation analysis projecting future cash flows from assets and liabilities to determine the present value of equity ( pve ) over a range of changes in market interest rates . the sensitivity of pve to changes in interest rates is a measure of the sensitivity of earnings over a longer time horizon . at december 31 , 2015 and 2014 , the pve exposure in a plus 200 basis point increase in market interest rates was estimated to be ( 0.07 ) % and 0.69 % , respectively . provision and allowance for loan losses at december 31 , 2015 , the allowance for loan losses amounted to $ 4.6 million , or 0.95 % of loans ( excludes loans held for sale ) , as compared $ 4.1 million , or 0.93 % of loans , at december 31 , 2014. loans that were acquired in the acquisition of savannah river and first south are accounted for under financial accounting standards board ( fasb ) accounting standard codification ( asc ) 310-30. these acquired loans are initially measured at fair value , which includes estimated future credit losses expected to be incurred over the life of the loans . the credit component on loans related to cash flows not expected to be collected is not subsequently accreted ( non-accretable difference ) into interest income . any remaining portion representing the excess of a loan 's or pool 's cash flows expected to be collected over the fair value is accreted ( accretable difference ) into interest income . subsequent to the acquisition date , increases in cash flows expected to be received in excess of the company 's initial estimates are reclassified from nonaccretable difference to accretable difference and are accreted into interest income on a level-yield basis over the remaining life of the loan .
| net interest spread , the difference between the yield on earning assets and the rate paid on interest-bearing liabilities , was 3.20 % in 2014 as compared to 3.16 % in 2015. the provision for loan losses was $ 881 thousand in 2014 as compared to $ 1.1million in 2015. non-interest income was increased to $ 9.0 million for 2015 as compared to $ 8.2 million in 2014. this increase resulted from increased mortgage banking income of $ 246 thousand as well as an increase in the gain on sale of investments of $ 173 thousand and a reduction in the loss on early extinguishment of debt of $ 152 thousand . non-interest expense increased $ 718 thousand in 2015 as compared to 2014. increases in all categories of non-interest expense were primarily a result of the impact of the savannah river acquisition that was completed on february 1 , 2014 , the opening of the lady street branch located in downtown columbia , south carolina in june of 2014 and the opening of a branch in blythewood , south carolina in april 2015 , each being included for the full year in 2015. in 2014 , there was $ 503 thousand in merger related expenses included in non-interest expense . there were no merger expenses included in the results for 2015. net income available to common shareholders was $ 5.1 million , or $ 0.78 diluted earnings per common share , for the year ended december 31 , 2014 , as compared to net income available to common shareholders of $ 4.1 million , or $ 0.78 diluted earnings per common share , for the year ended december 31 , 2013. the primary reason for the increase in net income available to common shareholders is that our net interest income margin improved by $ 5.7 million from $ 18.0 million in 2013 to $ 23.7 million for 2014. this improvement was a result of an increase of $ 133.0 million in average earning assets as well as an improved tax equivalent net interest margin from 3.18 % in 2013
| 13,537 |
we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances . on an on-going basis , we evaluate all of our estimates , including those related to revenue recognition , allowance for doubtful accounts , goodwill , property and equipment , including depreciation and amortization , inventories , income taxes , and litigation and other contingencies . actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting policies and related judgments and estimates affect the preparation of our consolidated financial statements . revenue recognition : revenue from construction contracts in our water transmission group is recognized on the percentage-of-completion method . for a majority of contracts , revenue is measured by the costs incurred to date as a percentage of the estimated total costs of each contract ( cost-to-cost method ) . for a small number of contracts , revenue is measured using units of delivery as progress is best estimated by the number of units delivered under the contract . contract costs include all direct material and labor costs and those indirect costs related to contract performance , such as indirect labor , supplies , tools , repairs and depreciation . selling , general and administrative costs are charged to expense as incurred . the cost of steel is recognized as a project cost when the steel is introduced into the manufacturing process . estimated total costs of each contract are reviewed on a monthly basis by project management and operations personnel for all active projects . all cost revisions that result in the gross profit as a percent of sales increasing or decreasing by more than two percent are reviewed by senior management personnel . we begin recognizing revenue on a project when persuasive evidence of an arrangement exists , recoverability is reasonably assured , and project costs are incurred . costs may be incurred before we have persuasive evidence of an arrangement . in those cases , if recoverability from that arrangement is probable , the project costs are deferred and revenue recognition is delayed . changes in job performance , job conditions and estimated profitability , including those arising from contract change orders , contract penalty provisions , foreign currency exchange rate movements , changes in raw materials costs , and final contract settlements may result in revisions to estimates of revenue , costs and income and are recognized in the period in which the revisions are determined . provisions for losses on uncompleted contracts are made in the period such losses become known . revenue from our tubular products group is recognized when all four of the following criteria have been satisfied : persuasive evidence of an arrangement exists ; the price is fixed or determinable ; delivery has occurred ; 24 and collectability is reasonably assured . deferred revenue is recorded when the manufacturing process is complete and customers are invoiced prior to physical delivery of the product . allowance for doubtful accounts : we maintain allowances for estimated losses resulting from the inability of our customers to make required payments based on historical experience and management 's judgment . the extension and revision of credit is established by obtaining credit rating reports or financial information on the customer . an allowance is recorded based on a variety of factors , including our historical collection experience and our historical product quality claims . at least monthly , we review past due balances to identify the reasons for non-payment . we will write down or write off a receivable account once the account is deemed uncollectible for reasons such as customer quality claims , a contract dispute , deterioration in the customer 's financial position , a bankruptcy filing or other events . we believe the reported allowances at december 31 , 2014 are adequate . if the customer 's financial conditions were to deteriorate resulting in their inability to make payments , additional allowances may need to be recorded which would result in additional expenses being recorded for the period in which such determination was made . inventories : inventories are stated at the lower of cost or market . determining market value of inventories involves judgments and assumptions made by us , including projecting selling prices and cost of sales . to project market value , we review recent sales and gross profit history , existing customer orders , current contract prices , industry supply and demand , forecasted steel prices , replacement costs , seasonal factors , general economic trends and other information , as applicable . if future market conditions are less favorable than those projected by us , inventory write-downs may be required . at december 31 , 2014 , the inventory balance of $ 74.0 million is reported net of lower of cost or market reserves totaling $ 6.6 million . raw material inventories of steel are stated at cost either on a specific identification basis or on an average cost basis . all other raw materials , as well as supplies , are stated on an average cost basis . finished goods are stated at cost using the first-in , first-out method of accounting . due to recent volatility of energy markets , it is at least reasonably possible that these lower of cost or market reserves will materially change in the near term . property and equipment : property and equipment are recorded at cost , and are depreciated using either the units of production method or a straight-line method depending on the classification of the asset . depreciation expense calculated under the units of production method may be less than , equal to , or greater than depreciation expense calculated under the straight-line method . we evaluate historical and projected units of production at each plant to reassess the units of production expected on an annual basis . we assess impairment of property and equipment whenever changes in circumstances indicate that the carrying values of the asset group may not be recoverable . story_separator_special_tag the recoverable value of long-lived assets is determined by estimating future undiscounted cash flows using assumptions about our expected future operating performance . estimates of future cash flows used in the recoverability test incorporate our own assumptions about the use of the asset group and shall consider all available evidence . our estimates of undiscounted cash flows may differ from actual cash flow due to , among other things , technological changes , economic conditions , or changes to our business operations . if we determine the carrying value of the property and equipment will not be recoverable , we calculate and record an impairment loss . this analysis is performed prior to assessing goodwill for impairment . business combinations and valuation of goodwill and other acquired intangible assets : we allocate the fair value of purchase consideration to the tangible assets acquired , liabilities assumed and intangible assets acquired based on their estimated fair values . goodwill is recorded for the excess of the fair 25 value of purchase consideration over the fair values of these identifiable assets and liabilities . such valuations require management to make significant estimates and assumptions , especially with respect to intangible assets . contingent consideration is calculated and recorded at the date of the acquisition . during the measurement period , which does not exceed one year from the acquisition date , we may record adjustments to the assets acquired and liabilities assumed as a result of information received regarding the valuation of assets and liabilities after the acquisition date , with the corresponding offset to goodwill . upon the conclusion of the measurement period , any subsequent adjustments are recorded to earnings . goodwill is reviewed for impairment annually at december 31 or whenever events occur or circumstances change that indicates goodwill may be impaired . goodwill is tested for impairment at the reporting unit level . a reporting unit is an operating segment or one level below an operating segment ( also known as a component ) . our reporting units are equivalent to our operating segments as the individual components meet the criteria for aggregation . fair value of goodwill is first evaluated under a qualitative approach which takes into account industry and market conditions , cost factors , overall financial performance , and other relevant entity specific events and changes . in the evaluation of our operating segments , we look at the long-term prospects for the reporting units and recognize that current performance may not be the best indicator of future prospects or value , which requires management judgment . if this analysis determines that it is more likely than not that the fair value of goodwill is above its carrying value , no further analysis is required . alternatively , we may choose to unconditionally bypass the qualitative analysis in favor of a two-step quantitative impairment test . the first step of this analysis calculates the business enterprise value of the reporting unit by using a combination of income and market approaches . the income approach is based upon projected future after-tax cash flows discounted to present value using factors that consider the timing and risk associated with the future after-tax cash flows . the market approach is based upon historical and or forward-looking measures using multiples of revenue or earnings before interest , tax , depreciation , and amortization ( ebitda ) . we utilize a weighted average of the income and market approaches , with a heavier weighting on the income approach because of the relatively limited number of direct comparable entities for which relevant multiples are available . if the carrying value of the reporting unit exceeds its calculated enterprise value , then the company continues to assess the fair value of individual assets and liabilities , other than goodwill . the difference between the reporting unit enterprise value and the fair value of its identifiable net assets is the implied fair value of the reporting unit 's goodwill . a goodwill impairment loss is recorded for the difference between the implied fair value and its carrying value . goodwill resulting from the acquisition of permalok of $ 5.3 million is included in our water transmission group . the company elected to perform a quantitative impairment test of the water transmission group 's goodwill in 2014 and concluded that there was no impairment as of december 31 , 2014. goodwill of $ 4.4 million related to the sale of the company 's discontinued octg business in march 2014 was written off as part of the loss on sale of business . goodwill related to the company 's tubular products group of $ 16.1 million was evaluated using a quantitative impairment test . we concluded that there was no implied fair value of the tubular products group goodwill and that it should be completely written off as of december 31 , 2014. if our assumptions about goodwill change as a result of future events or circumstances , and we believe the assets may have declined in value , then further impairment charges will be recorded , resulting in lower profits . stock-based compensation : we recognize the compensation cost of employee and director services received in exchange for awards of equity instruments based on the grant date estimated fair value of the awards . share-based compensation cost is 26 recognized over the period during which the employee or director is required to provide service in exchange for the award , and as forfeitures occur , the associated compensation cost recognized to date is reversed . we estimate the fair value of restricted stock units ( rsus ) and performance stock awards ( psas ) using the value of the company 's stock on the date of grant , with the exception of market-based psas , for which a monte carlo simulation model is used . the monte carlo simulation model calculates many potential outcomes for an award and estimates fair value based on the most likely outcome .
| the sales increase was due to a 24 % increase in tons sold from 132,800 tons to 164,600 tons . the increase in volume is directly related to our capacity expansion project in atchison . selling prices per ton in 2014 were relatively even with 2013. energy pipe represented 77 % of tons sold in 2014 compared to 71 % for the same period of 2013. the selling price for energy pipe decreased 3 % in 2014 compared with 2013. gross profit . gross profit decreased 32.6 % to $ 40.6 million ( 10.1 % of total net sales from continuing operations ) in 2014 from $ 60.2 million ( 16.8 % of total net sales from continuing operations ) in 2013. water transmission gross profit decreased 15.7 % to $ 39.6 million ( 16.6 % of segment net sales from continuing operations ) in 2014 from $ 47.0 million ( 20.7 % of segment net sales from continuing operations ) in 2013. the decrease in gross profit was primarily due to the decrease in selling price per ton , partially offset by the increase in tons produced as discussed above . we have experienced significant competition on recent project bids , which has also contributed to decreased gross profit . the mix of projects produced also contributed to the decrease in gross profit . the decrease was partially offset by our cost reduction initiatives , which have reduced overhead costs and labor hours per ton , as well as improvements in quality . also partially offsetting the above was a $ 2.7 million reduction of cost of sales primarily related to insurance settlements , which reimbursed the company for past costs incurred for portland harbor site . ( see item 3 , legal proceedings , and note 13 of the accompanying consolidated financial statements for additional information on the settlements ) . tubular products gross profit from continuing operations decreased 92.7 % to $ 1.0 million ( 0.6 % of segment net sales from continuing operations ) in 2014 from $
| 13,538 |
key measures we use to evaluate our performance to evaluate the performance of our business , we utilize a variety of financial and performance measures . these key measures include revenue , average unit volumes ( `` auvs '' ) , comparable restaurant sales , restaurant contribution , ebitda and adjusted ebitda . revenue restaurant revenue represents sales of food and beverages in company-owned restaurants . several factors affect our restaurant revenue in any period , including the number of restaurants in operation and per restaurant sales . franchise royalties and fees represent royalty income and initial franchise fees . while we expect that the majority of our revenue and net income growth will be driven by company-owned restaurants , our franchise restaurants remain an important part of our financial success . seasonal factors cause our revenue to fluctuate from quarter to quarter . our revenue per restaurant is typically lower in the first and fourth quarters due to reduced winter and holiday traffic and higher in the second and third quarters . as a result of these factors , our quarterly and annual operating results and comparable restaurant sales may fluctuate significantly . average unit volumes ( `` auvs '' ) auvs consist of the average annualized sales of all company-owned restaurants for the trailing 12 periods . auvs are calculated by dividing restaurant revenue by the number of operating days within each time period and multiplying by 361 , which is equal to the number of operating days we have in a typical year . this measurement allows management to assess changes in consumer traffic and per person spending patterns at our restaurants . comparable restaurant sales comparable restaurant sales refer to year-over-year sales comparisons for the comparable restaurant base . we define the comparable restaurant base to include restaurants open for at least 18 full periods . as of 2013 , 2012 and 2011 , there were 248 , 216 and 192 restaurants , respectively , in our comparable restaurant base for company owned locations . this measure highlights performance of existing restaurants , as the impact of new restaurant openings is excluded . comparable restaurant sales growth is generated by increases in traffic , which we calculate as the number of entrées sold , or changes in per person spend , calculated as sales divided by traffic . per person spend can be influenced by changes in menu prices and the mix and number of items sold per person . measuring our comparable restaurant sales allows us to evaluate the performance of our existing restaurant base . various factors impact comparable restaurant sales , including : consumer recognition of our brand and our ability to respond to changing consumer preferences ; overall economic trends , particularly those related to consumer spending ; our ability to operate restaurants effectively and efficiently to meet consumer expectations ; pricing ; 29 per person spend and average check amount ; marketing and promotional efforts ; local competition ; trade area dynamics ; introduction of new and seasonal menu items and limited time offerings ; and opening of new restaurants in the vicinity of existing locations . as a result of the 53-week fiscal year 2011 , our fiscal year 2012 began one week later than our fiscal year 2011. consistent with common industry practice , we present comparable restaurant sales on a calendar-adjusted basis that aligns current year sales weeks with comparable periods in the prior year , regardless of whether they belong to the same fiscal period or not . since opening new company-owned and franchise restaurants will be a significant component of our revenue growth , comparable restaurant sales are only one measure of how we evaluate our performance . restaurant contribution restaurant contribution is defined as restaurant revenue less restaurant operating costs which are cost of sales , labor , occupancy and other restaurant operating costs . we expect restaurant contribution to increase in proportion to the number of new restaurants we open and our comparable restaurant sales growth . fluctuations in restaurant contribution margin can also be attributed to those factors discussed above for the components of restaurant operating costs . ebitda and adjusted ebitda we define ebitda as net income before interest expense , provision ( benefit ) for income taxes and depreciation and amortization . we define adjusted ebitda as net income before interest expense , debt extinguishment expense , provision ( benefit ) for income taxes , asset disposals , closure costs and restaurant impairments , depreciation and amortization , stock-based compensation , management fees , ipo related expenses , and follow-on offering expenses . ebitda and adjusted ebitda provide clear pictures of our operating results by eliminating certain non-cash expenses that are not reflective of the underlying business performance . we use these metrics to facilitate a comparison of our operating performance on a consistent basis from period to period and to analyze the factors and trends affecting our business . the following table presents a reconciliation of net income to ebitda and adjusted ebitda : replace_table_token_9_th _ ( a ) fiscal year 2013 included $ 0.5 million in management fee expense , and fiscal years 2012 and 2011 each included $ 1.0 million of management fee expense , in accordance with our management services agreement and through the class c common stock dividend paid to the holder of the one 30 outstanding share of our class c common stock . in connection with our ipo , the management services agreement expired and the one share of class c common stock was redeemed . ( b ) 2010 included $ 3.7 million of non-cash stock-based compensation expense and $ 0.3 million of expense for our portion of payroll taxes related to the 2010 equity recapitalization . see note 2 of our consolidated financial statements , equity recapitalization . ( c ) reflects certain expenses incurred in conjunction with the closing of our initial public offering . story_separator_special_tag amount includes $ 2.0 million of stock-based compensation related to accelerated vesting of outstanding stock options , $ 1.2 million of stock-based compensation related to stock options granted to our chief executive officer and president and chief operations officer of which 50 % were vested at grant , $ 1.7 million of transaction bonuses and related payroll tax and $ 0.8 million in transaction payments to our equity sponsors . ( d ) reflects $ 0.7 million of offering expenses related to our follow-on offering completed in december of 2013. key financial definitions cost of sales cost of sales includes the direct costs associated with the food , beverage and packaging of our menu items . cost of sales also includes any costs related to discounted menu items . cost of sales is a substantial expense and can be expected to grow proportionally as our restaurant revenue grows . fluctuations in cost of sales are caused primarily by volatility in the cost of commodity food items and related contracts for such items . other important factors causing fluctuations in cost of sales include seasonality , discounting activity and restaurant level management of food waste . labor costs labor costs include wages , payroll taxes , workers ' compensation expense , benefits and bonuses paid to our management teams . like other expense items , we expect labor costs to grow proportionally as our restaurant revenue grows . factors that influence fluctuations in our labor costs include minimum wage and payroll tax legislation , the frequency and severity of workers ' compensation claims , health care costs and the performance of our restaurants . occupancy costs occupancy costs include rent , common area maintenance and real estate tax expense related to our restaurants and is expected to grow proportionally as we open new restaurants . other restaurant operating costs other restaurant operating costs include the costs of utilities , restaurant-level marketing , credit card processing fees , restaurant supplies , repairs and maintenance and other restaurant operating costs . like other costs , it is expected to grow proportionally as restaurant revenue grows . general and administrative expense general and administrative expense is composed of payroll , other compensation , travel , marketing , accounting fees , legal fees and other expenses related to the infrastructure required to support our restaurants . general and administrative expense also includes the non-cash stock compensation expense related to our employee stock incentive plan . general and administrative expense can be expected to grow as we grow , including incremental legal , accounting , insurance and other expenses incurred as a public company . depreciation and amortization our principal depreciation and amortization charges relate to depreciation of fixed assets , including leasehold improvements and equipment , from restaurant construction and ongoing maintenance . pre-opening costs pre-opening costs relate to the costs incurred prior to the opening of a restaurant . these include management labor costs , staff labor costs during training , food and supplies utilized during training , marketing costs and other related pre-opening costs . pre-opening costs also include rent recorded between date of possession and opening date for our restaurants . 31 asset disposals , closure costs and restaurant impairments asset disposals , closure costs and restaurant impairments include the loss on disposal of assets related to retirements and replacement of leasehold improvements or equipment , non-cash restaurant closure and impairment charges . debt extinguishment in both 2013 and 2012 , we amended our credit facility to extend the maturity date and to reduce interest rates on borrowings . as a result of these amendments , a portion of the existing and new fees were treated as debt extinguishment . in 2011 , we wrote off debt issuance costs related to our credit facility refinancing . interest expense interest expense consists primarily of interest on our outstanding indebtedness . debt issuance costs are amortized at cost over the life of the related debt . provision for income taxes provision for income taxes consists of federal , state and local taxes on our income . restaurant openings , closures and relocations the following table shows restaurants opened , closed or relocated in the years indicated . replace_table_token_10_th _ ( 1 ) we account for relocated restaurants under both restaurant openings and closures and relocations . during 2012 , we closed one restaurant and relocated another restaurant . in fiscal 2011 and 2013 , we closed one restaurant at the end of its lease term . 32 story_separator_special_tag style= '' line-height:120 % ; padding-bottom:12px ; text-align : justify ; text-indent:24px ; font-size:10pt ; '' > pre-opening costs increased by $ 0.7 million in 2013 compared to 2012 , due to 43 restaurant openings in 2013 , compared to 39 in 2012 . as a percentage of revenue , pre-opening costs increased to 1.1 % in 2013 compared to 1.0 % in 2012 due to the timing of restaurant openings including rent incurred for locations opening in the first quarter of 2014 . 35 asset disposals , closure costs and restaurant impairments asset disposals , closure costs and restaurant impairments decreased by $ 0.1 million in 2013 compared to 2012 due primarily to a lease termination and other related closing costs of one restaurant which closed in 2012 , which was offset by increased loss on disposal of assets . debt extinguishment debt extinguishment expense was $ 0.6 million in 2013 and $ 2.6 million in 2012 , as a result of an amendment in november 2013 and august of 2012 , respectively , to our credit facility to extend the maturity date and reduced interest rates on borrowings . a portion of the existing and new fees were treated as debt extinguishment expense . interest expense interest expense decreased by $ 2.8 million in 2013 compared to 2012 .
| million of expenses related to our follow-on offering which closed in december of 2013. revenue restaurant revenue increased by $ 49.9 million in 2013 compared to 2012 . restaurants not in the comparable restaurant base accounted for $ 40.6 million of this increase , with the balance attributed to growth in comparable restaurant sales . comparable restaurant sales increased by $ 9.3 million or 3.0 % in 2013 , composed primarily of a modest price increase we took during 2013 and increases in traffic at our comparable base restaurants . franchise royalties and fees increased by $ 0.6 million due to 11 new restaurant openings and increased comparable restaurant sales of 0.6 % during 2013 . 34 cost of sales cost of sales increased by $ 12.9 million in 2013 compared to 2012 , due primarily to the increase in restaurant revenue in 2013 . as a percentage of restaurant revenue , cost of sales decreased to 26.5 % in 2013 from 26.6 % in 2012 . this decrease as a percentage of restaurant revenue was the result of an increase in restaurant menu pricing , partially offset by a minimal increase in food cost inflation . labor costs labor costs increased by $ 14.6 million in 2013 compared to 2012 , due primarily to the increase in restaurant revenue in 2013 . as a percentage of restaurant revenue , labor costs decreased to 30.0 % in 2013 from 30.1 % in 2012 . the decrease in labor cost percentage was driven primarily by lower incentive compensation expense . occupancy costs occupancy costs increased by $ 5.9 million in 2013 compared to 2012 , due primarily to new restaurants opened in each of these years . as a percentage of restaurant revenue , occupancy costs increased to 10.1 % in 2013 , from 9.9 % in 2012 . the increase was due to an increase in the percentage of restaurants not in the
| 13,539 |
in addition , edc margins 24 were negatively impacted by net cumulative catch-up adjustments ( loss contracts ) of $ 1.5 million and $ 444,000 resulting from changes in estimated costs to complete on certain edc programs for fiscal 2014 and 2013 , respectively . margin in fiscal 2014 was 30.8 % as compared to 40 % in fiscal 2013. the margin decrease reflects primarily the negative margins on edc contracts and product mix shipped during fiscal 2014. research and development . r & d expense was $ 2.6 million for fiscal 2014 and fiscal 2013. r & d expense declined to 5.9 % of net sales in fiscal 2014 compared to 8.2 % in fiscal 2013 reflecting the increase in fiscal 2014 net sales . selling , general , and administrative . selling , general and administrative expenses increased $ 3.0 million , or 36.9 % , to $ 11.1 million or 25.2 % , of net sales for fiscal 2014 from $ 8.1 million or 25.7 % of net sales , for fiscal 2013. the increase in selling , general and administrative expenses for the year ended september 30 , 2014 reflects the bad debt expense of $ 3.7 million related to the delta contract , ( see item 3. legal proceedings . ) , partially offset by the expense of $ 657,000 recorded in the year ended september 30 , 2013 related to a previously disclosed legal matter . ( see the description of the daghigh matter in note 14-contingencies in notes to consolidated financial statements attached ) . interest income , net . net interest income decreased by $ 19,000 to $ 22,000 for fiscal 2014 from $ 41,000 for fiscal 2013. the decrease in interest was primarily the result of lower cash balances throughout the year ended september 30 , 2014 versus the year ended september 30 , 2013. a special cash dividend of $ 25 million was paid to shareholders in late december 2012. other income . other miscellaneous income remained unchanged in fiscal 2014 compared to fiscal 2013. income taxes . the income tax benefit for fiscal year ended september 30 , 2014 was $ 0.3 million compared to an income tax expense of $ 0.1 million or for the fiscal year ended september 30 , 2013. the tax benefit for the fiscal year ended september 30 , 2014 resulted from a pretax loss of $ 0.1 million and the favorable impact of the federal research and development tax credits ( federal r & d tax credits ) . the tax expense for the fiscal year ended september 30 , 2013 was attributable to the pretax income offset in part by federal r & d tax credits . on january 1 , 2013 , congress enacted the american taxpayer relief act of 2012 which retroactively reinstated and extended the federal r & d tax credit from january 1 , 2012 to december 31 , 2013. the 2013 fiscal year income tax provision reflects the benefit of the retroactive application of the federal r & d tax credit for nine months from the 2012 fiscal year plus a full year benefit for the current fiscal year in accordance with fasb asc topic 740 income taxes ( asc topic 740 ) . the effective tax rate for the year ended september 30 , 2013 was 6.0 % . the effective tax rate differs from the statutory rate for the year ended september 30 , 2013 primarily because of the benefit of the retroactive application of the federal r & d tax credit . net income . as a result of the factors described above , the company 's net income for fiscal 2014 was $ 0.2 million compared to net income of $ 1.9 million for fiscal 2013. on a fully diluted basis , the net income per share was $ 0.01 for fiscal 2014 , compared to $ 0.11 for fiscal 2013 . 25 liquidity and capital resources the following table highlights key financial measurements of the company : replace_table_token_7_th replace_table_token_8_th ( 1 ) excludes deferred revenue ( 2 ) calculated as : the sum of cash and cash equivalents plus accounts receivable , net , divided by current liabilities ( 3 ) calculated as : current assets divided by current liabilities the company 's principal source of liquidity has been cash flows from current year operations and cash accumulated from prior years ' operations . cash is used principally to finance inventory , accounts receivable , unbilled receivables , and payroll . operating activities the company generated $ 1.4 million of cash during fiscal 2015 as compared to a use of $ 0.7 million of cash in operating activities during fiscal 2014. the cash provided by operating activities for the year ended september 30 , 2015 resulted primarily from a decrease in accounts receivable and net unbilled receivables of $ 2.0 million and $ 2.3 million respectively , partially offset by the decrease in accounts payable , accrued expenses and taxes payable of $ 1.0 million , $ 1.3 million and $ 0.4 million , respectively . unbilled receivables represent principally sales recorded under the percentage-of-completion method of accounting that have not been billed to customers in accordance with applicable contract terms on engineering development projects . the decrease in unbilled receivables reflects the billing of milestones achieved in the engineering development contract as they near completion in fiscal 2015. the company used $ 0.7 million in operating activities during the year ended september 30 , 2014 , primarily the result of increases in net unbilled receivables of $ 0.9 million , inventory of $ 1.3 million and deferred income taxes of $ 0.6 million , partially offset by cash provided from increases in accrued expenses of $ 0.6 million , share-based compensation of $ 0.6 million and depreciation and amortization of $ 0.6 million . the company used $ 2.2 million of cash in operating activities during fiscal 2013. the cash used in operating activities for the year ended september 30 , 2013 resulted primarily from an increase in unbilled receivables of $ 4.9 story_separator_special_tag million , partially offset by cash provided from increases in accounts payable and accrued expenses of $ 2.0 million . investing activities cash used in investing activities was $ 0.1 million , $ 0.7 million and $ 0.6 million for fiscal years 2015 , 2014 and 2013 respectively , and consisted of spending for production equipment and laboratory test equipment . the company plans to continue investing in capital equipment to support engineering development efforts and operations . 26 financing activities cash used by financing activities was $ 0.2 million for fiscal year 2015 and consisted primarily from the purchase of treasury stock . cash provided by financing activities was $ 0.3 million for fiscal year 2014 and consisted of the proceeds from the exercise of stock options by employees . on december 7 , 2012 , the company 's board of directors declared a special cash dividend in the amount of $ 1.50 per share which was paid to shareholders on december 27 , 2012. the aggregate amount of the dividend payment was approximately $ 25 million . for the fiscal year ended september 30 , 2013 , the company received $ 1.2 million from the exercise of options to acquire shares of common stock . the company used $ 696 to purchase 175 shares of the company 's common stock under the share repurchase program on the first day of fiscal 2013. summary future capital requirements depend upon numerous factors , including market acceptance of the company 's products , the timing and rate of expansion of business , acquisitions , joint ventures , and other factors . is & s has experienced increases in expenditures since its inception and anticipates that expenditures will return to levels experienced prior to fiscal 2014 in the foreseeable future . the company believes that its cash and cash equivalents will provide sufficient capital to fund operations for at least the next twelve months . further , is & s may need to develop and introduce new or enhanced products , to respond to competitive pressures , to invest in or acquire businesses or technologies , or to respond to unanticipated requirements or developments . if additional funds are raised through the issuance of equity securities , dilution to existing shareholders may result . if insufficient funds are available , the company may not be able to introduce new products or to compete effectively . contractual obligations the company 's contractual obligations as of september 30 , 2015 mature as follows : replace_table_token_9_th ( 1 ) a purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on the company and that specifies all significant terms , including fixed or minimum quantities to be purchased ; fixed , minimum or variable price provisions ; and the approximate timing of the transaction . these amounts are primarily comprised of open purchase order commitments entered in the ordinary course of business with vendors and subcontractors pertaining to fulfillment of the company 's current order backlog . off-balance sheet arrangements the company has no off-balance sheet arrangements . inflation is & s does not believe inflation had a material effect on its financial position or results of operations during the past three years ; however , it can not predict future effects of inflation . 27 critical accounting policies the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america ( gaap ) requires management to make estimates and assumptions that affect reported amounts of assets and liabilities , 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 . the company 's most critical accounting policies are revenue recognition , income taxes , inventory valuation , share based compensation and warranty reserves . revenue recognition the company enters into sales arrangements with customers that , in general , provide for the company to design , develop , manufacture and deliver air data equipment , large flat-panel display systems , and advanced monitoring systems that measure and display critical flight information , including data relative to aircraft separation , airspeed , altitude , and engine and fuel data measurements . the company 's sales arrangements may include multiple deliverables as defined in fasb asc topic 605-25 multiple-element arrangements ( asc topic 605-25 ) , which typically include design and engineering services and the production and delivery of the flat panel display and related components . the company includes any design and engineering services elements in edc sales and any functional upgrade and product elements in product sales on the accompanying consolidated statements of income . to the extent that an arrangement contains software elements that are essential to the functionality of tangible products sold in the arrangement , the company recognizes revenue for the deliverables in accordance with the guidance included in fasb accounting update 2009-14 , revenue arrangements that include software elements ( asu 2009-14 ) ; and fasb accounting standards update 2009-13 , multiple-deliverable revenue arrangements-a consensus of the fasb emerging issues task force ( asu 2009-13 ) ; and fasb asc topic 605 , revenue recognition ( asc topic 605 ) . to the extent that an arrangement contains software components , which include functional upgrades that are sold on a standalone basis and which the company has deemed outside the scope of the exception defined by asu 2009-14 , the company recognizes software revenue in accordance with asc topic 985 , software ( asc topic 985 ) . multiple element arrangements the company identifies all goods and or services that are to be delivered separately under such a sales arrangement and allocates sales to each deliverable ( if more than one ) based on that deliverable 's selling price . the company considers the appropriate recognition method for each deliverable . the company 's multiple element arrangements can include defined design and development activities , functional upgrades , and product sales .
| research and development ( r & d ) . r & d expense was $ 2.7 million for fiscal 2015 and $ 2.6 million for fiscal 2014. r & d expense increased to 13.5 % of net sales in fiscal 2015 compared to 5.9 % in fiscal 2014 , reflecting the decrease in fiscal 2015 net sales and a higher proportion of engineering hours incurred on internal r & d projects as the edc programs are nearing completion . selling , general , and administrative . selling , general and administrative expenses decreased $ 3.3 million , or 29.4 % , to $ 7.8 million or 39.1 % of net sales for fiscal 2015 from $ 11.1 million or 25.2 % of net sales , for fiscal 2014. the decrease in selling , general and administrative expenses for the year ended september 30 , 2015 primarily reflects bad debt expense of $ 1.3 million as compared to $ 3.7 million of bad debt expense in the year ended september 30 , 2014 , lower personnel costs and lower professional fees partially offset by higher legal fees primarily related to the delta matter . the bad debt expense of $ 1.3 million in fiscal 2015 is due to an impairment of an unbilled receivable . the company has renegotiated and executed a new agreement in january 2016 with a customer to provide products and services with current technology . therefore , the unbilled amount is impaired . we expect that this agreement will result in approximately $ 1.2 million positive impact from a reversal of a total liability of $ 1.2 million comprising of deferred revenue and contract loss accrual to the statement of operations in q2 2016 due to the extinguishment of our obligation to deliver certain products under the original contract . the bad debt expense of $ 3.7 million in fiscal 2014 related to the delta contract , ( see item 3. legal proceedings. ) . interest income , net . net
| 13,540 |
replace_table_token_1_th nights and experiences booked nights and experiences booked is a key measure of the scale of our platform , which in turn drives our financial performance . nights and experiences booked on our platform in a period represents the sum of the total number of nights booked for stays and the total number of seats booked for experiences , net of cancellations and alterations that occurred in that period . for example , a booking made on february 15 would be reflected in nights and experiences booked for our quarter ended march 31. if , in the example , the booking were canceled on may 15 , nights and experiences booked would be reduced by the cancellation for our quarter ended june 30. a night can include one or more guests and can be for a listing with one or more bedrooms . a seat is booked for each participant in an experience . substantially all of the bookings on our platform to date have come from nights . we believe nights and experiences booked is a key business metric to help investors and others understand and evaluate our results of operations in the same manner as our management team , as it represents a single unit of transaction on our platform . in 2020 , we had 193.2 million nights and experiences booked , a 41 % decrease from 326.9 million nights and experiences booked in 2019 , which in turn was a 31 % increase from 250.3 million nights and experiences booked in 2018. nights and experiences booked grows as we attract new hosts and guests to our platform and as repeat guests increase their activity on our platform . our nights and experiences booked declined from prior levels as a result of the covid-19 pandemic . the decline in 2020 was most severe in the second quarter , with nights and experiences booked declining 67 % from the prior year period , and our business improved from those levels in the third and fourth quarters with declines of 28 % and 39 % , respectively , from the prior year period . this improvement was driven by stronger results in north america and europe , in particular with resilience in domestic and short-distance travel , with more people gravitating toward airbnb stays within driving distance of their homes . gross booking value gbv represents the dollar value of bookings on our platform in a period and is inclusive of host earnings , service fees , cleaning fees , and taxes , net of cancellations and alterations that occurred during that period . the timing of recording gbv and any related cancellations is similar to that described in the subsection titled “ — key business metrics and non-gaap financial measures — nights and experiences booked ” above . revenue from the booking is recognized upon check-in ; accordingly , gbv is a leading indicator of revenue . the entire amount of a booking is reflected in gbv during the quarter in which booking occurs , whether the guest pays the entire amount of the booking upfront or elects to use our pay less upfront program . growth in gbv reflects our ability to attract and retain hosts and guests and reflects growth in nights and experiences booked . in 2020 , our gbv was $ 23.9 billion , a 37 % decrease from $ 38.0 billion in 2019 , which in turn was a 29 % increase from $ 29.4 billion in 2018. the decrease in our gbv in 2020 was due to the reduction in nights and experiences booked due to the covid-19 pandemic , as described above . on a constant currency basis , the reduction in gbv was 37 % . the decline was most severe in the second quarter , with gbv declining 67 % from the prior year . we experienced an increase in gbv in the third and fourth quarters of 2020 as domestic travel rebounded on our platform from 57 table o f contents the second quarter levels , but below third and fourth quarter 2019 levels by 17 % and 31 % , respectively . in the third and fourth quarters of 2020 , gbv declined less than nights and experiences booked as a result of increased gbv per night and experience booked driven by a shift towards north america compared to other regions and entire home bookings . non-gaap financial measures in addition to our results determined in accordance with gaap , we believe the following non-gaap measures are useful in evaluating our operating performance . we use the following non-gaap financial information , collectively , to evaluate our ongoing operations and for internal planning and forecasting purposes.we believe that non-gaap financial information , when taken collectively , may be helpful to investors because it provides consistency and comparability with past financial performance , and assists in comparisons with other companies , some of which use similar non-gaap financial information to supplement their gaap results . the non-gaap financial information is presented for supplemental informational purposes only , should not be considered a substitute for financial information presented in accordance with gaap , and may be different from similarly titled non-gaap measures used by other companies . a reconciliation of each non-gaap financial measure to the most directly comparable financial measure stated in accordance with gaap is provided below . investors are encouraged to review the related gaap financial measures and the reconciliation of these non-gaap financial measures to their most directly comparable gaap financial measures . the following table summarizes our non-gaap financial measures , along with the most directly comparable gaap measure , for each period presented below . story_separator_special_tag replace_table_token_2_th adjusted ebitda we define adjusted ebitda as net income or loss adjusted for ( i ) provision for ( benefit from ) income taxes ; ( ii ) interest income , interest expense , and other income ( expense ) , net ; ( iii ) depreciation and amortization ; ( iv ) stock-based compensation expense and stock-settlement obligations related to the ipo ; ( v ) acquisition-related impacts consisting of gains ( losses ) recognized on changes in the fair value of contingent consideration arrangements ; ( vi ) net changes to the reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with hosts for collecting and remitting such taxes ; and ( vii ) restructuring charges . the above items are excluded from our adjusted ebitda measure because these items are non-cash in nature , or because the amount and timing of these items is unpredictable , not driven by core results of operations and renders comparisons with prior periods and competitors less meaningful . we believe adjusted ebitda provides useful information to investors and others in understanding and evaluating our results of operations , as well as provides a useful measure for period-to-period comparisons of our business performance . moreover , we have included adjusted ebitda in this annual report on form 10-k because it is a key measurement used by our management internally to make operating decisions , including those related to operating expenses , evaluating performance , and performing strategic planning and annual budgeting . adjusted ebitda also excludes certain items related to transactional tax matters , for which management believes it is probable that we may be held jointly liable with hosts in certain jurisdictions , and we urge investors to review the detailed disclosure regarding these matters included in the subsection titled “ —critical accounting policies and estimates—lodging tax obligations , ” as well as the notes to our consolidated financial statements included elsewhere in this annual report on form 10-k. adjusted ebitda has limitations as a financial measure , should be considered as supplemental in nature , and is not meant as a substitute for the related financial information prepared in accordance with gaap . these limitations include the following : adjusted ebitda does not reflect interest income ( expense ) and other income ( expense ) , net , which include unrealized and realized gains and losses on foreign currency exchange , investments , and financial instruments , including the warrants issued in connection with a term loan agreement entered into in april 2020 ; adjusted ebitda excludes certain recurring , non-cash charges , such as depreciation of property and equipment and amortization of intangible assets , and although these are non-cash charges , the assets being depreciated and amortized may have to be replaced in the future , and adjusted ebitda does not reflect all cash requirements for such replacements or for new capital expenditure requirements ; adjusted ebitda excludes stock-based compensation expense , which has been , and will continue to be for the foreseeable future , a significant recurring expense in our business and an important part of our compensation strategy as well as stock-settlement obligations , which represent employer and related taxes related to the ipo ; adjusted ebitda excludes acquisition-related impacts consisting of gains ( losses ) recognized on changes in the fair value of contingent consideration arrangements . the contingent consideration , which was in the form of equity , was valued as of the 58 table o f contents acquisition date and is mark-to-market at each reporting period based on factors including our stock price . the changes in fair value of contingent consideration was insignificant prior to the fourth quarter of 2020 ; adjusted ebitda does not reflect net changes to reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with hosts for collecting and remitting such taxes ; and adjusted ebitda does not reflect restructuring charges , which include severance and other employee costs , lease impairments , and contract amendments and terminations . because of these limitations , you should consider adjusted ebitda alongside other financial performance measures , including net loss and our other gaap results . in 2020 , adjusted ebitda was $ ( 250.7 ) million , compared to adjusted ebitda in 2019 of $ ( 253.3 ) million , primarily due to the reduction in nights and experiences booked and gbv due to the covid-19 pandemic , as described above , partially offset by a reduction in overall spend . in 2019 , adjusted ebitda was $ ( 253.3 ) million , compared to adjusted ebitda in 2018 of $ 170.6 million , primarily due to significant investments in growth initiatives and investments in our technical infrastructure in 2019. adjusted ebitda reconciliation the following is a reconciliation of adjusted ebitda to the most comparable gaap measure , net loss : replace_table_token_3_th ( 1 ) excludes stock-based compensation related to restructuring , which is included in restructuring charges in the table above . free cash flow we define free cash flow as net cash provided by ( used in ) operating activities less purchases of property and equipment . we believe that free cash flow is a meaningful indicator of liquidity that provides information to our management and investors about the amount of cash generated from operations , after purchases of property and equipment , that can be used for investment in our business and for acquisitions as well as to strengthen our balance sheet . our free cash flow is impacted by the timing of gbv because we collect our service fees at the time of booking , which is generally before a stay or experience occurs . funds held on behalf of our hosts and guests and amounts payable to our hosts and guests do not impact free cash flow , except interest earned on these funds .
| cost of revenue decreased $ 320.3 million , or 27 % , in 2020 compared to 2019. the change was primarily due to a $ 236.8 million decrease in payment processing costs , consisting of merchant fees and chargebacks and a $ 87.9 million decrease in the cost of data hosting services . in 2020 and 2019 , payment processing costs totaled $ 600.2 million and $ 837.0 million , respectively , which represented 3 % and 2 % of gbv , respectively . the decrease in payment processing costs resulted from the decreased dollar value of 65 table o f contents payments processed through our platform attributable to covid-19 and lower payment processing fees . the decrease in data hosting resulted from lower usage and demand charges . 2019 compared to 2018 . cost of revenue increased $ 332.3 million , or 38 % , in 2019 compared to 2018. the change was primarily due to a $ 193.0 million increase in payment processing costs , consisting of merchant fees and chargebacks , a $ 90.2 million increase in the cost of data hosting services , and a $ 29.4 million increase in spend with other third-party service providers and technologies to support our platform . in 2019 and 2018 , payment processing costs totaled $ 837.0 million and $ 644.0 million , respectively , which represented 2 % of gbv for both periods . the increase in payment processing costs resulted from the increased dollar value of payments processed through our platform associated with the growth in gbv , while increases in data hosting and third-party service providers resulted from the associated growth in traffic on our platform . a portion of our increase in data hosting services was related to costs associated with our migration to a service-oriented architecture . operations and support replace_table_token_10_th 2020 compared to 2019 . operations and support expense increased $ 62.8 million , or 8 % , in 2020 compared to 2019. the change was primarily due to a $ 139.9 million increase in personnel-related expenses , predominantly comprised of stock-based compensation related to rsus , for which the liquidity-based vesting condition was satisfied in connection
| 13,541 |
we recognize direct cost of services when incurred . selling , general and administrative expenses ( s , g & a ) include the payroll and related costs of our internal management as well as general and administrative , marketing and recruiting costs . our sales and marketing efforts are led by our management team who are salaried employees and earn bonuses based on operating results for the company as a whole and each individual 's performance . the company 's fiscal year consists of 52 or 53 weeks , ending on the saturday in may closest to may 31. fiscal years 2018 , 2017 , and 2016 consisted of four 13 week quarters and a total of 52 weeks of activity for the fiscal year . for fiscal years of 53 weeks ( the next of which occurs for fiscal 2020 ) , the first three quarters consist of 13 weeks each and the fourth quarter consists of 14 weeks . the company continues to make progress toward its strategic initiatives announced in april 2017. during fiscal 2018 , the company further advanced its initiative to cultivate a more sophisticated and robust sales culture . rgp continued the initiative to roll out enhanced training initiatives and new compensation programs to drive accountability and profitable growth . the company has completed other facets of this initiative , including the alignment of the company 's sales process and the establishment of an enterprise-wide business development function . another initiative , the company 's strategic client program , which involves a dedicated account team for certain high profile clients with world-wide operations , is performing well with revenue of clients in this program up 8.4 % year over year . with the announcement of its new bonus reward program for fiscal 2019 for individuals focused on revenue generation , the company believes it has substantially completed its sales culture transformation . the new bonus program rewards individuals for achieving or exceeding pre-determined sales goals , with bonus multipliers applicable for exceeding goals ; the rewards for sales achievement are coupled tied to both gross margin goals and qualitative goals associated with the company 's culture of life at rgp . the company is close to completing its second initiative to redesign the company 's business model to enhance its client offerings , with a focus on building its integrated solutions capabilities and delivering multi-disciplinary offerings to its clients in three areas of focus transaction services , technical accounting services , and data & analytics . in the second quarter of fiscal 2018 , the company implemented the new operating model for sales , talent and integrated solutions within rgp for all of north america ; that is , reporting relationships are now largely defined by functional area rather than on an office location basis . we believe this effort has already delivered improved revenue growth and improved customer experience in fiscal 2018. the rollout of the operating model will continue in europe and asia pacific during fiscal 2019. with respect to the cost containment initiative , the company remains focused on ( i ) improving leverage of its s , g & a as a percentage of revenue and ( ii ) cost synergies in the core business and with the accretive acquisition . although the company made certain headcount reductions in fiscal 2017 , certain non-recurring expenses incurred during the fiscal year 2018 for severance , 34 acquisition and sales transformation and the hiring of headcount principally for talent recruitment and management and europe have negated those reductions . rgp remains committed to managing its cost structure to achieve improved s , g & a performance as measured against revenue throughout fiscal 2019. during the third quarter of fiscal 2018 , the company completed its acquisition of substantially all of the assets and assumption of certain liabilities of accretive . accretive was a professional services firm that provided expertise in accounting and finance , enterprise governance , business technology and business transformation solutions to a wide variety of organizations in the u.s. and supports startups through its countsy suite of back office services . the company paid consideration of $ 20.0 million in cash and issued 1,072,000 shares of resources connection , inc. common stock restricted for sale for four years ; additional cash and shares of company stock will be due , subject to working capital adjustments . as of may 26 , 2018 , the amounts due for working capital adjustments are estimated at $ 0.1 million in cash and 108,000 additional shares of common stock and are accrued as a liability on the balance sheet as of may 26 , 2018. the company expects ebitda from this acquisition ( ebitda is defined as our earnings before interest , taxes , depreciation and amortization ) to increase during fiscal 2019 , driven by cost synergies that rgp expects to achieve from this acquisition by the end of calendar 2018 , resulting from office consolidations , the elimination of redundant back-office functions and other specific cost reductions . results of operations of accretive are included in the company 's consolidated statement of operations for the six months ended may 26 , 2018 , including revenue of $ 35.5 million and income before amortization and depreciation of $ 1.8 million . the principal operations of accretive have been integrated into rgp 's business model effective with the first day of fiscal 2019 and so further segregated reporting is not available after that date . during the second quarter of fiscal 2018 , the company completed its acquisition of taskforce , a german based professional services firm founded in 2007 that provides clients with senior interim management and project management expertise . the company paid initial consideration of 5.8 million ( approximately $ 6.9 million translated to u.s. dollars based on the exchange rates at the date of acquisition ) for all of the outstanding shares of taskforce in a combination of cash and restricted stock . story_separator_special_tag in addition , the purchase agreement requires additional earn-out payments resulting from application of a formula based upon adjusted ebitda ( as defined in the purchase agreement ) for calendar years 2017 , 2018 and 2019. the estimated fair value of these additional earn-out payments are recorded as contingent consideration at a discounted rate in the company 's consolidated balance sheet for 3.7 million as of may 26 , 2018 ( approximately $ 4.3 million translated to u.s. dollars based on the exchange rate on the last day of fiscal 2018 ) . the initial payment for calendar 2017 of 2.1 million was made march 28 , 2018. the remaining contingent consideration is subject to revision until ultimately settled and such adjustments are recorded through the company 's statement of operations . results of operations of taskforce are included in the company 's consolidated statement of operation for the nine months ended may 26 , 2018 , including revenue of $ 11.4 million and income before depreciation and amortization of $ 0.6 million . critical accounting policies the following discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements , which have been prepared in accordance with gaap in the united states . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . the following represents a summary of our critical accounting policies , defined as those policies we believe : ( a ) are the most important to the portrayal of our financial condition and results of operations and ( b ) involve inherently uncertain issues that require management 's most difficult , subjective or complex judgments . valuation of long-lived assets we assess the potential impairment of long-lived tangible and intangible assets periodically or whenever events or changes in circumstances indicate the carrying value may not be recoverable . identifiable intangible assets are amortized over their lives , typically ranging from three to ten years . goodwill is not subject to amortization . this asset is considered to have an indefinite life and its carrying value is required to be assessed by us for impairment at least annually . depending on future market values of our stock , our operating performance and other factors , these assessments could potentially result in impairment reductions of this intangible asset in the future and this adjustment may materially affect the company 's future financial results and financial condition . allowance for doubtful accounts we maintain an allowance for doubtful accounts for estimated losses resulting from our clients failing to make required payments for services rendered . we estimate this allowance based upon our knowledge of the 35 financial condition of our clients ( which may not include knowledge of all significant events ) , review of historical receivable and reserve trends and other pertinent information . while such losses have historically been within our expectations and the provisions established , we can not guarantee we will continue to experience the same credit loss rates we have in the past . a significant change in the liquidity or financial position of our clients could cause unfavorable trends in receivable collections and additional allowances may be required . these additional allowances could materially affect the company 's future financial results . income taxes in order to prepare our consolidated financial statements , we are required to make estimates of income taxes , if applicable , in each jurisdiction in which we operate . the process incorporates an assessment of any current tax exposure together with temporary differences resulting from different treatment of transactions for tax and financial statement purposes . these differences result in deferred tax assets and liabilities that are included in our consolidated balance sheets . the recovery of deferred tax assets from future taxable income must be assessed and , to the extent recovery is not likely , we will establish a valuation allowance . an increase in the valuation allowance results in recording additional tax expense and any such adjustment may materially affect the company 's future financial result . if the ultimate tax liability differs from the amount of tax expense we have reflected in the consolidated statements of operations , an adjustment of tax expense may need to be recorded and this adjustment may materially affect the company 's future financial results and financial condition . revenue recognition we primarily charge our clients on an hourly basis for the professional services of our consultants . revenues are recognized when the company 's professionals deliver promised services to clients , in an amount that reflects the consideration the company expects to be entitled to in exchange for those services . our clients are contractually obligated to pay us for all hours billed . to a much lesser extent , we also earn revenue if a client hires one of our consultants . conversion fees are recognized when one of the company 's professionals accepts an offer of permanent employment from a client and all requisite terms of the agreement have been met . stock-based compensation under our 2014 performance incentive plan , officers , employees , and outside directors have received or may receive grants of restricted stock , stock units , options to purchase common stock or other stock or stock-based awards . under our espp , eligible officers and employees may purchase our common stock in accordance with the terms of the plan . the company estimates a value for employee stock options on the date of grant using an option-pricing model . we have elected to use the black-scholes option-pricing model which takes into account assumptions regarding a number of highly complex and subjective variables . these variables include the expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors .
| as of may 26 , 2018 , the company had $ 56.5 million of cash and cash equivalents including $ 16.5 million held in international operations . in october 2016 , we entered into a $ 120 million facility with bank of america . the facility is available for working capital and general corporate purposes , including potential acquisitions and stock repurchases . the facility allows the company to choose the interest rate applicable to advances . borrowings under the facility bear interest at a rate per annum of either , at the company 's option , ( i ) libor plus a margin of 1.25 % or 1.50 % or ( ii ) an alternate base rate , plus margin of 0.25 % or 0.50 % with the applicable margin depending on the company 's consolidated leverage ratio . the alternate base rate is the highest of ( i ) bank of america 's prime rate , ( ii ) the federal funds rate plus 0.50 % and ( iii ) the eurodollar rate plus 1.0 % . the company pays an unused commitment fee on the average daily unused portion of the facility at a rate of 0.15 % to 0.25 % depending upon on the company 's consolidated leverage ratio . the facility expires october 17 , 2021. as of may 26 , 2018 , the company had borrowings of approximately $ 63.0 million under the facility and directed bank of america to issue approximately $ 1.0 million of outstanding letters of credit for the benefit of third parties related to operating leases and guarantees . as of may 26 , 2018 the company was in compliance with the financial covenants in the facility . in october 2016 , we commenced a modified dutch auction tender offer to purchase up to 6 million shares of our common stock at a price not greater than $ 16.00 per share and not less than $ 13.50 per share . in november 2016 , the company exercised its right to increase the size
| 13,542 |
the annual rent is comprised of a fixed component , part of which is subject to an annual escalator of up to 2 % if certain rent coverage ratio thresholds are met , and a component that is based on the performance of the facilities which is adjusted , subject to certain floors , every two years to an amount equal to 4 % of the average annual net revenues of belterra park during the preceding two years in excess of a contractual baseline . the meadows lease the real estate assets of the meadows are leased to penn pursuant to the meadows lease . the meadows lease commenced on september 9 , 2016 and has an initial term of 10 years , with no purchase option , and the option to renew for 36 three successive 5-year terms and one 4-year term ( exercisable by the tenant ) on the same terms and conditions . the meadows lease contains a fixed component , subject to annual escalators , and a component that is based on the performance of the facility , which is reset every two years to an amount determined by multiplying ( i ) 4 % by ( ii ) the average annual net revenues of the facility for the trailing two-year period . the meadows lease contains an annual escalator provision for up to 5 % of the base rent , if certain rent coverage ratio thresholds are met , which remains at 5 % until the earlier of ten years or the year in which total rent is $ 31 million , at which point the escalator will be reduced to 2 % annually thereafter . amended and restated caesars master lease and lumière place lease on october 1 , 2018 , the company closed its previously announced transaction to acquire certain real property assets from tropicana and certain of its affiliates pursuant to the real estate purchase agreement dated april 15 , 2018 between tropicana and glp capital , which was subsequently amended on october 1 , 2018. pursuant to the terms of the amended real estate purchase agreement , the company acquired the real estate assets of tropicana atlantic city , tropicana evansville , tropicana laughlin , trop casino greenville and the belle of baton rouge from tropicana for an aggregate cash purchase price of $ 964.0 million , exclusive of transaction fees and taxes . concurrent with the tropicana acquisition , caesars acquired the operating assets of these properties from tropicana pursuant to an agreement and plan of merger dated april 15 , 2018 by and among tropicana , glp capital , caesars and a wholly-owned subsidiary of caesars and leased the glp assets from the company pursuant to the terms of the caesars master lease . additionally , on october 1 , 2018 , the company entered into the czr loan in connection with caesars 's acquisition of lumière place . the czr loan was satisfied and replaced with the lumière place lease on september 29 , 2020 , the initial term of which expires on october 31 , 2033 , with 4 separate renewal options of five years each , exercisable at the tenants ' option . the lumière place lease rent is subject to an annual escalator of up to 2 % if certain rent coverage ratio thresholds are met . on june 15 , 2020 , the company amended and restated the caesars master lease ( as amended , the `` amended and restated caesars master lease '' ) to , ( i ) extend the initial term of 15 years to 20 years , with renewals of up to an additional 20 years at the option of caesars , ( ii ) remove the variable rent component in its entirety commencing with the third lease year , ( iii ) in the third lease year increase annual land base rent to approximately $ 23.6 million and annual building base rent to approximately $ 62.1 million , ( iv ) provide fixed escalation percentages that delay the escalation of building base rent until the commencement of the fifth lease year with building base rent increasing annually by 1.25 % in the fifth and sixth lease year , 1.75 % in the seventh and eighth lease years and 2 % in the ninth lease year and each lease year thereafter , ( v ) subject to the satisfaction of certain conditions , permit caesars to elect to replace the tropicana evansville and or tropicana greenville properties under the amended and restated caesars master lease with one or more of caesars gaming scioto downs , the row in reno , isle casino racing pompano park , isle casino hotel – black hawk , lady luck casino – black hawk , waterloo , bettendorf or isle of capri casino boonville , provided that the aggregate value of such new property , individually or collectively , is at least equal to the value of tropicana evansville or tropicana greenville , as applicable ( vi ) permit caesars to elect to sell its interest in belle of baton rouge and sever it from the amended and restated caesars master lease ( with no change to the rent obligation to the company ) , subject to the satisfaction of certain conditions , and ( vii ) provide certain relief under the operating , capital expenditure and financial covenants thereunder in the event of facility closures due to pandemics , governmental restrictions and certain other instances of unavoidable delay . story_separator_special_tag the effectiveness of the amended and restated caesars master lease was subject to the review of certain gaming regulatory agencies and the expiration of applicable gaming regulatory advance notice periods which were received on july 23 , 2020. on december 18 , 2020 , the company and caesars completed an exchange agreement with subsidiaries of caesars in which caesars transferred to the company the real estate assets of waterloo and bettendorf in exchange for the transfer by the company to caesars of the real property assets of tropicana evansville , plus a cash payment of $ 5.7 million . tropicana las vegas on april 16 , 2020 , the company and certain of its subsidiaries closed on its previously announced transaction to acquire the real property associated with the tropicana las vegas from penn in exchange for rent credits of $ 307.5 million , which were applied against future rent obligations due under the parties ' existing leases during 2020. an affiliate of penn will continue to operate the casino and hotel business of the tropicana las vegas pursuant to a triple net lease with glpi for nominal rent for the earlier of two years ( subject to three one-year extensions at the company 's option ) or until the tropicana las vegas is sold . we will conduct a sale process with respect to the tropicana las vegas , with penn receiving 75 % of the net proceeds above $ 307.5 million ( plus certain taxes , expenses and costs ) if a sale agreement is signed during the first 12 months following closing and 50 % of net proceeds above $ 307.5 million ( plus certain taxes , expenses and costs ) if a sale agreement is signed during the subsequent 12 months following closing . penn will not be entitled to receive any net sale proceeds if the relevant sale agreement is signed at any time after 24 months from closing . 37 morgantown lease on october 1 , 2020 , the company and penn closed on their previously announced transaction whereby glpi acquired the land under penn 's gaming facility under construction in morgantown , pennsylvania in exchange for $ 30.0 million in rent credits that were utilized by penn in the fourth quarter of 2020. the company is leasing the land back to an affiliate of penn pursuant to the morgantown lease for an initial annual rent of $ 3.0 million , provided , however , that ( i ) on the opening date and on each anniversary thereafter the rent shall be increased by 1.5 % annually ( on a prorated basis for the remainder of the lease year in which the gaming facility opens ) for each of the following three lease years and ( ii ) commencing on the fourth anniversary of the opening date and for each anniversary thereafter , ( a ) if the cpi increase is at least 0.5 % for any lease year , the rent for such lease year shall increase by 1.25 % of rent as of the immediately preceding lease year , and ( b ) if the cpi increase is less than 0.5 % for such lease year , then the rent shall not increase for such lease year subject to escalation provisions following the opening of the property . hollywood casino baton rouge on november 25 , 2020 , the company entered into a definitive agreement to sell the operations of our hollywood casino baton rouge to casino queen holding company inc. ( `` casino queen '' ) for $ 28.2 million . the company will retain ownership of all real estate assets at hollywood casino baton rouge and will simultaneously enter into a master lease with casino queen , which will include the casino queen property in east st. louis that is currently leased by us to them and the hollywood casino baton rouge facility . the initial annual cash rent will be approximately $ 21.4 million and the lease will have an initial term of 15 years with four 5 year renewal options exercisable by the tenant . this rental amount will be increased annually by 0.5 % for the first six years . beginning with the seventh lease year through the remainder of the lease term , if the cpi increases by at least 0.25 % for any lease year then annual rent shall be increased by 1.25 % , and if the cpi increase is less than 0.25 % then rent will remain unchanged for such lease year.additionally , the company will complete the current landside development project that is in process and the rent under the master lease will be adjusted upon delivery to reflect a yield of 8.25 % on glpi 's project costs . the company will also have a right of first refusal with casino queen for other sale leaseback transactions up to $ 50 million over the next 2 years . finally , upon the closing of the transaction , which is anticipated to occur in mid 2021 , subject to regulatory approvals and customary closing conditions , glpi will forgive the casino queen loan which has been previously written off in return for a one-time cash payment of $ 4 million . hollywood casino perryville on december 11 , 2020 , penn agreed to purchase from the company the operations of our hollywood casino perryville , located in perryville , maryland , for $ 31.1 million , with the closing of such purchase , subject to regulatory approvals , expected to occur during calendar year 2021 on a date selected by penn with reasonable prior notice to the company unless otherwise agreed by both parties . upon closing , the company will lease the real estate assets of the perryville facility to penn pursuant to a lease providing for initial annual rent of $ 7.77 million , $ 5.83 million of which will be subject to escalation provisions beginning in the second lease year through the fourth lease year and shall increase by 1.50 % and then to 1.25 % for the remaining lease term .
| the largest driver of the decrease resulted from the temporary closures of the properties during 2020 due to covid-19 . the trs properties were closed in mid-march 2020. hollywood casino baton rouge reopened to the public on may 18 , 2020 and hollywood casino perryville reopened on june 19 , 2020 with various restrictions to limit capacity in accordance with regulatory requirements . total operating expenses decreased by $ 92.2 million for the year ended december 31 , 2020 , as compared to the prior year , primarily driven by a non-cash gain on the disposition of property related to the evansville swap transaction of $ 41.4 million , the $ 13 million loan impairment charge recorded on the casino queen loan in 2019 , lower land rights and ground lease expense due primarily to the acceleration of amortization of expense related to the ground lease for the closure of the resorts casino tunica property and lower ground rents due to the casino closures from covid-19 and decreased expenses at both trs properties during 2020 due to the temporary closures from covid-19 . finally , depreciation expense declined due primarily to the acceleration of $ 10.3 million related to the closure of the resorts casino tunica property in 2019. other expenses , net decreased by $ 22.1 million for the year ended december 31 , 2020 , as compared to the prior year , primarily due to lower interest expense resulting from the refinancing of long term debt . net income increased by $ 114.8 million for the year ended december 31 , 2020 , as compared to the prior year , primarily due to the variances explained above . segment developments the following are recent developments that have had or are expected to have an impact on us by segment : glp capital due to temporary casino closures that occurred during 2020 as a result of covid-19 , for our leases that contain variable rent which is reset on varying schedules depending on the lease , we
| 13,543 |
total revenue per capita , defined as total revenue divided by total attendance , consists of admission per capita and in-park per capita spending : admission per capita . we calculate admission per capita as total admissions revenue divided by total attendance . admission per capita is primarily driven by ticket pricing , the admissions product mix and the park attendance mix , among other factors . the admissions product mix , also referred to as the attendance or visitation mix , is defined as the mix of attendance by ticket category such as single day , multi-day , annual/season passes or complimentary tickets and can be impacted by the mix of guests as domestic and international guests generally purchase higher admission per capita ticket products than our local guests . a higher mix of complimentary tickets will generally lower our admissions per capita . the park attendance mix is defined as the mix of theme parks visited and can impact admission per capita based on the theme park 's respective pricing which , on average , is lower for our water parks compared to our other theme parks . in-park per capita spending . we calculate in-park per capita spending as total food , merchandise and other revenue divided by total attendance . food , merchandise and other revenue primarily consists of culinary , merchandise , parking and other in-park products and also includes other miscellaneous revenue , including online transaction fees , not necessarily generated in our parks , which is not significant in the periods presented . in-park per capita spending is primarily driven by pricing changes , new product offerings , the mix of guests ( such as local , domestic or international guests ) , penetration levels ( percentage of guests purchasing ) and the mix of in-park spending , among other factors . see further discussion in the “ results of operations ” section which follows . for other factors affecting our revenues , see the “ risk factors ” section of this annual report on form 10-k. attendance the level of attendance in our theme parks is generally a function of many factors , including affordability , the opening of new attractions and shows , competitive offerings , weather , marketing and sales efforts , awareness and type of ticket and park offerings , travel patterns of both our domestic and international guests , fluctuations in foreign exchange rates and global and regional economic conditions , consumer confidence , the external perceptions of our brands and reputation , industry best practices and perceptions as to 44 safety . t he external perceptions of our brands and reputation have at times impacted relationships with some of our business partners , including certain ticket resellers that have terminated relationships with us and other zoological-themed attractions . as a result of the covid-19 pandemic , we believe the level of attendance in our theme parks , including the mix of attendance from certain markets , has been and will continue to be impacted by public concerns over the covid-19 pandemic , the number of reported local cases of covid-19 , domestic and international travel restrictions , federal , state and local regulations related to public places , limits on social gatherings and overall public safety sentiment . we continuously monitor factors impacting our attendance , making strategic marketing and sales adjustments as necessary . see further discussion in the “ seasonality ” section which follows . costs and expenses historically , the principal costs of our operations are employee wages and benefits , driven partly by staffing levels , advertising , maintenance , animal care , utilities and insurance . factors that affect our costs and expenses include fixed operating costs , competitive wage pressures including minimum wage legislation , commodity prices , costs for construction , repairs and maintenance , other inflationary pressures and attendance levels , among other factors . the mix of products sold compared to the prior year period can also impact our costs as generally retail products have a higher cost of sales component than our culinary or other in-park offerings . we continue our focus on reducing costs , improving operating margins and streamlining our labor structure to better align with our strategic business objectives . since the start of the covid-19 pandemic , we have spent significant time reviewing our operations and have identified meaningful cost savings opportunities which we believe will further strengthen our business once we return to normalized operations . during the year ended december 31 , 2020 , in connection with two previously disclosed legal settlements , we received proceeds of $ 16.9 million which is included as a reduction to selling , general and administrative expenses in the accompanying consolidated statements of comprehensive ( loss ) income included elsewhere in this annual report on form 10-k. during the year ended december 31 , 2019 , we recorded $ 32.1 million related to a legal settlement charge , net of insurance recoveries , which is included in selling , general and administrative expenses in the accompanying consolidated statements of comprehensive ( loss ) income included elsewhere in this annual report on form 10-k. see note 15–commitments and contingencies to our consolidated financial statements included elsewhere in this annual report on form 10-k for further details . during the year ended december 31 , 2020 , we committed to a plan of termination ( the “ 2020 restructuring program ” ) , primarily impacting some of our furloughed employees . we recorded approximately $ 2.8 million of severance and other separation costs during the year ended december 31 , 2020 , primarily related to the 2020 restructuring program . story_separator_special_tag during the year ended december 31 , 2019 , we recorded approximately $ 4.2 million in pre-tax charges primarily consisting of severance and other termination benefits for positions eliminated in 2019 , which is included in severance and other separation costs in the accompanying consolidated statements of comprehensive ( loss ) income included elsewhere in this annual report on form 10-k. see note 21–severance and other separation costs to our consolidated financial statements included elsewhere in this annual report on form 10-k for further details . as a result of the park closures related to the covid-19 pandemic , costs and expenses for the year ended december 31 , 2020 , are not necessarily indicative of costs and expenses for any future period . due in part to the impact of fixed operating costs and certain other costs which are not dependent on attendance levels , operating expenses and selling , general and administrative expenses during the year ended december 31 , 2020 increased as a percent of revenue when compared to the prior year period . see the “ impact of global covid-19 pandemic ” section for further details . for other factors affecting our costs and expenses , see the “ risk factors ” section included elsewhere in this annual report on form 10-k. we make annual investments to support and improve our existing theme park facilities and attractions . maintaining and improving our theme parks , as well as opening new attractions , is critical to remain competitive , grow revenue , and increase our guests ' length of stay . for further discussion of our new and planned attractions , see “ capital improvements ” in the “ business ” section included elsewhere in this annual report on form 10-k. seasonality the theme park industry is seasonal in nature . historically , we generate the highest revenues in the second and third quarters of each year , in part because seven of our theme parks are typically only open for a portion of the year . approximately two-thirds of our attendance and revenues are typically generated in the second and third quarters of the year and we generally incur a net loss in the first and fourth quarters . the percent mix of revenues by quarter is relatively constant each year , but revenues can shift between the first and second quarters due to the timing of easter and spring break holidays and between the first and fourth quarters due to the timing of holiday breaks around christmas and new year . even for our five theme parks which have historically been open year-round , attendance patterns have significant seasonality , driven by holidays , school vacations and weather conditions . changes in school calendars that impact traditional school vacation breaks could also impact attendance patterns . due in part to the temporary park closures , capacity limitations and modified/limited operations , the covid-19 pandemic has impacted the seasonality of our business for 2020 and it is difficult to estimate how the covid-19 pandemic will impact seasonality in the future . furthermore , any 45 changes to the operating schedule of a park such as increasing operating days for our seasonal parks , could change the impact of seasonality in the future . see “ risk factors ” section included elsewhere in this annual report on form 10-k for further discussion of the adverse impacts of the covid-19 pandemic on our business and financial performance . story_separator_special_tag and other termination costs in 2020 primarily relates to the 2020 restructuring program . severance and other termination costs in 2019 primarily relate to positions which were eliminated in 2019. see note 21–severance and other separation costs in our notes to the consolidated financial statements included elsewhere in this annual report on form 10-k. depreciation and amortization . depreciation and amortization expense for the year ended december 31 , 2020 decreased by $ 10.0 million , or 6.2 % to $ 150.5 million as compared to $ 160.6 million for the year ended december 31 , 2019. the decrease primarily relates to a decline in new asset additions in 2020 along with the impact of asset retirements and fully depreciated assets . interest expense . interest expense for the year ended december 31 , 2020 increased $ 16.7 million , or 19.9 % to $ 100.9 million as compared to $ 84.2 million for the year ended december 31 , 2019. the increase primarily relates to approximately $ 32.7 million of additional interest related to the senior secured notes issued in april 2020 and the second-priority senior secured notes issued in august 2020 , a higher average outstanding balance on our revolving credit facility during the period and the impact of interest rate swap agreements , which expired in may 2020 , partially offset by the impact of decreased libor rates . see note 11 –long-term debt to our consolidated financial statements included elsewhere in this annual report on form 10-k and the “ our indebtedness ” section which follows for further details . ( benefit from ) provision for income taxes . benefit from income taxes for the year ended december 31 , 2020 was $ 30.5 million compared to a provision for income taxes of $ 39.5 million in the year ended december 31 , 2019. our consolidated effective tax rate was 8.9 % for 2020 compared to 30.6 % for 2019. the effective tax rate decreased primarily due to a non-cash valuation allowance adjustment on federal and state net operating loss carryforwards , a valuation allowance adjustment on federal tax credits and charitable contributions , changes in state tax rates , and other permanent items including equity-based compensation . see note 14–income taxes in our notes to the consolidated financial statements included elsewhere in this annual report on form 10-k for further details . 47 liquidity and capital resources overview generally , our principal sources of liquidity are cash generated from operations , funds from borrowings and existing cash on hand .
| food , merchandise and other revenue for the year ended december 31 , 2020 decreased $ 419.0 million , or 70.4 % to $ 176.4 million as compared to $ 595.4 million for the year ended december 31 , 2019 . the decrease largely results from the decline in attendance discussed above , partially offset by an increase in in-park per capita spending . in-park per capita spending increased by 5.2 % , to $ 27.68 in 2020 from $ 26.32 in 2019 . in-park per capita spending improved primarily due to higher realized prices and fees , enhanced and expanded product offerings , the mix of certain merchandise and food and beverage items , and increased guest spending , partially offset by the impact of attendance mix , including higher pass mix when compared to the prior year period . costs of food , merchandise and other revenues . costs of food , merchandise and other revenues for the year ended december 31 , 2020 decreased $ 72.2 million , or 66.3 % , to $ 36.7 million as compared to $ 109.0 million for the year ended december 31 , 2019. the decrease primarily relates to the decline in attendance and related park closures and limited reopenings . these costs represent 20.8 % and 18.3 % of related revenue for the years ended december 31 , 2020 and 2019 , respectively . the increase as a percent of related revenue partly relates to a higher mix of retail products sold , which generally have a higher cost of sales component than our culinary or other in park products . operating expenses . operating expenses for the year ended december 31 , 2020 decreased by $ 261.2 million , or 40.2 % to $ 388.5 million as compared to $ 649.7 million for the year ended december 31 , 2019. the decrease largely results from a reduction in labor-related costs due primarily to the covid-19 temporary park closures and limited reopenings and a
| 13,544 |
during the year ended december 31 , 2020 , we sold , at a volume-weighted average price of $ 4.62 , an aggregate of 9.4 million shares of common stock and received $ 40.7 million after deducting commissions related to the jefferies sales agreement and other offering costs . as of december 31 , 2020 , we had sold the maximum allowable amount and no further sales may be made under the jefferies sales agreement . in march 2019 , we entered into the hercules credit facility , which provided for a term loan of up to $ 60.0 million , $ 25.0 million of which may become available for draw-down in the future , subject to the satisfaction of certain conditions contained therein . the loan agreement contains customary affirmative and negative covenants and events of default . affirmative covenants include , among others , covenants requiring us to maintain our legal existence and governmental approvals , deliver certain financial reports , and maintain insurance coverage . negative covenants include , among others : restrictions on transferring any part of our business or intellectual property ; incurring additional indebtedness ; engaging in mergers or acquisitions ; paying dividends or making other distributions ; making investments ; and creating other liens on our assets , in each case subject to customary exceptions . the hercules credit facility is described in note 9 to the notes to the consolidated financial statements contained in this annual report on form 10-k. as of december 31 , 2020 , $ 15.0 million was outstanding under the hercules credit facility , and no additional amounts were available for borrowing . in january 2021 , we sold 7.9 million shares of our common stock in an underwritten public offering at $ 9.50 per share , for an aggregate gross cash purchase price of $ 74.7 million or proceeds of $ 70.0 million after underwriters ' discount and expenses . we will need to raise additional capital in the form of debt or equity or through partnerships to fund additional development of our product candidates and , subject to regulatory approval , if any , the commercialization of our product candidates , and we may in-license , acquire , or invest in complementary businesses or products . in addition , as capital resources permit , we may augment or otherwise modify the clinical development plans described herein . however , any disruption in the capital markets caused by the covid-19 outbreak could make any financing more challenging , and there can be no assurance that we will be able to raise capital on commercially reasonable terms or at all . our agreement with madrigal we are developing adx-1612 pursuant to a license agreement with madrigal pharmaceuticals , inc. ( “ madrigal ” ) , entered into on december 26 , 2016 ( the “ madrigal agreement ” ) . pursuant to the madrigal agreement , we obtained an exclusive , worldwide license from madrigal under certain patents and patent applications , and other licenses to intellectual property , to develop and commercialize hsp90 inhibitors , including adx-1612 ( investigated in oncology under the name ganetespib ) ( “ madrigal agreement products ” ) . we have agreed to use our commercially reasonable efforts to develop madrigal agreement products . in consideration for the rights licensed under the madrigal agreement , we paid madrigal an upfront license fee of $ 250,000 and are obligated to make future regulatory and development and sales-dependent milestone payments to madrigal of less than $ 340 million in the aggregate ( over 80 % of such amount being tied to our achievement of increasingly greater annual worldwide net sales milestones ) , as well as royalty payments to madrigal at a rate which , as a percentage of net sales , is in the high single digits for products containing adx-1612 and mid-single digits for any other hsp90 inhibitor product . we are also obligated under the madrigal agreement to pay madrigal a percentage of certain sublicense revenue that we receive in connection with entering into any sublicensing arrangements with any third parties , at a percentage rate which tiers downward from the mid-twenties to low-single digits based on the development stage of the product at the time of the sublicense . the madrigal agreement will remain in effect until all payment obligations under the madrigal agreement expire . we may terminate the madrigal agreement in its entirety or on a madrigal agreement product-by madrigal agreement product basis with timely notice to madrigal . either party may terminate the madrigal agreement for uncured material breach by the other party or upon certain insolvency or bankruptcy proceedings involving the other party , both with timely notice to the other party . in addition , madrigal has the right to terminate the madrigal agreement if we , our affiliates , or sublicensees interferes with , challenges the validity or enforceability of , opposes 78 the extension of , or grant of a supplementary protection certificate with respect to any of our licensed patents under the madrigal agreement . in the event of an early termination of the madrigal agreement , all rights licensed and developed by us under the madrigal agreement may revert back to madrigal . each party has agreed to indemnify the other party for certain third party claims arising under the madrigal agreement . our agreement with meei we are developing adx-2191 pursuant to an exclusive license agreement with massachusetts eye and ear infirmary ( “ meei ” ) originally entered into in july 2016 between meei and helio vision , inc. ( as amended , the “ meei agreement ” ) . we assumed the meei agreement in connection with our 2019 acquisition of helio vision . pursuant and subject to the meei agreement , we obtained an exclusive , worldwide license from meei to develop and commercialize adx-2191 under certain patents and patent applications , and other licenses to intellectual property ( the “ meei patent rights ” ) . story_separator_special_tag we have agreed to use our commercially reasonable efforts to develop adx-2191 and to meet certain specified effort and achievement benchmarks by certain dates . in consideration for the rights licensed under the meei agreement , helio vision issued meei a number of shares of its preferred stock and helio vision agreed to pay non-creditable non-refundable license maintenance fees to meei of $ 15,000 on each of the second and third anniversary of the meei agreement , $ 25,000 on each of the fourth and fifth anniversary of the meei agreement and $ 35,000 on the sixth and each subsequent anniversary of the meei agreement during the term of such agreement . in addition , helio vision was obligated to make future sales-dependent milestone payments to meei of up to the low seven figures in the aggregate , as well as royalty payments to meei at a rate which , as a percentage of net sales , is in the low single digits for products that incorporate or use the meei patent rights in the united states and as a percentage in the low single digits for products that incorporate or use the meei patent rights outside the united states . we are also obligated under the meei agreement to pay meei a percentage of certain sublicense revenue that we receive in connection with entering into any sublicensing arrangements with any third parties , at a percentage rate which tiers downward from low-double digits to mid-single digits based on the date of the sublicense . following our acquisition of helio vision , we became obligated to make any future payments owed under the meei agreement . there is no additional equity consideration issuable under the meei agreement . the meei agreement will remain in effect until the expiration date of the last to expire patent licensed under the meei agreement . we may terminate the meei agreement with timely written notice to meei . meei has the right to terminate the meei agreement if we , subject to certain specified cure periods , cease all business operations with respect to licensed products , fail to pay amounts due under the meei agreement , fail to comply with certain due diligence obligations , default in our obligation to maintain insurance , one of our officers is convicted of a felony relating to the manufacture , use , sale or importation of licensed products , we materially breach any provisions of the meei agreement or in the event of our insolvency or bankruptcy . in the event of an early termination of the meei agreement , all rights licensed and developed by us under the meei agreement may revert back to meei . we have agreed to indemnify meei for certain claims that may arise under the meei agreement . our acquisition of helio vision , inc. on january 28 , 2019 , we acquired helio vision , inc. , a delaware corporation ( “ helio ” ) . as a result of the acquisition , we issued an aggregate of 1,160,444 shares of common stock to the former securityholders and an advisor of helio . we , subject to the conditions of the acquisition agreement , will be obligated to make additional payments to the former securityholders of helio as follows : ( a ) $ 2.5 million of common stock on the date that is 24 months following the closing date ; ( b ) $ 10.0 million of common stock following approval by the fda of a new drug approval application for the prevention and or treatment of proliferative vitreoretinopathy or a substantially similar label ( “ pvr ” ) prior to the 10th anniversary of the closing date ; and ( c ) $ 2.5 million of common stock following fda approval of a new drug application for an indication ( other than pvr ) prior to the 12th anniversary of the closing date , provided that in no event shall we be obligated to issue more than 5,248,885 shares of common stock . additionally , in the event of certain change of control or divestitures by us , certain former convertible noteholders of helio will be entitled to a tax gross-up payment in an amount not to exceed $ 1.0 million . 79 the founders were issued 568,627 shares and non-founders were issued 591,817 shares . on january 28 , 2021 , a contingent milestone was achieved and 246,562 shares of our common stock were issued to the former helio securityholders during the first quarter of 2021. research and development expenses we expense all of our research and development expenses as they are incurred . research and development costs that are paid in advance of performance are capitalized as a prepaid expense until incurred . research and development expenses primarily include : non-clinical development , preclinical research , and clinical trial and regulatory-related costs ; expenses incurred under agreements with sites and consultants that conduct our clinical trials ; and employee-related expenses , including salaries , benefits , travel , and stock-based compensation expense . substantially all of our research and development expenses to date have been incurred in connection with reproxalap . we expect our research and development expenses to increase for the foreseeable future as we advance reproxalap and other compounds through preclinical and clinical development . the process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming . we are unable to estimate with any certainty the costs we will incur in the continued development of reproxalap and our other product candidates . clinical development timelines , the probability of success , and development costs can differ materially from expectations . we may never succeed in achieving marketing approval for our product candidates .
| general and administrative expenses were $ 10.0 million for the year ended december 31 , 2020 , compared to $ 12.2 million for the year ended december 31 , 2019. the decrease of approximately $ 2.2 million is primarily related to decreases in personnel costs , legal costs , public company costs related to continuing compliance with the sarbanes oxley act of 2002 , and miscellaneous administrative costs . acquired in-process research and development expenses . acquired in-process research and development expenses were $ 1.8 million for the year ended december 31 , 2020 , compared to $ 6.6 million for the year ended december 31 , 2019. the $ 6.6 million recorded during the year ended december 31 , 2019 of in-process research and development expenses was associated with the january 2019 acquisition of helio . we determined that the assets acquired from helio did not constitute a business since substantially all of the assets acquired were related to adx-2191 , and that the transaction would be accounted for as an asset acquisition . as the asset and development program acquired from helio are at an early stage of development and determining the future economic benefit of the acquired assets at the date of acquisition and december 31,2020 is highly uncertain , the cost to acquire the assets was fully expensed as in-process research and development . during the year ended december 31 , 2020 , a contingent milestone related to helio was determined to be probable and estimable , and we recorded $ 1.8 million of acquired in-process research and development expense related to a portion of the non-cash compensation costs related to the contingent milestone which was settled in the first quarter of 2021. other income ( expense ) . total other income ( expense ) was approximately $ ( 1.6 ) million for the year ended december 31 , 2020 , compared to $ 0.9 million for the year ended december 31 , 2019. the change was primarily due to an increase in the interest expense related to the hercules credit facility and lower interest income during the year ended december 31 , 2020. liquidity and capital resources we have funded our operations primarily from the sale
| 13,545 |
additional cemetery revenue from preneed finance charges and trust earnings has increased from $ 5.9 million in 2011 to $ 10.0 million in 2015 . changes in the capital markets and interest rates affect this component of our cemetery revenues . our goal is to build broader and deeper teams of sales leaders and counselors in our larger and more strategically located cemeteries in order to focus on growth of our preneed property sales . additionally , a portion of our capital expenditures is designed to continually expand our cemetery product offerings . financial revenue we market funeral and cemetery services and products on a preneed basis . preneed funeral or cemetery contracts enable families to establish , in advance , the type of service to be performed , the products to be used and the cost of such products and services . preneed contracts permit families to eliminate issues of making deathcare plans at the time of need and allow input from other family members before the death occurs . we guarantee the price and performance of the preneed contracts to the customer . preneed funeral contracts are usually paid on an installment basis at the local , business level . the performance of preneed funeral contracts is usually secured by placing the funds collected in trust for the benefit of the customer or by the purchase of a life insurance policy , the proceeds of which will pay for such services at the time of need . these methods are intended to fund preneed funeral contracts , cover the original contract price and generally include an element of growth ( earnings ) designed to offset future inflationary cost increases . revenue from preneed funeral contracts , along with accumulated earnings , is not recognized until the time the funeral service is performed . the accumulated earnings from the trust investments and insurance policies are intended to offset the inflation in funeral prices . additionally , we generally earn a commission from the insurance company from the sale of insurance-funded policies reflected as preneed funeral commission income within revenues from funeral operations . the commission income is recognized as revenue when the period of refund expires ( generally one year ) , which helps us defray the costs we incur to originate the preneed contract ( primarily commissions we pay to our sales counselors ) . preneed sales of cemetery interment rights are usually financed through interest-bearing installment sales contracts , generally with terms of up to five years with such earnings reflected as preneed cemetery finance charges within revenues from cemetery operations . in substantially all cases , we receive an initial down payment at the time the contract is signed . in most states , regulations require a portion ( generally 10 % ) of the sale amount of cemetery property and memorials to be placed in a perpetual care trust . we have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws . such trusts include ( i ) preneed funeral trusts ; ( ii ) preneed cemetery merchandise and service trusts ; and ( iii ) perpetual care trusts . these trusts are typically administered by independent financial institutions selected by us . investment management and advisory services are provided either by our wholly-owned registered investment advisor ( csv ria ) or independent financial advisors . at december 31 , 2015 , csv ria provided these services to two institutions , which have custody of 79 % of our trust assets , for a fee based on the market value of trust assets . under state trust laws , we are allowed to charge the trust a fee for advising on the investment of the trust assets and these fees are recognized as income as the advisory services are provided . the investment advisors establish an investment policy that gives guidance on asset allocation , investment requirements , investment manager selection and performance monitoring . the investment objectives are tailored to generate long-term investment returns without assuming undue risk , while ensuring the management of assets is in compliance with applicable laws . preneed funeral trust fund income earned , along with the receipt and recognition of any insurance benefits , are deferred until the service is performed . applicable state laws generally require us to deposit a specified amount ( which varies from state to state , generally 50 % to 100 % of the selling price ) into a merchandise and service trust fund for preneed cemetery merchandise and service sales . the related trust fund income earned is recognized when the related merchandise and services are delivered . in most states , regulations require a portion ( generally 10 % ) of the sale amount of cemetery property to be placed in a perpetual care trust . the income from perpetual care trusts provides a portion of the funds necessary to maintain cemetery property and memorials in perpetuity . perpetual care trust fund income is recognized , as earned , in our cemetery revenues . income recognized from the investments in the preneed funeral trust funds , the cemetery merchandise and services trust funds and the perpetual care trust funds increased $ 0.8 million , or 5.4 % for the year ended december 31 , 2015 , as compared to 2014 as a result of higher income from fixed income securities and from capital gains recognized in the portfolios . for the five year period ended december 31 , 2015 , the performance of the funds , which includes realized income and unrealized appreciation , resulted in a 37.2 % return . investment income realized in the perpetual care trust funds ( except for capital gains ) is recognized as income when earned in the portfolio . investment income realized in the preneed funeral trust funds and the cemetery merchandise and services trust funds is allocated to the individual preneed contracts and deferred from revenue until the time that the services and merchandise are delivered to the customer . story_separator_special_tag 25 acquisitions during 2015 , we acquired two funeral home businesses , one in clarksville , tennessee and one in wake forest , north carolina , for the aggregate purchase price of approximately $ 15.0 million . the purchase price for both businesses consisted of approximately ( i ) $ 9.7 million paid in cash at closing , ( ii ) $ 4.5 million , the net present value of future deferred payments totaling $ 5.5 million and ( iii ) $ 0.8 million , the net present value of contingent consideration totaling $ 1.0 million . in 2014 , we acquired six businesses from sci which included four businesses in new orleans , louisiana , consisting of four funeral homes , one of which was a combination funeral home and cemetery , and two funeral businesses in alexandria , virginia for approximately $ 54.9 million . additionally , we acquired real estate for approximately $ 3.0 million to be used for funeral home expansion projects . overview of critical accounting policies and estimates the preparation of the consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . on an on-going basis , we evaluate estimates and judgments , including those related to revenue recognition , realization of accounts receivable , inventories , goodwill , other intangible assets , property and equipment and deferred tax assets and liabilities . we base our estimates on historical experience , third party data and assumptions that we believe to be reasonable under the circumstances . the results of these considerations form the basis for making judgments about the amount and timing of revenues and expenses , the carrying value of assets and the recorded amounts of liabilities . actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change . historical performance should not be viewed as indicative of future performance because there can be no assurance the margins , operating income and net earnings , as a percentage of revenues , will be consistent from year to year . management 's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements presented herewith , which have been prepared in accordance with united states generally accepted accounting principles ( “ gaap ” ) . our significant accounting policies are more fully described in part ii , item 8 , financial statements and supplementary data , note 1. we believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements . funeral and cemetery operations we record the sales of funeral and cemetery merchandise and services when the merchandise is delivered or service is performed . sales of cemetery interment rights are recorded as revenue in accordance with the retail land sales accounting principles . this method generally provides for the recognition of revenue in the period in which the customer 's cumulative payments exceed 10 % of the contract price related to the real estate . costs related to the sales of interment rights , which include property and other costs related to cemetery development activities , are charged to operations using the specific identification method in the period in which the sale of the interment right is recognized as revenue . sales taxes collected are recognized on a net basis in our consolidated financial statements . allowances for bad debts and customer cancellations are provided at the date that the sale is recognized as revenue and are based on our historical experience and the current economic environment . we also monitor changes in delinquency rates and provide additional bad debt and cancellation reserves when warranted . when preneed funeral services and merchandise are funded through third-party insurance policies , we earn a commission on the sale of the policies . insurance commissions earned by us are recognized as revenue when the commission is no longer subject to refund , which is usually one year after the policy is issued . preneed selling costs consist of sales commissions that we pay our sales counselors and other direct related costs of originating preneed sales contracts . these costs are expensed as incurred . business combinations tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized for any difference between the price of the acquisition and fair value . we recognize the assets acquired , the liabilities assumed and any non-controlling interest in the acquiree at the acquisition date , measured at the fair value as of that date . acquisition related costs are recognized separately from the acquisition and are expensed as incurred . we customarily estimate related transaction costs known at closing . to the extent that information not available to us at the closing date subsequently becomes available during the allocation period , we may adjust goodwill , intangible assets , assets or liabilities associated with the acquisition . see part ii , item 8 , financial statements and supplementary data , note 3 for additional information . 26 goodwill the excess of the purchase price over the fair value of identifiable net assets of funeral home businesses acquired is recorded as goodwill . goodwill has primarily been recorded in connection with the acquisition of funeral home businesses . goodwill is tested annually for impairment by assessing the fair value of each of our reporting units . the funeral segment reporting units consist of our east , central and west regions in the united states , and we performed our annual impairment test of goodwill using information as of august 31 , 2015. under current guidance , we are permitted to first assess qualitative factors to determine whether it is more-likely-than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test .
| percentage of funeral same store operating revenue , remained relatively flat at 37.5 % in 2014 and 37.4 % in 2013. the decline in operating profit was directly a result of lower revenue , offset by modest management of expenses . funeral home acquired revenues for the year ended december 31 , 2014 increased $ 11.3 million , or 33.5 % , when compared to the year ended december 31 , 2013 , as we experienced a 26.9 % increase in the number of contracts due to our 2014 acquisition and an increase in the average revenue per contract of 5.9 % , to $ 5,344. excluding funeral trust earnings , the average revenue per contract increased 5.2 % to $ 5,207. the number of traditional burial contracts increased 31.5 % , and the average revenue per burial contract increased 5.1 % to $ 8,254. the cremation rate for the acquired businesses was 47.1 % for 2014 compared to 49.2 % in 2013. the average revenue per cremation contract increased 5.6 % to $ 3,279 and the number of cremation contracts increased 21.3 % to 4,060. the increase in the average revenue per contract for acquired operations and the decline in the cremation rate is 40 because the acquired businesses serve primarily traditional burial families . cremations with services remained relatively consistent at 34.6 % and 34.4 % for 2013 and 2014 , respectively . acquired operating profit for the year ended december 31 , 2014 increased $ 5.2 million , or 49.9 % , from the year ended december 31 , 2013 and , as a percentage of revenue from acquired businesses , was 35.0 % for 2014 compared to 31.2 % for 2013. salaries and benefits of acquired operations are generally higher as a percentage of revenue than existing locations . as these acquired businesses transition into our standards operating model , we expect to see operating profit margins rise toward those on a same store basis . the two categories of financial revenue ( insurance
| 13,546 |
non-operating expenses/income and provision for income taxes non-operating expenses/income and provisions for income taxes were as follows ( dollar amounts in millions ) : replace_table_token_17_th interest expense , net the decrease in interest expense , net in 2013 was due primarily to the decrease in non-cash interest resulting from the settlement of our 0.375 % 2013 convertible notes in february 2013 offset partially by increases resulting from the higher average balance of other outstanding debt and financing fees paid in association with the acquisition of onyx . the increase in interest expense , net in 2012 was due primarily to a higher average debt balance . interest and other income , net the decrease in interest and other income , net for 2013 was due primarily to lower net gains on sales of investments recognized in the current year . the increase in interest and other income , net for 2012 was due primarily to higher interest income due to a higher average balance of cash , cash equivalents and marketable securities offset partially by lower yields and lower net gains realized on investments . income taxes the decrease in our effective rate for 2013 was due primarily to three significant events occurring in 2013 : ( i ) the acquisition of onyx , which resulted in a tax benefit of $ 182 million ; ( ii ) the $ 187 million settlement of our examination with the internal revenue service ( irs ) for the years ended december 31 , 2007 , 2008 and 2009 in which we agreed to certain adjustments proposed by the irs and remeasured our unrecognized tax benefits ( utbs ) accordingly ; and ( iii ) the reinstatement of the federal r & d tax credit for 2012 and 2013. because the american taxpayer relief act of 2012 was not enacted until 2013 , certain provisions of the act benefiting the company 's 2012 federal taxes , including the retroactive extension of the r & d tax credit for 2012 , were not 46 recognized in the company 's 2012 financial results and instead are reflected in the company 's 2013 financial results . the tax benefit of the retroactive extension of the 2012 r & d tax credit that was recognized in 2013 was $ 70 million . additionally , our rate was further reduced by the indefinitely reinvested earnings of our foreign operations . the increase in our effective tax rate for 2012 was due primarily to the unfavorable tax impact of changes in the jurisdictional mix of income and expenses and the exclusion of the federal r & d tax credit in 2012 , offset partially by the favorable resolution of certain state tax matters related to prior years . the effective tax rates for 2013 , 2012 and 2011 would have been approximately 9.2 % , 18.7 % , and 18.0 % , respectively , without the impact of the tax credits associated with the puerto rico excise tax . as permitted under u.s. gaap , we do not provide for u.s. income taxes on undistributed earnings of our foreign operations that are intended to be invested indefinitely outside the united states . see summary of critical accounting policies — income taxes and note 4 , income taxes , to the consolidated financial statements for further discussion . financial condition , liquidity and capital resources selected financial data was as follows as of december 31 , 2013 and 2012 ( in millions ) : replace_table_token_18_th the company intends to continue to return capital to stockholders through the payment of cash dividends , reflecting our confidence in the future cash flows of our business . whether and when we declare dividends and the size of any dividend could be affected by a number of additional factors . ( see item 1a . risk factors — there can be no assurance that we will continue to declare cash dividends ) . in april 2011 , the board of directors approved a dividend policy related to our common stock and subsequently declared quarterly cash dividends of $ 0.28 per share of common stock during the second half of 2011. subsequently , the board of directors declared a 29 % increase in our quarterly cash dividends to $ 0.36 per share of common stock in 2012 , and a 31 % increase in our quarterly cash dividends to $ 0.47 per share of common stock in 2013. in december 2013 , the board of directors declared a 30 % increase in our quarterly cash dividend to $ 0.61 per share of common stock , payable in march 2014. the company has also returned capital to stockholders through its stock repurchase program . during 2011 , 2012 and 2013 , we spent $ 8.3 billion , $ 4.6 billion and $ 832 million , respectively , to repurchase shares of our common stock . as of december 31 , 2013 , $ 1.6 billion remains available under the board of directors-approved stock repurchase program ; however , we do not expect to make significant repurchases of our common stock during 2014 and 2015. in connection with the acquisition of onyx in october 2013 , we entered into a repurchase agreement and a term loan credit facility . see note 2 , business combinations to the consolidated financial statements . pursuant to the repurchase agreement , we sold 34,097 class a preferred shares of one of our wholly-owned subsidiaries , atl holdings limited , on september 30 , 2013. we are obligated to repurchase the class a preferred shares from the counterparties on or before september 28 , 2018 , for the aggregate sale price of $ 3.1 billion . under the repurchase agreement , which is accounted for as long-term debt , we are obligated to make payments to the counterparties based on the sale price of the outstanding preferred shares at a floating interest rate of london interbank offered rates ( libor ) plus story_separator_special_tag non-operating expenses/income and provision for income taxes non-operating expenses/income and provisions for income taxes were as follows ( dollar amounts in millions ) : replace_table_token_17_th interest expense , net the decrease in interest expense , net in 2013 was due primarily to the decrease in non-cash interest resulting from the settlement of our 0.375 % 2013 convertible notes in february 2013 offset partially by increases resulting from the higher average balance of other outstanding debt and financing fees paid in association with the acquisition of onyx . the increase in interest expense , net in 2012 was due primarily to a higher average debt balance . interest and other income , net the decrease in interest and other income , net for 2013 was due primarily to lower net gains on sales of investments recognized in the current year . the increase in interest and other income , net for 2012 was due primarily to higher interest income due to a higher average balance of cash , cash equivalents and marketable securities offset partially by lower yields and lower net gains realized on investments . income taxes the decrease in our effective rate for 2013 was due primarily to three significant events occurring in 2013 : ( i ) the acquisition of onyx , which resulted in a tax benefit of $ 182 million ; ( ii ) the $ 187 million settlement of our examination with the internal revenue service ( irs ) for the years ended december 31 , 2007 , 2008 and 2009 in which we agreed to certain adjustments proposed by the irs and remeasured our unrecognized tax benefits ( utbs ) accordingly ; and ( iii ) the reinstatement of the federal r & d tax credit for 2012 and 2013. because the american taxpayer relief act of 2012 was not enacted until 2013 , certain provisions of the act benefiting the company 's 2012 federal taxes , including the retroactive extension of the r & d tax credit for 2012 , were not 46 recognized in the company 's 2012 financial results and instead are reflected in the company 's 2013 financial results . the tax benefit of the retroactive extension of the 2012 r & d tax credit that was recognized in 2013 was $ 70 million . additionally , our rate was further reduced by the indefinitely reinvested earnings of our foreign operations . the increase in our effective tax rate for 2012 was due primarily to the unfavorable tax impact of changes in the jurisdictional mix of income and expenses and the exclusion of the federal r & d tax credit in 2012 , offset partially by the favorable resolution of certain state tax matters related to prior years . the effective tax rates for 2013 , 2012 and 2011 would have been approximately 9.2 % , 18.7 % , and 18.0 % , respectively , without the impact of the tax credits associated with the puerto rico excise tax . as permitted under u.s. gaap , we do not provide for u.s. income taxes on undistributed earnings of our foreign operations that are intended to be invested indefinitely outside the united states . see summary of critical accounting policies — income taxes and note 4 , income taxes , to the consolidated financial statements for further discussion . financial condition , liquidity and capital resources selected financial data was as follows as of december 31 , 2013 and 2012 ( in millions ) : replace_table_token_18_th the company intends to continue to return capital to stockholders through the payment of cash dividends , reflecting our confidence in the future cash flows of our business . whether and when we declare dividends and the size of any dividend could be affected by a number of additional factors . ( see item 1a . risk factors — there can be no assurance that we will continue to declare cash dividends ) . in april 2011 , the board of directors approved a dividend policy related to our common stock and subsequently declared quarterly cash dividends of $ 0.28 per share of common stock during the second half of 2011. subsequently , the board of directors declared a 29 % increase in our quarterly cash dividends to $ 0.36 per share of common stock in 2012 , and a 31 % increase in our quarterly cash dividends to $ 0.47 per share of common stock in 2013. in december 2013 , the board of directors declared a 30 % increase in our quarterly cash dividend to $ 0.61 per share of common stock , payable in march 2014. the company has also returned capital to stockholders through its stock repurchase program . during 2011 , 2012 and 2013 , we spent $ 8.3 billion , $ 4.6 billion and $ 832 million , respectively , to repurchase shares of our common stock . as of december 31 , 2013 , $ 1.6 billion remains available under the board of directors-approved stock repurchase program ; however , we do not expect to make significant repurchases of our common stock during 2014 and 2015. in connection with the acquisition of onyx in october 2013 , we entered into a repurchase agreement and a term loan credit facility . see note 2 , business combinations to the consolidated financial statements . pursuant to the repurchase agreement , we sold 34,097 class a preferred shares of one of our wholly-owned subsidiaries , atl holdings limited , on september 30 , 2013. we are obligated to repurchase the class a preferred shares from the counterparties on or before september 28 , 2018 , for the aggregate sale price of $ 3.1 billion . under the repurchase agreement , which is accounted for as long-term debt , we are obligated to make payments to the counterparties based on the sale price of the outstanding preferred shares at a floating interest rate of london interbank offered rates ( libor ) plus
| our material u.s. patents for filgrastim ( neupogen ® ) expired in december 2013. we now face competition in the united states , which may have a material adverse impact over time on future sales of neupogen ® and , to a lesser extent , neulasta ® . our outstanding material u.s. patent for pegfilgrastim ( neulasta ® ) expires in 2015. future neulasta ® /neupogen ® sales will also depend , in part , on the development of new protocols , tests and or treatments for cancer and or new chemotherapy treatments or alternatives to chemotherapy that may have reduced and may continue to reduce the use of chemotherapy in some patients . enbrel total enbrel sales by geographic region were as follows ( dollar amounts in millions ) : replace_table_token_9_th the increase in enbrel sales for 2013 was driven primarily by an increase in the average net sales price offset partially by slight unit declines . the increase in enbrel sales for 2012 was driven primarily by an increase in the average net sales price and , to a lesser extent , an increase in unit demand . enbrel also faces increased competition . see item 1. business — marketing , distribution and selected marketed products — competition . aranesp ® total aranesp ® sales by geographic region were as follows ( dollar amounts in millions ) : replace_table_token_10_th 42 the decreases in u.s. aranesp ® sales for both 2013 and 2012 were driven by declines in unit demand . the unit declines reflect changes in practice patterns resulting from changes to the label and to the reimbursement environment that occurred during 2011. the decrease in row aranesp ® sales for 2013 reflects unit declines and price pressure in europe . in 2012 , the row decline was driven by a decrease in the average net sales price . epogen ® total epogen ® sales were as follows ( dollar amounts in millions ) : replace_table_token_11_th epogen ® sales for 2013 increased by 1 % due to unit growth . the decrease in epogen ® sales for 2012 was driven by a 23 % decrease in unit demand , driven by reductions in dose utilization due
| 13,547 |
we may need additional financing to fund our operations in the future , including the continued development of our lead drug candidates . clinical development programs pracinostat in june 2013 , we initiated a randomized , double-blind , placebo-controlled phase ii clinical study of pracinostat in combination with azacitidine in intermediate-2 or high-risk patients with previously untreated mds . the study enrolled 102 evaluable patients , randomized one-to-one , at 19 sites in the u.s. in march 2015 , we announced top-line data from the study , which showed that the addition of pracinostat to azacitidine failed to improve the overall cr rate , the study 's primary endpoint , compared to azacitidine alone . there were no new toxicities observed in the study ; however fatigue , gastrointestinal toxicities and myelosuppression occurred more frequently in the combination group and resulted in a higher rate of drug discontinuations compared to azacitidine alone , predominantly within the first two cycles of treatment . exploratory analyses of patients able to tolerate pracinostat plus azacitidine for at least four cycles suggest superior activity of the combination compared to azacitidine alone , with hazard ratios for overall survival ( 0.59 ) and duration of response ( 0.48 ) both favoring the pracinostat plus azacitidine arm . these data were presented at the ash annual meeting in december 2015 . 21 in february 2014 , the fda granted orphan drug designation to pracinostat for the treatment of aml . the designation provides orphan status to drugs defined by the fda as those intended for the safe and effective treatment , diagnosis or prevention of rare diseases that affect fewer than 200,000 people in the u.s. orphan designation qualifies us for certain development incentives , including tax credits for qualified clinical testing , prescription drug user fee exemptions and seven-year marketing exclusivity upon fda approval . we also intend to seek orphan drug designation in the u.s. and europe for pracinostat in combination with azacitidine for the treatment of aml . in november 2014 , we completed enrollment in our open-label phase ii study of pracinostat in combination with azacitidine in elderly patients with newly diagnosed aml . the study enrolled a total of 50 patients at 15 clinical sites in the u.s. the median age in the study was 76 years . patients received 60 mg of pracinostat orally three times a week for three weeks followed by one week of rest and 75 mg/m2 of azacitidine via subcutaneous injection or intravenous infusion for the first seven days of each 28-day cycle . results from this study were presented at the ash annual meeting in december 2015. according to the oral presentation by principal investigator dr. guillermo garcia-manero , md anderson cancer center , 28 of the 50 patients in the study ( 56 % ) achieved the primary endpoint of cr plus cri plus morphologic leukemia-free state , including 21 patients ( 42 % ) who achieved a cr . notably , 19 of the 21 patients who achieved a cr were still alive with a 100 % one-year survival rate among all cr patients , indicating a correlation between cr and survival with this low-intensity therapy . the combination of pracinostat and azacitidine was generally well tolerated in the study , with no unexpected toxicities . the most common grade 3/4 treatment-emergent adverse events reported in > 10 % of all patients included febrile neutropenia , thrombocytopenia , anemia and fatigue . median overall survival for all 50 patients in the study has now been reached at 19.1 months . these data compare favorably to a recent international phase iii study of azacitidine ( aza-001 ; dombret h et al . blood . 2015 may 18 ) , which showed a median overall survival of 10.4 months with azacitidine alone and a cr rate of 19.5 % in a similar patient population . median survival among patients with high-risk cytogenetics in this study ( n=21 ) was 13.3 months , more than double the median survival of the high-risk population in the aza-001 study ( 6.4 months ) . in august 2016 , we announced that the fda granted breakthrough therapy designation for pracinostat in combination with azacitidine for the treatment of patients with newly diagnosed acute myeloid leukemia ( aml ) who are ³ 75 years of age or unfit for intensive chemotherapy . in addition , agreement has been reached with the fda on the proposed phase iii study design . according to the fda , breakthrough therapy designation is intended to expedite the development and review of drugs for serious or life-threatening conditions . the criteria for breakthrough therapy designation require preliminary clinical evidence that demonstrates the drug may have substantial improvement on at least one clinically significant endpoint over available therapy . a breakthrough therapy designation has all the benefits of the fast track program together with more intensive guidance on an efficient drug development program and an organizational commitment involving senior managers . in august 2016 , we entered into an exclusive license , development and commercialization agreement with helsinn , a swiss pharmaceutical corporation , for pracinostat in aml and other potential indications . under the terms of the agreement , helsinn is granted a worldwide exclusive license to develop , manufacture and commercialize pracinostat , and is responsible for funding its global development and commercialization . story_separator_special_tag as compensation for such grant of rights , we will receive near-term payments of $ 20 million , including a $ 15 million upfront payment and a $ 5 million payment upon the earlier to occur of ( i ) dosing of the first patient in the upcoming phase iii study of pracinostat in newly diagnosed aml patients unfit to receive induction therapy , or ( ii ) march 1 , 2017. in addition , we will be eligible to receive up to $ 444 million in potential regulatory and sales-based milestones , along with royalty payments on the net sales of pracinostat . as part of the license , development and commercialization agreement , we will also collaborate with helsinn to explore an optimal dosing regimen of pracinostat in combination with azacitidine for the treatment of high risk mds . this clinical study is anticipated to commence in the first half of 2017. me-401 data from a first-in-human , single ascending dose clinical study of me-401 in healthy subjects demonstrated on target activity at very low plasma concentrations . in addition , the pharmacokinetic results suggest that me-401 has the potential for a superior pharmacokinetic and pharmacodynamics profile and an improved therapeutic window compared to idelalisib , with a half-life that supports once-daily dosing . these results were presented at the aacr annual meeting in april 2016. we expect to dose the first patient in a phase ib dose-escalation study of me-401 in patients with recurrent cll or fnhl in the third quarter of calendar year 2016. me-344 results from our first-in-human , single-agent phase i clinical trial of me-344 in patients with refractory solid tumors were published in the april 1 , 2015 issue of cancer . the results indicated that eight of 21 evaluable patients ( 38 % ) treated with me-344 achieved stable disease or better , including five who experienced progression-free survival that was at least twice the duration of their last prior treatment before entry into the study . in addition , one of these patients , a heavily pre-treated patient with small cell lung cancer , achieved a confirmed partial response and remained on study for two years . me-344 was generally well tolerated at doses equal to or less than 10 mg/kg delivered on a weekly schedule for extended durations . treatment-related adverse events included nausea , dizziness and fatigue . dose limiting toxicities were observed at both the 15 mg/kg and 20 mg/kg dose levels , consisting primarily of grade 3 peripheral neuropathy . 22 in may 2015 , we announced new pre-clinical data from a collaboration with the spanish national cancer research centre in madrid showing mitochondria-specific effects of me-344 in cancer cells , including substantially enhanced anti-tumor activity when combined with a vegf inhibitor . these new data demonstrate that the anti-cancer effects when combining me-344 with a vegf inhibitor are due to an inhibition of both mitochondrial and glycolytic metabolism . an investigator-sponsored study of me-344 in combination with the vegf inhibitor bevacizumab ( marketed as avastin ® ) in her2-negative breast cancer opened for enrollment in august 2016. equity transactions shelf registration statement in april 2014 , we filed a shelf registration statement on form s-3 with the sec ( shelf registration statement ) . the shelf registration statement was declared effective by the sec in april 2014. the shelf registration statement permits us to sell , from time to time , up to $ 150 million of common stock , preferred stock and warrants . as of june 30 , 2016 , there is $ 104 million aggregate value of securities available under the shelf registration statement . pursuant to sec regulations , if the market value of our public float is below $ 75 million , we can not sell securities from the shelf registration statement which represent more than one-third of the market value of our non-affiliated public float during any 12-month period . the market value of our non-affiliated public float was less than $ 75 million as of june 30 , 2016. accordingly , until our non-affiliated public float exceeds $ 75 million , we may not sell shares with a market value greater than one-third of our non-affiliated public float during any 12-month period under the shelf registration statement . underwritten registered offerings in december 2014 , we completed an underwritten registered offering of 11,500,000 shares of our common stock at a price per share of $ 4.00 , pursuant to the april 2014 shelf registration statement . we received net proceeds of $ 43.1 million associated with the offering , after costs of $ 2.9 million . in october 2013 , we completed an underwritten registered offering of 4,375,000 shares of our common stock at a price per share of $ 8.00 , pursuant to a shelf registration statement . we received net proceeds of $ 32.7 million associated with the offering , after costs of $ 2.3 million . critical accounting policies and management estimates management 's discussion and analysis of our financial condition and results of operations is based on our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , expenses and related disclosures . actual results could differ from those estimates . we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements . clinical trials expenses estimates have been used in determining the expenses under certain clinical trial contracts where services have been performed but not yet invoiced .
| other income or expense : we received interest on cash , cash equivalents and short-term investments of $ 143,000 for the year ended june 30 , 2016 and $ 78,000 for the year ended june 30 , 2015. the increase was due to higher yields during the year ended june 30 , 2016 compared to the year ended june 30 , 2015. comparison of years ended june 30 , 2015 and 2014 research and development : research and development expenses increased $ 4.5 million to $ 23.8 million for the year ended june 30 , 2015 compared to $ 19.3 million for the year ended june 30 , 2014. the increase was primarily due to costs associated with phase ii clinical trials for pracinostat . additionally , we incurred costs associated with a phase i clinical trial for me-344 , as well as pre-clinical costs related to me-401 . salaries and benefit costs , including share-based compensation of $ 1.0 million for the year ended june 30 , 2015 , increased due to hiring of additional employees . general and administrative : general and administrative expenses increased by $ 1.0 million to $ 8.9 million for the year ended june 30 , 2015 compared to $ 7.9 million for the year ended june 30 , 2014. the increase primarily relates to higher levels of salaries and benefits . other income or expense : we received interest on cash , cash equivalents and short-term investments of $ 78,000 for the year ended june 30 , 2015 and $ 81,000 for the year ended june 30 , 2014. recent accounting pronouncements in august 2014 , the financial accounting standards board ( fasb ) issued accounting standard update ( asu ) no . 2014-15 , disclosure of uncertainties about an entity 's ability to continue as a going concern ( asu 2014-15 ) . the standard requires management to perform interim and annual assessments of an entity 's ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements . certain disclosures will be required if conditions give rise to substantial doubt about an entity 's ability to continue as a going concern . asu 2014-15 applies to all entities and is effective for annual reporting periods ending after december 15 , 2016 , with early adoption permitted . subsequent to adoption the company will apply the guidance in asu 2014-15 to assess going concern . 24 in february 2016 , the fasb issued asu
| 13,548 |
on january 11 , 2018 , we acquired kws biotest limited ( kws biotest ) , a cro specializing in in vitro and in vivo discovery testing services for immuno-oncology , inflammatory and infectious diseases . the acquisition enhances our discovery expertise , with complementary offerings that provide our customers with additional tools in the active therapeutic research areas of oncology and immunology . the purchase price for kws biotest was $ 20.3 million in cash , subject to certain post-closing adjustments . in addition to the initial purchase price , the transaction includes aggregate , undiscounted contingent payments of up to £ 3.0 million ( approximately $ 3.8 million based on recent exchange rates ) , based on future performance . during the three months ended september 29 , 2018 , the terms of these contingent payments were amended , resulting in a fixed payment of £ 2.0 million ( approximately $ 2.5 million based on recent exchange rates ) , due in the first quarter of fiscal year 2019. the kws biotest business is reported as part of our dsa reportable segment . on august 4 , 2017 , we acquired brains on-line , a leading cro providing critical data that advances novel therapeutics for the treatment of central nervous system ( cns ) diseases . brains on-line strategically expands our existing cns capabilities and establishes us as a single-source provider for a broad portfolio of discovery cns services . the purchase price for brains on-line was $ 21.3 million in cash . in addition to the initial purchase price , the transaction includes aggregate , undiscounted contingent payments of up to 6.7 million ( approximately $ 7.7 million based on recent exchange rates ) , based on future performance and due in the first quarter of fiscal year 2019 if achieved . the brains on-line business is reported as part of our dsa reportable segment . on february 10 , 2017 , we completed the divestiture of our cdmo business to quotient clinical ltd. , based in london , england for $ 75.0 million in proceeds , net of cash , cash equivalents , and working capital adjustments . the cdmo business was acquired in april 2016 as part of the acquisition of wil research and was reported in our manufacturing reportable segment . fiscal quarters our fiscal year is typically based on 52-week s , with each quarter comp osed of 13 weeks ending on the last saturday on , or closest to , march 31 , june 30 , september 30 , and december 31. a 53 rd week was included in the fourth quarter of fiscal year 2016 , which is occasionally necessary to align with a december 31 calendar year-end . business trends the demand for our products and services increased meaningfully in fiscal year 2018. our pharmaceutical and biotechnology clients continued to intensify their use of strategic outsourcing to improve their operating efficiency and to access capabilities that they do not maintain internally . many of our large biopharmaceutical clients have continued to increase investments in their drug discovery and early-stage development efforts and have strengthened their relationships with both cros , like charles river , and biotechnology companies to assist them in bringing new drugs to market . in addition , small and mid-size biopharmaceutical clients benefited from the continued strength in the biotechnology funding environment in fiscal year 2018 , from capital markets , partnering with large biopharmaceutical companies , and investment by venture capital . our full service , early-stage portfolio continued to lead to additional client discussions and new business opportunities in fiscal year 2018 , as clients seek to outsource larger portions of their early-stage drug research programs to us . the primary result of these trends was robust demand for our safety assessment services in fiscal year 2018 , particularly from biotechnology clients . as a result of this improvement , our safety assessment facilities remained well utilized in fiscal year 2018. in order to accommodate increasing client demand , we continued to open modest amounts of capacity at legacy sites , and gained additional capacity through the acquisition of mpi research in april 2018. price also improved slightly in fiscal year 2018 , as we believe industry capacity utilization continued to increase , as well . we believe our scientific expertise , quality , and responsiveness remain key criteria when our clients make the decision to outsource to us . as our clients continue to pursue their 31 goal of more efficient and effective drug research , they are evaluating outsourcing new areas of their research programs , such as discovery services . we have enhanced our discovery services capabilities over the past five years to enable us to work with clients at the earliest stages of the discovery process . in fiscal year 2018 , demand in our discovery services business also increased meaningfully , driven by biotechnology clients as many of these clients either initiated or continued to work with us on integrated programs and other projects . our efforts to enhance our sales strategies and become a trusted scientific partner for our clients ' early-stage programs have been successful , and enabled us to attract new clients for our early discovery services , including a growing base of biotechnology clients . demand from large biopharmaceutical companies also increased . these clients continue to have significant internal discovery capabilities , on which they can choose to rely . in order for large biopharmaceutical clients to increasingly outsource more work to us , we must continue to demonstrate that our services can augment and accelerate our clients ' drug discovery processes . demand for our in vivo discovery services continued to increase in fiscal year 2018 , and we acquired kws biotest in january 2018 to enhance our discovery expertise and provide immuno-oncology capabilities to our clients . story_separator_special_tag demand for our products and services that support our clients ' manufacturing activities was also robust in fiscal year 2018. demand for our microbial solutions business remained strong as manufacturers continued to increase their use of our rapid microbial testing solutions . our biologics business continued to benefit from increased demand for services associated with the growing proportion of biologic drugs in the pipeline and on the market . to support this increased demand , we continue to expand the capacity of our biologics business . demand for our research models and services increased in fiscal year 2018 , driven by strong demand for research models in china , higher revenue for research model services , and improved pricing . demand for research models in china continued to be robust in fiscal year 2018 , as clients in this growing market continue to value our high-quality research models and we expanded our geographic footprint . demand for research models services also improved in fiscal year 2018 , particularly for our is and gems businesses . the is business further benefited from being awarded a five-year , $ 95.7 million contract from the national institute of allergy and infectious diseases , or niaid , which commenced in september 2018. the continued effect of the consolidation of internal infrastructure within our large biopharmaceutical clients and a longer-term trend towards more efficient use of research models has led to reduced demand for research models outside of china . we are confident that research models and services will remain essential tools for our clients ' drug discovery and early-stage development efforts , and the rms business will continue to be an important source of cash flow generation for us . overview of results of operations and liquidity revenue for fiscal year 2018 was $ 2.3 billion compared to $ 1.9 billion in fiscal year 2017 . the 2018 increase as compared to the corresponding period in 2017 was $ 408.5 million , or 22.0 % , and was primarily due to both growth in our dsa and manufacturing segments , as discussed in the above “ business trends ” section , as well as the recent acquisitions of mpi research , kws biotest , and brains on-line . the positive effect of changes in foreign currency exchange rates increased revenue by $ 23.7 million , or 1.3 % , when compared to the corresponding period in 2017. in fiscal year 2018 , our operating income and operating income margin were $ 331.4 million and 14.6 % , respectively , compared with $ 288.3 million and 15.5 % , respectively , in fiscal year 2017 . the increase in operating income was primarily due to our recent acquisitions and increased demand from biotechnology and global biopharmaceutical clients . the decrease in operating income margin was primarily due to increased amortization expense and costs related to our recent acquisitions ; as well as continued investments to support future growth of the company , which includes increased investments in personnel ( staffing levels and hourly wage increase ) , facility expansions ( primarily in the rms , microbial solutions , and biologics businesses ) , and company-wide it and infrastructure projects . offsetting the decreases in operating income margin were the realization of improved volume , mix , and pricing across our products and services portfolio as well as the impact of recent productivity initiatives across all businesses . net income attributable to common shareholders increased to $ 226.4 million in fiscal year 2018 , from $ 123.4 million in the corresponding period of 2017 . the increase in net income attributable to common shareholders of $ 103.0 million was primarily due to the increase in operating income discussed above and a lower effective tax rate driven primarily by net benefits of u.s. tax reform ; partially offset by lower gains on our venture capital and life insurance policy investments , higher interest expense related to higher debt balances to support our recent acquisitions , and the absence of a gain recorded in other income , net on the cdmo divestiture in 2017. during fiscal year 2018 , our cash flows from operations was $ 441.1 million compared with $ 318.1 million for fiscal year 2017 . the increase was primarily driven by an increase in income from continuing operations and positive changes in operating assets 32 and liabilities resulting from an increase in our deferred revenue and customer contract deposits as well as improved collections of our receivables . on march 26 , 2018 , we amended and restated our credit facility creating a $ 2.3b credit facility . the $ 2.3b credit facility provides for a $ 750.0 million term loan and a $ 1.55 billion multi-currency revolving facility . the term loan facility matures in 19 quarterly installments with the last installment due march 26 , 2023. the revolving facility matures on march 26 , 2023 , and requires no scheduled payment before that date . under specified circumstances , we have the ability to increase the term loan and or revolving facility by up to $ 1.0 billion in the aggregate . on april 3 , 2018 , we issued $ 500.0 million of 5.5 % senior notes ( senior notes ) due in 2026 in an unregistered offering . interest on the senior notes is payable semi-annually on april 1 and october 1 of each year , beginning on october 1 , 2018. critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with generally accepted accounting principles in the united states ( u.s. ) . the preparation of these financial statements requires us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities , the reported amounts of revenues and expenses during the reported periods and related disclosures . these estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances , and material changes in these estimates could occur in the future .
| additionally , operating income and operating income as a percentage of revenue increased due to the increased revenue discussed above ; partially offset by continued investments to support future growth , including increased investments in personnel ( staffing levels and hourly wage increases ) , and facility expansions ( primarily in china ) as well as lower operating income margins on the aforementioned large government contract . dsa replace_table_token_7_th dsa revenue increased $ 336.9 million due primarily to the recent acquisitions of mpi research , kws biotest , and brains on-line , which contributed $ 209.5 million , $ 8.6 million and $ 6.0 million to service revenue growth , respectively . additionally , service revenue increased in both the safety assessment and discovery services businesses due to demand from both biotechnology and global biopharmaceutical clients and favorable pricing and mix of services . the effect of changes in foreign currency exchange rates also increased revenue . dsa operating income increased $ 44.8 million compared to the corresponding period in 2017 . dsa operating income as a percentage of revenue for fiscal year 2018 was 17.3 % , a decrease of 1.4 % from 18.7 % for the corresponding period in 2017 . the increase to operating income was primarily attributable to contributions from recent acquisitions of mpi research , kws biotest , and brains on-line . these increases were partially offset by increased costs to support the growth of the company , which include costs due to the acquisitions , including a higher service cost base , an increase in compensation , benefits , and other employee-related expenses recorded within both cost of revenue and selling , general , and administrative expense , and higher amortization of intangible assets as substantially all of our acquisitions in fiscal year 2018 are included within the dsa reportable segment . these increased costs collectively decreased operating income as a percentage of revenue in 2018 compared to 2017 . manufacturing replace_table_token_8_th manufacturing revenue increased $ 45.5 million due primarily to higher demand for endotoxin products and species identification services in the microbial solutions business , higher service revenue in the biologics business , higher product revenue in the avian business , and the effect of
| 13,549 |
we estimate our annual nameplate capacity was 50 million square feet of aerogel blankets at december 31 , 2017. we believe the square foot operating metric allows us and our investors to measure our manufacturing capacity and product shipments on a uniform and consistent basis . the following chart sets forth product shipments associated with recognized revenue in square feet for the periods presented : replace_table_token_5_th adjusted ebitda we use adjusted ebitda , a non-gaap financial measure , as a means to assess our operating performance . we define adjusted ebitda as net income ( loss ) before interest expense , taxes , depreciation , amortization , stock-based compensation expense and other items , which occur from time to time , that we do not believe are indicative of our core operating performance . adjusted ebitda is a supplemental measure of our performance that is not presented in accordance with u.s. gaap . adjusted ebitda should not be considered as an alternative to net income ( loss ) or any other measure of financial performance calculated and presented in accordance with u.s. gaap . in addition , our definition and presentation of adjusted ebitda may not be comparable to similarly titled measures presented by other companies . we use adjusted ebitda : as a measure of operating performance because it does not include the impact of items that we do not consider indicative of our core operating performance ; for planning purposes , including the preparation of our annual operating budget , to allocate resources to enhance the financial performance of our business ; and as a performance measure used under our bonus plan . we also believe that the presentation of adjusted ebitda provides useful information to investors with respect to our results of operations and in assessing the performance and value of our business . various measures of ebitda are widely used by investors to measure a company 's operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods , book values of assets , capital structures and the methods by which assets were acquired . 48 although measures sim ilar to adjusted ebitda are frequently used by investors and securities analysts in their evaluation of companies , we understand that adjusted ebitda has limitations as an analytical tool , and you should not consider it in isolation or as a substitute for net income , income from operations , net cash provided by ( used in ) operating activities or an analysis of our results of operations as reported under u.s. gaap . some of these limitations are : adjusted ebitda does not reflect our historical cash expenditures or future requirements for capital expenditures or other contractual commitments ; adjusted ebitda does not reflect changes in , or cash requirements for , our working capital needs ; adjusted ebitda does not reflect stock-based compensation expense ; adjusted ebitda does not reflect our tax expense or cash requirements to pay our income taxes ; adjusted ebitda does not reflect our interest expense , or the cash requirements necessary to service interest or principal payments on our debt ; although depreciation , amortization and impairment charges are non-cash charges , the assets being depreciated , amortized or impaired will often have to be replaced in the future , and adjusted ebitda does not reflect any cash requirements for these replacements ; and other companies in our industry may calculate ebitda or adjusted ebitda differently than we do , limiting their usefulness as a comparative measure . because of these limitations , our adjusted ebitda should not be considered as a measure of discretionary cash available to us to reinvest in the growth of our business or as a measure of cash available for us to meet our obligations . to properly and prudently evaluate our business , we encourage you to review the gaap financial statements included elsewhere in this annual report on form 10-k , and not to rely on any single financial measure to evaluate our business . the following table presents a reconciliation of net loss , the most directly comparable gaap measure , to adjusted ebitda for the years presented : replace_table_token_6_th ( 1 ) represents non-cash stock-based compensation related to vesting and modifications of stock option grants , vesting of restricted stock units and vesting and modification of restricted common stock . the following table presents a reconciliation of net loss , the most directly comparable gaap measure , to adjusted ebitda for the quarters presented : replace_table_token_7_th ( 1 ) represents non-cash stock-based compensation related to vesting and modifications of stock option grants , vesting of restricted stock units and vesting and modification of restricted common stock . 49 our financial performance , including such measures as net income ( loss ) , earnings per share and adjusted ebitda , are affected by a number of factors including volume and mix of aerogel products sold , average sel ling prices , our material and manufacturing costs , the costs associated with and timing of capacity expansions and start-up of additional production capacity , and the amount and timing of operating expenses , including patent enforcement costs . as we build out our manufacturing capacity in new facilities in the longer term , we expect increased manufacturing expenses will periodically have a negative impact on net income ( loss ) , earnings per share and adjusted ebitda , but will set the framework for improved p erformance in the long term . accordingly , we expect that our net income ( loss ) , earnings per share and adjusted ebitda will vary from period to period , in particular as and when we expand our manufacturing capacity in new facilities . story_separator_special_tag as a result of the conclusion of a multiyear petrochemical project with reliance industries limited and an expected decline in the volume of subsea projects , which together comprised 19 % of our product revenue during 2017 , we may experience a decrease in revenue , an increase in net loss and loss per share and a decrease in adjusted ebitda during 2018. in addition , we plan to increase investment in new initiatives and personnel by approximately $ 6.0 million during 2018 with the objective of restoring long-term growth in our existing markets and developing new business opportunities . this investment is associated , in large part , with our plan to add 49 new employees to our team during the year . as a result of a planned increase in manufacturing and operating expenses associated with these new initiatives and personnel , we may experience an increase in net loss and loss per share and a decrease in adjusted ebitda during 2018 even in the event that we experience an increase in revenue during the year . emerging growth company status the jobs act permits an “ emerging growth company ” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies . we have opted out of this provision and , as a result , we comply with new or revised accounting standards as required when they are adopted . this decision to opt out of the extended transition period under the jobs act is irrevocable . components of our results of operations revenue we recognize product revenue from the sale of our line of aerogel products and research services revenue from the provision of services under contracts with various agencies of the u.s. government and other institutions . product revenue is recognized upon transfer of title and risk of loss , which is upon shipment or delivery . the following table sets forth the total revenue for the periods presented : replace_table_token_8_th product revenue accounted for 98 % of total revenue for each of the years ended december 31 , 2017 , 2016 and 2015. in the near term , we may experience a decrease in product revenue due to an anticipated decrease in project related revenue in the subsea market and as a result of the conclusion of the major petrochemical project with reliance industries . however , we expect a resumption of growth in product revenue in the long term due to increasing market adoption of our line of aerogel blankets in the energy infrastructure market , particularly in the power generation , lng and district energy markets , and increasing penetration of new markets , including the building materials market . we expect that research services revenue will remain a small percentage of total revenue due to limitations on our eligibility to receive contract awards under federal guidelines . a substantial majority of our revenue is generated from a limited number of direct customers , including distributors , contractors , oems , partners and end-use customers . our 10 largest customers accounted for approximately 69 % of our total revenue during the year ended december 31 , 2017 , and we expect that most of our revenue will continue to come from a relatively small number of customers for the foreseeable future . in 2017 , sales to distribution international , inc. and technipfmc represented 15 % and 12 % of our total revenue , respectively . in 2016 , sales to reliance industries limited and distribution international , inc. represented 25 % and 15 % of our total revenue , respectively . in 2015 , sales to distribution international , inc. and reliance industries limited represented 14 % and 12 % of total revenue , respectively . for each of the noted periods , there were no other customers that represented 10 % or more of our total revenues . 50 we conduct business across the globe and a substantial portion of our revenue is generated outside of the united states . total revenue from outside of the united states , based on shipment destination , amounted to $ 60.2 million , or 54 % of our total revenue , $ 82.0 million , or 70 % of our total revenue , and $ 78.0 million or 64 % of our total revenue , in the years ended dece mber 31 , 2017 , 2016 and 2015 , respectively . cost of revenue cost of product revenue consists primarily of materials and manufacturing expense , including labor , utilities , maintenance expense and depreciation on manufacturing assets . cost of product revenue is recorded when the related product revenue is recognized . cost of product revenue also includes stock-based compensation of manufacturing employees and shipping costs . material is our most significant component of cost of product revenue and includes fibrous batting , silica materials and additives . material costs as a percentage of product revenue were 45 % , 41 % and 45 % for the years ended december 31 , 2017 , 2016 and 2015 , respectively . material costs as a percentage of product revenue vary from product to product due to differences in average selling prices , material requirements , product thicknesses and manufacturing yields . in addition , we provide warranties for our products and record the estimated cost within cost of sales in the period that the related revenue is recorded . as a result , material costs as a percentage of revenue will vary from period to period due to changes in the mix of aerogel products sold or the estimated cost of warranties . however , in general , we expect material costs in the aggregate to decline as a percentage of revenue as we seek to achieve higher selling prices , material sourcing improvements , quality improvements and manufacturing yield enhancements for our aerogel products . manufacturing expense is also a significant component of cost of revenue .
| the in crease in average selling price reflects a year-over-year increase in the mix of high-priced sub sea products , combined with a de crease in the volume of products sold to reliance industries limited with lower , project-based pricing . this in crease in average selling price had the effect of in creasing product revenu e by approximately $ 11.6 million for the year ended decembe r 31 , 2017 . in volume terms , product shipments decreased 6.8 million square feet , or 15 % , to 37.5 million square feet of aerogel products for the year ended december 31 , 2017 , as compared to 44.3 million square feet in the year ended december 31 , 2016. the decrease in product volume had the effect of decreasing product revenue by approximately $ 17.6 million for the year ended december 31 , 2017. research services revenue decreased by $ 0.2 million , or 9 % , to $ 2.0 million in 2017 from $ 2.2 million in 2016. the decrease was primarily due to the timing and amount of funding available under research contracts during the year ended december 31 , 2017 from the comparable period in 2016. product revenue as a percentage of total revenue was 98 % of total revenue in 2017 and 2016. research services revenue was 2 % of total revenue in 2017 and 2016. we expect that product revenue will continue to comprise a significant percentage of our total revenue in the long-term . during 2018 , we may experience a decrease in product and total revenue versus the comparable period in 2017. the potential decline in revenue is the result of the conclusion of a multiyear petrochemical project with reliance industries limited and a projected decrease in the volume of subsea projects , which together comprised 19 % of product revenue during 2017. cost of revenue replace_table_token_12_th total cost of revenue decreased by $ 1.5 million , or 2 % , to $ 93.0 million in 2017
| 13,550 |
`` risk factors – our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio , ” in this form 10-k. 54 valuation of oreo . real estate properties acquired through foreclosure or by deed-in-lieu of foreclosure are recorded at the lower of cost or 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 . 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 13 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 . 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 instrument , whether the financial instrument is new to the market and not yet established and the characteristics specific to the transaction . see note 8 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 . comparison of financial condition at december 31 , 2014 and december 31 , 2013 assets . the following table details the changes in the composition of our assets at december 31 , 2014 from december 31 , 2013 . 55 replace_table_token_31_th interest-earning deposits increased $ 48.6 million partially as a result of $ 27.2 million in cash flow from the investments available-for-sale portfolio for calls , sales , and scheduled principal repayments . in addition , the increase in interest-earning deposits reflects liquidity provided by a $ 16.5 million increase in fhlb advances and $ 54.4 million increase in brokered certificates of deposit , partially offset by a decrease in retail deposits of $ 52.4 million . our investments available-for-sale decreased $ 24.0 million , or 16.6 % to $ 120.4 million at december 31 , 2014 from $ 144.4 million at december 31 , 2013. during the year ended december 31 , 2014 , we sold a $ 5.0 million variable rate security and had a call redemption on a $ 1.4 million tax-exempt municipal bond . story_separator_special_tag gross proceeds from the sale was $ 5.0 million with a net loss of $ 20,000. during the year ended december 31 , 2014 , we purchased two securities for a total of $ 2.1 million . the anticipated yields on the securities purchased during the year were 2.20 % while the security sold had a yield of 0.15 % . the underlying collateral of the purchased bonds qualify for the community reinvestment act ( `` cra '' ) and were purchased to support our cra compliance efforts . this investment portfolio activity resulted in an increase of the effective duration of the portfolio to 2.40 % at december 31 , 2014 , as compared to 1.64 % at december 31 , 2013. 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 . net loans receivable remained relatively unchanged , increasing $ 785,000 during 2014 , to $ 663.9 million . however , the composition of loans receivable changed , reflecting our focus on short-term higher yielding construction and land development loans . construction and land development loans increased $ 20.4 million or 67 % , representing 7.2 % of our gross loan portfolio at december 31 , 2014 , as compared to 4.5 % at december 31 , 2013. the increase in construction and land development loans was predominantly related to `` in-fill '' one-to-four family speculative construction projects in selective urban areas that have high levels of nearby amenities . subject to market conditions , we anticipate continuing to increase our construction and land development loans as a percentage of our total loan portfolio during 2015. the quality of our loan portfolio continued to improve during 2014 as our nonperforming loans decreased to $ 1.3 million at december 31 , 2014 from $ 4.0 million at december 31 , 2013. nonperforming loans as a percent of our total loan portfolio , net of lip , was 0.20 % and 0.59 % at december 31 , 2014 and 2013 , respectively . adversely classified loans decreased to $ 10.2 million at december 31 , 2014 , from $ 14.4 million at december 31 , 2013. the following table presents a breakdown of our nonperforming assets : 56 replace_table_token_32_th we continued to focus on reducing our nonperforming assets through loan work outs , foreclosures , short-sales , and acceptance of deeds in lieu of foreclosure . foregone interest during the year ended december 31 , 2014 relating to nonperforming loans totaled $ 126,000. there were no lip related to nonperforming loans at december 31 , 2014 or 2013. oreo decreased $ 2.2 million to $ 9.3 million at december 31 , 2014 , from $ 11.5 million at december 31 , 2013 as we continue to sell our inventory of foreclosed real estate . we foreclosed or accepted deeds in lieu of foreclosure on $ 1.8 million of real estate during 2014 , as compared to $ 6.5 million during 2013 and $ 12.1 million in 2012. the number of properties that transferred into oreo has decreased considerably compared to previous years and , consequently , the number of properties that we sold has also declined . during 2014 , we transferred six properties into oreo , compared to 15 properties during 2013 and 35 properties during 2012. sales of oreo in 2014 totaled 12 properties , as compared to 43 properties in 2013 , and 89 properties in 2012. the decline in both the transfer of properties into oreo and the sale of oreo properties was a result of our efforts to identify the problem loans within our portfolio and take prompt appropriate actions to turn these nonperforming assets into performing assets . deposits . during the year ended december 31 , 2014 , deposits increased $ 2.1 million to $ 614.2 million as compared to $ 612.1 million at december 31 , 2013. retail certificates of deposit decreased $ 52.2 million as we continued to reduce higher cost certificates of deposit by competing slightly less aggressively on certain deposit interest rates . to offset this decrease , management implemented a strategy of generating funds through national brokered certificates of deposit . this new source of funds added $ 54.4 million of certificates of deposit as of december 31 , 2014. while these certificates carry a higher cost of funds than retail certificates , they range in maturity from four to six years with a call option six months after issuance . the longer term nature of these brokered deposits , along with their enhanced features , compared to retail certificates of deposit , assist us in our interest rate risk management efforts . also contributing to our efforts to reduce our cost of funds , a $ 4.7 million decrease in now accounts was partially offset by a $ 3.7 million increase in noninterest checking accounts . in addition , statement savings accounts increased $ 3.5 million while higher cost money market accounts decreased $ 2.6 million . advances . we use advances from the fhlb as an alternative funding source to manage funding costs , reduce interest rate risk and to leverage our balance sheet .
| our current speculative construction underwriting requirements are also higher than prior periods , with a loan to actual cost ratios of no more than 80 % and a loan to completed value ratio of no more than 75 % , unless sufficient factors exist to mitigate operating outside of these guidelines . while total new loan originations decreased from $ 157.0 million in 2013 to $ 154.5 million in 2014 , originations of construction and land development loans increased from $ 15.4 million in 2013 to $ 47.2 million in 2014. these short term loans typically mature in 6-18 months . in addition , the funding is usually not fully disbursed at origination , thereby reducing our net loans receivable in the short term . reflecting the increase in construction and land development originations , lip increased from $ 7.5 million in 2013 to $ 26.7 million in 2014 , resulting in a $ 1.2 million increase in these loans , net of lip , to $ 24.4 million from $ 23.2 million at december 31 , 2014 , and 2013 , respectively . with the current low interest rate environment , we are not aggressively pursuing longer term assets , but rather are focused on financing shorter term loans . during 2014 , originations of new loans and refinances slightly outpaced repayments , resulting in net loans receivable of $ 663.9 million at december 31 , 2014 , as compared to $ 663.2 million at december 31 , 2013. our primary source of revenue is net interest income . net interest income is the difference between interest income that we earn on our loans and investments and interest expense that we pay on our deposits and borrowings . changes in levels of interest rates affect our net interest income . first savings bank is liability-sensitive , meaning our interest-bearing liabilities reprice at a faster rate than our interest-earning assets . the lower interest rate environment that we are currently experiencing has contributed to an improvement in our net interest rate spread to 3.62 % for
| 13,551 |
as of december 31 , 2020 and december 31 , 2019 , 99.2 % and 99.0 % , respectively , of our debt investments , based on fair value , bore interest at floating rates , which may be subject to interest rate floors . variable-rate investments subject to a floor generally reset periodically to the applicable floor , only if the floor exceeds the index . trends in base interest rates , such as libor , may affect our net investment income over the long term . in addition , our results may vary from period to period depending on the interest rates of new investments made during the period compared to investments that were sold or repaid during the period ; these results reflect the characteristics of the particular portfolio companies that we invested in or exited during the period and not necessarily any trends in our business or macroeconomic trends . dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected . dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies . expenses our primary operating expenses include the payment of fees to our advisor under the second amended and restated investment advisory agreement ( the “ amended advisory agreement ” ) , our allocable portion of overhead expenses under the administration agreement ( the “ administration agreement ” ) and other operating costs , including those described below . the base management fee and incentive fee compensate our advisor for its work in identifying , evaluating , negotiating , closing and monitoring our investments . we bear all other out-of-pocket costs and expenses of our operations and transactions , including : our operational and organizational cost ; the costs of any public offerings of our common stock and other securities , including registration and listing fees ; costs of calculating our net asset value ( including the cost and expenses of any third-party valuation services ) ; fees and expenses payable to third parties relating to evaluating , making and disposing of investments , including our advisor 's or its affiliates ' travel expenses , research costs and out-of-pocket fees and expenses associated with performing due diligence and reviews of prospective investments , monitoring our investments and , if necessary , enforcing our rights ; interest payable on debt and other borrowing costs , if any , incurred to finance our investments ; costs of effecting sales and repurchases of our common stock and other securities ; distributions on our common stock ; transfer agent and custody fees and expenses ; the allocated costs incurred by the administrator in providing managerial assistance to those portfolio companies that request it ; 80 other expenses incurred by bcsf advisors or us in connection with administering our business , including payments made to third-party providers of goods or services ; brokerage fees and commissions ; federal and state registration fees ; u.s. federal , state and local taxes ; independent director fees and expenses ; costs associated with our reporting and compliance obligations under the 1940 act and applicable u.s. federal and state securities laws ; costs of any reports , proxy statements or other notices to our stockholders , including printing costs ; costs of holding stockholder meetings ; our fidelity bond ; directors ' and officers ' errors and omissions liability insurance , and any other insurance premiums ; litigation , indemnification and other non-recurring or extraordinary expenses ; direct costs and expenses of administration and operation , including printing , mailing , long distance telephone , staff , audit , compliance , tax and legal costs ; fees and expenses associated with marketing efforts ; dues , fees and charges of any trade association of which we are a member ; and all other expenses reasonably incurred by us or the administrator in connection with administering our business . to the extent that expenses to be borne by us are paid by bcsf advisors , we will generally reimburse bcsf advisors for such expenses . to the extent the administrator outsources any of its functions , the company will pay the fees associated with such functions on a direct basis without profit to the administrator . we will also reimburse the administrator for its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the administration agreement , including certain rent and compensation paid to or compensatory distributions received by our officers ( including our chief compliance officer and chief financial officer ) and any of their respective staff who provide services to us , operations staff who provide services to us , internal audit staff , if any , to the extent internal audit performs a role in our sarbanes-oxley internal control assessment and fees paid to third-party providers for goods or services . our allocable portion of overhead will be determined by the administrator , which expects to use various methodologies such as allocation based on the percentage of time certain individuals devote , on an estimated basis , to our business and affairs , and will be subject to oversight by our board of directors ( our “ board ” ) . the sub-administrator is paid its compensation for performing its sub-administrative services under the sub-administration agreement . we incurred expenses related to the sub-administrator of $ 0.5 million , $ 0.6 million and $ 0.8 million for the years ended december 31 , 2020 , 2019 and 2018 respectively , which is included in other general and administrative expenses on the consolidated statements of operations . bcsf advisors will not be reimbursed to the extent that such reimbursements would cause any distributions to our stockholders to constitute a return of capital . story_separator_special_tag all of the foregoing expenses are ultimately borne by our stockholders . leverage we may borrow money from time to time . however , our ability to incur indebtedness ( including by issuing preferred stock ) , is limited by applicable regulations such that our asset coverage , as defined in the 1940 act , must equal at least 150 % . in determining whether to borrow money , we will analyze the maturity , covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook . as of december 31 , 2020 , the company 's asset coverage was 173 % . 81 impact of covid-19 in late 2019 and early 2020 , a novel coronavirus ( sars-cov-2 ) and related respiratory disease ( “ covid-19 ” ) emerged in china and spread rapidly to across the world , including to the u.s. this outbreak has led and for an unknown period of time will continue to lead to disruptions in local , regional , national and global markets and economies affected thereby . the extent to which the covid-19 pandemic will adversely impact the company 's business , financial condition , liquidity and results of operations will depend on future developments , which are highly uncertain and can not be predicted , including the scope and duration of this outbreak , and any future outbreaks . it is clear that these types of events are negatively impacting and will , for at least some time , continue to negatively impact the company and portfolio companies and in many instances the impact will be profound . for example , smaller and middle market companies in which we may invest are being significantly impacted by these emerging events and the uncertainty caused by these events . with respect to loans to such companies , the company will be impacted if , among other things , ( i ) amendments and waivers are granted ( or are required to be granted ) to borrowers permitting deferral of loan payments or allowing for payment-in-kind ( “ pik ” ) interest payments , ( ii ) borrowers default on their loans , are unable to refinance their loans at maturity , or go out of business permanently , and or ( iii ) the value of loans held by the company decreases as a result of such events and the uncertainty they cause . such emerging events , to the extent experienced , will cause the company to suffer a loss on its investments or interest thereon . the company will also be negatively affected if the operations and effectiveness of the adviser or a portfolio company ( or any of the key personnel or service providers of the foregoing ) is compromised or if necessary or beneficial systems and processes are disrupted as a result of stay-at-home orders or other related interruptions to regular business operations . with respect to the company 's investments , we have taken incremental steps in actively overseeing all of our individual portfolio companies . these measures include , among other things , ( i ) frequent communication with our portfolio company management teams and related private equity sponsors to understand the expected financial performance impact of the covid-19 pandemic ; ( ii ) re-underwriting our portfolio companies to understand the impact if the current economic environment persists ; and ( iii ) the creation of an internal working group focused on understanding the potential financial needs of our portfolio companies and engaging with these companies and their private equity sponsors , as needed . the effects of the covid-19 pandemic on economic and market conditions have increased the company 's demands to provide capital to its existing portfolio companies . during the month of march 2020 , we received unprecedented draw requests on revolving credit and delayed draw facilities we provided to our portfolio companies as many of them sought to husband excess cash as a defensive measure in these uncertain times . all of those draws were met in a timely fashion and we maintain adequate cash and additional borrowing capacity in reserve to meet any further such draw requests . the company experienced a significant reduction in our net asset value as of december 31 , 2020 as compared to our net asset value as of december 31 , 2019. the significant decrease between those time periods is primarily the result of unrealized depreciation across the fair value of the company 's investments resulting from the covid-19 pandemic and the dilution impact from the company 's rights offering . as of december 31 , 2020 , the company was in compliance with its asset coverage requirements under the 1940 act . in addition , the company was in compliance with all financial covenants within its credit facilities as of december 31 , 2020. however , any continued increase in realized or unrealized depreciation of our investment portfolio or further significant reductions in our net asset value as a result of the effects of the covid-19 pandemic or otherwise increase the risk of breaching the relevant covenants and requirements . any breach of these requirements may adversely affect the company 's access to sufficient debt and equity capital . the effects of the covid-19 pandemic may also cause the company to limit distributions . it is impossible to determine the scope of this outbreak , or any future outbreaks , how long any such outbreak , market disruption or uncertainties may last , the effect any governmental actions will have or the full potential impact on the company , the adviser and portfolio companies . portfolio and investment activity during the year ended december 31 , 2020 , we invested $ 535.8 million , including pik , in 67 portfolio companies , and had $ 525.8 million in aggregate amount of principal repayments and sales , resulting in a net increase in investments of $ 10.0 million for the year .
| our investment portfolio at amortized cost increased to $ 2,537.3 million from $ 1,753.1 million for the year ended december 31 , 2018. dividend income decreased to $ 16.7 million for the year ended december 31 , 2019 from $ 25.4 million for the year ended december 31 , 2018 , primarily due to the closing of the abcs distribution transaction on april 30 , 2019. as of december 31 , 2019 , the weighted average yield of our investment portfolio decreased to 7.8 % from 8.8 % as of december 31 , 2018 , at amortized cost . operating expenses the composition of our operating expenses for the years ended december 31 , 2020 , 2019 and 2018 were as follows ( dollars in thousands ) : 90 replace_table_token_22_th interest and debt financing expenses interest and debt financing expenses on our borrowings totaled approximately $ 63.3 million and $ 66.3 million for the years ended december 31 , 2020 and 2019 , respectively . interest and debt financing expense for the year ended december 31 , 2020 as compared to december 31 , 2019 , decreased primarily due to a decline in libor during 2020 , since 89 % of our principal debt outstanding is floating rate . on april 30 , 2019 , the company entered into a new loan and security agreement with jpmorgan chase bank , n.a. , and wells fargo bank , n.a. , the jpm credit facility . interest and debt financing expenses on our borrowings totaled approximately $ 66.3 million and $ 24.0 million for the years ended december 31 , 2019 and 2018 , respectively . interest and debt financing expense for the year ended december 31 , 2019 as compared to december 31 , 2018 , increased primarily due to higher principal balances outstanding on our revolving credit facilities throughout 2019 and the issuance of our 2019-1 debt in august 2019. on april 30 , 2019 , the company entered into a new loan and security agreement with jpmorgan chase bank , n.a. , and wells
| 13,552 |
revenue for the year ended december 31 , 2015 was $ 1.13 billion , an increase of $ 104.7 million or 10 % from $ 1.03 billion for the same period in 2014 . the increase was primarily due to the reduction in expenses related to changes in the fdic indemnification asset and receivable/payable . this decrease was largely due to the expiration of the ucb non-single-family shared-loss agreement in 2014 and the early termination of the remaining shared-loss agreements in 2015. income tax expense was $ 140.5 million , $ 194.0 million , and $ 101.1 million for the years ended december 31 , 2016 , 2015 , and 2014 , respectively . the effective tax rate was 24.6 % , 33.5 % , and 22.6 % for the years ended december 31 , 2016 , 2015 , and 2014 , respectively . the fluctuation of the effective tax rate year over year was mainly attributable to the tax credits recognized from investments in historic rehabilitation and renewable energy projects . noninterest expense was $ 615.9 million for the year ended december 31 , 2016 , an increase of $ 75.0 million or 14 % from $ 540.9 million for the same period in 2015 . the increase was mainly due to higher amortization of tax credit and other investments from additional tax credit investments placed into service for the year ended december 31 , 2016 , and higher compensation and employee benefits in support of business expansion and regulatory compliance requirements for the year ended december 31 , 2016 . noninterest expense increased slightly to $ 540.9 million for the year ended december 31 , 2015 from $ 533.0 million for the same period in 2014 . return on average assets increase d three basis points to 1.30 % for the year ended december 31 , 2016 , compared to 1.27 % for the same period in 2015 ; and also increase d two basis points to 1.27 % for the year ended december 31 , 2015 , compared to 1.25 % for the same period in 2014 . the return on average equity increase d 32 basis points to 13.06 % for the year ended december 31 , 2016 , compared to 12.74 % for the same period in 2015 ; and increased two basis points to 12.74 % for the year ended december 31 , 2015 , compared to 12.72 % for the same period in 2014 . the strong returns on average assets and average equity reflected the company 's ability to achieve higher profitability while expanding the loan and deposit base . net interest income the company 's primary source of revenue is net interest income , which is the difference between interest earned on loans , investment securities and other interest-earning assets less interest expense on customer deposits , securities sold under repurchase agreements ( “ repurchase agreements ” ) , long-term debt and other interest-bearing liabilities . net interest margin is calculated by dividing gross interest revenue less gross interest expense by average interest-earning assets . net interest income and net interest margin are affected by several factors , including changes in average balances and composition of interest-earning assets and funding sources , market interest rate fluctuations and slope of the yield curve , repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities , volume of noninterest-bearing sources of funds and asset quality . net interest income for the year ended december 31 , 2016 was $ 1.03 billion , an increase of $ 82.2 million or 9 % compared to $ 950.4 million for the same period in 2015 . the increase in net interest income was primarily due to higher interest income from strong loan growth during 2016. net interest margin was 3.30 % for the year ended december 31 , 2016 , a five basis points decrease from 3.35 % in 2015 . the decrease in net interest margin was primarily due to a reduction of eight basis points in loan yields from 4.35 % for the year ended december 31 , 2015 to 4.27 % for the year ended december 31 , 2016 . the decrease in loan yields was primarily due to the lower accretion income from the loans accounted for under accounting standards codification ( “ asc ” ) 310-30 , loans and debt securities acquired with deteriorated credit quality ( “ asc 310-30 ” ) . for the year ended december 31 , 2016 , total accretion income from the loans accounted for under asc 310-30 was $ 45.4 million compared to $ 61.3 million for the same period in 2015 . 30 net interest income for the year ended december 31 , 2015 was $ 950.4 million , a decrease of $ 90.4 million or 9 % compared to $ 1.04 billion for the same period in 2014 . net interest margin was 3.35 % for the year ended december 31 , 2015 , a decrease of 68 basis points from 4.03 % for the year ended december 31 , 2014 . the decreases in net interest income and net interest margin were primarily due to the decreases in interest income and yields on loans as a result of lower accretion income associated with the loans acquired from the fdic-assisted acquisitions of ucb and wfib , partially offset by a reduction in interest expense on repurchase agreements that were paid off during 2015 . for the year ended december 31 , 2016 , average interest-earning assets increase d $ 2.91 billion or 10 % to $ 31.30 billion from $ 28.39 billion for the same period in 2015 . the increase was primarily due to a $ 1.98 billion or 9 % increase in average loan balances to $ 24.26 billion for the year ended december 31 , 2016 , compared to $ 22.28 billion for the same period in 2015 . story_separator_special_tag for the year ended december 31 , 2015 , average interest-earning assets increased by $ 2.59 billion or 10 % to $ 28.39 billion from $ 25.80 billion for the year ended december 31 , 2014. the increase was primarily due to an increase in average loan balances of $ 1.92 billion or 9 % to $ 22.28 billion for the year ended december 31 , 2015 , compared to $ 20.35 billion for the same period in 2014 . customer deposits are an important source of low-cost funding affecting both net interest income and net interest margin . average deposits which consist of noninterest-bearing demand , interest-bearing checking , money market , saving and time deposits , increase d by $ 2.74 billion or 11 % to $ 28.50 billion for the year ended december 31 , 2016 , compared to $ 25.76 billion for the same period in 2015 . average deposits increased by $ 2.82 billion or 12 % to $ 25.76 billion for the year ended december 31 , 2015 , compared to $ 22.94 billion for the same period in 2014 . the ratio of average noninterest-bearing demand deposits to total average deposits increase d from 31 % as of december 31 , 2015 to 33 % as of december 31 , 2016 . cost of deposits was 0.30 % for the year ended december 31 , 2016 . cost of deposits remained stable at 0.29 % for each of the years ended december 31 , 2015 and 2014 . average loans were 117 % funded by average deposits for the year ended december 31 , 2016 , which was higher than the funding level of 116 % and 113 % for the same periods in 2015 and 2014 , respectively . 31 the following table presents the interest spread , net interest margin , average balances , interest income and expense , and the average yield/rates by asset and liability component for the years ended december 31 , 2016 , 2015 and 2014 : replace_table_token_0_th ( 1 ) average balances of resale and repurchase agreements are reported net pursuant to asc 210-20-45 , balance sheet offsetting . ( 2 ) yields on tax-exempt securities are not presented on a tax-equivalent basis . ( 3 ) includes the amortization of net premiums on investment securities of $ 26.2 million , $ 18.7 million and $ 24.2 million for the years ended december 31 , 2016 , 2015 and 2014 , respectively . ( 4 ) average balance includes nonperforming loans . ( 5 ) includes the accretion of asc 310-30 discount , net deferred loan fees , unearned income and amortization of premiums , which totaled $ 53.5 million , $ 66.2 million and $ 185.8 million for the years ended december 31 , 2016 , 2015 and 2014 , respectively . 32 the following table summarizes the extent to which changes in interest rates and changes in average interest-earning assets and average interest-bearing liabilities affected the company 's net interest income for the periods presented . the total change for each category of interest-earning assets and interest-bearing liabilities is segmented into the change attributable to variations in volume and the change attributable to variations in interest rates . changes that are not solely due to either volume or rate are allocated proportionally based on the absolute value of the change related to average volume and average rate . nonaccrual loans are included in average loans used to compute the table below : ( $ in thousands ) year ended december 31 , 2016 vs. 2015 2015 vs. 2014 total change changes due to total change changes due to volume yield/rate volume yield/rate interest-bearing assets : interest-bearing cash and deposits with banks $ ( 3,208 ) $ 394 $ ( 3,602 ) $ ( 5,275 ) $ 5,102 $ ( 10,377 ) resale agreements 10,748 6,149 4,599 ( 524 ) ( 47 ) ( 477 ) investment securities 12,024 7,831 4,193 ( 3,309 ) 5,022 ( 8,331 ) loans 66,752 85,120 ( 18,368 ) ( 90,580 ) 94,158 ( 184,738 ) investments in fhlb and federal reserve bank stock ( 2,650 ) ( 168 ) ( 2,482 ) ( 195 ) ( 1,389 ) 1,194 total interest and dividend income $ 83,666 $ 99,326 $ ( 15,660 ) $ ( 99,883 ) $ 102,846 $ ( 202,729 ) interest-bearing liabilities : checking deposits $ 4,187 $ 2,348 $ 1,839 $ 3,022 $ 1,722 $ 1,300 money market deposits 8,106 2,798 5,308 2,987 2,237 750 saving deposits 1,251 671 580 497 63 434 time deposits ( 2,825 ) ( 4,249 ) 1,424 1,513 1,735 ( 222 ) federal funds purchased and other short-term borrowings 655 503 152 58 — 58 fhlb advances 1,315 752 563 154 ( 278 ) 432 repurchase agreements ( 11,603 ) ( 8,831 ) ( 2,772 ) ( 17,488 ) ( 26,397 ) 8,909 long-term debt 381 ( 445 ) 826 ( 187 ) ( 405 ) 218 total interest expense $ 1,467 $ ( 6,453 ) $ 7,920 $ ( 9,444 ) $ ( 21,323 ) $ 11,879 change in net interest income $ 82,199 $ 105,779 $ ( 23,580 ) $ ( 90,439 ) $ 124,169 $ ( 214,608 ) noninterest income ( loss ) noninterest income decrease d slightly to $ 182.9 million for the year ended december 31 , 2016 , compared to $ 183.4 million for the same period in 2015 . the decrease was primarily due to the decreases in net gains on sales of available-for-sale investment securities and loans , partially offset by a reduction in expenses related to changes in fdic indemnification asset and receivable/payable . noninterest income increase d by $ 195.1 million to $ 183.4 million for the year ended december 31 , 2015 compared to noninterest loss of $ 11.7 million for the same period in 2014 . the increase was primarily due to a reduction in expenses related to changes in fdic indemnification asset and receivable/payable and an increase in net gains on sales of available-for-sale investment securities .
| return on average equity increased 32 basis points to 13.06 % for the year ended december 31 , 2016 , compared to the same period in 2015 . cost of funds improved three basis points to 0.36 % for the year ended december 31 , 2016 , compared to the same period in 2015 . additionally , the company experienced growth of total assets of $ 2.44 billion or 8 % to $ 34.79 billion as of december 31 , 2016 , compared to $ 32.35 billion as of december 31 , 2015 . this increase was primarily attributable to the increases in gross loans held-for-investment , cash and cash equivalents and securities purchased under resale agreements ( “ resale agreements ” ) , partially offset by a decrease in available-for-sale investment securities . gross loans held-for-investment increased $ 1.86 billion or 8 % to $ 25.50 billion as of december 31 , 2016 , compared to $ 23.64 billion as of december 31 , 2015 , while the allowance for loan losses to loans held-for-investment ratio as of december 31 , 2016 declined by 10 basis points to 1.02 % compared to 1.12 % as of december 31 , 2015 as credit quality continued to improve . the overall balance sheet growth was primarily fueled by solid deposit growth during the year ended december 31 , 2016 . deposits increased $ 2.42 billion or 9 % to $ 29.89 billion as of december 31 , 2016 compared to $ 27.48 billion as of december 31 , 2015 , primarily due to a $ 3.42 billion or 16 % increase in core deposits to $ 24.28 billion as of december 31 , 2016 , partially offset by a $ 1.00 billion or 15 % decrease in time deposits to $ 5.62 billion as of december 31 , 2016 . core deposits accounted for 81 % and 76 % of total deposits as of december 31 , 2016 and 2015 , respectively . 28 from a capital management perspective , the company continued to maintain a strong capital position with its cet1 capital ratio at 10.9 % as of
| 13,553 |
the key strategies include focusing on street sales and performance brands , pursuing new customers for all three of our reportable segments , expansion of geographies , utilizing our infrastructure to gain further operating and purchasing efficiencies , and making strategic acquisitions . how we assess the performance of our business in assessing the performance of our business , we consider a variety of performance and financial measures . the key measures used by our management are discussed below . the percentages on the results presented below are calculated based on rounded numbers . net sales net sales is equal to gross sales minus sales returns ; sales incentives that we offer to our customers , such as rebates and discounts that are offsets to gross sales ; and certain other adjustments . our net sales are driven by changes in case volumes , product inflation that is reflected in the pricing of our products , and mix of products sold . gross profit gross profit is equal to our net sales minus our cost of goods sold . cost of goods sold primarily includes inventory costs ( net of supplier consideration ) and inbound freight . cost of goods sold generally changes as we incur higher or lower costs from our suppliers and as our customer and product mix changes . ebitda and adjusted ebitda management measures operating performance based on our ebitda , defined as net income before interest expense , interest income , income taxes , and depreciation and amortization . ebitda is not defined under u.s. 34 gaap and is not a measure of operating income , operating performance , or liquidity presented in accordance with u.s. gaap and is subject to important limitations . our definition of ebitda may not be the same as similarly titled measures used by other companies . we believe that the presentation of ebitda enhances an investor 's understanding of our performance . we use this measure to evaluate the performance of our segments and for business planning purposes . we present ebitda in order to provide supplemental information that we consider relevant for the readers of our consolidated financial statements included elsewhere in this report , and such information is not meant to replace or supersede u.s. gaap measures . in addition , our management uses adjusted ebitda , defined as net income before interest expense , interest income , income and franchise taxes , and depreciation and amortization , further adjusted to exclude certain items that we do not consider part of our core operating results . such adjustments include certain unusual , non-cash , non-recurring , cost reduction , and other adjustment items permitted in calculating covenant compliance under our credit agreement and indenture ( other than certain pro forma adjustments permitted under our credit agreement and indenture relating to the adjusted ebitda contribution of acquired entities or businesses prior to the acquisition date ) . under our credit agreement and indenture , our ability to engage in certain activities such as incurring certain additional indebtedness , making certain investments , and making restricted payments is tied to ratios based on adjusted ebitda ( as defined in the credit agreement and indenture ) . our definition of adjusted ebitda may not be the same as similarly titled measures used by other companies . adjusted ebitda is not defined under u.s. gaap and is subject to important limitations . we believe that the presentation of adjusted ebitda is useful to investors because it is frequently used by securities analysts , investors , and other interested parties , including our lenders under the abl facility ( as defined below under liquidity and capital resources ) and holders of our notes ( as defined below under liquidity and capital resources ) , in their evaluation of the operating performance of companies in industries similar to ours . in addition , targets based on adjusted ebitda are among the measures we use to evaluate our management 's performance for purposes of determining their compensation under our incentive plans . ebitda and adjusted ebitda have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under u.s. gaap . for example , ebitda and adjusted ebitda : exclude certain tax payments that may represent a reduction in cash available to us ; do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future ; do not reflect changes in , or cash requirements for , our working capital needs ; and do not reflect the significant interest expense , or the cash requirements , necessary to service our debt . in calculating adjusted ebitda , we add back certain non-cash , non-recurring , and other items as permitted or required by our credit agreement and indenture . adjusted ebitda among other things : does not include non-cash stock-based employee compensation expense and certain other non-cash charges ; does not include cash and non-cash restructuring , severance , and relocation costs incurred to realize future cost savings and enhance our operations ; and does not reflect management fees paid to blackstone and wellspring . we have included the calculations of ebitda and adjusted ebitda for the periods presented . 35 results of operations , ebitda , and adjusted ebitda the following table sets forth a summary of our results of operations , ebitda , and adjusted ebitda for the periods indicated ( dollars in millions , except per share data ) : replace_table_token_6_th we believe that the most directly comparable gaap measure to ebitda and adjusted ebitda is net income . the following table reconciles ebitda and adjusted ebitda to net income for the periods presented : replace_table_token_7_th ( 1 ) includes a $ 9.4 million loss on extinguishment and $ 5.5 million of accelerated amortization of original issuance discount and deferred financing costs during fiscal 2016 . story_separator_special_tag 36 ( 2 ) includes adjustments for non-cash charges arising from stock-based compensation , interest rate swap hedge ineffectiveness , and gain/loss on disposal of assets . stock-based compensation cost was $ 17.3 million , $ 17.2 million and $ 1.2 million for fiscal 2017 , fiscal 2016 and fiscal 2015 , respectively . in addition , this includes an increase ( decrease ) in the lifo reserve of $ 2.6 million , $ ( 1.5 ) million and $ 1.7 million for fiscal 2017 , fiscal 2016 , and fiscal 2015 , respectively . ( 3 ) includes professional fees and other costs related to completed and abandoned acquisitions ; in fiscal 2015 these fees are net of a $ 25.0 million termination fee related to the terminated agreement to acquire 11 us foods facilities from sysco and us foods , costs of integrating certain of our facilities , facility closing costs , advisory fees paid to blackstone and wellspring , and offering fees . ( 4 ) consists primarily of an expense related to our withdrawal from a purchasing cooperative of which we were a member , pre-acquisition worker 's compensation claims related to an insurance company that went into liquidation , a legal settlement expense , and amounts received from business interruption insurance because of weather related or other one-time events . ( 5 ) consists primarily of professional fees and related expenses associated with productivity initiatives . ( 6 ) includes amounts related to the withdrawal from the central states southeast and southwest areas pension fund . see note 15 commitments and contingencies to the audited consolidated financial statements included in item 8. financial statements and supplementary data . ( 7 ) consists primarily of changes in fair value and costs related to settlements on our fuel collar derivatives , certain financing transactions , lease amendments , and franchise tax expense and other adjustments permitted by our credit agreements . story_separator_special_tag the 53 rd week in fiscal 2016 , growth in cases sold and a higher gross profit per case , which in turn was the result of selling an improved mix of channels and products . within performance foodservice , case growth to street customers positively affected gross profit per case . street customers typically receive more services from us , cost more to serve , and pay a higher gross profit per case than other customers . also , in fiscal 2016 , performance foodservice grew our performance brand sales , which have higher gross profit per case compared to the other brands we sell . see segment resultsperformance foodservice below for additional discussion . the company estimates that the gross profit for the extra week in fiscal 2016 was approximately $ 40.1 million . operating expenses operating expenses increased $ 119.6 million , or 7.1 % , for fiscal 2016 compared to fiscal 2015. the increase in operating expenses was primarily driven by the 53 rd week in fiscal 2016 , the increase in case volume , an increased investment in our sales force , and increases in stock compensation expense of $ 16.0 million , bonus expense of $ 13.8 million , and insurance expense of $ 7.0 million , as discussed in the segment results below . the increase was partially offset by leverage of our fixed costs , improved productivity in our warehouse and transportation operations , and decreases in fuel expense and amortization of intangible assets . operating expenses for the extra week is fiscal 2016 were approximately $ 35.3 million . depreciation and amortization of intangible assets decreased from $ 121.3 million in fiscal 2015 to $ 118.6 million in fiscal 2016 , a decrease of 2.2 % . decreases in amortization of intangible assets , since certain intangibles were fully amortized compared to the prior year , more than offset the increases in depreciation in fixed assets resulting from larger capital outlays to support our growth . net income net income increased by $ 11.8 million , or 20.9 % , to $ 68.3 million for fiscal 2016 compared to fiscal 2015. the increase in net income was attributable to a $ 42.1 million increase in operating profit and a $ 1.8 million decrease in interest expense , partially offset by a $ 26.0 million increase in other expense and a $ 6.1 million increase in income tax expense . the company estimates that net income for the extra week in fiscal 2016 was approximately $ 2.1 million . the increase in operating profit was a result of the increase in gross profit discussed above , partially offset by the increase in operating expenses . the decrease in interest expense was primarily the result of lower average borrowings during fiscal 2016 compared to fiscal 2015 , partially offset by a $ 9.4 million loss on extinguishment of debt and $ 5.5 million of accelerated amortization of original issuance discount and deferred financing costs . the $ 26.0 million increase in other expense related primarily to the absence of the $ 25.0 million termination fee income recognized in fiscal 2015 , a $ 3.7 million increase in expense related to settlements on our derivatives and a $ 0.5 million increase in hedge ineffectiveness in fiscal 2016 compared to fiscal 2015. these increases were partially offset by a $ 3.2 million increase in non-cash income primarily related to the change in fair value of our derivatives for fiscal 2016 compared to fiscal 2015. the increase in income tax expense was primarily a result of the increase in income before taxes , partially offset by a decrease in the effective tax rate . our effective tax rate in fiscal 2016 was 40.3 % compared to 41.5 % in fiscal 2015. the decrease in the effective tax rate was a result of an increase in other permanent deductions and a reduction in non-deductible expenses and state income tax as a percentage of income before taxes . since non-deductible expenses tend to be relatively constant , there is a favorable rate impact as income before taxes increases .
| the company estimates that the gross profit for the extra week in fiscal 2016 was approximately $ 40.1 million . operating expenses operating expenses increased $ 106.0 million , or 5.9 % , for fiscal 2017 compared to fiscal 2016. the increase in operating expenses was primarily driven by the increase in case volume and the resulting impact on variable operational and selling expenses , as well as investments associated with expansion of geographies served in the 37 dollar store channel , transition of business within pfg customized and the opening of our automated retail facility within the vistar segment . additionally , operating expenses increased for fiscal year 2017 as a result of an $ 8.4 million increase in insurance expense primarily related to workers compensation and professional and legal fees including settlements of $ 3.0 million . the increase was partially offset by the 53 rd week in fiscal 2016. operating expenses for the extra week is fiscal 2016 were approximately $ 35.3 million . depreciation and amortization of intangible assets increased from $ 118.6 million in fiscal 2016 to $ 126.1 million in fiscal 2017 , an increase of 6.3 % . depreciation of fixed assets increased as a result of larger capital outlays to support our growth , as well as recent acquisitions . this increase was partially offset by decreases in amortization since certain intangibles are now fully amortized compared to the prior year . net income net income increased by $ 28.0 million , or 41.0 % , to $ 96.3 million for fiscal 2017 compared to fiscal 2016. the increase in net income was attributable to an $ 8.8 million increase in operating profit , a $ 29.0 million decrease in interest expense , and a $ 5.4 million decrease in other expense , partially offset by a $ 15.2 million increase in income tax expense . the company estimates that net income for the extra week in fiscal 2016 was approximately $ 2.1
| 13,554 |
we manage our cash and our use of credit facilities to ensure adequate liquidity , in adherence to related financial covenants . sources of revenue we derive our revenue from two sources : from business services associated with our revenue cycle management , electronic health record management , patient communication management , care coordination and analytics offerings and from implementation and other services . implementation and other services consist primarily of professional services fees related to assisting clients with the initial implementation of our services and for ongoing training and related support services . business services accounted for approximately 97 % of our total revenues for each of the years ended december 31 , 2011 , 2010 , and 2009 , respectively . business services fees are typically 2 % to 8 % of a practice 's total collections depending upon the services used and the size , complexity , and other characteristics of the practice , plus a per-statement charge for billing statements that are generated for patients of certain clients . accordingly , business services fees are largely driven by : the number of physician practices we serve , the number of physicians and other medical providers working in those physician practices , the volume of activity and related collections of those physicians and other medical providers , the services used by the practice and our contracted rates . there is moderate seasonality in the activity level of physician practices . typically , discretionary use of physician services declines in the late summer and during the holiday season , which leads to a decline in collections by our physician clients about 30 to 50 days later . additionally , the volume of activity and related collections vary from year to year based in large part on the severity , length and timing of the onset of the flu season . while we believe that the severity , length and timing of the onset of the cold and flu season will continue to impact collections by our physician clients , there can be no assurance that our future sales of these services will necessarily follow historical patterns . implementation and other revenue are largely driven by the increase in the volume of new business . as a result , we expect implementation and other revenue to increase in absolute terms for the foreseeable future but to remain relatively consistent as a percentage of total revenue . none of our clients accounted for more than 10 % of our total revenues for the years ended december 31 , 2011 , 2010 , or 2009. operating expense direct operating expense . direct operating expense consists primarily of salaries , benefits , claim processing costs , other direct costs , and stock-based compensation related to personnel who provide services to clients , including staff who implement new clients . we expense implementation costs as incurred . we include in direct operating expense all service costs associated with athenacollector , athenaclinicals , athenacommunicator , athenacoordinator and anodyne analytics . we expect to increase our overall level of automation as we become a larger operation , with higher volumes of work in particular functions , geographies , and medical specialties . although we expect that direct operating expense will increase in absolute terms for the foreseeable future , the direct operating expense is expected in the long-term to decline as a percentage of revenues as we increase automation . additionally , in the near-term , we expect that the percentage of direct operating expenses as a percentage of revenue will slightly increase until we fully integrate our newly acquired business and automate our new care coordinator offering . direct operating expense does not include allocated amounts for rent , occupancy and other indirect costs ( including building maintenance and utilities ) , depreciation , and amortization , except for amortization related to purchased intangible assets . 49 selling and marketing expense . selling and marketing expense consists primarily of marketing programs ( including trade shows , brand messaging , and on-line initiatives ) and personnel-related expense for sales and marketing employees ( including salaries , benefits , commissions , stock-based compensation , non-billable travel , lodging , and other out-of-pocket employee-related expense ) . although we recognize substantially all of our revenue when services have been delivered , we recognize a large portion of our sales commission expense at the time of contract signature and at the time our services commence . accordingly , we incur a portion of our sales and marketing expense prior to the recognition of the corresponding revenue . we have increased our sales and marketing expenses from year to year and we expect to continue to increase our investment in sales and marketing by hiring additional direct sales personnel and support personnel to add new clients and increase sales to our existing clients and expand awareness through paid search and other similar initiatives . we also plan to expand our marketing activities in certain areas , such as attending trade shows , expanding user groups , and creating new printed materials . as a result , we expect that , in the near-term , sales and marketing expense will increase at the same rate as revenue growth . research and development expense . research and development expense consists primarily of personnel-related expenses for research and development employees ( including salaries , benefits , stock-based compensation , non-billable travel , lodging , and other out-of-pocket employee-related expense ) and consulting fees for third-party developers . we expect that , in the near-term , research and development expense will increase in absolute terms and will likely increase as a percentage of total revenue as we develop and enhance new and existing services . general and administrative expense . story_separator_special_tag general and administrative expense consists primarily of personnel-related expense for administrative employees ( including salaries , benefits , stock-based compensation , non-billable travel , lodging , and other out-of-pocket employee-related expense ) , occupancy and other indirect costs ( including building maintenance and utilities ) , and insurance premiums ; software as a service fees ; outside professional fees for accountants , lawyers , and consultants ; and compensation for temporary employees . we expect that general and administrative expense will increase in absolute terms for the foreseeable future as we invest in infrastructure to support our growth . though expenses are expected to continue to rise in absolute terms , we expect general and administrative expense to decline as a percentage of total revenue over time . depreciation and amortization expense . depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization of capitalized software development costs , which we amortize over a two-year period from the time of release of related software code . as we grow , we will continue to make capital investments in the infrastructure of the business , and we will continue to develop software that we capitalize . in the near-term we expect related depreciation and amortization expense to increase as a percentage of total revenue . other income ( expense ) . interest expense has historically consisted of interest costs related to our equipment-related term leases , our term loan and revolving loans under our credit facility , offset by interest income on investments . interest income represents earnings from our cash , cash equivalents , and investments . the gain ( loss ) on the interest rate derivative contract represented the change in the fair market value of a derivative instrument that is not designated a hedge . as we repaid all capital leases , the term loan and terminated the interest rate derivative contract in may 2011 , we expect that our interest expense will be insignificant until such time we determined it is appropriate to draw down on our new financing arrangements . income tax provision . income tax provision consists of federal and state income taxes in the united states and india . the difference between our effective tax rate and statutory rate is mainly related to the treatment of incentive stock options ( isos ) as permanent differences . we substantially ceased issuing isos in 2009 and expect that the difference between the effective tax rate and our federal and state statutory rates will be nominal as the previously issued isos vest and possibly become disqualified dispositions . 50 recent developments on october 20 , 2011 , the company entered into a credit agreement that provides for a five-year $ 100 million revolving credit facility ( revolving credit agreement ) . the revolving credit agreement replaces the $ 15 million credit agreement that expired september 3 , 2011. the terms and conditions of the revolving credit agreement are customary to facilities of this nature . on august 31 , 2011 , the company acquired proxsys llc ( proxsys ) . the acquisition broadens the company 's offerings by bringing order transmission , pre-certification and pre-registration capabilities to the company 's service platform . the results of proxsys 's operations are included in the statement of operations of the combined entity since the date of acquisition . consideration for this transaction was $ 28 million plus potential additional consideration of $ 8 million which will be paid over a two-year period if proxsys achieves certain business and financial milestones . as of december 31 , 2011 , we have not paid any amounts associated with the additional consideration . critical accounting policies our discussion and analysis of our results of operations and liquidity and capital resources 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 , liabilities , revenue , expenses , and the related disclosures . we base our assumptions , estimates and judgments on historical experience , current trends and other factors we believe to be relevant at the time we prepared our consolidated financial statements . on a regular basis , we review the accounting policies , 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 . the preparation of our consolidated financial statements in conformity with gaap requires us to make estimates and assumptions . these estimates and assumptions affect the reported amounts of assets and liabilities and 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 periods . 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 options ; ( 5 ) allocation of direct and indirect cost of sales ; ( 6 ) fair value of contingent consideration and acquired intangible assets and ( 7 ) litigation reserves . future events and their effects can not be predicted with certainty , and accordingly , our accounting estimates require the exercise of judgment . 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 .
| revenue from implementations and other sources was $ 11.3 million for the year ended december 31 , 2011 , an increase of $ 2.9 million , or 35 % , over revenue of $ 8.4 million for the year ended december 31 , 2010. this increase was driven by new client implementations and increased professional services , including consulting services , for our larger client base . the increase in implementation and other revenue is the result of the increase in the volume of new business . year ended december 31 , 2011 2010 change amount amount amount percent direct operating costs $ 122,795 $ 96,582 $ 26,213 27 % direct operating costs . direct operating costs for the year ended december 31 , 2011 , was $ 122.8 million , an increase of $ 26.2 million , or 27 % , over direct operating costs of $ 96.6 million for the year ended december 31 , 2010 mainly as a result of increased direct operating employee-related costs and business partner services . these increases were primarily due to an increase in the number of claims that we processed on behalf 56 of our clients and the related expense of providing services , including transactions expense and salary and benefits expense . the total claims submitted on behalf of clients for the year ended december 31 , 2011 , was 59.3 million , an increase of 11.9 million , or 25 % over total claims submitted of 47.4 million for the year ended december 31 , 2010. direct operating employee-related costs , including stock-based compensation expense , increased $ 14.4 million , or 27 % , from $ 52.8 million for the year ended december 31 , 2010 , compared to $ 67.2 million for the year ended december 31 , 2011. this increase is primarily due to the 21 % increase in headcount since december 31 , 2010 , which does not include the approximately 200 employees from our acquisition of proxsys at the end of august 2011. not including our acquisition of proxsys , we increased headcount to meet the current and anticipated demand for our services as our customer base has expanded and includes larger medical groups . also , for the year ended december 31 , 2011 , direct operating expense includes $ 36.5 million of business partners ' services , an increase
| 13,555 |
all corporate and centrally incurred costs are allocated to the business segments based principally on net sales . we evaluate business segment cash flow and financial position performance based primarily upon capital expenditures and primary working capital levels ( see definition of primary working capital in “ liquidity and capital resources ” below ) . although we 27 monitor the three elements of primary working capital ( receivables , inventory and payables ) , our primary focus is on the total amount due to the significant impact it has on our cash flow . our management structure , financial reporting systems , and associated internal controls and procedures , are all consistent with our three geographic business segments . we report on a march 31 fiscal year-end . our financial results are largely driven by the following factors : global economic conditions and general cyclical patterns of the industries in which our customers operate ; changes in our selling prices and , in periods when our product costs increase , our ability to raise our selling prices to pass such cost increases through to our customers ; the extent to which we are able to efficiently utilize our global manufacturing facilities and optimize our capacity ; the extent to which we can control our fixed and variable costs , including those for our raw materials , manufacturing , distribution and operating activities ; changes in our level of debt and changes in the variable interest rates under our credit facilities ; and the size and number of acquisitions and our ability to achieve their intended benefits . we have two primary product lines : reserve power and motive power products . net sales classifications by product line are as follows : reserve power products are used for backup power for the continuous operation of critical applications in telecommunications systems , uninterruptible power systems , or “ ups ” applications for computer and computer-controlled systems , and other specialty power applications , including medical and security systems , premium starting , lighting and ignition applications , in switchgear , electrical control systems used in electric utilities , large-scale energy storage , energy pipelines , in commercial aircraft , satellites , military aircraft , submarines , ships and tactical vehicles . reserve power products also include thermally managed cabinets and enclosures for electronic equipment and batteries . with the recent alpha acquisition , we are a provider of highly integrated power solutions and services to broadband , telecom , renewable and industrial customers . motive power products are used to provide power for electric industrial forklifts used in manufacturing , warehousing and other material handling applications as well as mining equipment , diesel locomotive starting and other rail equipment . current market conditions economic climate the covid-19 pandemic has weakened economic activity around the world . china 's economic activity was the hardest hit during our fourth fiscal quarter and two of our plants in china were shut down for several weeks and order demand slowed significantly . in europe and north america , the impact of covid-19 was felt towards the end of our fourth quarter so the economic impact was not as severe as in china . we believe that emea and americas economies will be much harder hit by the impact of covid-19 during our first fiscal quarter of fiscal 2021. while the adverse direct impact from covid-19 was felt by our factories in china and our overall supply chain , our factories in both the americas and emea , deemed essential critical infrastructure suppliers , remain in operation with some near full capacity while others are experiencing lower demand , particularly those in our motive power lines of business . we have been able to meet customer demand while maintaining the safety considerations for those in our facilities and as many employees continue to work effectively from home . the pandemic continues to pose challenges in many of our markets including delayed 5g deployments and lower oem sales to our transportation and motive power customers as they experience lower demand with their end customers . volatility of commodities and foreign currencies our most significant commodity and foreign currency exposures are related to lead and the euro , respectively . historically , volatility of commodity costs and foreign currency exchange rates have caused large swings in our production costs . as a result of the covid-19 pandemic and a forecasted global economic recession , we anticipate that our commodity costs will be lower in the near future and foreign currency exposures may continue to fluctuate as they have in the past several years . since the outbreak of covid-19 in our fourth fiscal quarter of 2020 , we have experienced declining commodity costs . 28 customer pricing our selling prices fluctuated during the last several years to offset the volatile cost of commodities . approximately 30 % of our revenue is currently subject to agreements that adjust pricing to a market-based index for lead . lead prices rose for the most part of fiscal 2018 , peaked in the first quarter of fiscal 2019 and then declined sequentially in every quarter in fiscal 2019. in fiscal 2020 , our selling prices declined in response to declining commodity costs , including lead . based on current commodity markets , we will likely see year over year benefits from declining commodity prices , with some related reduction in our selling prices in the upcoming year . liquidity and capital resources we believe that our financial position is strong , and we have substantial liquidity with $ 327 million of available cash and cash equivalents and available and undrawn credit lines of approximately $ 694 million at march 31 , 2020 to cover short-term liquidity requirements and anticipated growth in the foreseeable future . the nominal amount of credit available is subject to a leverage ratio maximum of 3.5x ebitda , as discussed in the liquidity and capital resources , which effectively limits additional debt or lowered cash balances by approximately $ 500 million . story_separator_special_tag in fiscal 2020 , we issued $ 300 million in aggregate principal amount of our 4.375 % senior notes due 2027 ( the “ 2027 notes ” ) . proceeds from this offering , net of debt issuance costs were $ 296.3 million and were utilized to pay down the balance outstanding on the revolver borrowings . in fiscal 2018 , we entered into a credit facility ( “ 2017 credit facility ” ) that consisted of a $ 600.0 million senior secured revolving credit facility ( “ 2017 revolver ” ) and a $ 150.0 million senior secured term loan ( “ 2017 term loan ” ) with a maturity date of september 30 , 2022. on december 7 , 2018 , we amended the 2017 credit facility ( as amended , the “ amended credit facility ” ) . the amended credit facility consists of $ 449.1 million senior secured term loans ( the “ amended 2017 term loan ” ) , including a cad 133.1 million ( $ 99.1 million ) term loan and a $ 700.0 million senior secured revolving credit facility ( the “ amended 2017 revolver ” ) . the amendment resulted in an increase of the 2017 term loan and the 2017 revolver by $ 299.1 million and $ 100.0 million , respectively . in fiscal 2020 and 2019 we repurchased $ 34.6 million and $ 56.0 million of our common stock under existing authorizations , respectively . in fiscal 2020 and fiscal 2019 , we reissued 17,410 and 3,256 shares out of our treasury stock , respectively , to participants under the company 's employee stock purchase plan . in fiscal 2019 , we reissued 1,177,630 shares from our treasury stock to satisfy $ 100.0 million of the initial purchase consideration of $ 750.0 million , in connection with the alpha acquisition . in fiscal 2018 , we repurchased $ 121.0 million of our common stock through an accelerated share repurchase program ( “ asr ” ) with a major financial institution and through open market purchases . a substantial majority of the company 's cash and investments are held by foreign subsidiaries . the majority of that cash and investments is expected to be utilized to fund local operating activities , capital expenditure requirements and acquisitions . the company believes that it has sufficient sources of domestic and foreign liquidity . we believe that our strong capital structure and liquidity affords us access to capital for future capital expenditures , acquisition and stock repurchase opportunities and continued dividend payments . cost savings initiatives cost savings programs remain a continuous element of our business strategy and are directed primarily at further reductions in plant manufacturing ( labor and overhead ) , raw material costs and our operating expenses ( primarily selling , general and administrative ) . in order to realize cost savings benefits for a majority of these initiatives , costs are incurred either in the form of capital expenditures , funding the cash obligations of previously recorded restructuring expenses or current period expenses . in january 2017 , we started our operational excellence program , referred to as the enersys operating system , or eos , which serves as our continuous improvement engine . during fiscal 2018 and 2019 , we were able to fund our investment in new product development and digital core with savings of approximately $ 25 million in each year , primarily from restructuring programs . our global deployment of eos began to slow in fiscal 2019 and we have struggled to maintain pace with surging customer demand for tppl amidst disruptions in fiscal 2019 from our erp implementation and in fiscal 2020 from a fire , both 29 adversely impacting our productivity at our richmond motive power facility . we constantly evaluate the return on investment to ensure we achieve our targeted improvement by the end of fiscal 2021. critical accounting policies and estimates our significant accounting policies are described in note 1 - summary of significant accounting policies to the consolidated financial statements in item 8. in preparing our financial statements , management is required to make estimates and assumptions that , among other things , affect the reported amounts in the consolidated financial statements and accompanying notes . these estimates and assumptions are most significant where they involve levels of subjectivity and judgment necessary to account for highly uncertain matters or matters susceptible to change , and where they can have a material impact on our financial condition and operating performance . we discuss below the more significant estimates and related assumptions used in the preparation of our consolidated financial statements . if actual results were to differ materially from the estimates made , the reported results could be materially affected . revenue recognition we adopted the new accounting standard for the recognition of revenue under asc 606 for the fiscal year beginning on april 1 , 2019. under this standard , we recognize revenue only when we have satisfied a performance obligation through transferring control of the promised good or service to a customer . the standard indicates that an entity must determine at contract inception whether it will transfer control of a promised good or service over time or satisfy the performance obligation at a point in time through analysis of the following criteria : ( i ) the entity has a present right to payment , ( ii ) the customer has legal title , ( iii ) the customer has physical possession , ( iv ) the customer has the significant risks and rewards of ownership and ( v ) the customer has accepted the asset . our primary performance obligation to our customers is the delivery of finished goods and products , pursuant to purchase orders . control of the products sold typically transfers to our customers at the point in time when the goods are shipped as this is also when title generally passes to our customers under the terms and conditions of our customer arrangements .
| product line sales replace_table_token_13_th sales in our reserve power products increased in fiscal 2019 by $ 168.3 million or 13.5 % compared to the prior year , primarily due to a 13 % increase due to the alpha acquisition , a 2 % increase in pricing , and a 1 % increase in organic volume , partially offset by a 2 % decrease in currency translation impact . sales in our motive power products increased in fiscal 2019 by $ 57.9 million or 4.3 % compared to the prior year , primarily due to a 5 % increase in organic volume and a 1 % increase in pricing , partially offset by a 2 % decrease in currency translation impact . gross profit replace_table_token_14_th gross profit increased $ 34.7 million or 5.3 % in fiscal 2019 compared to fiscal 2018 . gross profit , as a percentage of net sales , decreased 80 basis points in fiscal 2019 compared to fiscal 2018 . the decrease in the gross profit margin was primarily due to an increase in commodity costs , freight and tariffs of approximately $ 60 million , which were offset by comparable increase in organic volume and pricing , but still resulted in gross margin dilution . however , this dilutive effect had reversed by our fourth quarter of fiscal 2019 , due to a decline in commodity costs . gross profit , as a percentage of net sales , was also negatively impacted by the opening balance sheet adjustment to alpha inventories of $ 7.2 million . 41 operating items replace_table_token_15_th nm = not meaningful operating expenses operating expenses increased $ 59.3 million or 15.5 % in fiscal 2019 from fiscal 2018 and increased as a percentage of net sales by 90 basis points . the impact of foreign currency translation resulted in a decrease of $ 8.5 million . excluding the impact of the foreign currency translation , the increase in dollars was primarily due to alpha acquisition related costs and payroll related expenses . selling expenses , our main component of operating expenses , were 46.4 % in fiscal 2019 , compared to 51.5 % in fiscal 2018 . restructuring and other exit charges with the recent alpha acquisition , the company commenced restructuring in the americas , as part of its targeted
| 13,556 |
we also proposed a collector project that would consist of up to five new transmission lines in montana to connect new generation , primarily wind farms , with our existing transmission system and to the proposed msti line . the timing of the collector project would coincide with the construction of msti . due to the status of msti , we have also suspended efforts on the collector project . we have not capitalized any costs associated with the collector project . dave gates generating station at mill creek ( dggs ) on january 1 , 2011 , we began commercial operations of dggs , a 150 mw natural gas fired facility that provides regulating resources ( in place of previously contracted ancillary services ) . dggs was constructed for a total cost of $ 183 million , as compared to an original estimate of $ 202 million . our regulatory filings seeking approval of rates related to dggs are based on an allocation of approximately 80 % of revenues related to the facility from retail customers being subject to the jurisdiction of the mpsc and approximately 20 % of revenues allocated to wholesale customers subject to the jurisdiction of the ferc . in march 2012 , the mpsc issued a final order in review of our previously submitted required compliance filing . the mpsc found that the total project costs incurred were prudent and established final rates . as a result of the lower than estimated construction costs and impact of the flow-through of accelerated state tax depreciation , the final rates are lower than our 2011 interim rates . we are refunding the amount we over collected of approximately $ 6.2 million to customers over a one-year period that began in may 2012 . the mpsc 's final order approves using our proposed cost allocation methodology on a temporary basis , and requires us to complete a study of the relative contribution of retail and wholesale customers to regulation capacity needs . the results of this study may be used in determining future cost allocations between retail and wholesale customers . in our dggs ferc proceedings , total project costs were not challenged and the parties to the case stipulated to the revenue requirement ; however , intervenors challenged the allocation of costs . we proposed allocating 20 % of the dggs revenue requirement to ferc jurisdictional customers , based on our past practice of allocating 20 % of the contracted costs for these services to ferc jurisdictional customers . a hearing was held in june 2012 before a ferc administrative law judge ( alj ) to consider this proposed allocation methodology . in september 2012 , we received an initial decision from the alj concluding that we should only recover approximately 4.4 % of the revenue requirement from ferc jurisdictional customers . the alj 's initial decision is nonbinding . during the fourth quarter of 2012 , we filed a brief in opposition to the initial decision . various intervening parties also filed briefs in opposition or support of the initial decision . the ferc is expected to consider the matter and issue a binding decision during the second quarter of 2013 . the ferc is not obliged to follow any of the findings from the alj 's initial decision and can accept or reject the initial decision in whole or in part . if the ferc upholds the alj decision and a portion of the costs are effectively disallowed , we would be required to assess dggs for impairment . if we disagree with a decision issued by the ferc , we may pursue full appellate rights through rehearing and appeal to a united states circuit court of appeals , which could extend into 2015 . we continue to bill customers interim rates that have been in effect since january 1 , 2011 . these interim rates are subject to refund plus interest pending final resolution at ferc . as a result of the alj initial decision , we deferred additional revenue of approximately $ 11.4 million during the third quarter of 2012. of this charge , approximately $ 6.4 million relates to 24 revenues collected during 2011. as of december 31 , 2012 , our cumulative deferred revenue related to dggs ferc jurisdictional revenues is approximately $ 16.5 million . we expect to defer revenues of approximately $ 0.7 million per month during 2013 pending final resolution at ferc . dggs was shut down on january 31 , 2012 after problems were discovered in the power turbines of two of the generation units . similar problems were subsequently found in the third unit . there are two power turbines per unit , and by may 3 , 2012 , five of the six turbines had been returned to service through using a combination of the original turbines after servicing by their supplier pratt & whitney power systems ( pwps ) and turbines on loan from pwps . by late 2012 all six turbines had been returned to service . pwps has been investigating the root cause of the problem and we expect modifications of the turbines will take place during 2013 to address issues identified in the root cause analysis . we anticipate that the work will be performed in a manner that will not require dggs to be taken completely off-line . turbine repair costs are covered under the manufacturer 's warranty . we have entered into an agreement with pwps that will extend the warranty for all of the turbines for two years beyond the point at which the last of the six turbines have been fitted with the modifications discussed above . strategy we are focused on providing our customers with safe and reliable service at reasonable rates . in response to our aging infrastructure , we continue to make significant maintenance capital investments in our generation , distribution and transmission assets in excess of our depreciation , which is the amount of these costs we recover through rates . story_separator_special_tag these investments reflect our focus on maintaining our system reliability , and allow us to pursue the deployment of newer technology that promotes the efficient use of electricity , including smart grid . see the “ capital requirements '' discussion below for further detail on planned maintenance capital expenditures . we are considering additional opportunities for the ownership and or development of electric generation facilities and proven gas reserves , which are intended to help stabilize our customers ' energy costs . investing in our system and making prudent acquisitions provide us the opportunity to grow our rate base and earn a reasonable return on invested capital . regulatory matters general rate cases are necessary to cover the cost of providing safe , reliable service , while contributing to earnings growth and achieving our financial objectives . in september 2012 , we filed a request with the mpsc for a natural gas delivery revenue increase of approximately $ 15.7 million . this request was based on a return on equity of 10.5 % , a capital structure consisting of 52 % debt and 48 % equity and rate base of $ 309.5 million . a hearing is scheduled for the second quarter of 2013. we regularly review the need for electric and natural gas rate changes in each state in which we provide service . we expect to file a general electric rate case in south dakota during the second quarter of 2013 based on a 2012 test year due to the supply investments discussed below . as part of this rate case , we plan to include a known and measurable adjustment to incorporate the cost of the aberdeen generating station . we also expect to request a tariff mechanism ( environmental rider ) to recover future environmental related expenses and capital costs associated with big stone and neal # 4 electric generation units . distribution investment montana distribution system infrastructure project ( dsip ) as part of our commitment to maintain high level reliability and system performance we continue to evaluate the condition of our distribution assets to address aging infrastructure through our asset management process . the primary goals of our infrastructure investment are to reverse the trend in aging infrastructure , maintain reliability , proactively manage safety , build capacity into the system , and prepare our network for the adoption of new technologies . we are working on various solutions taking a proactive and pragmatic approach to replace these assets while also evaluating the implementation of additional technologies to prepare the overall system for smart grid applications . we requested and received mpsc approval of an accounting order to defer certain incremental operating and maintenance expenses incurred during 2011 and 2012 and amortize these expenses associated with the phase-in portion of the dsip . the amortization of these expenses will be approximately $ 3.1 million annually over five years beginning in 2013. in addition , we are projecting approximately $ 72.0 million of incremental dsip expenses , including $ 10.9 million for 2013 , and approximately $ 253.3 million of dsip capital expenditures over a five-year time span beginning in 2013. based on 25 our current forecast , along with the mpsc 's approval of the accounting order , we believe dsip-related expenses and capital expenditures will be recovered in base rates through annual or biennial general rate cases . supply investments wind generation during the fourth quarter of 2012 , we purchased and placed into service the 40 mw spion kop wind project in judith basin county in montana for approximately $ 84 million . the terms of pre-approval by the mpsc include an authorized rate of return of 7.4 % , which was computed using a 10 % return on equity , a 5 % estimated cost of debt and a capital structure consisting of 52 % debt and 48 % equity . the pre-approval also includes a performance condition that would reduce our revenue requirement if the average production failed to meet a minimum threshold for the first three years . we do not believe this performance condition will have a significant impact on our revenue requirement . during the fourth quarter of 2012 , we made a compliance filing to reflect actual project costs , including an adjustment to reduce the cost of debt to 4.23 % and the authorized rate of return to 7.0 % . both the energy and associated renewable energy credits are included in our electric supply portfolio to meet future customer loads and rps obligations . beginning in december 2012 , the cost of service of the electricity generated , including a return on our investment , has been included in electric supply rates . we expect the acquisition of spion kop to contribute net income of approximately $ 4.0 million based on estimated revenues of approximately $ 6.2 million during 2013. we expect a state tax bonus depreciation deduction of approximately $ 2.5 million will be flowed through to customers during 2013. the revenue estimate is also based on our expectation that we will flow through annual production tax credits ( ptcs ) of approximately $ 3.0 million . ptcs are federal income tax credits on qualifying renewable electric generation property . as the state bonus depreciation deduction and the ptcs are flowed through to customers , the lower revenue is offset by corresponding reductions to our income tax expense . south dakota electric during 2012 , we began construction on the aberdeen generating station , a 60 mw natural gas peaking facility located in aberdeen , south dakota , which we expect to achieve commercial operation before the 2013 summer season . this facility is intended to provide peaking reserve margin necessary to comply with capacity reserve requirements . as of december 31 , 2012 , we have capitalized approximately $ 50.7 million associated with this project . we do not expect additional capital expenditures during 2013 to be significant . the big stone and neal # 4 electric generation facilities are subject to additional emission reduction requirements .
| 2011 and approximately $ 2.7 million that we had deferred in 2011 pending outcome of allocation uncertainty in montana ; and lower revenues for operating expenses recovered in trackers , primarily due to lower environmental remediation costs , partly offset by increases in costs for customer efficiency programs . demand-side management ( dsm ) lost revenues - base rates , including impacts of past dsm activities , are reset in general rate case filings . as time passes between rate cases , more energy saving measures ( primarily more efficient residential and commercial lighting ) are implemented , causing an increase in dsm lost revenues . during the second quarter of 2012 we recognized approximately $ 6.6 million of dsm lost revenues as compared with approximately $ 2.1 million during the second quarter of 2011. the 2012 amount includes $ 3.3 million in dsm lost revenues for the july 2010 through june 2011 electric tracker period , which we recognized as revenue when we received mpsc approval in april 2012. historically , the mpsc had authorized us to include a calculation of lost revenues based on actual historic dsm program activity , but prohibited the inclusion of forecasted or estimated future lost revenue in the electric tracker . in its 30 april 2012 order , the mpsc authorized us to include forecasted lost revenues in future tracker filings . we have not recognized the entire forecasted amount as we are required to provide the mpsc with a detailed independent study supporting our requested dsm lost revenues during the first quarter of 2013. the study will also be subject to review and potential challenge by intervenors , such as the montana consumer counsel . the mpsc could ultimately determine our requested amounts are too high and we may have to refund a portion of dsm lost revenues that we have recognized . as of december 31 , 2012 , we have deferred revenue
| 13,557 |
net income from continuing operations in 2014 was impacted negatively by $ 562.0 million of long-lived asset impairment recorded in the second half of 2014 along with $ 73.5 million of goodwill impairment recorded in the third quarter of 2014 . 48 strategy the company is focused on our core u.s. iron ore business we continue the strategic shift to a company focused fully on our u.s. iron ore business . we are the market-leading iron ore producer in the u.s. , supplying differentiated iron ore pellets under long-term contracts , some of which begin to expire at the end of 2016 , to the largest north america steel producers . cliffs has the unique advantage of being a low cost producer of iron ore pellets in the u.s. market . pricing structures contained in and the long-term supply provided by our existing contracts , along with our low-cost operating profile , positions u.s. iron ore as our most stable business . we expect to continue to strengthen our u.s. iron ore operating cost profile through continuous operational improvements and disciplined capital allocation policies . strategically , we continue to develop various entry options into the eaf market . as the eaf steel market continues to grow in the u.s. , there is an opportunity for our iron ore to serve this market by providing pellets to the alternative metallics market to produce direct reduced iron pellets , hot briquetted iron and or pig iron . in 2015 , we produced and shipped a batch trial of dr-grade pellets , a source of lower silica iron units for the production of direct reduced iron pellets . in early 2016 , we reached a significant milestone with positive results from the successful industrial trial of our dr-grade pellets . while we are still in the early stages of developing our alternative metallic business , we believe this will open up a new opportunity for us to diversify our product mix and add new customers to our u.s. iron ore segment beyond the traditional blast furnace clientele . reviewing all other businesses for either optimization , divestiture or shutdown we commenced restructuring proceedings for our eastern canadian iron ore businesses under the ccaa in the first quarter of 2015. during the second quarter of 2015 , the ccaa protection granted to the bloom lake group was extended to include the wabush group to facilitate the reorganization of each of their businesses and operations . for more information regarding the status of our divestiture of our eastern canadian iron ore business , see note 14 - discontinued operations for further information . on december 22 , 2015 , we closed the sale of our remaining north american coal business which included pinnacle mine in west virginia and oak grove mine in alabama . the remaining north american coal business was sold to seneca coal resources , llc . the sale marked our exit from the coal business and represents another very important step in the implementation of our u.s. iron ore pellet-centric , environmentally compliant strategy . prior to this sale , it was determined by management as of march 31 , 2015 that our north american coal operating segment met the criteria to be classified as held for sale under asc 205 , presentation of financial statements . for more information regarding the sale and the held for sale classification of our north american coal business , see note 14 - discontinued operations for further information . as an extension of our re-focused u.s. iron ore strategy , we continue to consider further divestiture of the asia pacific iron ore business . we believe the assets from this non-core segment have value and will only consummate a transaction where we believe the consideration fairly and adequately represents such value . asia pacific iron ore is a well-recognized and reliable supplier to steelmakers in asia . as we consider selling this business , we will continue to operate asia pacific iron ore with very low total capital expenditures for the remaining life of mine . maintaining discipline on costs and capital spending and improving our financial flexibility we believe our ability to execute our strategy is dependent on our financial position , balance sheet strength and financial flexibility to manage through current demand for our products and volatility in commodity prices . we have developed a highly disciplined financial and capital expenditure plan with a focus on improving our cost profile and increasing long-term profitability . we resized and streamlined our organization and support functions to better fit our new strategic direction . our capital allocation plan is focused on strengthening our core u.s. iron ore operations to promote greater free cash flow generation . competitive strengths resilient u.s. iron ore operations our u.s. iron ore segment is the core focus of our business strategy . the u.s. iron ore segment is the primary contributor to our consolidated results , generating 76 percent of consolidated revenue and $ 352 million of consolidated adjusted ebitda for the year ended december 31 , 2015. u.s. iron ore produces differentiated iron ore pellets that are customized for use in customers ' blast furnaces as part of the steelmaking process . the grades of pellets currently delivered to each customer are based on that customer 's preferences , which depend in part on the characteristics of the customer 's blast furnace operation . we believe our long history of supplying customized pellets to the u.s. steel producers has resulted in a co-dependent relationship between us and our customers . this technical and operational co-dependency 49 has enabled cliffs to claim a substantial portion of the total u.s. iron ore market . based on cliffs ' equity ownership in its u.s. mines , cliffs ' share of the annual rated production capacity is 25.5 million tons , representing 44 percent of total u.s. annual pellet capacity . long-lived assets with an average mine life of approximately 20 years provide the opportunity to maintain our significant market position well into the future . we believe u.s. story_separator_special_tag iron ore is uniquely positioned in the global iron ore market due to its reduced exposure to seaborne iron ore pricing . more than half of u.s. iron ore production is sold through long-term contracts that are structured with various formula-based pricing mechanisms that reference seaborne pricing , inflation factors and steel prices and mitigate the impact of any one factor 's price volatility on our business . u.s. iron ore 's realized revenue rate decreased 25 percent and 23 percent for the three months and year ended december 31 , 2015 , respectively , compared to a 37 percent and 43 percent decline in the platts 62 percent fe fines spot price over the same periods . in addition , we maintain lower costs compared to our competition as a result of our proximity to u.s. steelmaking operations . our costs are lower as a result of inherent transportation advantages associated with our mine locations near the great lakes which allows for transportation via railroads and loading ports . u.s. iron ore mines also benefit from on-site pellet production and ore production facilities located a short distance from the mines . these advantages translated to cash production costs in the three months and year ended december 31 , 2015 of $ 45 per ton and $ 54 per ton , respectively , which included the cost to mine , concentrate and pelletize , certain transportation costs and site administration costs . competitive asia pacific iron ore operations although our annual production tonnage is substantially less than our competitors in the seaborne market , the asia pacific iron ore business maintains a competitive position with the major australian iron ore producers . we produce a product mix of approximately 50 percent lump ore and 50 percent fines , which is a significantly higher lump mix than the major producers in australia . this lump ore commands a premium in the seaborne market over iron ore fines . further , our asia pacific iron ore segment is a cost competitive producer and requires minimal ongoing sustaining capital expenditures to continue our operations . cash production costs during the three months and year ended december 31 , 2015 , were $ 26 per ton and $ 31 per ton , respectively . going forward , we will continue to operate asia pacific iron ore with a clear bias toward cash optimization . recent developments usw labor agreements our labor agreements with the usw at our tilden , empire , hibbing and united taconite mines were scheduled to expire at 12:01 a.m. on october 1 , 2015. prior to the expiration of these agreements , we agreed with the usw to extend these agreements indefinitely . either party may terminate the agreements by providing the other party with 168 hours ( i.e. , seven days ) notice . we continue to bargain with the usw in good faith with the expectation that we will be able to reach a mutually acceptable long-term extension of our agreements . at this time , we do not anticipate any type of labor disruption as the usw has committed to “ continue working under the current terms and conditions of employment until a tentative agreement is reached. ” pellet agreement with essar on october 6 , 2015 , we announced that , effective october 5 , 2015 , we terminated our pellet agreement with essar . our decision was made as a result of essar 's multiple and material breaches under the agreement . while the agreement has been terminated , we remain open to discussing supplying the essar steel-making operation in sault st. marie or its successor with pellets on commercially reasonable terms consistent with a just-in-time iron ore supply arrangement . northshore on november 17 , 2015 , we announced that we would be temporarily idling iron ore pellet production at our northshore mining operation in minnesota . the idling was a result of a reduction in iron pellet nominations from our customers . until our domestic customers ' blast furnace capacity utilization rates improve , our existing customer demand can be satisfied from our current pellet inventory . we completed the idling of the northshore mine by the end of november . our northshore mine could be restarted and return to normal operating levels if recently filed and forthcoming trade cases were to result in increased pellet nominations from our customers . conversely , if increased iron ore pellet demand does not materialize during this period , the idled state of production could be for an extended period of time . currently , we anticipate that northshore mine will be idled through the first quarter of 2016. the temporary idling resulted in reductions in force at the northshore mine . 50 north american coal operations on december 22 , 2015 , we closed the sale of our remaining north american coal business which included pinnacle mine in west virginia and oak grove mine in alabama . pinnacle mine and oak grove mine were sold to seneca coal resources , llc ( `` seneca '' ) and the deal structure was a sale of equity interests of our remaining coal business . additionally , seneca may pay cliffs an earn-out of up to $ 50 million contingent upon the terms of a revenue sharing plan which extends through the year 2020. the pinnacle complex includes the pinnacle and green ridge mines , which are underground low-volatile metallurgical coal mines . the pinnacle mine has been in operation since 1969. the green ridge mines became operational in 2004. in february 2010 , the green ridge no . 1 mine was closed permanently due to exhaustion of the economic reserves at the mine . in addition , the green ridge no . 2 mine was idled in january 2012. both facilities share preparation , processing and load-out facilities . the oak grove mine is an underground low-volatile metallurgical coal mine . the mine has been in operation since 1972. preparation , processing and rail load-out facilities are located on-site .
| preparation of financial statements requires management to make assumptions , estimates and judgments that affect the reported amounts of assets , liabilities , revenues , costs and expenses , and the related disclosures of contingencies . management bases its estimates on various assumptions and historical experience , which are believed to be reasonable ; however , due to the inherent nature of estimates , actual results may differ significantly due to changed conditions or assumptions . on a regular basis , management reviews the accounting policies , assumptions , estimates and judgments to ensure that our financial statements are fairly presented 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 . management believes that the following critical accounting estimates and judgments have a significant impact on our financial statements . revenue recognition u.s. iron ore and asia pacific iron ore provisional pricing arrangements most of our u.s. iron ore long-term supply agreements are comprised of a base price with annual price adjustment factors . the base price is the primary component of the purchase price for each contract . the inflation-indexed price adjustment factors are integral to the iron ore supply contracts and vary based on the agreement , but typically include adjustments based upon changes in benchmark and international pellet prices and changes in specified producers price indices , including those for industrial commodities excluding fuel , cold rolled steel and strip , and fuel and related products . the pricing adjustments generally operate in the same manner , with each factor typically 76 comprising a portion of the price adjustment , although the weighting of each factor varies based upon the specific terms of each agreement . in most cases , these adjustment factors have not been finalized at the time our product is sold . in these cases , we historically have estimated the adjustment factors at each reporting period based upon the
| 13,558 |
such statements are based on current expectations subject to uncertainties and other factors which may involve known and unknown risks that could cause actual results of operations to differ materially from those projected or implied . further , certain forward-looking statements are based upon assumptions about future events which may not prove to be accurate . risks and uncertainties inherent in forward looking statements include , but are not limited to , the partnership 's future cash flows and ability to obtain sufficient financing , level of operating expenses , conditions in the low income housing tax credits property market and the economy in general , changes in law rules and regulations , and legal proceedings . historical results are not necessarily indicative of the operating results for any future period . subsequent written and oral forward looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by cautionary statements in this form 10-k and in other reports filed with the sec . the following discussion should be read in conjunction with the financial statements and the notes thereto included elsewhere in this filing . critical accounting policies and certain risks and uncertainties the partnership believes that the following discussion addresses the partnership 's most significant accounting policies , which are the most critical to aid in fully understanding and evaluating the partnership 's reported financial results , and certain of the partnership 's risks and uncertainties . use of estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements , and the reported amounts of revenues and expenses during the reporting period . actual results could materially differ from those estimates . method of accounting for investments in local limited partnerships the partnership accounts for its investments in local limited partnerships using the equity method of accounting , whereby the partnership adjusts its investment balance for its share of the local limited partnerships ' results of operations and for any contributions made and distributions received . the partnership reviews the carrying amount of an individual investment in a local limited partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable . recoverability of such investment is measured by the estimated value derived by management , generally consisting of the product of the remaining future low income housing tax credits estimated to be allocable to the partnership and any estimated residual value to the partnership . if an investment is considered to be impaired , the partnership reduces the carrying value of its investment in any such local limited partnership . the accounting policies of the local limited partnerships , generally , are expected to be consistent with those of the partnership . costs incurred by the partnership in acquiring the investments are capitalized as part of the investment account and were being amortized over 30 years ( see notes 2 and 3 to the financial statements ) . 20 “ equity in losses of local limited partnerships ” for each year ended march 31 has been recorded by the partnership based on the twelve months of reported results provided by the local limited partnerships for each year ended december 31. equity in losses from the local limited partnerships allocated to the partnership is not recognized to the extent that the investment balance would be adjusted below zero . if the local limited partnerships report net income in future years , the partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period ( s ) the equity method was suspended . distributions received from the local limited partnerships are accounted for as a reduction of the investment balance . distributions received after the investment has reached zero are recognized as distribution income . in accordance with the accounting guidance for the consolidation of variable interest entities , the partnership determines when it should include the assets , liabilities , and activities of a variable interest entity ( vie ) in its financial statements , and when it should disclose information about its relationship with a vie . the analysis that must be performed to determine which entity should consolidate a vie focuses on control and economic factors . a vie is a legal structure used to conduct activities or hold assets , which must be consolidated by a company if it is the primary beneficiary because it has ( 1 ) the power to direct the activities of the vie that most significantly impact the vie 's economic performance and ( 2 ) the obligation to absorb losses or receive benefits that could potentially be significant to the vie . if multiple unrelated parties share such power , as defined , no party will be required to consolidate the vie . further , the guidance requires continual reconsideration of the primary beneficiary of a vie . based on this guidance , the local limited partnerships in which the partnership invests meet the definition of a vie because the owners of the equity at risk in these entities do not have the power to direct their operations . story_separator_special_tag however , management does not consolidate the partnership 's interests in these vies , as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities . the partnership currently records the amount of its investment in these local limited partnerships as an asset on its balance sheets , recognizes its share of partnership income or losses in the statements of operations , and discloses how it accounts for material types of these investments in its financial statements . the partnership 's balance in investment in local limited partnerships , plus the risk of recapture of tax credits previously recognized on these investments , represents its maximum exposure to loss . the partnership 's exposure to loss on these local limited partnerships is mitigated by the condition and financial performance of the underlying housing complexes as well as the strength of the local general partners and their guarantee against credit recapture to the investors in the partnership . income taxes the partnership has elected to be treated as a pass-through entity for income tax purposes and , as such , is not subject to income taxes . rather , all items of taxable income , deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns . the partnership 's federal tax status as a pass-through entity is based on its legal status as a partnership . accordingly , the partnership is not required to take any tax positions in order to qualify as a pass-through entity . the partnership is required to file and does file tax returns with the internal revenue service and other taxing authorities . accordingly , these financial statements do not reflect a provision for income taxes and the partnership has no other tax positions which must be considered for disclosure . income tax returns filed by the partnership are subject to examination by the internal revenue service for a period of three years . while no income tax returns are currently being examined by the internal revenue service , tax years since 2014 remain open . 21 impact of recent accounting pronouncements in january 2014 , the financial accounting standards board ( “ fasb ” ) issued an amendment to the accounting and disclosure requirements for investments in qualified affordable housing projects . the amendments provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit . the amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met . under the proportional amortization method , an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received , and recognizes the net investment performance in the income statement as a component of income tax expense ( benefit ) . the amendments are effective for interim and annual periods beginning after december 15 , 2014 and should be applied retrospectively to all periods presented . early adoption is permitted . the adoption of this update did not materially affect the partnership 's financial statements . in february 2015 , the fasb issued asu no . 2015-02 , “ consolidation ( topic 810 ) : amendments to the consolidation analysis ” . in addition , in october 2016 , the fasb issued asu no . 2016-17 , “ consolidation ( topic 810 ) : interests held through related parties that are under common control ” , to provide further clarification guidance to asu no . 2015-02. this will improve certain areas of consolidation guidance for reporting organizations that are required to evaluate whether to consolidate certain legal entities such as limited partnerships , limited liability corporations and securitization structures . asu 2015-02 and asu 2016-17 simplifies and improves gaap by : eliminating the presumption that a general partner should consolidate a limited partnership , eliminating the indefinite deferral of fasb statement no . 167 , thereby reducing the number of variable interest entity ( vie ) consolidation models from four to two ( including the limited partnership consolidation model ) and clarifying when fees paid to a decision maker should be a factor to include in the consolidation of vies . asu 2015-02 is effective for periods beginning after december 15 , 2015. asu 2016-17 is effective for periods beginning after december 15 , 2016. the adoption of these updates did not materially affect the partnership 's financial statements . certain risks and uncertainties see item 1a for a discussion of risks regarding the partnership . to date , certain local limited partnerships have incurred significant operating losses and have working capital deficiencies . in the event these local limited partnerships continue to incur significant operating losses , additional capital contributions by the partnership and or the local general partners may be required to sustain the operations of such local limited partnerships . if additional capital contributions are not made when they are required , the partnership 's investment in certain of such local limited partnerships could be lost , and the loss and recapture of the related low income housing tax credits could occur . anticipated future and existing cash resources of the partnership are not sufficient to pay existing liabilities of the partnership . however , substantially all of the existing liabilities of the partnership are payable to the general partner and or its affiliates . though the amounts payable to the general partner and or its affiliates are contractually currently payable , the partnership anticipates that the general partner and or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual
| reporting fees decreased by $ 14,000 for the year ended march 31 , 2017 compared to the year ended march 31 , 2016 , and distribution income increased by $ 16,000 for the year ended march 31 , 2017 compared to the year ended march 31 , 2016. local limited partnerships pay the reporting fees and distribution income to the partnership when the local limited partnerships ' cash flows will allow for the payment . accounting and legal fees decreased by $ 2,000 for the year ended march 31 , 2017 due to the timing of the accounting work performed . asset management fees decreased by $ 10,000 during the year ended march 31 , 2017 compared to the year ended march 31 , 2016. the fees are calculated based on the value of invested assets which decreased due to the sale of local limited partnerships . liquidity and capital resources year ended march 31 , 2018 compared to year ended march 31 , 2017 the net decrease in cash and cash equivalents during the year ended march 31 , 2018 was $ 49,000 compared to a net decrease in cash and cash equivalents of $ 23,000 for the year ended march 31 , 2017. the partnership received $ 98,000 of disposition proceeds from the sale of local limited partnerships during the year ended march 31 , 2018 compared to $ 108,000 of disposition proceeds received during the year ended march 31 , 2017. proceeds received from disposition vary from period to period depending on the sales prices and the values of the housing complexes sold . during the year ended march 31 , 2018 , the partnership paid the general partner or an affiliate $ 58,000 for operating expenses paid on its behalf and $ 112,000 in accrued asset management fees compared to $ 60,000 and $ 108,000 paid during the year ended march 31 , 2017. each quarter the partnership evaluates its cash position and determines how much of operating expense reimbursements and accrued asset management fees will
| 13,559 |
the valuation allowance against cpac europe 's net deferred tax assets was recorded in the first quarter of fiscal 2006 and has been adjusted to reflect belgian taxable losses in fiscal 2006. also , a valuation allowance was recorded in cpac asia against a deferred tax asset for certain receivable balances written off for financial statement purposes , but not yet deducted for tax purposes . due to the uncertainty as to the ultimate success in obtaining regulatory approval to deduct this previous bad debt , a valuation reserve was recorded against this deferred tax asset . in addition to the valuation allowance recorded for cpac asia , the cpac europe and domestic valuation allowances established as a result of losses incurred during the current and prior fiscal years under the criteria established in sfas no . 109 , `` accounting for income taxes , '' were the result of the company no longer able to assert that realization of the related future tax benefits was `` more likely than not . '' during the company 's fiscal year ended march 31 , 2006 , none of the company 's foreign subsidiaries repatriated any of their current or cumulative foreign earnings to their u.s. parent company . as has been the company 's historical practice , income of the foreign subsidiaries is considered to be permanently reinvested , and as such , deferred income taxes were not 17 provided on this income . accordingly , no deferred taxes have been provided on this income , as the company does not plan to initiate any action that would require the payment of income taxes . it is not practicable to estimate the amount of additional tax that might be payable on this foreign income if distributed ( see note 10 to the consolidated financial statements for further discussion on the 2006 consolidated tax provision ) . the company 's consolidated income tax provision and resulting effective tax rate for 2005 were impacted significantly by the $ 3.2 million valuation allowance that was recorded in the fourth quarter against the company 's domestic net deferred tax assets . a `` soft '' fourth quarter for the fuller brands segment , coupled with higher than expected fourth quarter operating losses in the domestic imaging segment , increased the company 's 2005 loss , where , under criteria specified in sfas no . 109 , `` accounting for income taxes '' ( cumulative losses experienced over several years ) , the company was no longer able to assert that realization of its future tax benefits was `` more likely than not . '' the 2005 income tax provision also reflected a tax benefit from the carry-back of substantially all of the domestic net operating losses against previously remitted federal taxes . in addition , the 2005 provision reflected the benefits of the cpac asia tax holiday in thailand ( computed to be approximately $ 371,000 or $ 0.08 per diluted share , under a seven-year tax holiday on manufacturing operation earnings , expiring in august 2006 ) , as well as the utilization of cpac africa 's net operating loss carryforward to offset taxable income . cpac europe and cpac italia 's tax provisions in 2005 were not material . the company 's 2005 provision also recognized a tax liability based on `` the american jobs creation act of 2004 '' ( the act ) , which became law in the united states on october 22 , 2004. included in the act was a provision that allowed for a one-time tax dividends received deduction of 85 % of certain foreign earnings remitted by foreign subsidiaries to u.s. parent companies through december 31 , 2005. the earnings available for remittance were those earnings previously designated as reinvested indefinitely . the company evaluated the legislation and determined that certain previously unremitted earnings relating only to its wholly-owned foreign subsidiary , cpac asia imaging products limited , would be repatriated . in march of 2005 , cpac asia declared a special dividend of $ 2,297,000 payable to cpac , inc. ( a portion of its previously unremitted earnings ) and remitted the amount prior to march 31 , 2005. in accordance with the act requirements , the use of these funds was described in a domestic reinvestment plan approved by the company 's senior management and board of directors . the company recorded the applicable $ 117,000 tax liability , after the one-time dividends received deduction , in its 2005 tax provision . at march 31 , 2005 , all other income of the company 's foreign subsidiaries was considered to be permanently reinvested , and as such , deferred income taxes were not provided on this income . in 2004 the company recorded a net tax benefit of ( $ 469,000 ) or ( 12.3 ) % of the pretax loss . the benefit was primarily attributable to domestic losses that were carried back to offset previous year 's earnings , resulting in various state and u.s. refundable taxes . the net benefit was reduced somewhat by foreign tax expense , resulting from earnings at cpac europe , cpac italia , and cpac africa . cpac asia continued to enjoy the tax savings from its seven-year tax holiday granted in thailand , which amounted to approximately $ 306,000 ( $ 0.06 per diluted share ) . at march 31 , 2004 the company had recorded gross deferred tax assets of approximately $ 4,471,000 with no valuation allowance . these deferred tax assets consisted primarily of domestic ( u.s. federal and state ) tax benefits for items which have been recognized for financial reporting purposes , but which will be reported on tax returns to be filed in the future and approximately $ 368,000 representing tax-effected foreign net operating loss carryforwards . realization of the domestic portion of the net deferred tax asset is dependent upon profitable operations in the united states during future years . story_separator_special_tag despite domestic pretax losses for the year ended march 31 , 2004 , the company believed they were primarily attributable to the asset impairment and equity in losses from its investment in tura and the imaging restructuring plan and that the company would return to profitability in fiscal 2005. likewise , realization of the deferred tax asset related to the foreign net operating loss carryforward was also dependent on future , foreign income . although realization for both was not assured , the company believed at march 31 , 2004 , in following the criteria specified in sfas no . 109 , `` accounting for income taxes , '' that it was more likely than not that such assets would be realized . net income ( loss ) the company 's net income for the year ended march 31 , 2006 increased approximately $ 4.3 million , as compared to the year ended march 31 , 2005. an increase in the imaging segment 's international operations profits , coupled with a reduction in the operating loss in the imaging segment 's domestic chemical operations , offset reduced profits at fuller brands and increased corporate expenses . in addition , 2005 's net loss was impacted by the $ 3.3 million valuation reserve recorded against the company 's domestic net deferred tax assets , due to continuing losses . the company 's net loss for the year ended march 31 , 2005 increased $ 497,346 , as compared to the year ended march 31 , 2004. the recognition of a valuation reserve against consolidated net deferred tax assets , an impairment 18 adjustment related to a third party investment , and equity losses recognized on the company 's investment in tura , coupled with revenue declines in 2005 versus 2004 in the imaging segment , all contributed to the increase in the company 's net loss . foreign operations the results of operations for the company 's foreign subsidiaries , including the impact of currency exchange , are reported on a three-month lag . intercompany sales between foreign operations have been eliminated in discussions of year-over-year fluctuations on a u.s. dollar basis , as well as disclosures concerning amounts and percentages , with foreign currency impacts excluded . combined net sales for the company 's operations in thailand , china , south africa , belgium , and italy for fiscal 2006 as compared to 2005 increased approximately $ 1,387,000 or 9.5 % ( or increased approximately $ 1,369,000 or 9.4 % , excluding the impact of currency exchange ) . for fiscal 2006 cpac europe and cpac italia net sales combined increased 14.5 % ( increased 14.4 % , after removing currency impact ) . cpac asia 's sales increased 4.6 % ( increased 4.0 % , after removing currency impact ) , while cpac africa 's net sales increased approximately 3.2 % ( 4.0 % , after removing currency impact ) . combined net sales for the company 's operations in thailand , south africa , belgium , and italy for fiscal 2005 as compared to 2004 decreased approximately $ 370,000 or 2.5 % ( or decreased approximately $ 1,489,000 or 10.0 % , excluding the impact of currency exchange ) . for fiscal 2005 cpac europe and cpac italia net sales combined decreased 15.9 % ( decreased 23.1 % , after removing currency impact ) . cpac asia 's sales decreased less than 1.0 % ( decreased 3.0 % , after removing currency impact ) . cpac africa continued to demonstrate growth , as net sales increased approximately $ 1,083,000 or 95.7 % ( $ 727,000 or 64.3 % , after removing currency impact ) . combined pretax profits for fiscal 2006 prior to minority interests , increased approximately $ 517,000 or 39.7 % ( approximately $ 526,000 , excluding impact of currency exchange ) , as compared to fiscal 2005. cpac europe and cpac italia 's pretax profits combined increased approximately $ 348,000 ( approximately $ 349,000 , excluding impact of currency exchange ) . cpac africa 's fiscal 2006 pretax income increased approximately $ 61,000 ( approximately $ 58,000 , after removing currency impact ) , while cpac asia 's profits were up approximately $ 108,000 ( approximately $ 119,000 , after removing currency impact ) over fiscal 2005. combined pretax profits for fiscal 2005 , prior to minority interests and equity in losses of tura , decreased approximately $ 215,000 ( approximately $ 318,000 , excluding impact of currency exchange ) , as compared to fiscal 2004. cpac europe and cpac italia 's pretax profits combined decreased approximately $ 664,000 ( approximately $ 687,000 , excluding impact of currency exchange ) . cpac africa 's fiscal 2005 pretax income increased approximately $ 233,000 ( approximately $ 182,000 , after removing currency impact ) , while cpac asia 's profits were up approximately $ 216,000 ( approximately $ 187,000 , after removing currency impact ) over fiscal 2004. as disclosed in the consolidated financial statements , the company accounts for its 40 % investment in tura under the equity method . however , the company 's recognition of the 40 % share of the losses of tura during the first six months of fiscal 2005 effectively reduced the basis of its investment to zero . the company was not obligated to fund any losses or record its 40 % share of tura equity earnings or losses in future periods , unless tura became profitable . over the last six months , tura attempted to restructure its operations by reducing its workforce , replacing its former president , and terminating financial management in an effort to reduce operating losses and improve cash flows . however , tura was unsuccessful and is currently undergoing liquidation under german government supervision . during 2004 , the company increased the investment in tura to 40 % requiring the change in accounting for this investment to the equity method .
| for the fuller brands segment [ consisting of the fuller brush company , inc. ( fuller brush ) ; stanley home products ( stanley ) ; and cleaning technologies group ( ctg ) ] , net sales for fiscal 2006 decreased 2.2 % as compared to 2005. fuller brush sales decreased 7 % as compared to 2005 , largely due to lower sales into the television home shopping network distribution channel , as well as decreases in fuller 's private label , custom brush , and retail businesses . sales into the television home shopping network distribution channel , fuller 's largest sales distribution channel , were hurt by inconsistent television showings , which caused first and fourth quarter sales during 2006 to lag behind comparable 2005 periods , resulting in a decrease of approximately $ 531,000. the company believes that sales in 2007 , with the continued introduction of new product types , will remain consistent with 2006 levels over the next fiscal year . decreases in private label sales of approximately $ 366,000 were primarily a result of a loss of a major customer to an offshore supplier . sales into the retail channel were also down over $ 261,000 for 2006 as compared to 2005. while the fuller brush brand has value in the retail marketplace , entrance on a significant scale has been more difficult than first anticipated . discussions and product placement with major national retailers in early fiscal 2007 has re-invigorated the company 's commitment to the retail channel , which it believes can ultimately provide growth opportunities . helping to offset some of the sale declines , were sales through factory outlet stores , which increased over $ 244,000. stanley 's net sales decreased 6 % for 2006 as compared to 2005. while the current year 's decline slowed as compared to prior historical revenue declines , the company believes that further compensation plan changes ( similar to those rolled out to selected areas of the united states earlier in the year ) , as well as other incentive-type promotional programs are required to increase recruitment and retention of sales representatives , if it hopes to stabilize and grow the business . the sales decline during 2006 was partially
| 13,560 |
as part of the transactions , each issued and outstanding preferred and common unit of spero therapeutics , llc outstanding immediately prior to the reorganization was converted into and exchanged for shares of spero therapeutics , inc. capital stock of the same class and or series on a one-for-one basis , and previously outstanding incentive units of spero therapeutics , llc were cancelled . in july 2017 , previous holders of the cancelled incentive units who were still employed by us at the time of the reorganization received stock options under our 2017 stock incentive plan . such stock options were granted for the same number of shares of our common stock as the number of incentive units cancelled , and the stock options were granted on the same vesting terms as the incentive units . all such stock options have an exercise price of $ 5.90 per share . upon consummation of the reorganization , the historical consolidated financial statements of spero therapeutics , llc became the historical consolidated financial statements of spero therapeutics , inc. recent developments initiation of phase 1 clinical trial of spr994 in australia in october 2017 , we initiated our phase 1 clinical trial of spr994 in australia . spr994 is our novel antibiotic with potential to be the first broad-spectrum oral carbapenem approved for use in adults . while spr994 has demonstrated a broad spectrum of activity against mdr gram-negative bacteria , the clinical trial will focus on the treatment of complicated urinary tract infections , or cuti . the trial is designed as a double-blind , placebo-controlled , ascending dose , multi-cohort study to assess the safety , tolerability , food effect and pharmacokinetics of spr994 in healthy subjects . we expect to report top-line data from this trial in mid-2018 . thereafter , we plan to request a pre-phase 3 meeting with the food and drug administration , or fda , to confirm that no additional clinical trials or preclinical studies are required prior to initiating a phase 3 clinical trial . subject to feedback from the fda , we plan to submit an investigational new drug application , or ind , and to obtain agreement on the clinical trial protocol in late 2018 and expect to initiate the pivotal phase 3 clinical trial of spr994 for the treatment of cuti around year-end 2018 in support of a new drug application , or nda . initiation of phase 1b clinical trial of potentiator spr741 in the united kingdom in late november 2017 , as described below , we initiated our phase 1b drug-drug interaction clinical trial of spr741 in the united kingdom . spr741 is one of our lead product candidates generated from our potentiator platform , such candidates currently consisting of spr741 and spr206 , which are iv-administered agents designed to treat mdr gram-negative infections in the hospital setting . spr741 is our co-administered product candidate designed to expand the spectrum and increase the potency of a partner antibiotic when administered in combination , and spr206 is designed to have an antibiotic activity as a single agent . in preclinical studies , spr741 has shown an ability to potentiate over two dozen existing antibiotics and enable activity against gram-negative pathogens . the phase 1b trial enrolled 27 healthy volunteers to evaluate spr741 as a single dose in combination with compounds from the beta-lactam class of antibiotics , including cephalosporins ( such as ceftazidime ) , monobactams ( such as aztreonam ) and beta-lactams/beta-lactamase inhibitors ( such as piperacillin/tazobactum ) . the trial was designed to assess the impact , if any , on the standalone pharmacokinetics of spr741 or the standalone pharmacokinetics of the beta-lactam combination drug when the two are dosed together as a single dose . we anticipate top-line data from this phase 1b trial during the second quarter of 2018. in addition , we continue to progress the development of our direct-acting potentiator platform molecules , exemplified by our product candidate spr206 . spr206 is designed to also have antibiotic activity as a single agent against mdr and extremely drug resistant , or xdr , bacterial strains , including variants isolated in pseudomonas aeruginosa , acinetobacter baumannii and carbapenem-resistant enterobacteriaceae . after we receive results from the phase 1b clinical trial of spr741 and our ongoing preclinical toxicology study of spr206 , we intend to prioritize our product candidates for further clinical development . our decision will be based on which program we believe represents the best opportunity for us within an optimal timeframe , factoring in the choices we must make to prioritize the opportunities within our portfolio and to best deploy our capital resources . accordingly , for the balance of 2018 , our internal 72 operational plans and budget and our estimate of our cash runway being sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2019 are based on us funding the development of spr994 and spr720 and either spr206 or spr741 during that period . we may seek partnering opportunities or other non-dilutive funding for further clinical development of the p otentiator candidate we elect to deprioritize . components of our results of operations grant revenue to date , we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future . if our development efforts for our product candidates are successful and result in regulatory approval , we may generate revenue in the future from product sales . we can not predict if , when , or to what extent we will generate revenue from the commercialization and sale of our product candidates . we may never succeed in obtaining regulatory approval for any of our product candidates . to date , all of our revenue has been derived from government awards . we expect that our revenue for the next several years will be derived primarily from payments under our government awards that we may enter into in the future . story_separator_special_tag u.s. department of defense in september 2016 , we were awarded a cooperative agreement with the u.s. department of defense to further develop anti-infective agents to combat gram-negative bacteria . the agreement is structured as a single , two-year $ 1.5 million award . we are eligible for the full funding from dod and there are no options to be exercised at a later date . the dod funding supports next-generation potentiator discovery and screening of spr741 partner antibiotics . we receive funding under the dod award as we incur qualifying expenses . niaid in february 2017 , we received an award from the u.s. national institute of allergy and infectious diseases to conduct additional preclinical studies of spr720 . the award is structured as a 12-month $ 0.6 million base period , which has already been committed , and a $ 0.4 million option period . in february 2018 niaid exercised the $ 0.4 million 12-month option period . we receive funding under the niaid award as we incur qualifying expenses . in june 2016 , we entered into agreements with pro bono bio plc , a corporation organized under the laws of england , and certain of its affiliates , including pbb distributions limited and cantab anti-infectives limited , in order to acquire certain intellectual property and government funding arrangements relating to spr206 . under these agreements , cai agreed to submit a request to niaid to assign the cai-held niaid contract to us . the niaid contract provides for development funding of up to $ 5.7 million over a base period and three option periods . as of december 31 , 2017 , funding for the base period and the first two option periods totaling $ 5.1 million have been committed . novation of the niaid contract was finalized in december 2017. we will pay pbb a percentage of funds received from niaid up to a maximum of $ 1.3 million . carb-x in april 2017 , we received an award from the combating antibiotic resistant bacteria biopharmaceutical accelerator , a public-private partnership funded by the biomedical advanced research and development authority within the u.s. department of health and human services , to be used to screen , identify and complete phase 1 clinical trials with at least one partner compound for spr741 , one of our lead potentiator product candidates . the award committed funding of $ 1.5 million over a 12-month period . on march 12 , 2018 , carb-x committed an additional $ 0.4 million related to the first option for a period from december 1 , 2017 to march 31 , 2018. there will be no additional options exercised under the carb-x award . we receive funding from carb-x as we incur qualifying expenses . operating expenses research and development expenses research and development expenses consist primarily of costs incurred for our research activities , including our drug discovery efforts , and the development of our product candidates , which include : employee-related expenses , including salaries , related benefits , travel and share-based compensation expense for employees engaged in research and development functions ; 73 expenses incurred in connection with the preclinical and clinical development of our product candidates , including under agreements with contract research organizations , or cros ; the cost of consultants and contract manufacturing organizations , or cmos , that manufacture drug products for use in our preclinical studies and clinical trials ; facilities , depreciation and other expenses , which include direct and allocated expenses for rent and maintenance of facilities , insurance and supplies ; and payments made under third-party licensing agreements . in april 2014 , we entered into a research and development services and support agreement and an option agreement with hoffmann-la roche , inc. and certain of its affiliates , or roche , whereby we were required to use our best efforts to research and develop a specified asset while roche would provide partial funding as well as participate in a joint steering committee for the development of this asset . the nonrefundable payments we received in 2014 and 2015 from roche were recognized as reductions to research and development expense . we terminated our agreement with roche in august 2016. prior to novation of the niaid contract to us , under our agreements with pbb and certain of its affiliates , cai continued to perform research and development at our direction . we paid cai for such research and development services at an agreed-upon rate that took into consideration costs incurred by cai , net of amounts reimbursed to cai by niaid . thus , prior to novation of the niaid contract to us , the amount we record as research and development expenses is net of the niaid reimbursement amount that cai received . we also paid cai a portion of the niaid reimbursement received at rates specified in the agreement , which we also recorded as research and development expense . since the fourth quarter of 2016 , we have recorded research and development expenses for our spr741 program conducted by our australian subsidiary net of a 43.5 % research and development tax incentive we expect to receive for qualified expenses from the australian government . we expense research and development costs as incurred . nonrefundable advance payments we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses . the prepaid amounts are expensed as the related goods are delivered or the services are performed . our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs , such as fees paid to consultants , contractors , cmos and cros in connection with our preclinical and clinical development activities . license fees and other costs incurred after a product candidate has been designated and that are directly related to the product candidate are included in direct research and development expenses for that program .
| direct costs related to our spr741 program decreased primarily due to a decrease in preclinical costs resulting from costs incurred in the prior year to support our ctn filing in australia in the fourth quarter of 2016 , partially offset by an increase in clinical trial costs and manufacturing costs as well as expense related to a total payment to northern antibiotics oy ltd. of $ 2.6 million which became due and was paid under our agreements with northern upon the completion of our ipo in november 2017 . the increase in clinical trial costs and manufacturing costs was due to our phase 1 clinical trial of spr741 , which was initiated in the fourth quarter of 2016 , as well as manufacturing of clinical trial materials for our phase 1b drug-drug interaction clinical trial of spr741 in the united kingdom , which was initiated in november 2017 , and a possible phase 2 clinical trial . research and development expenses for our spr741 program conducted by our australian subsidiary were recorded net of a 43.5 % research and development tax incentive for qualified expenses from the australian government of $ 1.8 million in the year ended december 31 , 2017. we designated spr720 as a product candidate in the second half of 2016. direct costs related to our spr720 program during the year ended december 31 , 2017 were primarily due to preclinical and manufacturing costs related to ind-enabling toxicology studies . we designated spr206 as a product candidate in july 2017. direct costs related to our spr206 program during the year ended december 31 , 2017 were primarily due to preclinical and manufacturing costs related to ind-enabling toxicology studies . direct costs related to our preclinical programs decreased by $ 5.2 million during the year ended december 31 , 2017 compared to the prior year due primarily to the cost of in-licensing technology incurred in 2016 of $ 5.1 million and to decreased spending on preclinical programs in 2017. the cost of in-licensing technology incurred in 2016 of $ 5.1 million was a result of the issuance of equity and anti-dilution rights to promiliad
| 13,561 |
future dividends on the common stock of sirius xm canada are expected to be declared on a 6.0 % annual basis . in connection with the transaction , sirius xm also made a contribution in the form of a loan to sirius xm canada in the aggregate amount of $ 130,794 . the loan is denominated in canadian dollars and is considered a long-term investment with any unrealized gains or losses reported within accumulated other comprehensive ( loss ) income . the loan has a term of fifteen years , bears interest at a rate of 7.62 % per annum and includes customary covenants and events of default , including an event of default relating to sirius xm canada 's failure to maintain specified leverage ratios . the terms of the loan require sirius xm canada to prepay a portion of the outstanding principal amount of the loan within sixty days of the end of each fiscal year in an amount equal to any cash on hand in excess of c $ 10,000 at the last day of the financial year if all target dividends have been paid in full . in connection with the transaction , sirius xm also entered into a services agreement and an advisory services agreement with sirius xm canada . each agreement has a thirty year term . pursuant to the services agreement , sirius xm canada will pay sirius xm 25 % of its gross revenues on a monthly basis through december 31 , 2021 and 30 % of its gross revenues on a monthly basis thereafter . pursuant to the advisory services agreement , sirius xm canada will pay sirius xm 5 % of its gross revenues on a monthly basis . these agreements superseded and replaced the former agreements between sirius xm canada and its predecessors and sirius xm . sirius xm canada is accounted for as an equity method investment , and its results are not consolidated in our consolidated financial statements . sirius xm canada does not meet the requirements for consolidation as we do not have the ability to direct the most significant activities that impact sirius xm canada 's economic performance . investment in pandora media , inc. on september 22 , 2017 , sirius xm completed a $ 480,000 investment in pandora media , inc. ( “ pandora ” ) . pursuant to an investment agreement with pandora , sirius xm purchased 480 shares of pandora 's series a convertible preferred stock , par value $ 0.0001 per share ( the “ series a preferred stock ” ) , for an aggregate purchase price of $ 480,000 . the series a preferred stock , including accrued but unpaid dividends , represents a stake of approximately 19 % of pandora 's currently outstanding common stock , and approximately a 16 % interest on an as-converted basis . pandora operates an internet-based music discovery platform , offering a personalized experience for listeners . the series a preferred stock is convertible at the option of the holders at any time into shares of common stock of pandora ( “ pandora common stock ” ) at an initial conversion price of $ 10.50 per share of pandora common stock and an initial conversion rate of 95.2381 shares of pandora common stock per share of series a preferred stock , subject to certain customary anti-dilution adjustments . holders of the series a preferred stock are entitled to a cumulative dividend at the rate of 6.0 % per annum , payable quarterly in arrears , if and when declared . pandora has the option to pay dividends in cash when authorized by their board and declared by pandora or accumulate dividends in lieu of paying cash . any conversion of series a preferred stock may be settled by pandora , at its option , in shares of pandora common stock , cash or any combination thereof . however , unless and until pandora 's stockholders have approved the issuance of greater than 19.99 % of the outstanding pandora common stock , the series a preferred stock may not be converted into more than 19.99 % of pandora 's outstanding pandora common stock as of june 9 , 2017. the liquidation preference of the series a preferred stock , including accrued dividends of $ 10,849 , was $ 490,849 as of december 31 , 2017 . the investment includes a mandatory redemption feature on any date from and after september 22 , 2022 whereby sirius xm , at its option , may require pandora to purchase the series a preferred stock at a price equal to 100 % of the liquidation preference plus accrued but unpaid dividends for , at the election of pandora , cash , shares of pandora common stock or a combination thereof , and as such the investment qualifies as a debt security under accounting standards codification ( “ asc ” ) 320 , investments-debt and equity securities . as the investment includes a conversion option , we have elected to account for this investment under the fair value option to reduce the accounting asymmetry that would otherwise arise when recognizing the changes in the fair value of available-for-sale investments . under the fair value option , any gains ( losses ) associated with 27 the change in fair value will be recognized in other income within our consolidated statements of comprehensive income . a $ 472 unrealized gain was recognized during the year ended december 31 , 2017 as other income in our consolidated statements of comprehensive income associated with this investment . the fair value of our investment including accrued dividends as of december 31 , 2017 was $ 480,472 and is recorded as a related party long-term asset within our consolidated balance sheets . this investment does not meet the requirements for the equity method of accounting as it does not qualify as in-substance common stock . story_separator_special_tag we have appointed james e. meyer , our chief executive officer , david j. frear , our senior executive vice president and chief financial officer , and gregory b. maffei , the chairman of our board of directors , to pandora 's board of directors pursuant to our designation rights under the investment agreement . mr. maffei also serves as the chairman of pandora 's board of directors . story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > $ 51,140 . the increase was primarily driven by additional revenues from the u.s. music royalty fee due to an increase in the number of subscribers and subscribers paying at a higher rate . these increases were offset by lower non-recurring engineering fees associated with our connected vehicle services , lower activation revenues from sirius xm canada and a change in accounting for a programming contract in the third quarter of 2015. other revenue is expected to grow due to increases in u.s. music royalty fees as a result of rate and subscriber growth , and additional revenues from sirius xm canada due to the new services agreement and advisory services agreement . 29 operating expenses revenue share and royalties include distribution and content provider revenue share , royalties for transmitting content and web streaming , and advertising revenue share . 2017 vs. 2016 : for the years ended december 31 , 2017 and 2016 , revenue share and royalties were $ 1,210,323 and $ 1,108,515 , respectively , an increase of 9 % , or $ 101,808 , and increased as a percentage of total revenue . the increase was due to overall greater revenues subject to music royalties and revenue share to automakers and a 5 % increase in the statutory royalty rate applicable to our use of post-1972 recordings , which increased from 10.5 % in 2016 to 11 % in 2017. we recorded $ 45,100 and $ 45,900 of expense related to music royalty legal settlements and related reserves , in 2017 and 2016 , respectively . 2016 vs. 2015 : for the years ended december 31 , 2016 and 2015 , revenue share and royalties were $ 1,108,515 and $ 1,034,832 , respectively , an increase of 7 % , or $ 73,683 , but decreased as a percentage of total revenue . the increase was due to overall greater revenues subject to music royalties and revenue share to automakers , a 5 % increase in the statutory royalty rate applicable to our use of post-1972 recordings , and $ 45,900 related to music royalty legal settlements and related reserves recorded in the fourth quarter of 2016. the increase was mitigated by $ 128,256 in expense recorded during the twelve months ended december 31 , 2015 for a portion of the settlement of the capitol records llc et al . v. sirius xm radio inc . lawsuit related to our use of pre-1972 sound recordings . we recorded $ 39,808 in expense related to this settlement through the twelve months ended december 31 , 2016. we expect our revenue share and royalty costs to increase as our revenues grow and as a result of the increase in the royalty rate payable for sound recordings contained in the recent decision of the copyright royalty board ( the “ crb ” ) . on december 14 , 2017 , the crb issued its determination regarding the post-1972 royalty rate payable by us under the statutory license covering the performance of sound recordings over our satellite radio service , and the making of ephemeral ( server ) copies in support of such performances , for the five-year period starting january 1 , 2018 and ending on december 31 , 2022. under the terms of the crb 's decision , we are required to pay a royalty of 15.5 % of gross revenues , subject to exclusions and adjustments , for the five year period . the rate for 2017 was 11.0 % . programming and content includes costs to acquire , create , promote and produce content . we have entered into various agreements with third parties for music and non-music programming that require us to pay license fees and other amounts . 2017 vs. 2016 : for the years ended december 31 , 2017 and 2016 , programming and content expenses were $ 388,033 and $ 353,779 , respectively , an increase of 10 % , or $ 34,254 , and increased as a percentage of total revenue . the increase was primarily due to the addition of video content rights , payment for which started during the third quarter of 2016 , as well as talent and personnel-related costs . 2016 vs. 2015 : for the years ended december 31 , 2016 and 2015 , programming and content expenses were $ 353,779 and $ 293,091 , respectively , an increase of 21 % , or $ 60,688 , and increased as a percentage of total revenue . the increase was primarily due to renewed programming licenses as well as talent and personnel-related costs . we expect our programming and content expenses to increase as we expand our programming , through renewal or replacement of expiring agreements . customer service and billing includes costs associated with the operation and management of internal and third party customer service centers , and our subscriber management systems as well as billing and collection costs , transaction fees and bad debt expense . 2017 vs. 2016 : for the years ended december 31 , 2017 and 2016 , customer service and billing expenses were $ 385,431 and $ 387,131 , respectively , a decrease of less than 1 % , or $ 1,700 , and decreased as a percentage of total revenue . the decrease was primarily due to a decline in call center agent rates and contact rates , partially offset by increased transaction fees based on a higher subscriber base .
| 2016 vs. 2015 : for the years ended december 31 , 2016 and 2015 , advertising revenue was $ 138,231 and $ 122,292 , respectively , an increase of 13 % , or $ 15,939 . the increase was primarily due to a greater number of advertising spots sold and transmitted as well as increases in rates charged per spot . we expect our advertising revenue to continue to grow as more advertisers are attracted to our national platform and growing subscriber base and as we launch additional non-music channels . equipment revenue includes revenue and royalties from the sale of satellite radios , components and accessories . 2017 vs. 2016 : for the years ended december 31 , 2017 and 2016 , equipment revenue was $ 131,586 and $ 118,947 , respectively , an increase of 11 % , or $ 12,639 . the increase was driven by royalty revenue on certain satellite radio components starting in the second quarter of 2016 due to our transition to a new generation of chipsets and revenue from the sales of connected vehicle devices since the acquisition of automatic , partially offset by lower revenue generated through satellite radio sales to distributors and consumers and lower oem production . 2016 vs. 2015 : for the years ended december 31 , 2016 and 2015 , equipment revenue was $ 118,947 and $ 110,923 , respectively , an increase of 7 % , or $ 8,024 . the increase was driven by an increase in oem production and an increase in royalty revenue on certain satellite radio components starting in the second quarter of 2016 due to our transition to a new generation of chipsets , partially offset by lower revenue generated through satellite radio sales to distributors and consumers . we expect equipment revenue to increase due to the increase in royalty revenues associated with our transition to a new generation of chipsets . other revenue includes amounts earned from subscribers for the u.s. music royalty
| 13,562 |
million , or 0.6 % of total loans held for investment , remained under modification due to covid-19 hardship under the cares act . of those , 5 loans totaling $ 3.1 million were acquired in connection with the acquisition of opus . please also see note 4 - loans held for investment for additional information . additionally , the cares act provides for relief on existing and new sba loans through the small business debt relief program . as part of the sba small business debt relief , the sba will automatically pay principal , interest and fees of certain sba loans for a period of six months for both existing loans and new loans issued prior to september 27 , 2020. on december 27 , 2020 , the caa authorized a second round of sba payments on covered loans approved before march 27 , 2020 , for a two-month period beginning with the first payment due on the loan on or after february 1 , 2021 and for an additional three-month period for certain eligible borrowers . for new loans approved beginning on february 2 , 2021 and ending on september 30 , 2021 , sba will make the payments for a three-month period subject to the availability of funds . at december 31 , 2020 , approximately 507 loans , representing approximately $ 142.8 million aggregate reported balance , are eligible for this relief . the cares act also provides for mortgage payment relief and a foreclosure moratorium . the extent to which the covid-19 pandemic impacts the company 's business , asset valuations , results of operations , and financial condition , as well as its regulatory capital and liquidity ratios , will depend on future developments , which are highly uncertain and can not be accurately predicted , including the scope and duration of the covid-19 pandemic and the actions taken by governmental authorities and other third parties in response to the covid-19 pandemic . material adverse impacts may include all or a combination of valuation impairments on our intangible assets , investments , loans , loan servicing rights , and deferred tax assets . 49 given the fluidity of the situation , management can not estimate the long-term impact of the covid-19 pandemic at this time . during the fourth quarter of 2020 , the company , as part of its annual assessment of its goodwill assets for impairment , made an unconditional election to forego a qualitative assessment of goodwill and proceed directly to the first step in the quantitative assessment of goodwill . the results of this assessment indicated the estimated fair value of the company exceeded its carrying value and that the value of goodwill assets could be supported and were not impaired . as of december 31 , 2020 , our goodwill totaled $ 898.6 million . please also see note 8 - goodwill and other intangible assets for additional discussion concerning goodwill . the preventative measures taken by various state and local governments , as well as the u.s. government , to stem the spread and impact of the on-going covid-19 pandemic , have contributed to further strain on economic conditions . certain businesses and service providers have not been able to conduct operations in their usual manner or have had to temporarily halt operations altogether . while the magnitude of the impact from the on-going covid-19 pandemic and the related preventative measures taken is uncertain and difficult to predict , we anticipate the on-going covid-19 pandemic to have an impact on the following : loan growth and interest income - current weakness in economic activity will likely have an impact on our borrowers , the businesses they operate and their financial condition . if we experience a protracted decline in economic activity , our borrowers may have less demand for credit needed to invest in and expand their businesses and or support their ongoing operations . additionally , our borrowers may have less demand for real estate and consumer loans . further , during the first quarter of 2020 , the federal reserve 's federal open market committee reduced the federal funds rate to a range of 0 % to 0.25 % . the potential for a reduction in future loan growth in conjunction with the decline in interest rates will place pressure on the level of and yield on earnings assets which may negatively impact our interest income . credit quality - increases in unemployment , declines in consumer confidence , and a reluctance on the part of businesses to invest in and expand their operations , among other things , may result in additional weakness in economic conditions , place strain on our borrowers , and ultimately impact the credit quality of our loan portfolio . we expect this would result in increases in the level of past due , nonaccrual , and classified loans , as well as higher net charge-offs . while certain economic metrics have improved from the initial onset of the covid-19 pandemic in the first quarter of 2020 , there can be no assurance the improvement in economic conditions will continue . as such , future deterioration in credit quality in conjunction with weakened economic conditions , may require us to record additional provisions for credit losses . cecl - on january 1 , 2020 , the company adopted asc 326 , which requires the company to measure credit losses on certain financial assets , such as loans and debt securities , using the cecl model . the cecl model for measuring credit losses is highly dependent upon expectations of future economic conditions and requires management judgment . should expectations concerning future economic conditions continue to deteriorate , the company may be required to record additional provisions for credit losses . impairment charges - prolonged deterioration in economic conditions will likely adversely impact the company 's operating results and the value of certain of our assets . story_separator_special_tag as a result , the company may be required to write-down the value of certain assets such as goodwill or deferred tax assets when there is evidence to suggest their value has become impaired or will not be realizable at a future date . the u.s. government as well as other state and local policy makers have responded to the on-going covid-19 pandemic with actions geared to support not only the health and well-being of the public , but also consumers , businesses , and the economy as a whole . however , the impact and overall effectiveness of these actions is difficult to determine at this time . in addition , many economists have expressed concern over the need for additional government stimulus to support an economic recovery . however , the likelihood of additional government stimulus is unknown at this time , and the lack thereof may hinder the prospects of further economic recovery . 50 acquisition of opus effective as of june 1 , 2020 , the corporation completed the acquisition of opus , a california-chartered state bank headquartered in irvine , california , pursuant to a definitive agreement dated as of january 31 , 2020. at closing , opus had $ 8.32 billion in total assets , $ 5.94 billion in gross loans , and $ 6.91 billion in total deposits and operated 46 banking offices located throughout california , washington , oregon , and arizona . as a result of the opus acquisition , the corporation acquired specialty lines of business , including trust and escrow services . pursuant to the terms of the merger agreement , the consideration paid to opus shareholders consisted of whole shares of the corporation 's common stock and cash in lieu of fractional shares of the corporation 's common stock . upon consummation of the transaction , ( i ) each share of opus common stock issued and outstanding immediately prior to the effective time of the acquisition was canceled and exchanged for the right to receive 0.900 shares of the corporation 's common stock , with cash to be paid in lieu of fractional shares at a rate of $ 19.31 per share , and ( ii ) each share of opus series a non-cumulative , non-voting preferred stock issued and outstanding immediately prior to the effective time of the acquisition was converted into and canceled in exchange for the right to receive that number of shares of the corporation 's common stock equal to the product of ( x ) the number of shares of opus common stock into which such share of opus preferred stock was convertible in connection with , and as a result of , the acquisition , and ( y ) 0.900 , in each case , plus cash in lieu of fractional shares of the corporation 's common stock . the corporation issued 34,407,403 shares , net of 165,136 shares for tax withholding from opus equity award holders , of the corporation 's common stock valued at $ 21.62 per share , which was the closing price of the corporation 's common stock on may 29 , 2020 , the last trading day prior to the consummation of the acquisition , and paid cash in lieu of fractional shares . the corporation assumed opus 's warrants and options , which represented the issuance of up to approximately 406,778 and 9,538 additional shares of the corporation 's common stock , valued at approximately $ 1.8 million and $ 46,000 , respectively , and issued substitute restricted stock units in an aggregate amount of $ 328,000. the value of the total transaction consideration paid amounted to approximately $ 749.6 million . the opus warrants assumed by the corporation expired unexercised on september 30 , 2020 and no longer remain outstanding . the opus options assumed by the corporation have been fully exercised during the third quarter of 2020. as a result of the opus acquisition , the company acquired opus and recorded net assets of $ 659.4 million . the estimated fair value of assets acquired and liabilities assumed primarily consist of the followings : $ 5.81 billion of loans $ 937.1 million of cash and cash equivalents $ 829.9 million of investment securities $ 90.2 million of goodwill $ 16.1 million of core deposit intangible $ 3.2 million of customer relationship intangible $ 6.92 billion of deposits the fair values of the assets acquired and liabilities assumed were determined based on the requirements of fasb asc topic 820 : fair value measurements and disclosures . such fair values are preliminary estimates and are subject to adjustment for up to one year after the merger date or when additional information relative to the closing date fair values becomes available and such information is considered final , whichever is earlier . 51 the client account integration and system conversion of opus was completed in october 2020. at the same time , as a result of the opus acquisition , the bank consolidated twenty ( 20 ) branch offices primarily in california , washington , and arizona into nearby branch offices . the consolidated branches were identified largely based on the proximity of neighboring branches , historic growth , and market opportunity to improve further the overall efficiency of operations in line with the bank 's ongoing cost reduction initiatives . following the branch consolidations , the bank operates 65 branches in major metropolitan markets in california , washington , oregon , arizona , and nevada . for additional information about the acquisition of opus , please see note 28 - acquisitions of the notes to the consolidated financial statements contained in “ item 8. financial statements and supplementary data ” . critical accounting policies and estimates we have established various accounting policies that govern the application of accounting principles generally accepted in the united states of america in the preparation of the company 's financial statements in item 8 hereof .
| return on average tangible common equity : this figure is calculated by excluding amortization of intangible assets and excluding the average intangible assets and average goodwill from the average stockholders ' equity during the period . core net interest income and core net interest margin : core net interest income is calculated by excluding scheduled accretion income , accelerated accretion income , premium amortization on cds , and nonrecurring nonaccrual interest paid from net interest income . the core net interest margin is calculated as the ratio of core net interest income to average interest-earning assets . pre-provision net revenue : pre-provision net revenue is calculated by excluding income tax , provision for credit losses , and merger-related expenses from the net income . 57 the following tables provide reconciliations of the non-gaap measures with financial measures defined by gaap : tangible common equity amounts and ratios replace_table_token_3_th ( 1 ) related to the adoption of accounting standards update 2016-13 , financial instruments - credit losses ( topic 326 ) : measurement of credit losses on financial instruments . see note 1 - description of business and summary of significant accounting policies in item 8 of this form 10-k. 58 replace_table_token_4_th efficiency ratio replace_table_token_5_th 59 return on average tangible common equity replace_table_token_6_th ( 1 ) amortization of intangible assets expense adjusted by statutory tax rate core net interest margin replace_table_token_7_th 60 pre-provision net revenue replace_table_token_8_th 61 net interest income . our primary source of revenue is net interest income , which is the difference between the interest earned on loans , investment securities , and interest earning balances with financial institutions ( “ interest-earning assets ” ) and the interest paid on deposits and borrowings ( “ interest-bearing liabilities ” ) . net interest margin is net interest income expressed as a percentage of average interest earning assets . net interest income is affected by changes in volumes , mix , and rates of interest-earning assets and interest-bearing liabilities , as well as days in a period . for 2020 , net interest income totaled $ 574.2 million , an increase of $ 126.9 million , or 28 % , from 2019. this reflected an increase in average interest-earning assets
| 13,563 |
in the year ended november 30 , 2011 , rialto investments other income ( expense ) , net , was $ 39.2 million , which consisted primarily of gains from acquisition of real estate owned ( “ reo ” ) through foreclosure , as well as gains from sales of reo , partially offset by expenses related to owning and maintaining those assets , and a $ 4.7 million gain on the sale of investment securities . in the year ended november 30 , 2012 , the segment also had equity in earnings ( loss ) from unconsolidated entities of $ 41.5 million , which included $ 17.0 million of net gains primarily related to realized gains from the sale of investments in the portfolio underlying the the alliancebernstein l.p. ( “ ab ” ) fund formed under the federal government 's public-private investment program ( “ ppip ” ) , $ 6.1 million of interest income earned by the ab ppip fund and $ 21.0 million of equity in earnings related to our share of earnings from the real estate investment fund managed by the rialto segment ( `` fund i '' ) . during the second half of 2012 , all of the securities in the investment portfolio underlying the ab ppip fund were monetized related to the unwinding of its operations , resulting in liquidating distributions of $ 83.5 million . as our role as sub-advisor to the ab ppip fund has been completed , no further management fees will be received for these services . this compared to equity in earnings ( loss ) from unconsolidated entities of ( $ 7.9 ) million in the same period last year , consisting primarily of $ 21.4 million of unrealized losses related to our share of the mark-to-market adjustments of the investment portfolio underlying the ab ppip fund , partially offset by $ 10.7 million of interest income earned by the ab ppip fund and $ 2.9 million of equity in earnings related to fund i. in the year ended november 30 , 2012 , corporate general and administrative expenses were $ 127.3 million , or 3.1 % as a percentage of total revenues , compared to $ 95.3 million , or 3.1 % as a percentage of total revenues , in the same period last year . the increase in corporate general and administrative expenses was primarily due to an increase in personnel related expenses as a result of an increase in share-based and variable compensation expense . in the years ended november 30 , 2012 and 2011 , net earnings ( loss ) attributable to noncontrolling interests were ( $ 21.8 ) million and $ 20.3 million , respectively . net loss attributable to noncontrolling interests during the year ended november 30 , 2012 was attributable to noncontrolling interests related to our homebuilding operations and the fdic 's interest in the portfolio of real estate loans that we hold in partnership with the fdic in our rialto investments segment . net earnings attributable to noncontrolling interests during the year ended november 30 , 2011 were related to the rialto investments operations , partially offset by a net loss attributable to noncontrolling interests in our homebuilding operations . during the year ended november 30 , 2012 , we concluded that it was more likely than not that the majority of our deferred tax assets would be utilized . this conclusion was based on a detailed evaluation of all relevant evidence , both positive and negative . the positive evidence included factors such as eleven consecutive quarters of earnings , the expectation of continued earnings and evidence of a sustained recovery in the housing markets that we operate . such evidence is supported by us experiencing significant increases in key financial indicators , including new orders , revenues , gross margin , backlog , gross margin in backlog , and deliveries compared with the prior year . we have also restructured our corporate and field operations , significantly reducing our cost structure and permitting us to generate profits at lower level of activity . economic data has also been affirming housing market recovery . housing starts , homebuilding volume and prices are increasing and forecasted to continue to increase . low mortgage rates , affordable home prices , reduced foreclosures , and a favorable home ownership to rental comparison continue to drive the recovery . lastly , we project to use the majority of our net operating losses in the allowable carryforward periods , and we have no history of net operating losses expiring unutilized . we are required to use judgment in considering the relative impact of negative and positive evidence when determining the need for a valuation allowance for our deferred tax asset . the weight given to the potential effect of negative and positive evidence shall be commensurate with the extent to which it can be objectively verified . the more negative evidence that exists , the more positive evidence is necessary . the most significant direct negative evidence that currently exists is that we are currently in a cumulative four-year loss position . however , our cumulative four-year loss is declining 26 significantly as a result of eleven consecutive quarters of profitability and based on our current earnings level we will realize a majority of our deferred tax assets . based on the analysis of positive and negative evidence , we believe that there is enough positive evidence to overcome our current cumulative loss position . therefore , we concluded that it was more likely than not that we will realize our deferred tax assets , and reversed the majority of the valuation allowance established against our deferred tax assets during the year ended november 30 , 2012. accordingly , we reversed $ 491.5 million of the valuation allowance against our deferred tax assets . based on analysis utilizing objectively verifiable evidence , it was not more likely than not that certain state net operating loss carryforwards would be utilized . as a result , the remaining valuation allowance against our deferred tax assets was $ 88.8 story_separator_special_tag million , as of november 30 , 2012 , which is primarily related to state net operating loss carryforwards . in future periods , the remaining valuation allowance could be reversed if additional sufficient positive evidence is present indicating that it is more likely than not that such assets would be realized . the valuation allowance against our deferred tax assets was $ 576.9 million at november 30 , 2011 . as of november 30 , 2012 , we owned 107,138 homesites and had access to an additional 21,346 homesites through either option contracts with third parties or agreements with unconsolidated entities in which we have investments . as of november 30 , 2011 , we owned 94,684 homesites and had access to an additional 16,702 homesites through either option contracts with third parties or agreements with unconsolidated entities in which we have investments . our backlog of sales contracts was 4,053 homes ( $ 1.2 billion ) at november 30 , 2012 , compared to 2,171 homes ( $ 560.7 million ) at november 30 , 2011 . 2011 versus 2010 for both the years ended november 30 , 2011 and 2010 , revenues from home sales were $ 2.6 billion . there was a 1 % increase in the average sales price of homes delivered , offset by a 1 % decrease in the number of homes deliveries , excluding unconsolidated entities . new home deliveries , excluding unconsolidated entities , decreased to 10,746 homes in the year ended november 30 , 2011 from 10,859 homes in 2010. the decrease in home deliveries was primarily in our homebuilding houston and homebuilding west segments and homebuilding other as a result of the absence of the federal homebuyer tax credit , partially offset by an increase in home deliveries in our homebuilding southeast florida segment . the increase in deliveries in our homebuilding southeast florida segment was the result of an increase in home deliveries from communities acquired in 2010 that has sales but only a small amount of deliveries during the year ended november 30 , 2010. the average sales price of homes delivered increased to $ 244,000 in the year ended november 30 , 2011 from $ 243,000 in 2010 , driven primarily by an increase in the average sales price of home deliveries in all of our homebuilding segments and homebuilding other , except for our homebuilding west segment , primarily due to a higher percentage of home deliveries in higher priced communities . this increase was partially offset by a reduction in average sales price in our homebuilding west segment due to a shift to smaller square footage homes generating a lower average sales price . sales incentives offered to homebuyers were $ 33,700 per home delivered in the year ended november 30 , 2011 , or 12.1 % as a percentage of home sales revenue , compared to $ 32,800 per home delivered in 2010 , or 11.9 % as a percentage of home sales revenue . during 2011 our biggest competition was from the sales of existing and foreclosed homes . we differentiate our new homes from those homes by issuing new home warranty , and in certain markets emphasizing energy efficiency and new technology such as keyless door locks and lighting and thermostats controlled remotely from outside the home . gross margins on home sales were $ 523.4 million , or 19.9 % , in the year ended november 30 , 2011 , which included $ 35.7 million of valuation adjustments , compared to gross margins on home sales of $ 517.9 million , or 19.7 % , in the year ended november 30 , 2010 , which included $ 44.7 million of valuation adjustments . gross profits on land sales totaled $ 7.7 million in the year ended november 30 , 2011 , net of $ 0.5 million of valuation adjustments and $ 1.8 million in write-offs of deposits and pre-acquisition costs , compared to gross profits on land sales of $ 21.4 million in the year ended november 30 , 2010 , primarily due to a $ 14.1 million reduction of an obligation related to a profit participation agreement . gross profits on land sales for the year ended november 30 , 2010 were net of $ 3.4 million of valuation adjustments and $ 3.1 million in write-offs of deposits and pre-acquisition costs . selling , general and administrative expenses were $ 384.8 million in the year ended november 30 , 2011 , which included $ 8.4 million related to additional expenses associated with remedying pre-existing liabilities of a previously acquired company , offset by $ 8.0 million related to the receipt of a litigation settlement . selling , general and administrative expenses were $ 377.0 million in the year ended november 30 , 2010. selling , general and administrative expenses as a percentage of revenues from home sales increased to 14.7 % in the year ended november 30 , 2011 , from 14.3 % in 2010. lennar homebuilding equity in loss from unconsolidated entities was $ 62.7 million in the year ended november 30 , 2011 , which primarily included our share of valuation adjustments of $ 57.6 million related to an asset distribution from a lennar homebuilding unconsolidated entity as the result of a linked transaction . this was offset by a pre-tax gain of $ 62.3 million included in lennar homebuilding other income , net , related to that unconsolidated entity 's net asset distribution . the transaction resulted in a net pre-tax gain of $ 4.7 million . in addition , lennar homebuilding equity in loss from unconsolidated 27 entities included $ 8.9 million of valuation adjustments related to assets of lennar homebuilding 's unconsolidated entities , offset by our share of a gain on debt extinguishment at one of lennar homebuilding 's unconsolidated entities totaling $ 15.4 million .
| sales incentives offered to homebuyers were $ 28,300 per home delivered in the year ended november 30 , 2012 , or 10.0 % as a percentage of home sales revenue , compared to $ 33,700 per home delivered in the same period last year , or 12.1 % as a percentage of home sales revenue . currently , our biggest competition is from the sales of existing and foreclosed homes . we differentiate our new homes from those homes by issuing new home warranties , and in certain markets emphasizing energy efficiency and new technologies . gross margins on home sales were $ 793.3 million , or 22.7 % , in the year ended november 30 , 2012 , which included $ 12.6 million of valuation adjustments , compared to gross margins on home sales of $ 523.4 million , or 19.9 % , in the year ended november 30 , 2011 , which included 35.7 million of valuation adjustments . gross margin percentage on home sales improved compared to last year , primarily due to a greater percentage of deliveries from our new higher margin communities , a decrease in sales incentives offered to homebuyers as a percentage of revenue from home sales , an increase in the average sales price of homes delivered and lower valuation adjustments . gross profits on land sales totaled $ 10.2 million in the year ended november 30 , 2012 , compared to gross profits on land sales of $ 7.7 million in the year ended november 30 , 2011 . selling , general and administrative expenses were $ 438.7 million in the year ended november 30 , 2012 , compared to selling , general and administrative expenses of $ 384.8 million last year , which included $ 8.4 million related to expenses associated with remedying pre-existing liabilities of a previously acquired company , offset by $ 8.0 million related to the receipt of a litigation settlement . selling , general and administrative expenses as a percentage of revenues from home sales improved to 12.6 % in the year ended november 30 , 2012 , from 14.7 % in 2011 , primarily due to improved
| 13,564 |
the transaction , which we anticipate will close by the end of 2018 subject to customary approvals and closing conditions , is not expected to materially impact our results of operations or financial position for 2018 or alter our share repurchase and common stock dividend strategy . consolidated company outlook for 2018 we believe our disciplined approach to providing financial protection products at the workplace puts us in a position of strength as we seek to capitalize on the growing and largely unfilled need for our products and services . we believe the need for our products and services remains strong , and we intend to continue protecting our solid margins and returns through our pricing and risk actions . we continue to invest in our infrastructure and our employees , with a focus on quality and simplification of processes and offerings . our strategy is centered on market expansion , enhancing the customer experience , providing an innovative product portfolio of financial protection choices , and investing in new solutions to further improve productivity . our outlook for 2018 is for continued solid premium growth trends in our core businesses , with stable persistency and a disciplined approach to sales growth . we expect to have generally stable benefits experience due to our focus on disciplined pricing , risk selection , and management of renewals . we will maintain our commitment to expense discipline and improving our operational efficiencies . the low interest rate environment continues to place pressure on our profit margins and could unfavorably impact the adequacy of our reserves for some products . accordingly , we will continue to gradually increase our allocation to alternative assets , particularly in our long-term care line of business , while still adhering to our disciplined risk management strategy . this increase in allocation may cause an increase in volatility in our net investment income . our reported consolidated financial results may also continue to be unfavorably impacted by political and economic uncertainty in the u.k. , specifically lower interest rates , wage inflation and employer spending , and claims volatility due to the u.k. referendum . as a result of tax reform , we expect our effective tax rate for 2018 to be in the range of 19 percent to 20 percent . although we expect tax reform to be beneficial to our earnings and long-term cash generation , we may experience some further pressure on our rbc ratios as a result of expected naic revisions to the rbc calculations to consider the lower u.s. statutory income tax rate . we expect our insurance subsidiaries to generate stronger statutory earnings . the level of excess capital generation is dependent on the timing and magnitude of these naic changes and the extent to which and how quickly the rating agencies will expect the industry to rebuild its rbc ratio levels . 34 we continue to analyze and employ strategies that we believe will help us navigate the current environment and allow us to maintain solid operating margins and significant financial flexibility to support the needs of our businesses , while also continuing to return capital to our shareholders and exploring merger and acquisition opportunities to enhance our business lines . we have substantial leverage to rising interest rates and an improving economy which generates payroll growth and wage inflation . we believe that consistent operating results , combined with the implementation of strategic initiatives and the effective deployment of capital , will allow us to meet our long-term financial objectives . further discussion is included in `` reconciliation of non-gaap financial measures , '' `` consolidated operating results , '' `` segment results , '' `` investments , '' and `` liquidity and capital resources '' contained herein in this item 7 and in the `` notes to consolidated financial statements '' contained herein in item 8. reconciliation of non-gaap and other financial measures we analyze our performance using non-gaap financial measures . a non-gaap financial measure is a numerical measure of a company 's performance , financial position , or cash flows that excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with gaap . the non-gaap financial measure of `` after-tax adjusted operating income '' differs from net income as presented in our consolidated operating results and income statements prepared in accordance with gaap due to the exclusion of net realized investment gains and losses and certain other items as specified in the reconciliations below . we believe adjusted operating income is a better performance measure and better indicator of the profitability and underlying trends in our business . effective december 31 , 2017 , to more clearly differentiate between the gaap and non-gaap financial measures , we changed the naming convention for our non-gaap financial measures from “ operating ” to “ adjusted operating ” measures , which includes a change from `` after-tax operating income '' to `` after-tax adjusted operating income . '' the definition of this label remains unchanged . in addition , although they are in accordance with gaap guidance for segment reporting , we have also changed the naming convention for our `` operating revenue '' to `` adjusted operating revenue '' and our `` operating income '' to `` adjusted operating income . '' the definition of these labels also remains unchanged . realized investment gains or losses depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our segments . our investment focus is on investment income to support our insurance liabilities as opposed to the generation of realized investment gains or losses . although we may experience realized investment gains or losses which will affect future earnings levels , a long-term focus is necessary to maintain profitability over the life of the business since our underlying business is long-term in nature , and we need to earn the interest rates assumed in calculating our liabilities . story_separator_special_tag we previously excluded the amortization of prior period actuarial gains or losses , a component of the net periodic benefit cost for our pension and other postretirement benefit plans . effective january 1 , 2017 , the amortization of prior period actuarial gains or losses is now included in `` after-tax adjusted operating income '' and `` adjusted operating income '' in the following charts . amounts for periods prior to january 1 , 2017 have been adjusted to conform to current year reporting . we may at other times exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals , but this exclusion is not an indication that similar items may not recur and does not replace net income or net loss as a measure of our overall profitability . see notes 6 , 7 , and 14 of the `` notes to consolidated financial statements '' contained herein in item 8 for further discussion regarding the impacts of the tcja , the unclaimed death benefit reserve increase , and the loss from a guaranty fund assessment , respectively . 35 a reconciliation of gaap financial measures to our non-gaap financial measures is as follows : replace_table_token_5_th we measure and analyze our segment performance on the basis of `` adjusted operating revenue '' and `` adjusted operating income '' or `` adjusted operating loss '' , which differ from total revenue and income before income tax as presented in our consolidated statements of income due to the exclusion of net realized investment gains and losses and certain other items as specified in the reconciliations below . these performance measures are in accordance with gaap guidance for segment reporting , but they should not be viewed as a substitute for total revenue , income before income tax , or net income . a reconciliation of total revenue to `` adjusted operating revenue '' and income before income tax to `` adjusted operating income '' is as follows : replace_table_token_6_th 36 critical accounting estimates we prepare our financial statements in accordance with gaap . the preparation of financial statements in conformity with gaap requires us to make estimates and assumptions that affect amounts reported in our financial statements and accompanying notes . estimates and assumptions could change in the future as more information becomes known , which could impact the amounts reported and disclosed in our financial statements . the accounting estimates deemed to be most critical to our financial position and results of operations are those related to reserves for policy and contract benefits , deferred acquisition costs , valuation of investments , pension and postretirement benefit plans , income taxes , and contingent liabilities . for additional information , refer to our significant accounting policies in note 1 of the `` notes to consolidated financial statements '' contained herein in item 8. reserves for policy and contract benefits reserves for policy and contract benefits are our largest liabilities and represent claims that we estimate we will eventually pay to our policyholders . the two primary categories of reserves are policy reserves for claims not yet incurred and claim reserves for claims that have been incurred or are estimated to have been incurred but not yet reported to us . reserves for policy and contract benefits equaled $ 42.1 billion and $ 41.5 billion at december 31 , 2017 and 2016 , respectively , or approximately 77.4 percent and 78.3 percent of our total liabilities , respectively . reserves ceded to reinsurers were $ 7.2 billion and $ 7.1 billion at december 31 , 2017 and 2016 , respectively , and are reported as a reinsurance recoverable in our consolidated balance sheets . policy reserves policy reserves are established in the same period we issue a policy and equal the difference between projected future policy benefits and future premiums , allowing a margin for expenses and profit . these reserves relate primarily to our non-interest sensitive products , including our individual disability and voluntary benefits products in our unum us segment ; individual disability products in our unum uk segment ; disability and cancer and critical illness policies in our colonial life segment ; and individual disability , long-term care , and other products in our closed block segment . the reserves are calculated based on assumptions that were appropriate at the date the policy was issued and are not subsequently modified unless the policy reserves become inadequate ( i.e . loss recognition occurs ) . persistency assumptions are based on our actual historical experience adjusted for future expectations . claim incidence and claim resolution rate assumptions related to mortality and morbidity are based on actual experience or industry standards adjusted as appropriate to reflect our actual experience and future expectations . discount rate assumptions are based on our current and expected net investment returns . in establishing policy reserves , we use assumptions that reflect our best estimate while considering the potential for adverse variances in actual future experience , which results in a total policy reserve balance that has an embedded reserve for adverse deviation . we do not , however , establish an explicit and separate reserve as a provision for adverse deviation from our assumptions . we perform loss recognition tests on our policy reserves annually , or more frequently if appropriate , using best estimate assumptions as of the date of the test , without a provision for adverse deviation . we group the policy reserves for each major product line within a segment when we perform the loss recognition tests . if the policy reserves determined using these best estimate assumptions are higher than our existing policy reserves net of any deferred acquisition cost balance , the existing policy reserves are increased or deferred acquisition costs are reduced to immediately recognize the deficiency .
| the benefit ratio for our unum us segment for 2017 was 67.8 percent , or 67.4 percent excluding the unclaimed death benefit reserve increase , compared to 69.2 percent in 2016 . unum us sales increased 19.6 percent in 2017 compared to 2016 , aided by our addition of the dental and vision product offering in the third quarter of 2016. persistency declined relative to the prior year but remains within our expectations . our unum uk segment reported a decrease in adjusted operating income , as measured in unum uk 's local currency , of 8.6 percent in 2017 compared to 2016 , due to less favorable benefits experience , partially offset by increases in premium income and net investment income . premium income in local currency increased 1.9 percent in 2017 relative to 2016 . the benefit ratio for unum uk was 74.4 percent in 2017 compared to 69.4 percent in 2016 . unum uk sales in local currency increased 6.5 percent in 2017 compared to 2016 . persistency was generally stable relative to the prior year and is consistent with our expectations . our colonial life segment reported a decrease in adjusted operating income , including the 2017 unclaimed death benefits reserve increase , of 0.5 percent in 2017 compared to 2016 . excluding the reserve increase , adjusted operating income increased 3.4 percent due to growth in premium income , partially offset by slightly less favorable benefits experience . the 2017 benefit ratio for colonial life was 52.2 percent , or 51.4 percent excluding the unclaimed death benefit reserve increase , compared to 51.3 percent in 2016 . colonial life sales increased 7.5 percent in 2017 compared to 2016 . persistency was generally stable in 2017 compared to 2016 and is consistent with our expectations . our closed block segment reported a decrease in adjusted operating income of 4.3 percent in 2017 compared to 2016 , due primarily to an expected decline in premium income and declining investment yields . benefits experience for individual
| 13,565 |
mobile services mobile services segment results of operations were as follows ( dollars in thousands ) : replace_table_token_5_th 2018 compared with 2017 mobile services revenue decreased by $ 1.1 million , or 4 % , and was primarily driven by a decrease of $ 1.6 million to our subscription services revenue stream , offset by an increase of $ 0.5 million in our software license revenue stream . software license for our software license revenues , the increase was primarily due to the recognition of $ 0.6 million in revenues generated by our integrated realtimes products offered to mobile carriers due in part to our transition to topic 606 in the first quarter of 2018. subscription service for our subscription services , the $ 1.6 million decrease was primarily a result of a decrease of $ 1.4 million in our ringback tones business , driven partially by the recognition of $ 0.9 million in the first quarter of 2017 following the execution of a long-term contract with our partner in brazil . also contributing to the decrease was a $ 0.2 million reduction in our intercarrier messaging business . cost of revenue decreased by $ 1.4 million or 14 % as compared to the prior year , due primarily to lower bandwidth cost of $ 0.8 million , third-party customer service of $ 0.2 million , and salaries , professional services fees and benefits of $ 0.4 million . 22 2017 compared with 2016 mobile services revenue decreased by $ 0.5 million , or 2 % , which was driven by decreases of $ 0.6 million for system integrations for our carrier partners and $ 0.6 million in our intercarrier messaging service . these decreases were offset by increases of $ 0.4 million in our ringback tones business and $ 0.4 million from our realtimes platform . gross margin improved by $ 2.0 million , or 7 percentage points , as compared to the prior year . the increase was due primarily to our cost reduction efforts , including reductions to salaries and infrastructure costs , as well as reduced bandwidth and customer service costs . operating expenses decreased by $ 6.5 million , due to a decrease in salaries and benefits of $ 3.8 million , reduced expenses for facilities and support services of $ 1.7 million and a reduction in marketing expense of $ 0.6 million . games games segment results of operations were as follows ( dollars in thousands ) : replace_table_token_6_th 2018 compared with 2017 games revenue decreased by $ 3.7 million , or 15 % as compared to the prior year due to a decrease of $ 5.2 million in our product sales revenue stream , offset by an increase of $ 1.3 million in our advertising and other revenue stream . product sales for our product sales , the decrease of $ 5.2 million was due primarily to timing of launches and specific games launched within our original stories portfolio . there were fewer games launched in 2018 compared to 2017 , of which , our 2017 games experienced more comparative success than those titles released in 2018. additionally in 2018 , we launched our first free to play game which offers advertising within our games in lieu of purchasing the game . this model shifts the revenue from product sales to advertising . advertising and other our advertising and other revenues increased $ 1.3 million as compared to the prior year primarily as a result of new initiatives to offer in-game advertising within our mobile games and the launch of our first free to play game . cost of revenue decreased by $ 2.6 million , or 30 % , as compared to the prior year . we recorded decreased publisher license and service royalties of $ 1.6 million and decreased app store fees of $ 1.1 million . these decreases were offset by an increase of $ 0.2 million in advertising costs . as a result of our april 2018 acquisition of a netherlands-based game development studio described in note 4. acquisitions and disposals , we no longer pay royalties for this studio ; however , operating expenses relating to the ongoing operation of this studio have been incurred as noted in the following paragraph . operating expenses decreased by $ 0.1 million , as compared to the prior-year period , due to a decrease of $ 0.6 million in marketing expense offset by an increase of $ 0.5 million in people and professional service fees due to increased developer costs . as a result of our april 2018 acquisition of a netherlands-based game development studio described in note 4. acquisitions and disposals , operating expenses relating to the ongoing operation of this studio have been incurred . 2017 compared with 2016 games revenue increased by $ 0.3 million , or 1 % as compared to the prior year due to growth in our mobile games business , as the increase of $ 1.9 million in our mobile games revenues was offset by a decrease of $ 1.6 million in our other games revenues . 23 cost of revenue increased by $ 0.8 million , or 10 % , as compared to the prior year , due to an increase of $ 0.6 million from increased royalty fees paid to developers , as well as an increase of $ 0.6 million in app store fees related to our mobile revenue growth in the casual games business . these increases were offset by lower facilities and support service costs as compared to the prior year . operating expenses increased by $ 0.8 million , or 4 % as compared to the prior-year period , due to increased salaries , benefits and professional services costs of $ 1.2 million due to our continued investment in growing our mobile games offering , as well as increased facilities charges of $ 0.4 million . these increases were offset in part by lower marketing costs of $ 0.9 million . story_separator_special_tag corporate corporate segment results of operations were as follows ( dollars in thousands ) : replace_table_token_7_th 2018 compared with 2017 cost of revenue decreased by $ 0.9 million compared to the prior year due to the reversal of certain aged royalty liabilities relating to our legacy music business . operating expenses decreased by $ 2.0 million , or 15 % . the decrease was primarily due to a decrease of $ 1.7 million in salaries , benefits , professional services and facilities costs due to our ongoing cost reduction efforts . also contributing to the decrease were lower restructuring costs and a benefit in lease exit and related charges partially due to the renegotiation of certain leases , totaling $ 1.1 million . these decreases were offset by certain benefits recorded in the first quarter of 2017 : $ 0.5 million relating to the warrants received from napster and a $ 0.4 million release of previously accrued taxes . 2017 compared with 2016 operating expenses decreased by $ 6.9 million , or 34 % . the decrease was primarily due to a $ 4.6 million reduction in salary , benefit and professional service expenses , a reduction of $ 2.2 million in lease exit and related charges , as well as a benefit of $ 0.5 million relating to the warrant received from napster in the first quarter of 2017 , which is discussed further in note 6. fair value measurements , and lower expenses for facilities and support services as a result of our reduction of office space at our corporate headquarters and ongoing cost reduction efforts . these decreases were offset by an increase of $ 1.0 million relating to increased restructuring charges due to increased severance cost as compared to the prior year . consolidated operating expenses our operating expenses consist primarily of salaries and related personnel costs including stock based compensation , consulting fees associated with product development , sales commissions , amortization of certain intangible assets capitalized in our acquisitions , professional service fees , advertising costs , and restructuring charges . operating expenses were as follows ( dollars in thousands ) : replace_table_token_8_th research and development expenses increased by $ 1.1 million , or 4 % , in the year ended 2018 as compared to 2017 primarily due to an increase of $ 1.6 million in professional service expense , reflecting our continued efforts toward our growth initiatives and our april 2018 acquisition of a netherlands based game development studio described in note 4. acquisitions and disposals . there was also an increase of $ 0.3 million for facilities and support service costs . these increases were offset by a decrease in salaries and benefits of $ 0.8 million . 24 research and development expenses decreased by $ 0.2 million , or 1 % , in the year ended 2017 as compared to 2016. the decrease was primarily due to lower expenses for facilities and support services of $ 1.0 million as a result of our ongoing cost reduction efforts . the decrease was also due to the acceleration of depreciation expense of $ 0.7 million taken in the first quarter of 2016. these decreases were offset in part by an increase of $ 1.3 million in salaries , benefits and professional services expense due to increased efforts towards our growth initiatives . sales and marketing expenses decreased by $ 1.8 million , or 8 % , in the year ended 2018 , compared with 2017 . the decrease was due to reductions of $ 1.0 million in salaries , benefits and professional services fees , $ 0.4 million in facilities and support services costs , as well as a $ 0.3 million in marketing expenses . sales and marketing expenses decreased by $ 8.7 million , or 27 % , in the year ended 2017 , compared with 2016 . the decrease was due to reductions of $ 5.7 million in salaries , benefits and professional services fees , a $ 1.9 million decrease in marketing expenses , as well as decreased facilities and support services costs of $ 1.1 million . general and administrative expenses decreased by $ 0.3 million , or 1 % , in the year ended 2018 , compared with 2017 . the decrease was primarily due to a reduction of $ 1.2 million in salaries , benefits and professional services fees , and a decrease of $ 0.3 million related to reduced facilities and support services costs . these decreases were offset by certain benefits recorded in the first quarter of 2017 : $ 0.5 million relating to the warrants received from napster and a $ 0.4 million release of previously accrued taxes . general and administrative expenses decreased by $ 6.4 million , or 23 % , in the year ended 2017 , compared with 2016 . the decrease was primarily due to a reduction of $ 3.4 million in salaries , benefits and professional services fees , a decrease of $ 1.8 million related to reduced facilities and support services costs , as well as the first quarter 2017 benefit of $ 0.5 million relating to warrants we received from napster , which are discussed further in note 6. fair value measurements . also contributing to the decrease was a benefit of $ 0.4 million in the first quarter of 2017 related to the release of previously accrued taxes . restructuring and other charges and lease exit and related charges consist of costs associated with the ongoing reorganization of our business operations and our ongoing expense re-alignment efforts . the restructuring expense amounts in all years primarily related to severance costs due to workforce reductions . for additional details on these charges see note 11. restructuring charges and note 12. lease exit and related charges .
| for further detail regarding the changes , please see the discussions of segment revenues below . gross margin increased to 71 % from 66 % , driven by margin increases in consumer media and mobile services , offset by decreased margin in our games business due to increased app store fees as our mix shifts towards mobile games . operating expenses decreased by $ 16.5 million as compared to the prior year as a result of our continuing cost reduction efforts . these efforts were the primary reason for reductions to salaries , benefits and professional services costs of $ 7.7 million , facilities costs of $ 4.6 million , marketing expense of $ 1.8 million and lower lease exit costs of $ 2.2 million . further contributing to the decrease year over year was a benefit of $ 0.5 million relating to warrants received from napster in the first quarter of 2017 , which is discussed further in note 6. fair value measurements . these decreases were offset by an increase of $ 1.0 million in restructuring due to increased severance charges . segment operating results consumer media consumer media segment results of operations were as follows ( dollars in thousands ) : replace_table_token_4_th 2018 compared with 2017 total consumer media revenue decreased by $ 4.4 million , or 20 % as compared to the prior year , due primarily to decreased software license revenues of $ 3.7 million , as well as a decrease in our subscription service revenues of $ 1.0 million . these decreases were offset in part by an increase in advertising and other revenues of $ 0.4 million . software license for our software license revenues , the year-over-year decrease was related to declining shipments by our customers and the timing of contract renewals , which were offset in part by our transition to topic 606 that accelerated the recognition of revenue by $ 1.5 million on certain codec technologies contracts during the year . 21 subscription services for our
| 13,566 |
in may 2017 , the second , confirmatory phase 3 clinical trial was completed , in which administration of inveltys two times a day achieved statistical significance for both primary efficacy endpoints of complete resolution of inflammation at day eight maintained through day 15 with no need for rescue medication compared to placebo and complete resolution of pain at day eight maintained through day 15 with no need for rescue medications compared to placebo and all secondary endpoints . in this trial , inveltys was well tolerated with no treatment‑related significant adverse events observed during the course of the trial . we are evaluating opportunities for mpp nanosuspensions of le with less frequent daily dosing regimens for the treatment of inflammation and pain following ocular surgery , for the temporary relief of the signs and symptoms of dry eye disease and for potential chronic treatment of dry eye disease . we also are evaluating compounds in our topically applied mpp receptor tyrosine kinase inhibitor program , or rtki program , that inhibit the vascular endothelial growth factor , or vegf , pathway , for the potential treatment of a number of retinal diseases . for inveltys , we are seeking fda approval under section 505 ( b ) ( 2 ) of the u.s. federal food , drug and cosmetic act , or the fdca , which we plan to rely on for the approval of kpi‑121 0.25 % as well . we have retained worldwide commercial rights for our current product candidates . if inveltys and kpi‑121 0.25 % receive marketing approval , we expect to commercialize both in the united states , and we have started to build a commercial infrastructure to do so , with our own focused , specialty sales force . if inveltys receives marketing approval , we expect our commercial organization will initially consist of approximately 75 sales and marketing personnel . if kpi-121 0.25 % is approved for the short-term treatment of dry eye disease , we expect to further expand our sales force by up to approximately an additional 100 personnel . we expect to commercialize in the united states any of our other product candidates that receive marketing approval as well . in anticipation of the potential to commercialize our product candidates in other global markets , we are evaluating a variety of collaboration , distribution and other marketing arrangements with one or more third parties . on july 25 , 2017 , we completed our initial public offering of our common stock , or ipo , pursuant to which we issued and sold 6,900,000 shares of our common stock at a price of $ 15.00 per share , which included 900,000 shares sold pursuant to the exercise of the underwriters ' option to purchase additional shares . we received net proceeds of $ 94.0 million , after deducting underwriting discounts and commissions and offering expenses . since our inception in july 2009 , we have devoted substantial resources to the research and development of nanoparticle‑based drug products and our proprietary mpp technology . we have no products approved for sale and all our revenue to date has been derived from feasibility agreements with our collaboration partners . to date , we have funded our operations primarily through our ipo , private placements of preferred stock , convertible promissory notes and warrants . in addition , we have borrowed under venture debt facilities to fund our operations . specifically , since our inception and through december 31 , 2017 , we have raised an aggregate of $ 234.9 million to fund our operations , of which $ 113.4 million was from the sale of preferred stock , $ 94.0 million was from our ipo , $ 6.0 million was from convertible promissory notes and warrants and $ 21.5 million was from borrowings and warrants under venture debt facilities . as of december 31 , 2017 , we had cash on hand of $ 114.6 million . since inception , we have incurred significant operating losses . our net loss was $ 42.2 million , $ 33.2 million and $ 16.7 million for the years ended december 31 , 2017 , 2016 and 2015 , respectively . we recognized revenue of $ 0 , $ 0 , and $ 45,000 for the years ended december 31 , 2017 , 2016 and 2015 , respectively . we have not generated any revenue from the sale of products . our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current product candidates and programs . substantially all our operating losses resulted from expenses incurred in connection with our research programs and from general and administrative costs associated with our operations . as of december 31 , 2017 , we had an accumulated deficit of $ 134.4 million . we expect to continue to incur significant and increasing losses in the foreseeable future . our net losses may fluctuate significantly from quarter to quarter and year to year . we anticipate that our expenses will increase substantially if and as we : · seek marketing approval for inveltys and establish our sales , marketing and distribution capabilities for inveltys in advance of and upon any such approval ; 102 · seek marketing approvals for kpi‑121 0.25 % and any other product candidates that successfully complete clinical development ; · pursue the clinical development of kpi‑121 for the treatment of other additional indications or for use in other patient populations or , if approved , seek to broaden the label of inveltys or kpi‑121 0.25 % ; · pursue the preclinical and clinical development of product candidates derived from our rtki program for use in the treatment of retinal diseases ; · expand our sales , marketing and distribution capabilities for our other product candidates , prior to or upon receiving marketing approval ; · scale up our manufacturing processes and capabilities to support commercialization of inveltys , for which the fda has accepted our nda for filing , and story_separator_special_tag any of our other product candidates for which we seek and or obtain marketing approval ; · leverage our proprietary mpp technology to advance additional high‑value therapeutics into preclinical and clinical development ; · in‑license or acquire the rights to other products , product candidates or technologies ; · maintain , expand and protect our intellectual property portfolio ; · hire additional clinical , quality control , scientific , manufacturing , commercial and management personnel ; · expand our operational , financial and management systems and increase personnel , including personnel to support our clinical development , manufacturing and commercialization efforts and our operations as a public company ; and · increase our product liability insurance coverage as we initiate and expand our commercialization efforts . we do not expect to generate revenue from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates , which is subject to significant uncertainty . if we obtain regulatory approval for any of our product candidates , we expect to incur significant commercialization expenses related to product sales , marketing , manufacturing and distribution . until such time , if ever , that we generate product revenue , we expect to finance our cash needs through a combination of public or private equity offerings , debt financings and research collaboration and license agreements . we may be unable to raise capital or enter such other arrangements when needed or on favorable terms . our failure to raise capital or enter such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates . financial operations overview revenue our revenue to date has been generated through payments received through feasibility agreements with collaboration partners . for each such agreement , we and our collaboration partners agreed to an investigational study with specified phases and endpoints . these studies were executed according to a predefined work plan . under the terms of each agreement , we received an upfront payment upon consummation , additional upfront payments upon continuation to future phases after predefined objectives had been met and a final payment upon approval of a final report . we do not currently anticipate generating any significant additional revenue through feasibility agreements or other collaboration arrangements in the future . 103 research and development expenses research and development expenses consist of costs associated with our research activities , including compensation and benefits for full‑time research and development employees , an allocation of facilities expenses , overhead expenses , payments to universities under our license agreements and other outside expenses . our research and development expenses include : · employee‑related expenses , including salaries , related benefits , travel and stock‑based compensation ; · expenses incurred for the preclinical and clinical development of our product candidates and under agreements with contract research organizations , or cros ; · facilities , depreciation and other expenses , which include direct and allocated expenses for rent and maintenance of facilities and supplies ; and · payments made under our third‑party licensing agreements , including our license agreement with johns hopkins university , or jhu . the following table summarizes our research and development expenses incurred during the years ended december 31 , 2017 , 2016 and 2015 : replace_table_token_4_th we expect our research and development expenses to increase for the foreseeable future as we advance our product candidates toward regulatory approval . the process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time‑consuming . we may never succeed in obtaining marketing approval for any of our product candidates . the probability of success for each product candidate may be affected by numerous factors , including preclinical data , clinical data , competition , manufacturing capability and commercial viability . our research and development programs are at various stages of development . successful development and completion of clinical trials is uncertain and may not result in approved products . completion dates and completion costs can vary significantly for each future product candidate and are difficult to predict . we will continue to make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to our ability to enter into collaborations with respect to each product candidate , the scientific and clinical success of each product candidate as well as ongoing assessments as to the commercial potential of product candidates . we will need to raise additional capital and may seek collaborations in the future to advance our various product candidates . additional private or public financings may not be available to us on acceptable terms , or at all . our failure to raise capital as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy . general and administrative expenses general and administrative expenses consist primarily of salaries and related benefits , including stock‑based compensation , related to our executive , finance , legal , business development and support functions . other general and administrative expenses include travel expenses , professional fees for auditing , tax , consultants and legal services and allocated facility‑related costs not otherwise included in research and development expenses . 104 we anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates . we also anticipate that we will incur increased accounting , audit , legal , regulatory , compliance , director and officer insurance costs as well as investor and public relations expenses associated with being a public company . change in fair value of warrant liability prior to our ipo , we issued warrants for the purchase of our series seed , series b and series c preferred stock . these warrants were financial instruments that were issuable for contingently redeemable securities .
| this increase was primarily due to a $ 2.0 million increase in employee‑related costs comprised of a $ 1.2 million increase in general and administrative salaries and benefits expenses due to the hiring of additional employees and overall merit increases , and by a $ 0.7 million increase in stock compensation expense related to increased stock options being granted during the year . there was a $ 1.1 million increase in external consulting fees associated with accounting services and legal fees ; and a $ 0.2 million increase in external general and administrative costs as a result of being a public company , comprised primarily of directors ' and officers ' liability insurance , board of directors ' fees and investor relations costs . 109 interest income interest income was $ 527,000 for the year ended december 31 , 2017 compared to $ 147,000 for the year ended december 31 , 2016 an increase of $ 380,000. this increase was due to a higher average cash balance in our interest‑bearing deposit account during the year ended december 31 , 2017 compared to the same period in 2016 as a result of the proceeds from the ipo . interest expense interest expense was $ 1.0 million for the year ended december 31 , 2017 compared to $ 767,000 for the year ended december 31 , 2016 an increase of $ 252,000. the interest expense was comprised of the contractual coupon interest and the amortization of the debt discount associated with our 2014 debt facility . in september 2017 , the total debt balance increased to $ 20 million . the average interest rate in 2017 and 2016 was 7.10 % and 6.51 % , respectively . change in fair value of warrant liability the change in the fair value of our preferred stock warrant liability consisted of a loss of $ 1.8 million for the year ended december 31 , 2017 compared with a gain of $ 0.1 million for the year ended december 31 , 2016. this change was the result of an increase in the fair value of the underlying preferred stock prior to our ipo . upon closing of the ipo , the underlying preferred stock was converted into common stock , the
| 13,567 |
while management believes our valuation methodologies are appropriate and consistent with other market participants , different methodologies or assumptions used to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date . for additional information , see note 17 , fair value , to the consolidated financial statements in item 8 of this report . investment securities we review our investment portfolio quarterly for indications of other-than-temporary impairment ( otti ) . we use inputs from independent third parties to determine the fair value of investment securities , which are reviewed and corroborated by management . unrealized losses are evaluated to determine whether the impairment is temporary or other-than-temporary in nature . for debt securities , we consider our intent to sell the securities , the evidence available to determine if it is more likely than not that we will have to sell the securities before recovery of amortized cost , and the probable credit losses . probable credit losses are evaluated using the present value of expected future cash flows ; the severity and duration of the impairment ; the issuer 's financial condition and near-term prospects to service the debt ; the cause of the decline , such as adverse conditions related to the issuer , the industry , or economic environment ; the payment structure of the debt ; the issuer 's failure to make scheduled interest or principal payments ; and any change in the issuer 's credit rating by rating agencies . if the present value of expected future cash flows discounted at the security 's effective yield is less than the net book value , the difference is recognized as a credit-related otti in noninterest income . if we do not intend to sell and if we are not likely to be required to sell the security , the otti is separated into an amount representing the credit loss , which is recognized as a charge to noninterest income , and the amount representing all other factors , which is recognized in other comprehensive income ( oci ) . for equity securities , we consider our intent and ability to hold the security to recovery ; the severity and duration of the impairment ; the issuer 's financial condition , capital strength , and near-term prospects ; and any change in the issuer 's credit rating by rating agencies . if the fair value of the security is less than the net book value , the otti is recognized as a charge to noninterest income . for additional information , see note 3 , investment securities , to the consolidated financial statements in item 8 of this report . allowance for loan losses we review our allowance for loan losses quarterly to determine if it is sufficient to absorb probable loan losses in the portfolio . this determination requires management to make significant estimates and assumptions . while management uses its best judgment and available information , the ultimate adequacy of the allowance is dependent upon a variety of factors beyond our control , including the performance of our loan portfolio , the economy , changes in interest rates , and the view of regulatory authorities towards loan classifications . these uncertainties may result in material changes to the allowance for loan losses in the near term ; however , the amount of the change can not reasonably be estimated . our allowance for loan losses consists of reserves assigned to specific loans and credit relationships and general reserves assigned to loans not separately identified that have been segmented into groups with similar risk 28 characteristics using our internal risk grades . general reserve allocations are based on management 's judgments of qualitative and quantitative factors about macro and micro economic conditions reflected within the loan portfolio and the economy . factors considered in this evaluation include , but are not limited to , probable losses from loan and other credit arrangements , general economic conditions , changes in credit concentrations or pledged collateral , historical loan loss experience , and trends in portfolio volume , maturities , composition , delinquencies , and nonaccruals . historical loss rates for each risk grade of commercial loans are adjusted by environmental factors to estimate the amount of reserve needed by segment . individually significant loans require additional analysis that may include the borrower 's underlying cash flow and capacity for debt repayment , specific business conditions , and value of secondary sources of repayment ; consequently , this analysis may result in the identification of weakness and a corresponding need for a specific reserve . no allowance for loan losses is carried over or established at acquisition for purchased loans acquired in business combinations . a provision for loan losses is recorded for any credit deterioration in purchased performing loans after the acquisition date . loans acquired in business combinations that are deemed impaired at acquisition , purchased credit impaired ( pci ) loans , are grouped into pools and evaluated separately from the non-pci portfolio . the estimated cash flows to be collected on pci loans are discounted at a market rate of interest . management believed the allowance was adequate to absorb probable loan losses inherent in the loan portfolio as of december 31 , 2016. for additional information , see note 6 , allowance for loan losses , to the consolidated financial statements in item 8 of this report . third-party collateral valuations are regularly obtained and evaluated to help management determine changes in cash flows on purchased loans acquired in business combinations , potential credit impairment , and the amount of impairment to record . internal collateral valuations are generally performed within two to four weeks of identifying the initial potential impairment . the internal evaluation compares the original appraisal to current local real estate market conditions and considers experience and expected liquidation costs . when a third-party evaluation is received , it is reviewed for reasonableness . story_separator_special_tag once the evaluation is reviewed and accepted , discounts are applied to fair market value , based on , but not limited to , our historical liquidation experience for like collateral , resulting in an estimated net realizable value . the estimated net realizable value is compared to the outstanding loan balance to determine the appropriate amount of specific impairment reserve . specific reserves are generally recorded for impaired loans while third-party evaluations are in process and for impaired loans that continue to make some form of payment . while waiting for receipt of the third-party appraisal , we regularly review the relationship to identify any potential adverse developments and begin the tasks necessary to gain control of the collateral and prepare it for liquidation , including , but not limited to , engagement of counsel , inspection of collateral , and continued communication with the borrower . generally , the only difference between current appraised value , adjusted for liquidation costs , and the carrying amount of the loan , less the specific reserve , is any downward adjustment to appraised value that we determine appropriate , such as the costs to sell the property . impaired loans that do not meet certain criteria and do not have a specific reserve have typically been written down through partial charge-offs to net realizable value . based on prior experience , the company rarely returns loans to performing status after they have been partially charged off . impaired credits move quickly through the process towards ultimate resolution except in cases involving bankruptcy and various state judicial processes , which may extend the time for ultimate resolution . fdic indemnification asset in 2012 , we entered into a purchase and assumption agreement with loss share arrangements with the fdic to purchase certain assets and assume substantially all customer deposits and certain liabilities of waccamaw bank ( waccamaw ) . under the loss share agreements the fdic agreed to cover 80 % of covered assets , which consist of most loan ( covered loans ) and other real estate losses . gains and recoveries on covered assets offset prior losses or are paid to the fdic at the loss share percentage at the time of recovery . the loss share agreement for single family covered assets provides fdic loss sharing and recovery reimbursement to the fdic for ten years . the loss share agreement for commercial covered assets provides for fdic loss sharing for five years and recovery reimbursement to the fdic for eight years . certain expenses related to covered assets are reimbursable from the fdic through monthly and quarterly claims we submit . estimated reimbursements from the fdic are 29 netted against covered expenses in the consolidated statements of income . we regularly review the fair value of the fdic indemnification asset with input from a third-party provider . for additional information , see note 7 , fdic indemnification asset , to the consolidated financial statements in item 8 of this report . goodwill and other intangible assets we test goodwill annually , or more frequently if necessary , using a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount . we have one reporting unit for goodwill impairment testing purposes community banking . prior to october 2016 , we maintained two reporting units community banking and insurance services . the insurance services reporting unit consisted of the company 's wholly owned subsidiary greenpoint , which was sold in october 2016. we performed our annual qualitative assessment of goodwill as of october 31 , 2016 , and concluded that our carrying value of goodwill was not impaired . qualitative factors considered in the analysis included macroeconomic conditions , industry and market considerations , overall financial performance , changes in stock price , and our progress towards stated objectives as compared to prior years . an impairment charge to goodwill and other intangible assets may be required in the future if the company 's future earnings and cash flows decline or discount rates used in determining fair value increase . for additional information , see note 9 , goodwill and other intangible assets , to the consolidated financial statements in item 8 of this report . income taxes the establishment of provisions for federal and state income taxes is a complex area of accounting that involves judgments and estimates in applying relevant tax statutes . we operate in many state tax jurisdictions , which requires the appropriate allocation of income and expense to each state based on a variety of apportionment or allocation bases . audits by federal and state tax authorities may reveal liabilities that differ from our estimates and provisions . we continually evaluate our exposure to possible tax assessments arising from audits and record an estimate of possible exposure based on current facts and circumstances . we measure deferred tax assets and liabilities using the enacted tax rates applicable in the periods we expect temporary differences to be realized or settled . as changes in tax laws and rates are enacted , we adjust deferred tax assets and liabilities through the provision for income taxes . when evidence indicates that it is more likely than not that some , or all , of the deferred tax asset is not recoverable , we may record a valuation allowance to reduce the carrying value of the asset . increases or decreases in the valuation allowance result in increases or decreases to the provision for income taxes . the company is currently open to audit under the statute of limitations by the internal revenue service and various state tax departments for the years ended december 31 , 2013 through 2015. for additional information , see note 15 , income taxes , to the consolidated financial statements in item 8 of this report .
| 33 the following table presents the net interest analysis on a fte basis excluding the impact of non-cash purchase accounting accretion from acquired loan portfolios for the periods indicated : replace_table_token_8_th ( 1 ) fte basis based on the federal statutory rate of 35 % ( 2 ) nonaccrual loans are included in average balances ; however , no related interest income is recorded during the period of nonaccrual . ( 3 ) non-recurring discount accretion was enhanced in 2014 as a result of a positive resolution on a sizable credit . ( 4 ) normalized totals are non-gaap financial measures that exclude non-cash loan interest accretion related to pci loans . 2016 compared to 2015 . net interest income comprised 75.82 % of total net interest and noninterest income in 2016 compared to 74.16 % in 2015. net interest income on a gaap basis increased $ 127 thousand , or 0.15 % , and net interest income on a fte basis decreased $ 70 thousand , or 0.08 % . normalized net interest income on a fte basis is a non-gaap measure that excludes non-cash loan accretion income related to pci loans . for additional information , see non-gaap financial measures below . normalized net interest margin increased 18 basis points compared to an increase of 8 basis points on a gaap basis . the normalized and gaap-basis net interest spread increased 18 basis points . average earning assets decreased $ 42.12 million , or 1.90 % , primarily due to decreases in securities available for sale and interest-bearing deposits offset by loan growth . the normalized yield on earning assets increased 12 basis points compared to an increase of 2 basis points on a gaap basis . average loans increased $ 113.60 million , or 6.76 % , and the average loan to deposit ratio increased to 96.70 % from 86.56 % . the normalized yield on loans decreased 17 basis points compared to a decrease of 32 basis points on a gaap basis . non-cash accretion income decreased $ 2.34 million , or 32.96 % , as the effect of accretion income continued to decline from acquired portfolio attrition .
| 13,568 |
acquisitions in fiscal year 2013 we did not complete any acquisitions during fiscal year 2013. acquisitions in fiscal year 2012 in february 2012 , we acquired certain assets of ziff davis enterprise from enterprise media group , inc. , a new york-based online media and marketing company in the business-to-business technology market , in exchange for $ 17.3 million in cash , to broaden our registered user database and brand name in the business-to-business technology market . in august 2011 , we acquired 100 % of the outstanding equity interests of narrowcast group , llc , or it businessedge , a kentucky-based internet media company in the business-to-business technology market , in exchange for $ 24.0 million in cash , to broaden our registered user database and media access in the business-to-business technology market . during fiscal year 2012 , in addition to certain assets of ziff davis enterprise and all of the equity interests of it businessedge , we acquired eleven other online publishing businesses . development , acquisition and retention of targeted media one of the primary challenges of our business is acquiring or creating media that is high quality and targeted enough to attract prospects for our clients at costs that work for our business model . in order to grow our 36 index to financial statements business , we must be able to develop or acquire and retain quality targeted media on a cost-effective basis . changes in search engine algorithms , and retain high quality targeted media and increased competition on available media has , during some periods , limited and may continue to limit our ability to generate revenue . seasonality our results are subject to significant fluctuation as a result of seasonality . in particular , our quarters ending december 31 ( our second fiscal quarter ) are typically characterized by seasonal weakness . in our second fiscal quarters , there is lower availability of lead supply from some forms of media during the holiday period on a cost effective basis and some of our clients have lower budgets . in our quarters ending march 31 ( our third fiscal quarter ) , this trend generally reverses with better lead availability and often new budgets at the beginning of the year for our clients with fiscal years ending december 31. regulations our revenue has fluctuated as a result of recently adopted or amended regulations and the increased enforcement of existing regulations . our business is affected directly because we operate websites and conduct telemarketing and email marketing , and indirectly as clients adjust their operations as a result of regulatory changes and enforcement activity that affect their industries . one example of a recent regulatory change that may affect our business is the telephone consumer protection act ( the tcpa ) , which the federal communications commission amended to , among other things , impose heightened consent and opt-out requirements that companies conducting telemarketing must follow . certain provisions of the regulations became effective in july 2012 , and additional regulations requiring prior express written consent for telemarketing calls to wireless numbers became effective in october 2013. our efforts to comply with the tcpa has not had a material impact on traffic conversion rates . our clients may make business decisions based on their own experiences with the tcpa regardless of our products , and the changes we implemented to comply with the new regulations . those decisions may negatively affect our revenue or profitability . in addition , our education client vertical has been significantly affected by the adoption of regulations affecting for-profit educational institutions over the past several years , and a higher level of governmental scrutiny is expected to continue . clients in our financial services vertical have increasingly been affected by laws and regulations as a result of the adoption of new regulations under the doddfrank wall street reform and consumer protection act and the increased enforcement of new and pre-existing laws and regulations . the effect of these regulations , or any future regulations , may continue to result in fluctuations in the volume and mix of our business with these clients . basis of presentation general we operate in one reportable segment : dms . the remainder of our business is classified as all other . see note 14 , segment information , to our consolidated financial statements for further discussion and financial information regarding our reporting segment . net revenue our dms business generates revenue from fees earned through the delivery of qualified leads , clicks , calls , customers and , to a lesser extent , display advertisements , or impressions . we deliver targeted and measurable results through a vertical focus that we classify into the following client verticals : education , financial services and other ( which includes business-to-business technology , home services and medical ) . all other revenue 37 index to financial statements generated is less than 1 % of net revenue in fiscal years 2014 , 2013 and 2012. we expect all other revenue to continue to represent an immaterial portion of our business . cost of revenue cost of revenue consists primarily of media costs , personnel costs , amortization of intangible assets , depreciation expense and amortization of internal software development costs related to revenue-producing technologies . media costs consist primarily of fees paid to third-party publishers that are directly related to a revenue-generating event and pay-per-click ( ppc ) ad purchases from internet search companies . we pay these third-party publishers and internet search companies on a revenue-share , a cost-per-lead ( cpl ) cost-per-click , ( cpc ) , or cost-per-thousand-impressions ( cpm ) basis . personnel costs include salaries , stock-based compensation expense , bonuses and employee benefit costs . personnel costs are primarily related to individuals associated with maintaining our servers and websites , our editorial staff , client management , creative team , content , compliance group and media purchasing analysts . story_separator_special_tag costs associated with software incurred in the development phase or obtained for internal use are capitalized and amortized in cost of revenue over the software 's estimated useful life . we anticipate that our cost of revenue will increase more than our revenue for the near term as we invest in opportunities we see in the financial services client vertical . operating expenses we classify our operating expenses into three categories : product development , sales and marketing , and general and administrative . our operating expenses consist primarily of personnel costs and , to a lesser extent , professional services fees , rent and other costs . personnel costs for each category of operating expenses generally include salaries , stock-based compensation expense , bonuses , commissions and employee benefit costs . product development . product development expenses consist primarily of personnel costs and professional services fees associated with the development and maintenance of our technology platforms , development and launching of our websites , product-based quality assurance and testing . in the current period of business challenges , we are constraining expenses generally to the extent practicable . however , we expect product and development expenses to continue to increase in absolute dollars in the future as we believe that continuous investment in technology is critical to attaining our strategic objectives . sales and marketing . sales and marketing expenses consist primarily of personnel costs , advertising , professional services fees , and travel costs . we expect sales and marketing expenses to continue to increase in absolute dollars as we increase advertising spend and hire additional personnel in sales and marketing to support our offerings . general and administrative . general and administrative expenses consist primarily of personnel costs of our executive , finance , legal , employee benefits and compliance , technical support and other administrative personnel , as well as accounting and legal professional services fees , and insurance . in the current period of business challenges , we are constraining expenses generally to the extent practicable . however , we expect general and administrative expenses to increase in absolute dollars in future periods as we continue to invest in corporate infrastructure . interest and other income ( expense ) , net interest and other expense , net , consists primarily of interest expense , other income and expense , net and interest income . interest expense is related to our credit facility , including the related interest rate swap and promissory notes issued in connection with our acquisitions , and includes imputed interest on non-interest bearing notes . borrowings under our credit facility , the aggregate principal amount of outstanding promissory notes and related interest expense could increase if , among other things , we make additional acquisitions through debt financing . interest income represents interest earned on our cash , cash equivalents and marketable securities , which may increase or decrease depending on market interest rates and the amounts invested . 38 index to financial statements other income ( expense ) , net , includes foreign currency exchange gains and losses and other non-operating items . income tax ( provision for ) benefit from we are subject to tax in the united states as well as other tax jurisdictions or countries in which we conduct business . earnings from our limited non-u.s. activities are subject to local country income tax and may be subject to u.s. income tax . story_separator_special_tag online marketing for education companies in the prior year and additional decreased legal costs of $ 1.9 million related primarily to litigation expense , decreased bad debt expense of $ 1.4 million resulting from the insolvency of an advertising agency of record of one of our clients in the prior year , and decreased stock-based compensation expense of $ 1.0 million related to the departure of one of our directors and reduction in average headcount . impairment of goodwill as discussed under critical accounting policies and estimates we recorded a goodwill impairment charge of $ 95.6 million for the year ended june 30 , 2014 compared to $ 92.4 million for the year ended june 30 , 2013. interest and other expense , net replace_table_token_10_th interest and other expense , net decreased by $ 2.9 million , or 57 % , in fiscal year 2014 compared to fiscal year 2013 , primarily due to increased other income ( expense ) , net related to the gain of $ 0.9 million on the sale of our shares of preferred stock in demandbase and the sale of certain domain names for a gain of $ 0.5 million and due to decreased interest expense related to accelerated amortization of approximately $ 0.7 million of unamortized deferred upfront costs incurred in connection with the amendment of our credit facility in fiscal year 2013 and decreased debt obligations . 41 index to financial statements interest and other ( expense ) , net increased by $ 0.8 million , or 18 % , in fiscal year 2013 compared to fiscal year 2012 , primarily due to increased interest expense related to accelerated amortization of approximately $ 0.7 million of unamortized deferred upfront costs incurred in connection with the amendment of our credit facility during the third quarter of fiscal 2013. see note 9 , debt , to our consolidated financial statements for more information about our credit facility . benefit from ( provision for ) taxes replace_table_token_11_th the decrease in our effective tax rate for the fiscal year 2014 compared to fiscal year 2013 was primarily due to a one-time , non-cash charge to establish a valuation allowance for a specific portion of our deferred tax assets . the decrease in our effective tax rate for fiscal year 2013 compared to fiscal year 2012 , was primarily due to a goodwill impairment charge of $ 92.4 million for fiscal year 2013. the goodwill impairment charge had an associated tax benefit of $ 28.7 million due to the impairment of goodwill that is deductible for tax purposes .
| revenue from other client verticals decreased $ 10.3 million , or 17 % , primarily due to decreased client demand in our home services and business-to-business technology client verticals . cost of revenue cost of revenue decreased $ 9.7 million , or 4 % , in fiscal year 2014 compared to fiscal year 2013 , driven by decreased media costs of $ 6.7 million , decreased amortization of intangible assets and depreciation of $ 6.4 million , and decreased stock based compensation expense of $ 1.2 million , partially offset by increased personnel costs of $ 2.6 million and other increases of $ 2.0 million . the decreased media costs were primarily attributable to lower revenue levels offset by a lower mix of traffic from owned and operated websites . the decreased amortization of intangible assets was attributable to an amortization charge associated with certain licensed patents in fiscal year 2013 , assets from historical acquisitions becoming fully amortized and a reduced number of acquisitions in recent periods . the increased personnel costs were attributable to an increase in average headcount . gross margin was 14 % in fiscal year 2014 compared to 18 % in fiscal year 2013. cost of revenue decreased $ 31.9 million , or 11 % , in fiscal year 2013 compared to fiscal year 2012 , driven by decreased media costs of $ 26.1 million due to lower lead and click volumes , decreased personnel costs of $ 4.9 million and other decreases of $ 1.7 million , partially offset by increased amortization of intangible assets and depreciation of $ 1.2 million . the decreased personnel costs were attributable to a reduction in average headcount . gross margin was 18 % in fiscal year 2013 compared to 23 % in fiscal year 2012. operating expenses replace_table_token_9_th product development expenses product development expenses increased $ 0.5 million , or 3 % , in fiscal year 2014 compared to fiscal year 2013 , primarily due to increased personnel costs of $ 0.8 million due to an increase in average headcount , offset by a decrease in stock-based compensation
| 13,569 |
we believe the following critical accounting estimates affect our more significant judgments and estimates used in preparing our consolidated financial statements . see note 1 of the notes to consolidated financial statements for our organization and significant accounting policies . there have been no material changes made to the critical accounting estimates during the periods presented in the consolidated financial statements . revenue recognition significant management judgments and estimates must be made and used in connection with the recognition of revenue in any accounting period . material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management 's estimates change on the basis of development of the business or market conditions . management judgments and estimates have been applied consistently and have been reliable historically . we believe that there are two key factors which impact the reliability of management 's estimates . the first of those key factors is that the terms of our contracts are typically less than six months . the short-term nature of such contracts reduces the risk that material changes in accounting estimates will occur on the basis of market conditions or other factors . the second key factor is that we have hundreds of contracts in any given accounting period , which reduces the risk that any one change in an accounting estimate on one or several contracts would have a material impact on our consolidated financial statements or our two reporting segments ' measures of profit . the substantial majority of our revenue is generated pursuant to written contractual arrangements to design , develop , manufacture and or modify complex products , and to provide related engineering , technical and other services according to customer specifications . these contracts may be fixed price or cost-reimbursable . we consider all contracts for treatment in accordance with authoritative guidance for contracts with multiple deliverables . revenue from product sales not under contractual arrangement is recognized at the time title and the risk and rewards of ownership pass , which typically occurs when the products are shipped and collection is reasonably assured . 53 revenue and profits on fixed-price contracts are recognized using percentage-of-completion methods of accounting . revenue and profits on fixed-price production contracts , whose units are produced and delivered in a continuous or sequential process , are recorded as units are delivered based on their selling prices , or the units-of-delivery method . revenue and profits on other fixed-price contracts with significant engineering as well as production requirements are recorded based on the ratio of total actual incurred costs to date to the total estimated costs for each contract , or the cost-to-cost method . under percentage-of-completion methods of accounting , a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance , which can exceed one year . accounting for revenue and profits on a fixed-price contract requires the preparation of estimates of ( 1 ) the total contract revenue , ( 2 ) the total costs at completion , which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract 's statement of work and ( 3 ) the measurement of progress towards completion . the estimated profit or loss at completion on a contract is equal to the difference between the total estimated contract revenue and the total estimated cost at completion . under the units-of-delivery method , sales on a fixed-price type contract are recorded as the units are delivered during the period based on their contractual selling prices . under the cost-to-cost method , sales on a fixed-price type contract are recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion , multiplied by ( a ) the total estimated contract revenue , less ( b ) the cumulative sales recognized in prior periods . the profit recorded on a contract in any period using either the units-of-delivery method or cost-to-cost method is equal to ( x ) the current estimated total profit margin multiplied by the cumulative sales recognized , less ( y ) the amount of cumulative profit previously recorded for the contract . in the case of a contract for which the total estimated costs exceed the total estimated revenue , a loss arises , and a provision for the entire loss is recorded in the period that it becomes evident . the unrecoverable costs on a loss contract that are expected to be incurred in future periods are recorded in the program cost . revenue and profits on cost-reimbursable type contracts are recognized as costs are incurred on the contract , at an amount equal to the costs plus the estimated profit on those costs . the estimated profit on a cost-reimbursable contract is generally fixed or variable based on the contractual fee arrangement . we review cost performance and estimates to complete at least quarterly and in many cases more frequently . adjustments to original estimates for a contract 's revenue , estimated costs at completion and estimated profit or loss are often required as work progresses under a contract , as experience is gained and as more information is obtained , even though the scope of work required under the contract may not change , or if contract modifications occur . the impact of revisions in profit estimates for all types of contracts are recognized on a cumulative catch-up basis in the period in which the revisions are made . during the fiscal years ended april 30 , 2013 , 2012 and 2011 , changes in accounting estimates on fixed-price contracts recognized using the percentage of completion method of accounting were not material to our consolidated financial statements or our two reporting segments ' measure of profit . amounts representing contract change orders or claims are included in revenue only when they can be reliably estimated and their realization is probable . story_separator_special_tag incentives or penalties and awards applicable to performance on contracts are considered in estimating revenue and profit rates , and are recorded when there is sufficient information to assess anticipated contract performance . inventories and reserve for excess and obsolescence our policy for valuation of inventory , including the determination of obsolete or excess inventory , requires us to perform a detailed assessment of inventory at each balance sheet date , which includes a review of , among other factors , an estimate of future demand for products within specific time horizons , valuation of existing inventory , as well as product lifecycle and product development plans . inventory reserves are also provided to cover risks arising from slow-moving items . we write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based on assumptions about future demand and market conditions . we may be required to record additional inventory write-downs if actual market conditions are less favorable than those projected by our management . 54 self-insured liability we are self-insured for employee medical claims , subject to individual and aggregate stop-loss policies . we estimate a liability for claims filed and incurred but not reported based upon recent claims experience and an analysis of the average period of time between the occurrence of a claim and the time it is reported to and paid by us . we perform an annual evaluation of this policy and have determined that for all prior years during which this policy has been in effect there have been cost advantages to this policy , as compared to obtaining commercially available employee medical insurance . however , actual results may differ materially from those estimated and could have a material impact on our consolidated financial statements . impairment of long-lived assets we review the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable . the estimated future cash flows are based upon , among other things , assumptions about expected future operating performance , and may differ from actual cash flows . if the sum of the projected undiscounted cash flows ( excluding interest ) is less than the carrying value of the assets , the assets will be written down to the estimated fair value in the period in which the determination is made . long-term incentive awards we grant long-term incentive awards and we establish a target payout at the beginning of each performance period . the actual payout at the end of the performance period is calculated based upon our achievement of revenue and operating profit growth targets . payouts are made in cash and restricted stock units . upon vesting of the restricted stock units , we have the discretion to settle the restricted stock units in cash or stock . the cash component of the award is accounted for as a liability . the equity component is accounted for as a stock-based liability as the restricted stock units may be settled in cash or stock . at each reporting period , we reassess the probability of achieving the performance targets . the estimation of whether the performance targets will be achieved requires judgment , and to the extent actual results or updated estimates differ from our current estimates , the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised . income taxes we are required to estimate our income taxes , which includes estimating our current income taxes as well as measuring the temporary differences resulting from different treatment of items for tax and accounting purposes . we currently have significant deferred assets , which are subject to periodic recoverability assessments . realizing our deferred tax assets principally depends on our achieving projected future taxable income . we may change our judgments regarding future profitability due to future market conditions and other factors , which may result in recording a valuation allowance against those deferred tax assets . fiscal periods our fiscal year ends on april 30. due to our fixed year end date of april 30 , our first and fourth quarters each consist of approximately 13 weeks . the second and third quarters each consist of 13 weeks . our first three quarters end on a saturday . 55 story_separator_special_tag 59 % to 74 % , primarily due to an increase in sales of new products in low-rate production and with an associated higher cost of sales , and higher manufacturing and engineering overhead support costs . gross margin . gross margin for the fiscal year ended april 30 , 2012 was $ 129.3 million , as compared to $ 117.2 million for the fiscal year ended april 30 , 2011 , representing an increase of $ 12.1 million , or 10 % . as a percentage of revenue , gross margin remained at 40 % . uas gross margin increased $ 16.6 million , or 17 % , to $ 116.1 million for the fiscal year ended april 30 , 2012 , primarily due to an increase in sales volume . as a percentage of revenue , gross margin for uas increased from 40 % to 42 % , primarily due to a higher amount of fixed-price contract revenue compared to cost-reimbursable contract revenue . ees gross margin decreased $ 4.4 million , or 25 % , to $ 13.3 million for the fiscal year ended april 30 , 2012. as a percentage of revenue , ees gross margin decreased from 41 % to 26 % , primarily due to an increase in sales of new products in low-rate production and with an associated higher cost of sales , and higher manufacturing and engineering support overhead costs . selling , general and administrative .
| uas cost of sales decreased $ 42.5 million , or 27 % , to $ 115.2 million for the fiscal year ended april 30 , 2013 , primarily due to a decrease in sales volume . as a percentage of revenue , cost of sales for uas increased from 58 % to 59 % . ees cost of sales decreased $ 5.6 million , or 15 % , to $ 32.4 million for the fiscal year ended april 30 , 2013. as a percentage of revenue , cost of sales for ees decreased from 74 % to 71 % , primarily due to a higher sales mix of higher margin products and lower manufacturing and engineering overhead support costs . gross margin . gross margin for the fiscal year ended april 30 , 2013 was $ 92.5 million , as compared to $ 129.3 million for the fiscal year ended april 30 , 2012 , representing a decrease of $ 36.8 million , or 28 % . as a percentage of revenue , gross margin decreased from 40 % to 39 % . uas gross margin decreased $ 37.0 million , or 32 % , to $ 79.1 million for the fiscal year ended april 30 , 2013 , primarily due to a decrease in sales volume . as a percentage of revenue , gross margin for uas decreased from 42 % to 41 % . ees gross margin increased $ 0.2 million , or 1 % , to $ 13.5 million for the fiscal year ended april 30 , 2013. as a percentage of revenue , ees gross margin increased from 26 % to 29 % , primarily due to a higher sales mix of higher margin products and lower manufacturing and engineering overhead support costs . selling , general and administrative . sg & a expense for the fiscal year ended april 30 , 2013 was $ 51.5 million , or 21 % of revenue , compared to sg & a expense of $ 55.3 million , or 17 % of revenue , for the fiscal year ended april 30 , 2012. sg & a
| 13,570 |
our focus is to add customers to our network in a way that maximizes its use and at the same time provides us with a profitable customer mix . we are responding to this opportunity by increasing our sales and marketing efforts including increasing our number of sales representatives . we are expanding our network to locations that we believe can be economically integrated and represent significant concentrations of internet traffic . one of our keys to developing a profitable business will be to carefully match the cost of extending our network to reach new customers with the revenue expected to be generated by those customers . in addition , we may add customers to our network through strategic acquisitions . we believe two of the most important trends in our industry are the continued long-term growth in internet traffic and a decline in internet access prices within carrier neutral data centers . as internet traffic continues to grow and prices per unit of traffic continue to decline , we believe our ability to load our network and gain market share from less efficient network operators will continue to expand . however , continued erosion in internet access prices will likely have a negative impact on the rate at which we can increase our revenues and our profitability . our revenue may also be negatively affected if we are unable to grow our internet traffic or if the rate of growth of internet traffic does not offset the expected decline in per unit pricing . we do not know if internet traffic will increase or decrease , or the rate at which it will grow or decrease . changes in internet traffic will be a function of the number of users , the applications for which the internet is used , the pricing of internet services , and other factors . the growth in internet traffic has a more significant impact on our net-centric customers who represent the majority of the traffic on our network and who tend to consume the majority of their allocated bandwidth on their connections . net-centric customers tend to purchase their service on a price per megabit basis . our corporate customers tend to utilize a small portion of their allocated bandwidth on their connections and tend to purchase their service on a per connection basis . due to our strategic acquisitions of network assets and equipment , we believe we are well positioned to grow our revenue base . we continue to purchase and deploy network equipment to parts of our network to maximize the utilization of our assets and to expand our network . our future capital expenditures will be based primarily on the expansion of our network , the addition of on-net buildings and the concentration and growth of our customer base . we plan to continue to expand our network and to increase the number of on-net buildings we serve . many factors can affect our ability to add buildings to our network . these factors include the willingness of building owners to grant us access rights , the availability of optical fiber networks to serve those buildings , and equipment availability . 26 story_separator_special_tag expense for the performance shares related to 2011 is approximately $ 0.9 million and is recognized over the requisite service period of approximately one year through february 2012. asset impairment . in 2010 , we recorded an impairment charge of $ 0.6 million related to certain property and equipment that were no longer in use . there were no such charges in 2011. depreciation and amortization expenses . our depreciation and amortization expense increased 5.9 % from $ 56.5 million for 2010 to $ 59.9 million for 2011. the increase is primarily due to the depreciation expense associated with the increase related to newly deployed fixed assets more than offsetting the decline in depreciation expense from fully depreciated fixed assets and an adjustment to our asset retirement obligations , discussed below . the impact of exchange rates resulted in an increase of approximately $ 0.6 million in depreciation and amortization expenses . in the first quarter of 2010 , we revised our estimates of the cash flows that we believed will be required to settle our leased facility asset retirement obligations at the end of the respective lease terms , which resulted in a reduction to our asset retirement obligation liability . these revisions reduced our asset retirement obligation liability by $ 0.9 million with an offsetting reduction to depreciation and amortization of $ 0.7 million and selling , general and administrative expenses of $ 0.2 million . interest expense . interest expense results from interest incurred on our $ 175.0 million of senior notes issued in january 2011 , our $ 92.0 million of 1.00 % convertible senior notes ( the `` convertible notes '' ) issued in june 2007 , and interest on our capital lease obligations . our interest expense increased 106.9 % from $ 16.7 million for 2010 to $ 34.5 million for 2011. the increase is attributed to approximately $ 14.0 million of interest expense related to the issuance of our senior notes and to an increase in our capital lease obligations . the impact of exchange rates resulted in an increase in our interest expense for 2011 of approximately $ 0.3 million . release of lease obligation-gain . in 2011 , the requirements for extinguishment were met and we were released from an obligation under an iru capital lease obligation totaling $ 2.7 million resulting in a gain . the iru asset related to this obligation had been fully impaired in 2008 when it was determined that the iru asset was no longer in use . income tax benefit . story_separator_special_tag our income tax benefit was $ 1.2 million for 2010 and $ 2.0 million for 2011. the net income tax benefit for 2010 includes income taxes for the united states of approximately $ 0.7 million for state income taxes ( including approximately $ 0.3 million related to uncertain tax positions ) , $ 0.1 million of income tax provision related to our european operations offset by a tax benefit of $ 1.5 million from the reduction of the remaining valuation allowance on net deferred tax assets related to our canadian operations and $ 0.6 million related to a refund of federal alternative minimum taxes . the net income tax benefit for 2011 includes income taxes for the united states of approximately $ 3.4 million for state income taxes ( including approximately $ 3.0 million related to uncertain tax positions ) a tax benefit of $ 6.3 million from the reduction of the valuation allowance on net deferred tax assets related to our operations in certain state and municipal jurisdictions in the united states , and , $ 0.3 million and $ 0.6 million of income tax provision related to our european and canadian operations , respectively . buildings on-net . as of december 31 , 2010 and 2011 we had a total of 1,579 and 1,744 on-net buildings connected to our network , respectively . year ended december 31 , 2009 compared to the year ended december 31 , 2010 our management reviews and analyzes several key financial measures in order to manage our business and assess the quality of and potential variability of our service revenues and cash flows . the following summary table presents a comparison of our results of operations for the years ended 29 december 31 , 2009 and 2010 with respect to certain key financial measures . the comparisons illustrated in the table are discussed in greater detail below . replace_table_token_6_th ( 1 ) excludes equity-based compensation expense of $ 172 and $ 370 for 2009 and 2010 , respectively , which , if included would have resulted in a period-to-period change of 15.8 % . ( 2 ) excludes equity-based compensation expense of $ 8,435 and $ 6,267 for 2009 and 2010 , respectively , which , if included would have resulted in a period-to-period change of ( 6.3 ) % . service revenue . our service revenue increased 11.7 % from $ 235.8 million for 2009 to $ 263.4 million for 2010. exchange rates negatively impacted the increase in service revenues by approximately $ 1.2 million . all foreign currency comparisons herein reflect results for 2010 translated at the average foreign currency exchange rates for 2009. for 2009 and 2010 , on-net , off-net and non-core revenues represented 79.9 % , 18.4 % and 1.7 % and 77.8 % , 21.0 % and 1.2 % of our net service revenues , respectively . revenues from our corporate and net-centric customers represented 47.3 % and 52.7 % of our service revenue , respectively , for 2009 and represented 49.4 % and 50.6 % of our service revenue , respectively , for 2010. revenues from corporate customers increased 16.5 % from $ 111.6 million for 2009 to $ 130.1 million for 2010. revenues from our net-centric customers increased 7.4 % from $ 124.2 million for 2009 to $ 133.3 million for 2010. the difference in the increase percentages in net-centric revenues as compared to the increase in corporate revenues is primarily attributed to a decline in the average revenue per net-centric customer connection from discounting and from the impact of exchange rates ( almost all of our european revenues are from net-centric customers ) . our on-net revenues increased 8.8 % from $ 188.5 million for 2009 to $ 205.0 million for 2010. our on-net revenues increased as we increased the number of our on-net customer connections by 21.4 % from approximately 17,200 at december 31 , 2009 to approximately 20,900 at december 31 , 2010. on-net customer connections increased at a greater rate than on-net revenues due to a decline in the average revenue per on-net customer connectionprimarily from our net-centric customers . this decline is partly attributed to a shift in the customer connection mix and due to volume and term based pricing discounts . additionally , on-net customers who cancel their service from our installed base of customers , in general , have greater average revenue per connection than new customers . these trends and the impact of foreign exchange rates resulted in a reduction to our average revenue per on-net connection . 30 our off-net revenues increased 27.6 % from $ 43.3 million for 2009 to $ 55.3 million for 2010. our off-net customer connections increased 9.0 % from approximately 3,200 at december 31 , 2009 to approximately 3,500 at december 31 , 2010. off-net revenues increased at a greater rate than off-net customer connections due to an increase in the average revenue per off-net customer connection . off-net customers who cancel their service , in general , have an average revenue per connection and per connection bandwidth speed that is less than the average revenue per connection for new off-net customers who generally purchase higher-bandwidth connections . our non-core revenues decreased 22.0 % from $ 4.0 million for 2009 to $ 3.1 million for 2010. the number of our non-core customer connections decreased 29.9 % from approximately 900 at december 31 , 2009 to approximately 650 at december 31 , 2010. we do not actively market these acquired non-core services and expect that the service revenue associated with them will continue to decline . network operations expenses . network operations expenses include costs associated with service delivery , network management , and customer support . this includes the costs of personnel and related operating expenses associated with these activities , network facilities costs , fiber and equipment maintenance fees , leased circuit costs , and access and facilities fees paid to building owners . our network operations expenses , excluding equity-based compensation expense , increased 15.6 % from $ 102.6 million for 2009 to $ 118.7 million for 2010.
| in january 2012 , our largest ( net-centric ) customer was indicted by the u.s. government and as a result our on-net service to this customer and the associated revenue terminated in january 2012. the loss of this on-net net-centric customer will negatively impact our revenue growth rate in 2012. revenues from our corporate and net-centric customers represented 49.4 % and 50.6 % of our service revenue , respectively , for 2010 , and represented 48.9 % and 51.1 % of our service revenue , respectively , for 2011. revenues from corporate customers increased 14.9 % from $ 130.1 million for 2010 to $ 149.4 million for 2011. revenues from our net-centric customers increased 17.0 % from $ 133.3 million for 2010 to $ 156.1 million for 2011. our on-net revenues increased 13.7 % from $ 205.0 million for 2010 to $ 233.0 million for 2011. our on-net revenues increased as we increased the number of our on-net customer connections by 22.3 % from approximately 20,900 at december 31 , 2010 to approximately 25,500 at december 31 , 2011. on-net customer connections increased at a greater rate than on-net revenues due to a decline in the 27 average revenue per on-net customer connectionprimarily resulting from the pricing per connection related to our net-centric customers . this decline in the average revenue per on-net customer connection is partly attributed to volume and term based pricing discounts . additionally , on-net customers who cancel or renew their service from our installed base of customers , in general , have greater average revenue per connections than new or renewed customers . these trends resulted in a reduction to our average revenue per on-net connection . our off-net revenues increased 25.9 % from $ 55.3 million for 2010 to $ 69.6 million for 2011. our off-net customer connections increased 11.0 % from approximately 3,500 at december 31 , 2010 to approximately 3,900 at december 31 , 2011. off-net revenues increased at a greater rate than off-net customer connections due to an increase in the average revenue per off-net customer connection . off-net customers who cancel their service , in general , have an average revenue per connection and per connection bandwidth speed that is less than the average revenue per connection for new off-net customers who generally purchase higher-bandwidth connections . our non-core revenues decreased 8.7 % from $ 3.1 million for 2010 to $ 2.8 million for 2011 .
| 13,571 |
¡ the impact of fluctuating prices of labor and raw materials , such as cotton , which has contributed , and will continue to contribute , to ongoing pricing pressure throughout the supply chain . in particular , during the first half of 2011 , the price of cotton increased as a result of various dynamics in the commodity markets . trends such as these bring additional pressure on us and other wholesalers and retailers to shorten lead-times , reduce costs and raise product prices . raw materials costs may have an adverse impact on our cash and working capital needs as well as those of our suppliers . these factors contribute to a global market environment of intense competition , constant product innovation and continuing cost pressure , and combine with the continuing global economic conditions to create a challenging commercial and economic environment . we expect these trends to continue into the foreseeable future . in addition , we will remain focused on our key strategies and will continue to incur costs related to investment in our retail and wholesale network and in our information technology infrastructure , as well as refining our organizational structure to enable sustained , profitable growth . we expect our operating margins will continue to be pressured by these factors in 2012 , especially during the first half of the year . we anticipate that our 2012 gross margin will be in the high-40s . story_separator_special_tag motion . the $ 14 million decrease in advertising and promotion expenses was attributable to a reduction of our advertising activities in most markets as compared to the prior year . administration . administration expenses declined slightly , as a decrease in incentive compensation expense related to lower projected funding and a decline in pension expense primarily as a result of changes to the u.s. pension plans in the second quarter of 2011 were offset primarily by higher severance costs for headcount reductions and separation benefits related to the departure of executives . other . other sg & a includes distribution , information resources , and marketing organization costs . the $ 55 million increase in these costs was primarily due to our investment in global information technology systems and increased marketing project costs related to our strategic initiatives . operating income the following table shows operating income by reporting segment and corporate expenses for the periods indicated , the changes in these items from period to period and these items expressed as a percentage of net revenues : replace_table_token_6_th * percentage of consolidated net revenues 24 the net $ 45 million decline in total operating income as compared to the prior year included a favorable currency effect of approximately $ 17 million . regional operating income . americas . operating margin declined due to the region 's decline in gross margin , the effects of which on operating income was partially offset by lower sg & a and the favorable impact of the region 's higher net revenues . europe . the increase in operating income primarily reflected the favorable impact of currency as well as the region 's higher net revenues . the increase was partially offset by a decline in the region 's gross margin . asia pacific . the increase in operating margin and operating income reflected the region 's higher net revenues and the favorable impact of currency . corporate . corporate expenses are selling , general and administrative expenses that are not attributed to any of our regional operating segments . the $ 77 million increase in corporate expenses in 2011 reflected higher severance costs for headcount reductions and seperation benefits related to the departure of executives , as well as an increase in our investment in global information technology systems . corporate expenses also increased due to the classification of marketing , advertising and promotion , information technology and human resources costs of a global nature that were centralized under corporate management during 2011. such costs totaled approximately $ 29 million in our americas region and were not significant to our europe and asia pacific regions ; prior period amounts have not been reclassified . these increases in corporate expenses were partially offset by a decrease in incentive compensation expense related to lower projected funding , and a decline in pension expense primarily as a result of changes to the u.s. pension plans in the second quarter of 2011. corporate expenses in 2011 and 2010 include amortization of prior service benefit of $ 28.9 million and $ 29.6 million , respectively , related to postretirement benefit plan amendments in 2004 and 2003. we will continue to amortize the prior service benefit in the future , although the amount will decline significantly beginning in 2012. for more information , see note 8 to our audited consolidated financial statements included in this report . interest expense interest expense was $ 132.0 million for the year ended november 27 , 2011 , as compared to $ 135.8 million in the prior year . the weighted-average interest rate on average borrowings outstanding for 2011 was 6.90 % as compared to 7.05 % for 2010. loss on early extinguishment of debt for the year ended november 28 , 2010 , we recorded a $ 16.6 million loss on early extinguishment of debt as a result of our debt refinancing activities during the second quarter of 2010. the loss was comprised of tender premiums of $ 30.2 million and the write-off of $ 7.6 million of unamortized debt issuance costs , net of applicable premium , offset by a gain of $ 21.2 million related to the partial repurchase of yen-denominated eurobonds due 2016 at a discount to their par value . other income ( expense ) , net other income ( expense ) , net , primarily consists of foreign exchange management activities and transactions . for the year ended november 27 , 2011 , we recorded expense of $ 1.3 million compared to income of $ 6.6 million for the prior year . story_separator_special_tag the expense in 2011 primarily reflected losses on our foreign currency denominated balances . the income in 2010 primarily reflects transaction gains on our foreign currency denominated balances , partially offset by losses on foreign exchange derivatives which economically hedge future foreign currency cash flow obligations . 25 income tax expense income tax expense was $ 67.7 million for the year ended november 27 , 2011 , compared to $ 86.2 million for the prior year . our effective tax rate was 33.4 % for the year ended november 27 , 2011 , compared to 36.6 % for the prior year . the 3.2 percentage point decrease in our effective tax rate was primarily caused by an increase in the proportion of our 2011 earnings in foreign jurisdictions where we are subject to lower tax rates , as well as an unfavorable net impact of income tax charges recognized in 2010. in 2010 , we recognized a $ 27.5 million tax charge for a valuation allowance to fully offset the amount of deferred tax assets in japan and a $ 14.5 million tax charge for a reduction in deferred tax assets as a result of the enactment of the patient protection and affordable care act . these charges in 2010 were partially offset by a $ 34.2 million tax benefit arising from our plan to repatriate the prior undistributed earnings of certain foreign subsidiaries . 2010 compared to 2009 the following table summarizes , for the periods indicated , the consolidated statements of income , the changes in these items from period to period and these items expressed as a percentage of net revenues : replace_table_token_7_th 26 net revenues the following table presents net revenues by reporting segment for the periods indicated and the changes in net revenues by reporting segment on both reported and constant-currency bases from period to period : replace_table_token_8_th total net revenues increased on both reported and constant-currency bases for the year ended november 28 , 2010 , as compared to the prior year . changes in foreign currency exchange rates affected our consolidated reported amounts favorably by approximately $ 53 million . americas . on both reported and constant-currency bases , net revenues in our americas region increased in 2010. currency affected net revenues favorably by approximately $ 23 million . levi 's ® brand net revenues increased , driven by the outlet stores we acquired in july 2009 , as well as strong performance of our men 's and juniors ' products in the wholesale channel . the improved levi 's ® brand performance was partially offset by declines of net sales from our signature and u.s. dockers ® brands as compared to 2009 , although for the fourth quarter , dockers ® brand net sales increased as compared to the prior year , primarily driven by men 's long bottoms . europe . net revenues in our europe region increased on both reported and constant-currency bases . currency affected net revenues unfavorably by approximately $ 18 million . the increase was driven by the positive impact of our levi 's ® brand , including our 2009 footwear and accessories business acquisition and our expanding company-operated retail network throughout the region , and was partially offset by continued sales declines in our traditional wholesale channels , reflecting the region 's ongoing depressed economic environment . asia pacific . net revenues in asia pacific increased on both reported and constant-currency bases . currency affected net revenues favorably by approximately $ 48 million . net revenues in the region increased primarily due to the continued expansion of our brand-dedicated retail network in our emerging markets of china and india , offset by continued net revenue declines due to the weak performance of our business in japan . gross profit the following table shows consolidated gross profit and gross margin for the periods indicated and the changes in these items from period to period : replace_table_token_9_th 27 compared to the prior year , gross profit increased in 2010 primarily due to the increase in our constant-currency net revenues , improved gross margins in each of our regions , and a favorable currency impact of approximately $ 47 million . the improvement in our gross margin primarily reflected the increased contribution from our company-operated retail network , which generally has a higher gross margin than our wholesale business . selling , general and administrative expenses the following table shows our selling , general and administrative expenses ( sg & a ) for the periods indicated , the changes in these items from period to period and these items expressed as a percentage of net revenues : replace_table_token_10_th currency contributed approximately $ 12 million of the $ 246 million increase in sg & a as compared to the prior year . selling . the $ 138 million increase in selling expenses was across all business segments , primarily reflecting higher costs , such as rents and increased headcount , associated with the continued expansion of our company-operated store network . advertising and promotion . the $ 62 million increase in advertising and promotion expenses was attributable to the planned increase in support of our u.s. levi 's ® and u.s. dockers ® brands , as well as our global launch of our levi 's ® curve id jeans for women and the launch of our denizen ® brand in the asia pacific region . administration . the $ 32 million increase in administration expenses reflects higher costs associated with our pension and postretirement benefit plans , as well as higher costs related to various corporate initiatives , including costs in the third quarter of 2010 associated with executive separations . other . other sg & a includes distribution , information technology , and marketing organization costs . the $ 15 million increase in expenses was primarily due to increased marketing project costs related to our strategic initiatives .
| these costs were not significant to any of our regional segments individually in any of the periods presented herein , and accordingly , business segment information for prior years has not been revised . classification . our classification of certain significant revenues and expenses reflects the following : net sales is primarily comprised of sales of products to wholesale customers , including franchised stores , and direct sales to consumers at our company-operated and online stores and at our company-operated shop-in-shops located within department stores . it includes discounts , allowances for estimated returns and incentives . licensing revenue consists of royalties earned from the use of our trademarks by third-party licensees in connection with the manufacturing , advertising and distribution of trademarked products . cost of goods sold is primarily comprised of product costs , labor and related overhead , sourcing costs , inbound freight , internal transfers , and the cost of operating our remaining manufacturing facilities , including the related depreciation expense . selling costs include , among other things , all occupancy costs and depreciation associated with our company-operated stores and commission payments associated with our company-operated shop-in-shops . we reflect substantially all distribution costs in selling , general and administrative expenses , including costs related to receiving and inspection at distribution centers , warehousing , shipping to our customers , handling , and certain other activities associated with our distribution network . gross margins may not be comparable to those of other companies in our industry since some companies may include costs related to their distribution network and occupancy costs associated with company-operated stores in cost of goods sold . constant currency . constant-currency comparisons are based on translating local currency amounts in both periods at the foreign exchange rates used in the company 's internal planning process for the current year . we routinely evaluate our financial performance on a constant-currency basis in order to facilitate period-to-period comparisons without regard to the impact of changing foreign currency exchange rates .
| 13,572 |
however , we have already completed the overall architectural structure of our new facility , and are in the process of installation and commissioning the equipment . we are looking forward to submitting the application for new gmp certificate in the second quarter of 2014. we are confident that the new gmp upgrading will be accomplished in good quality . 37 once our new gmp facility receives a new gmp certificate and initiates production , we will begin upgrading our current existing old facility . the products in our pipeline have experienced delays . the cfda has been improving its approval criteria and processes , resulting in additional supplemental materials and trials , higher cost , and longer approval time for certain applications across all the pharmaceutical products including all of our product types . we commenced leading formulation screening , new technology exploration , technical criteria improvement activities in 2013. we expect this new model will improve our exploration channels for the pipeline products . the following is a list of the current status of some of our pipeline products : ÿ antibiotic combination - we completed the phase i clinical trials of our novel cephalosporin-based combination antibiotic . we are currently in phase ii of the clinical trial , due to the increased regulatory requests for clinical works . ÿ rosuvastatin - rosuvastatin is a generic form of crestor , a drug for the treatmentof high blood cholesterol levels . clinical trials for this generic drug were completed in the fourth quarter of 2010 and we have submitted an application for production approval , and are performing supplemental trials of related materials pursuant to the new criteria requirements . ÿ heart disease drug - we have an oral solution for the treatment of coronary heart disease in our new product pipeline . this product comes with a patented traditional chinese medicine ( tcm ) formula and is currently in phase iii clinical trials following the improved regulatory criteria for clinical works . market trends the chinese pharmaceutical industry has been a key contributor to the prc 's economic growth . the chinese pharmaceutical market reached cny 926.1 billion in 2012 according to `` medicine blue book : china pharmaceutical market report ( 2012 ) `` ( the “ blue book ” ) published by the chinese academy of social sciences ( cass ) on december 28 , 2012. the compound growth rate of china 's pharmaceutical market was over 20 % from 2005 to 2010 and the blue book forecasts that it will continue its rapid expansion at an average rate of 12 % from 2013 to 2020. the blue book pointed out that the chinese pharmaceutical market is showing features of rapid expansion , fierce competition , low concentration , and is greatly influenced by government policies.the blue book further mentioned that the pharmaceutical market expansion was supported by increased demand for medicine associated with population aging , improved social welfare and residents ' enhanced purchasing power along with economic development . 38 the healthcare reform program announced by the chinese government in late 2009 is having a significant impact on all healthcare related industries in china , including the pharmaceutical industry . overall , the government plans to provide a basic , universal healthcare coverage to all citizens of china . we believe that the volume expansion will continue as the government subsidies to rural communities expand further . while pricing is generally set at the central government level , provincial government intervention has added complexity to the pricing-volume interaction . in addition to the essential drug list ( edl ) products , we have also seen pricing pressure on most of the drugs we sell . while these changes have more impact on pharmaceutical distribution companies , manufacturers of pharmaceutical products are also affected . we believe the general implication is that gross margins for pharmaceutical products will continue to be under pressure for some time . that being said , we believe a pharmaceutical manufacturer with experienced management and the ability to react quickly to changes will survive in this environment . results of operations for the fiscal year ended december 31 , 2013 china provides a unique opportunity to its pharmaceutical industry ; however , real challenges remain : from compulsory new gmp upgrading requirements and rising pricing pressure to extended regulatory review time for new medical production applications . each of these challenges impacted our performance negatively in 2013 , causing us to experience a significant decrease in our financial results . net loss for the year ended december 31 , 2013 was $ 20.0 million , compared to net income of $ 4.6 million for the year ended december 31 , 2012. our net loss for the year ended december 31 , 2013 was mainly due to a significant decrease in revenue , an increase in inventory obsolescence and an increase in bad debt expense . revenue revenue decreased by 40 % to $ 32.8 million for the year ended december 31 , 2013 , as compared to $ 54.5 million for the year ended december 31 , 2012. this decrease primarily resulted from decreases in sales of our cns cerebral & cardio vascular products andour anti-viro/infectious & respiratory products . although it did not affect our sales during 2013 , we suspended production of our dry powder injectable and liquid injectable products at our two old production lines as of january 1 , 2014 due to the failure to meet the new gmp upgrading deadline . in anticipation that this shutdown will affect our sales in 2014 , we have gradually increased inventory levels of certain products in advance in order to support the sales demand for these products . we plan to start the upgrading of these two production lines once our new gmp facility starts operations . story_separator_special_tag set forth below are our revenues by product category in millions usd for the years ended december 31 , 2013 and 2012 : 39 replace_table_token_3_th the most significant revenue decreasein terms of dollar amount was in our “ cns cerebral & cardio vascular ” product category , which generated $ 7.2 million in sales revenue in 2013 compared to $ 15.2 million a year ago , a decrease of $ 8.0 million . the decrease was mainly due to the cfda notice for buflomedil . in march , 2013 the cfda issued a nationwide notice for the cessation of the production , sale and use of buflomedil effective immediately . consequently , the company terminated the production and sale of this product . sales of the “ anti-viro/infection & respiratory ” category decreased by $ 6.3 million to $ 18.2 million in 2013 compared to $ 24.5 million in 2012 , which was mainly due to the decrease in sales of roxithromycin and clarithromycin , two antibiotics , which were affected primarily by market demand volatility . our “ digestive diseases ” category generated $ 2.9 million of sales in 2013 , compared to $ 7.0 million in the previous year , or a decrease of $ 4.1 million . our “ other ” product category sales fell to $ 4.5 million from $ 7.8 million , a decrease of $ 3.3 million . in the year ended december 31 , 2013 , revenue breakdown by product category showed some changes . sales of the “ anti-viro & respiratory ” products category represented 55 % of total sales in the year ended on december 31 , 2013 , compared to 45 % in 2012. the “ cns , cerebral & cardio vascular ” category represented 22 % of total revenue in 2013 and 28 % in 2012. the “ digestive diseases ” category represented 9 % of total revenue in 2013 compared to 13 % in 2012. the “ other ” category represented 14 % and 14 % of revenues in 2013 and 2012 , respectively . cost of revenue for the year ended december 31 , 2013 , our cost of revenue was $ 23.4 million , or 71 % of total revenue , which represented a decrease of $ 15.3 million from $ 38.7 million , or 71 % of total revenue , in 2012. the decrease in cost of revenue during 2013 was proportional to the revenue decrease . inventory obsolescence due to cfda 's notice for the cessation of the production , sale and use of buflomedil , we ceased the production and sale of buflomedil-based products , and recognized an inventory obsolescence expense of approximately $ 3.7 million for buflomedil-related raw materials and finished goods . we have had decreases in the sales estimates between the time when raw materials were purchased compared to the sales performance realized for certain products . as a result , we determined that certain inventory was slow moving or obsolete . based on the developed estimates as of december 31 , 2013 and 2012 , we recognized an additional inventory obsolescence expense of $ 6.2 million and $ 1.8 million for the years ended december 31 , 2013 and 2012 , respectively . 40 gross profit ( loss ) and gross margin gross loss for the year ended december 31 , 2013 was $ 0.5 million , a decrease of $ 14.6 million , from gross profit of $ 14.1 million in 2012. our gross loss margin in 2013 was ( 1.5 % ) compared to gross profit margin of 25.8 % in 2012. without the effect of inventory obsolescence , management estimates that our gross profit would have been approximately 29 % in both 2013 and 2012. the healthcare reform instituted by the chinese government since 2009 contains pricing controls , which have resulted in margin compression in most pharmaceutical products on the market today , especially in the generic space where many of our products are sold . going forward , we expect to see continued pricing pressures on most products , while new products could help to support overall gross margin once they are launched . we launched candesartan in november 2013 and started its marketing activities . selling expenses our selling expenses for the year ended december 31 , 2013 were $ 3.3 million , a decrease of approximately $ 0.2 million , compared to $ 3.5 million in 2012. selling expenses accounted for 10.0 % of the total revenue in 2013 compared to 6.5 % in 2012. due to many adjustments in our selling processes under healthcare reform policies , despite the decrease in sales , we still need additional personnel and expenses to support the sales and collection of accounts receivable . story_separator_special_tag block '' > income ( loss ) from operations our operating loss for the year ended december 31 , 2013 was $ 18.6 million , compared to operating income of $ 5.9 million in 2012 , a decrease of $ 24.5 million . the main reasons for the decrease were lower revenue , higher inventory obsolescence and higher bad debt expenses in 2013. net interest expense net interest expense for the year ended december 31 , 2013 was $ 340,239 , compared to $ 303,431 in 2012 , an increase of $ 36,808. income tax expense for the years ended december 31 , 2013 and 2012 , our income tax rate was 15 % . income tax expense was $ 1.1 million and $ 1.0 million for the years ended december 31 , 2013 and 2012 , respectively .
| we also recognized bad debt expense resulting from an increase in the allowance for doubtful accounts relating to trade accounts receivable and other receivables of $ 8.7 million and $ 0.9 million during the years ended december 31 , 2013 and 2012 , respectively . 41 in general , our normal credit or payment terms extended to customers are 90 days . this has not changed in recent years . due to the peculiarity of the chinese pharmaceutical market environment , deferred payments to pharmaceutical companies by state-owned hospitals and local medicine distributors are a normal phenomenon . our customers are primarily pharmaceutical distributors who sell to mostly government-backed hospitals . therefore , the age of our receivables from our customers tends to be long . although these customers typically pay after the due date of the receivables , since the majority of hospitals in china are backed by the government , management believes that the deferred payments from state-owned hospitals are secure and will eventually be collected . the amount of accounts receivable that were past due ( or the amount of accounts receivable that were more than 90 days old ) was $ 40.1 million and $ 62.1 million as of december 31 , 2013 and 2012 , respectively . the following table illustrates our accounts receivable aging distribution in terms of percentage of total accounts receivable as of december 31 , 2013 and 2012 : replace_table_token_4_th our bad debt allowance estimate is currently the sum of 3.5 % of accounts receivable that are less than 365 days old , 10 % of accounts receivable that are between 365 days and 720 days old and 100 % of accounts receivable that are greater than 720 days old . we recognize bad debt expense per actual write-offs as well as the changes of allowance for doubtful accounts . to the extent that our current allowance for doubtful accounts is higher than that of the previous period , we recognize a bad debt expense for the difference during the current period , and when the current allowance is lower than that of the previous period , we recognize a bad debt benefit for the difference . the allowance for doubtful accounts
| 13,573 |
our cash flows from continuing operations were $ 137.5 million in 2013. in addition , we had available lines of credit of $ 189.7 million , our debt to capital ratio was 9.2 % , and our current ratio was 4.5. outlook looking forward , we remain cautious about the state of the global economy , and the impact it will have on our product lines . although we saw market stabilization and improvement in 2013 , there remains uncertainty as to the sustainability of the upturn . in 2014 , the company will continue to focus on innovation and new product development and other opportunities for sales growth as follows : · develop multiple high-filler technologies , such as filler-fiber , under the fulfill ® platform of products , to increase the fill rate in freesheet paper and continue to progress with commercial discussions and full-scale paper machine trials . · develop products and processes for waste management and recycling , opportunities to reduce the environmental impact of the paper mill , reduce energy consumption and improve the sustainability of the papermaking process and further penetration into the packaging segment of the paper industry . · increase our sales of pcc for paper by further penetration of the markets for paper filling at both freesheet and groundwood mills , particularly in emerging markets . · expand the company 's pcc coating product line using the satellite model . · promote the company 's expertise in crystal engineering , especially in helping papermakers customize pcc morphologies for specific paper applications . · expand pcc produced for paper filling applications by working with industry partners to develop new methods to increase the ratio of pcc for fiber substitutions . · develop unique calcium carbonates and talc products used in the manufacture of novel biopolymers , a new market opportunity . · deploy new talc and gcc products in paint , coating and packaging applications . · deploy value-added formulations of refractory materials that not only reduce costs but improve performance . · expand our solid core wire product line into bric , middle eastern and other asian countries . · deploy our laser measurement technologies into new applications . · expand our refractory maintenance model to other steel makers globally . · deploy operational excellence principles into all aspects of the organization , including system infrastructure and lean principles . · explore selective acquisitions to fit our core competencies in minerals and fine particle technology . however , there can be no assurance that we will achieve success in implementing any one or more of these opportunities . 23 story_separator_special_tag cost of goods sold in 2012 was 77.7 % of sales compared with 79.3 % in the prior year . production margin increased $ 8.1 million , or 4 % as compared with a 4 % decrease in sales . in the specialty minerals segment , production margin increased 7 % , or $ 9.0 million , as compared with a 2 % decrease in sales . this increase was primarily attributable to increased pricing of $ 20 million , lower energy costs of $ 1.3 million , continued productivity improvements and cost improvements of $ 4 million and combined higher volumes from our new satellite facilities and processed minerals product lines of $ 7 million . these items were offset by increased material costs of $ 12 million , the effects of continued permanent and temporary pcc facility closures and other volume declines of $ 8 million and the effects of foreign exchange of approximately $ 2.9 million . in the refractories segment , production margin decreased $ 0.9 million , or 1 % as compared with a 7 % decrease in sales . volume declines , lower equipment sales of $ 10 million and the effects of foreign exchange were partially offset by lower material costs of $ 9 million and increased pricing of $ 1.5 million . marketing and administrative costs increased 1 % to $ 89.2 million in 2013 from $ 88.5 million in the prior year . marketing and administrative costs as a percentage of net sales were 8.8 % which was the same as the prior year . in 2012 , marketing and administrative expenses were 3.0 % lower than in the prior year . research and development expenses decreased 1 % in 2013 to $ 20.1 million from $ 20.2 million and represented 2.0 % of net sales . in 2012 , research and development expense increased 5 % from 2011 and represented 2.0 % of net sales . the company recognized a one-time insurance settlement gain of $ 2.5 million in the fourth quarter of 2013. replace_table_token_13_th the company recorded income from operations in 2013 of $ 126.9 million as compared with $ 113.6 million in the prior year . income from operations represented 12.5 % of sales compared with 11.4 % of sales in the prior year . the specialty minerals segment recorded income from operations of $ 98.4 million in 2013 as compared with $ 87.7 million in the prior year . the refractories segment 25 recorded income from operations of $ 35.9 million in 2013 as compared to $ 32.6 million in the prior year . income from operations in the refractories segment included an insurance settlement gain of $ 2.5 million . in 2012 , the specialty minerals segment recorded income from operations of $ 87.7 million as compared with $ 76.6 million in the prior year . the refractories segment recorded income from operations of $ 32.6 million in 2012 as compared with $ 33.2 million in the previous year . replace_table_token_14_th the company recorded non-operating deductions of $ 3.2 million in 2013 as compared with $ 3.0 million in the previous year . the company recorded non-operating deductions of $ 3.0 million in 2012 as compared with $ 2.6 million in the previous year . story_separator_special_tag included in non-operating deductions in 2011 were foreign currency losses of $ 1.4 million recognized upon the sale of a 50 % interest in and deconsolidation of the company 's joint venture in korea . replace_table_token_15_th the company recorded provision for taxes on income of $ 34.5 million in 2013 as compared with $ 31.9 million in the previous year . the effective tax rate for 2013 was 27.9 % as compared with 28.9 % in the prior year . the decrease in the tax rate in the current year primarily relates to the settlement of an irs audit for tax years 2007 and 2008 and the impact of closing those years , the impact of the reversal of prior year charges resulting from the late extension of expiring corporate income tax provisions by the american taxpayer relief act of 2012 and additional foreign tax credits generated and utilized . the company recorded provision for taxes on income of $ 31.9 million in 2012 as compared to $ 28.7 million in the previous year . the effective tax rate for 2012 was 28.9 % as compared with 28.3 % in the previous year . the increase in the tax rate primarily relates to a prior year favorable united states tax court case settlement and the resulting expiration of the statute of limitations of the tax years related to the tax court case . the factors having the most significant impact on our effective tax rates in recent periods are the rate differential related to foreign earnings indefinitely invested , percentage depletion , and the reversal of tax reserves as a result of a tax court case settlement . percentage depletion allowances ( tax deductions for depletion that may exceed our tax basis in our mineral reserves ) are available to us under the income tax laws of the united states for operations conducted in the united states . the tax benefits from percentage depletion were $ 4.5 million in 2013 , $ 4.1 million in 2012 , and $ 4.0 million in 2011. we operate in various countries around the world that have tax laws , tax incentives and tax rates that are significantly different than those of the united states . many of these differences combine to move our overall effective tax rate higher or lower than the united states statutory rate depending on the mix of income relative to income earned in the united states . the effects of foreign earnings and the related foreign rate differentials resulted in a decrease of income tax expense of $ 4.4 million , $ 4.6 million and $ 1.1 million in 2013 , 2012 and 2011 , respectively . the increase of income tax benefits in 2013 as compared with 2012 results from the change in the mix of earnings in the foreign jurisdictions in 2013 , statutory rate changes and a change in the amount of local income and tax adjustment s. the increase of income tax benefits in 2012 as compared with 2011 results from the change in the mix of earnings in the foreign jurisdictions in 2012 , statutory rate changes and a change in the amount of local income and tax adjustment s. replace_table_token_16_th the company recognized income from continuing operations of $ 89.2 million in 2013 as compared to $ 78.7 million in 2012. in 2011 , the company recorded income from operations of $ 72.7 million . replace_table_token_17_th * percentage not meaningful 26 the company recognized a loss from discontinued operations of $ 5.8 million in 2013 as compared to $ 2.5 million in 2012. in 2011 , the company recorded a loss from discontinued operations of $ 2.5 million . the company discontinued its operations at its merchant pcc facility at walsum , germany in the second quarter of 2013. in connection with the company 's 2007 restructuring of its european coating pcc operations , the company recorded an impairment charge related to its walsum facility . this facility continued to operate well below capacity levels into 2013. the company recorded a pre-tax charge for closure costs of this facility in the second quarter of 2013 of $ 5.9 million . replace_table_token_18_th the increase in the income attributable to non-controlling interests is due to higher profitability in our joint ventures . replace_table_token_19_th the company recorded net income of $ 80.3 million in 2013 as compared to $ 74.1 million in 2012. diluted earnings per share were $ 2.30 as compared with $ 2.09 in the previous year . in 2011 , the company recorded net income of $ 67.5 million and diluted earnings per share of $ 1.86. liquidity and capital resources cash provided from operating activities from continuing operations in 2013 was $ 137.5 million , compared with $ 142.1 million in the prior year . cash flows provided from operations in 2013 were principally used to fund capital expenditures , pay the company 's dividend to common shareholders and to repurchase shares . cash flows used in discontinued operations were not material to the company 's liquidity . included in cash flow from operations was pension plan funding of approximately $ 11.4 million , $ 17.0 million and $ 6.6 million for the years ended december 31 , 2013 , 2012 and 2011 , respectively . trade working capital is defined as trade accounts receivable , trade accounts payable and inventories . our average total days of trade working capital were 57 days in 2013 compared with 58 days last year . the funding status of the company 's pension plans was approximately 83 % at december 31 , 2013 and we have met all minimum funding requirements . the funding status at december 31 , 2012 was 66 % . the increase in our funded status was due to a decrease in the projected benefit obligation from an increase in the discount rate and to a higher actual return on assets .
| sales of specialty pcc increased 2 % to $ 67.2 million from $ 65.9 million in 2012. this increase was due to higher volumes in the u.s. as a result of our expansion at adams , massachusetts and increased pricing , partially offset by weak demand in europe . in 2012 worldwide net sale of pcc decreased 2 % to $ 537.4 million from $ 548.6 million in the prior year . foreign exchange had an unfavorable impact on 2012 sales of approximately $ 16.5 million or 3 percentage points of growth . worldwide net sales of paper pcc decreased 3 % to $ 471.5 million from $ 485.0 million in the prior year . volumes for this product line decreased 3 percent , primarily in europe . sales were affected by the closure of one satellite pcc facility in finland , and the temporary shutdown of a satellite pcc facility in france , both of which occurred in the fourth quarter of 2011. there were , however , increased volumes from new satellites which largely offset the volume decline . sales of specialty pcc increased 4 % to $ 65.9 million from $ 63.6 million in 2011. this increase was attributable to higher volumes and the effects of foreign exchange . net sales of processed minerals products in 2013 increased 6 % to $ 122.6 million from $ 116.0 million in 2012. ground calcium carbonate ( gcc ) products increased 6 % to $ 71.7 million due to volume growth of 3 % and increased pricing . talc products increased 6 % to $ 50.9 million . this growth was attributable to increased pricing and 3 % higher volumes . net sales of processed minerals products in 2012 were relatively flat at $ 116.0 million as compared to $ 115.5 million in 2011. gcc products decreased 1 % to $ 67.9 million while talc products increased 3 % to $ 48.1 million . volume decreases of 2 % were offset by price increases . net sales in the refractories segment in 2013 increased 1 % to $ 348.4 million from $ 343.4 million in
| 13,574 |
in addition to reducing headcount , and instituting unpaid leave , the company negotiated savings on contracts with suppliers and service providers and reduced spending on sg & a in the second half of the year . also impacting operating results , we recorded a $ 20.3 million charge in the third quarter of 2015 for the impairment of goodwill . the decline in our stock price had caused the company 's market capitalization to fall sufficiently below book value to necessitate an impairment review under generally accepted accounting principles . the impairment charge fully eliminates goodwill from the balance sheet . 11 overall , our operating loss in 2015 was $ 30.1 million , compared to operating income of $ 10.9 million in 2014. however , the charges noted above related to goodwill impairment , idle plant costs , supplier losses , non-cash inventory write-offs , employee severance and exit costs , and the exit of a non-compete contract accounted for $ 26.4 million of the change in 2015 compared to 2014 . during 2015 we generated $ 19.2 million cash from operating activities , and incurred $ 9.6 million of capital spending . total debt was reduced by $ 9.7 million . we believe that demand in the majority of our end markets , especially aerospace where both boeing and airbus have production backlogs out for the next several years along with growth in the aftermarket parts markets , will continue to improve as we move through 2016. however , we see no sign that the oil and gas market will rebound in 2016. o ur operating facilities are integrated , and therefore our chief operating decision maker ( “ codm ” ) view s the company as one business unit . our codm sets performance goals , assesses performance and makes decisions about resource allocations on a consolidated basis . as a result of these factors , as well as the nature of the financial information available which is reviewed by our codm , we maintain one reportable segment . story_separator_special_tag new roman ; font-size : 1pt '' > 2014 results as compared to 2013 replace_table_token_10_th 15 ma r ket segment information : replace_table_token_11_th melt type information : replace_table_token_12_th the majority of our products are sold to service centers rather than the ultimate end market customers . the end market information in this annual report is our estimate based upon our knowledge of our customers and the grade of material sold to them , that they will in-turn sell to the ultimate end market customer . end market information : replace_table_token_13_th 16 net sales : net sales for the year ended december 31 , 2014 increased $ 24.8 million , or 13.7 % , as compared to the similar period in 2013. the increase in our sales primarily reflects a 6.6 % increase in consolidated tons shipped in 2014 compared to 2013 as demand for our products increased as a result of improved market conditions in 2014. the increase in both sales and sales dollars per shipped ton is primarily a result of increased base prices as well as more favorable product mix of our higher value added products . our product sales to all of our end markets , except heavy equipment , increased as noted in the above table . our product sales to our targeted end markets of aerospace , power generation , and oil and gas end markets increased 18.2 % , 8.4 % and 3.1 % , respectively in 2014 compared to 2013. sales to our heavy equipment market decreased by $ 1.6 million , or 8.3 % , in 2014 compared to 2013 , primarily due to uneven buying patterns from year to year because of the many smaller customers we have in this end market . during the year ended december 31 , 2014 , we recognized a $ 3.2 million , or a 30.0 % , increase in premium alloy sales when compared to 2013. it is a primary focus of ours to ship higher value added products . overall , our premium alloy sales , which are sold primarily to the aerospace end market increased from 5.9 % of total sales for the year ended december 31 , 2013 to 6.7 % of total sales during the year ended december 31 , 2014. gross margin : our gross margin , as a percentage of sales , more than doubled to 15.6 % for the year ended 2014 compared to 7.7 % for the same 2013 period . the improvement in our gross margin for the year ended december 31 , 2014 as compared to the same period in 2013 is largely a result of a better product mix of higher value added products sold , improved yields and scrap rates , and higher plant operating levels due to improved market conditions which created a higher demand for our products compared to the same 2013 period . selling , general and administrative expenses : our sg & a expenses consist primarily of employee costs , which include salaries , payroll taxes and benefit related costs , legal and accounting services , stock compensation and insurance costs . our sg & a expenses increased by $ 3.2 million in the year ended december 31 , 2014 as compared to the year ended december 31 , 2013 primarily due to increased expenses of $ 2.2 million related to our variable incentive compensation plan as the result of our increased profitability in 2014 as compared to 2013 and approximately $ 960,000 of administrative costs associated with moving our fully insured health care plans to a self-insured plan . however , our overall healthcare costs for 2014 were consistent with those incurred in 2013. in addition , we incurred higher than normal placement and relocation costs to deepen our management team for further growth ; however , these costs were somewhat offset by a reduction in severance costs . we incurred $ 392,000 in severance expense in the year ended december 31 , 2013 from the departure of a senior executive . story_separator_special_tag interest expense and deferred financing amortization : our interest costs on our debt increased to $ 3.0 million for the year ended december 31 , 2014 compared to $ 2.6 million for the same period of 2013. this increase is primarily due to higher interest rates incurred on our debt in 2014 as compared to 2013. the interest rate on our variable rate debt is determined by a libor-based rate plus an applicable margin based upon achieving certain covenant levels . our deferred financing costs are associated with the issuance and subsequent amendments to our credit facility . during the years ended december 31 , 2014 and 2013 , we recognized $ 644,000 and $ 444,000 , respectively , of deferred financing amortization . based upon the maturity date of our current debt facility , we expect that our annual deferred financing amortization expense for 2015 and 2016 to be approximately $ 639,000 and $ 107,000 in 2017. other income : during the year ended december 31 , 2013 , we entered into a settlement agreement with the sellers of the north jackson facility , whereby we received $ 425,000 as a final settlement of certain claims under an escrow agreement that was entered into at the time of acquisition to satisfy certain claims under the purchase agreement . the settlement was recognized as a gain during the year ended december 31 , 2013 , which is included as a component of other income on the consolidated statement of operations . income tax ( benefit ) provision : our effective tax rates for the years ended december 31 , 2014 and 2013 were 43.7 % and ( 38.1 ) % , respectively . our overall effective tax rate for the year ended december 31 , 2014 , which reflects federal and state taxable income , also includes net tax expenses of $ 570,000 due to a change in the new york state tax rate to zero percent ( 0 % ) for qualified new york manufacturers , a settlement with pennsylvania regarding certain expenses deducted , and 2013 and 2014 r & d tax credits . on march 31 , 2014 , new tax legislation was enacted in new york that reduced the new york state income tax rate to zero percent ( 0 % ) for qualified manufacturers , such as universal , for tax years beginning on or after january 1 , 2014. prior to this legislation , our facility in dunkirk operated in a new york state empire zone and qualified to benefit from investments made and employees hired , and as such , we had recorded a deferred tax asset on these investments . as a result of this new legislation , we placed a full valuation allowance on our remaining corresponding deferred tax asset in the amount of $ 596,000 during the first quarter of 2014. also , the 17 tax increase prevention act of 2014 extended the tax benefit for research and development tax credits for 2014 resulting in a benefit of approximately $ 342,000 which was recorded in the fourth quarter of 2014. in addition , we reached a settlement with pennsylvania on certain expenses , which had been deducted for state income tax purposes during the 2005-2008 tax years . as a result of this matter , we incurred $ 179,000 of additional pennsylvania income taxes net of the federal tax benefit . our effective tax rate for the year ended december 31 , 2013 was negatively impacted by the tax valuation allowance of $ 986,000 that we placed against certain deferred tax assets for new york . our effective tax rate for the year ended december 31 , 2013 benefited from approximately $ 1.0 million of r & d tax credits that we generated for 2012 and 2013. net income : our net income increased to $ 4.1 million , or $ 0.57 per diluted share , for the year ended december 31 , 2014 from a net loss of $ ( 4.1 ) million , or $ ( 0.58 ) per diluted share , for the year ended december 31 , 2013. liquidity and capital resources historically , we have financed our operating activities through cash provided by operations and cash provided through our credit facilities . net cash provided by operating activities : during 2015 , we generated net cash from operating activities of $ 19.2 million . our managed working capital , defined as net accounts receivable plus net inventory minus accounts payable , contributed $ 14.3 million of cash from operations . net income adjusted for non-cash expenses generated approximately $ 8.0 million of cash in 2015 which was partially offset by reductions in other accruals , primarily the payout of 2014 variable incentive compensation in 2015. the decrease in managed working capital was driven by efforts to reduce inventory levels as well as reductions in re ceivables due to reduced sales compared to the s ame period in 2014. during 2014 , we generated net cash from operating activities of $ 12.9 million . our net income adjusted for non-cash expenses generated approximately $ 26.5 million of cash in 2014 , which was partially offset by increases in our managed working capital which increased by $ 15.4 million to $ 105.1 million at december 31 , 2014 compared to $ 89.8 million at december 31 , 2013. the increase in managed working capital in 2014 was primarily the result of improved market conditions in 2014 compared to 2013. net cash used in investing activity : during 2015 , our capital spending , which is primarily discretionary in nature , was $ 9.6 million as compared to $ 11.2 million in 2014 . we received proceeds of approximately $ 218,000 in 2015 from an insurance recovery related to a casualty loss of manufacturing equipment . net cash used in financing activities : during 2015 , we used $ 9.9 million in cash from our financing activities .
| gross margin : our gross margin , as a percentage of sales , decreased to 5.3 % in 2015 from 15.6 % for 2014 . the decrease in gross margin is largely the result of the misalignment of sales surcharges , declining commodity prices , and lower sales volumes . the company also incurred approximately $ 4.7 million of costs , in the second half of 2015 , in response to the sharp industry downturn including costs to temporarily idle plants , non-cash inventory write downs , and costs for reducing the hourly and salary workforce . in addition , the c ompany incurred approximately $ 938,000 of costs associated with the unauthorized substitution by a vendor of a critical supply part for the melting process . selling , general and administrative expenses : our sg & a expenses consist primarily of employee costs , which include salaries , payroll taxes and benefit related costs , legal and accounting services , stock compensation and insurance costs . our sg & a expenses decreased by $ 1.7 million in the year ended december 31 , 2015 as compared to the yea r ended december 31 , 2014 primarily due to decreased expenses of $ 2.0 million related to our variable incentive compensation pla n as the result of our decreased profitability in 2015 as compared to 2014. in addition we incurred approximately $ 225,000 of severance costs for reductions in the salary workforce and a non-cash write off of $ 255,000 for the exit of a non-compete contract . the company implemented cost savings programs in the second half of the year including headcount reductions , unpaid leave , negotiating savings on existing contracts with suppliers and service providers and reducing spending on sg & a . goodwill impairment : we recorded a goodwill impairment in the third quarter of 2015. due to a significant and sustained drop in our share price and continued weak operating results driven by slower market conditions , the company determined that an interim goodwill impairment review was required
| 13,575 |
65 our revenue to date has been generated primarily from coll aboration and license payments pursuant to our license agreements with daiichi sankyo and baxalta . we have not generated any commercial product revenue . we have incurred significant losses in the past and expect to incur significant and increasing losses i n the foreseeable future as we advance our product candidates into later stages of development and , if approved , commercialization . our net losses were $ 238.3 million , $ 127.8 million and $ 223.9 million for the years ended december 31 , 2017 , 2016 and 2015 , respectively . as of december 31 , 2017 , we had an accumulated deficit of $ 775.5 million . in february 2016 , we issued and sold $ 100.0 million aggregate principal amount of our 8.2 % senior convertible notes due 2022 ( the “ convertible notes ” ) . these convertible notes require quarterly interest distributions at a fixed coupon rate of 8.2 % until maturity , redemption or conversion , which will be no later than march 31 , 2022. if we fail to satisfy certain registration or reporting requirements , then additional interest will accrue on the convertible notes at a rate of up to 0.50 % per annum in the aggregate . the holders of the convertible notes are healthcare royalty partners iii , l.p. and three of its related entities , which hold $ 75.0 million in aggregate principal amount , and three related party investors , kkr biosimilar l.p. , which holds $ 20.0 million , mx ii associates llc , which holds $ 4.0 million , and kmg capital partners , llc , which holds $ 1.0 million . the convertible notes are convertible into shares of common stock at an initial conversion rate of 44.7387 shares of common stock per $ 1,000 principal amount of the convertible notes ( equivalent to a conversion price of approximately $ 22.35 per share of common stock , representing a 60 % premium over the average last reported sale price of our common stock over the 15 trading days preceding the date the convertible notes were issued ) , subject to adjustment in certain events . upon conversion of the convertible notes by a holder , the holder will receive shares of our common stock , together , if applicable , with cash in lieu of any fractional share . after march 31 , 2020 , the full amount of the convertible notes not previously converted are redeemable for cash at our option if the last reported sale price per share of our common stock exceeds 160 % of the conversion price on 20 or more trading days during the 30 consecutive trading days preceding the date on which we send notice of such redemption to the holders of the convertible notes . at maturity or redemption , if not earlier converted , we will pay 109 % of the principal amount of the convertible notes , together with accrued and unpaid interest , in cash . in october 2016 , we entered into a sales agreement with cowen and company , llc ( “ cowen ” ) , under which we may offer and sell our common stock , having aggregate gross proceeds of up to $ 100.0 million , from time to time through cowen as our sales agent in our atm offering program . in january and december 2017 , we sold 925,999 shares of common stock at a weighted average price of $ 12.42 per share under the atm offering program for aggregate net proceeds of $ 11.1 million . as of december 31 , 2017 , we had $ 32.0 million remaining under the atm offering program . in january 2018 , the company issued and sold 183,316 shares of common stock at a weighted average price of $ 9.38 per share through its atm offering program and received total net proceeds of $ 1.7 million . in february 2017 and march 2017 , we completed an underwritten public offering of 5,294,902 shares of common stock , at a price of $ 24.25 per share . we received net proceeds from the offering of $ 120.4 million , after deducting the underwriting discounts and commissions and offering expenses . in june 2017 , we completed a restructuring plan and as a result , recorded aggregate restructuring charges of $ 3.6 million in our consolidated statement of operations in june 2017. the restructuring charges included one-time termination severance and other employee-related costs of $ 1.0 million and $ 1.1 million in research and development and general and administrative expense in our consolidated statement of operations , respectively . additionally , non-cash stock-based compensation expense related to the acceleration of stock options and the extension of post-termination stock option exercise periods of $ 0.3 million and $ 1.2 million were reflected in research and development and general and administrative expense in the consolidated statement of operations , respectively . in august 2017 , we issued and sold an aggregate of 6,556,116 shares of common stock to v-sciences investments pte ltd , a private limited singapore company ( “ temasek ” ) in a private placement transaction at an offering price of $ 11.4397 per share for gross proceeds of $ 75.0 million . after deducting offering expenses of $ 0.1 million , the net proceeds received were $ 74.9 million . pursuant to the stock purchase agreement , temasek may purchase additional shares of common stock equal to gross proceeds of $ 75.0 million , subject to certain conditions . on september 22 , 2017 , we filed a registration statement with the sec registering the resale of the common stock sold and issued in the private placement transaction as of august 2017 , and it was declared effective with the sec on october 16 , 2017. in december 2017 , the company issued and sold an aggregate of 776,104 shares of common stock to our contract manufacturer kbi in a private placement transaction at an offering price of $ 8.7746 story_separator_special_tag per share in exchange for the forgiveness of certain fees we incurred in connection with our manufacturing and supply agreement with kbi and advance reservation fee for future manufacturing service for the production of chs-1701 . on january 25 , 2018 , we filed a registration statement with the sec registering the resale of the common stock sold and issued in the private placement transaction as of december 2017. financial operations overview revenue we have not generated any revenue from commercial product sales to date . our revenue has been generated from license and collaboration agreements , under which we received license fees , milestone payments and other contingent payments . 66 research and development expense research and development expense represents costs incurred to conduct research , such as the discovery and development of our product candidates . we recognize all research and development costs as they are incurred . we currently track only the external research and development costs incurred for each of our product candidates . our external research and development expense consists primarily of : expense incurred under agreements with consultants , third-party contract research organizations ( “ cros ” ) , and investigative sites where a substantial portion of our preclinical studies and all of our clinical trials are conducted ; costs of acquiring originator comparator materials and manufacturing preclinical study and clinical trial supplies and other materials from contract manufacturing organizations ( “ cmos ” ) , and related costs associated with release and stability testing ; and costs associated with manufacturing process development activities . internal costs 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 : personnel-related expense , which include salaries , benefits and stock-based compensation ; and facilities and other allocated expense , which include direct and allocated expense for rent and maintenance of facilities , depreciation and amortization of leasehold improvements and equipment and laboratory and other supplies . the largest component of our total operating expense has historically been our investment in research and development activities , including the clinical development and manufacturing process development of our product candidates . we expect our research and development expense to be similar or slightly lower in 2018 as our late-stage product candidates work their way through the regulatory approval process and we prepare for commercialization . also , if we receive regulatory approval , a substantial portion of our future manufacturing costs will be capitalized as inventory and subsequently expensed as costs of goods sold when the inventory is sold . we consider regulatory approval of product candidates to be uncertain , and any products manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained . we expense manufacturing costs for product candidates incurred prior to regulatory approval as research and development expense as we incur them . if and when regulatory approval of a product candidate is obtained , we will begin capitalizing manufacturing costs related to the approved product into inventory . the process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming . furthermore , in the past we have entered into collaborations with third parties to participate in the development and commercialization of our product candidates , and we may enter into additional collaborations in the future . in situations in which third parties have substantial influence over the development activities for product candidates , the estimated completion dates are not fully under our control . for example , our partners in licensed territories may exert considerable influence on the regulatory filing process globally . therefore , we can not forecast with any degree of certainty the duration and completion costs of these or other current or future clinical trials of our product candidates . we may never succeed in achieving regulatory approval for any of our product candidates . in addition , we may enter into other collaboration arrangements for our other product candidates , which could affect our development plans or capital requirements . the following table summarizes our research and development expense incurred during the respective periods : replace_table_token_5_th ( 1 ) our research and development expense has been reduced by reimbursements of certain research and development expense pursuant to the cost-sharing provision of our licensing agreement with daiichi sankyo . reimbursement of research and development expense under the baxalta licensing agreement was recognized as revenue pursuant to the revenue recognition accounting policy applicable to that agreement . ( 2 ) amount consists of costs for other pipeline candidates . 67 ge neral and administrative expense general and administrative expense consists primarily of personnel costs , allocated facilities costs and other expense for outside professional services , including legal , human resources , audit and accounting services . personnel costs consist of salaries , benefits and stock-based compensation . if any of our product candidates receive regulatory approval for commercial sale , we expect to incur significant additional expense associated with the establishment of our sales force in the u.s. , as we undertake commercial infrastructure initiatives to implement information technology systems , quality and compliance systems and personnel support for the commercial organization . interest expense interest expense consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the amortization of debt discount and debt issuance costs associated with our various debt agreements outstanding during the years ended december 31 , 2017 and 2016. other income ( expense ) , net other income ( expense ) , net for the years ended december 31 , 2017 and 2016 , consists primarily of gains and losses resulting from the remeasurement of our contingent consideration , interest earned from our investments in marketable securities and foreign exchange gains and losses resulting from currency fluctuations .
| cash used in operating activities was $ 252.5 million for the year ended december 31 , 2016 , which was primarily due to the following : a net loss of $ 127.8 million ; non-cash reduction of $ 1.3 million in other receivables due to the reversal of a provision ; a decrease of $ 93.2 million in deferred revenue and $ 66.3 million in contingent liability to collaborator primarily due to the recognition of all baxalta deferred revenue and contingent liability to collaborator as a result of the termination of the baxalta license agreement during the third quarter of 2016 ; and a decrease in accounts payable , accounts payable-related parties , and accrued and other liabilities of $ 3.6 million primarily due to the payments to our clinical research organizations and clinical manufacturing organizations as a result of the progression of our phase 3 clinical trial programs that are winding down , and the timing of the vendor payments . the cash used in operating activities was partially offset by the following : non-cash charges related to stock-based compensation of $ 27.4 million , fair value remeasurement of our contingent consideration obligation of $ 4.3 million , non-cash interest expense of $ 1.0 million , and depreciation and amortization of property and equipment of $ 3.0 million ; and a decrease in prepaid and other current assets of $ 4.2 million primarily due to the progression of our phase 3 clinical trial programs that are winding down and the timing of the vendor payments . 76 cash used in operating activities was $ 108.0 million for the year ended december 31 , 2015 , which was primarily due to the following : a net loss of $ 223.9 million ; and an increase in prepaid and other current assets of $ 15.9 million resulting from the increase in clinical activities and timing of vendor payments as a result of prepayments for comparator drug and for starting clinical trials . the cash used in operating activities was partially offset by the following : non-cash charges of stock-based compensation of $ 16.7
| 13,576 |
seasonal fa ctors , such as the timing of our employees ' and clients ' vacations and holidays , impact the timing of our revenues . our financial results are primarily driven by : · the number , size and type of engagements we secure ; · the rate per hour or fixed charges we charge our clients for services ; · the utilization rates of the revenue-generating professionals we employ ; · the number of revenue-generating professionals ; · fees from clients on a retained basis or other ; · licensing of our software products and other technology services ; · the types of assignments we are working on at different times ; · the length of the billing and collection cycles ; and · the geographic locations of our clients or locations in which services are rendered . we define acquisition growth as revenue of acquired companies in the first twelve months following the effective date of an acquisition . our definition of organic growth is the change in revenue excluding the impact of all such acquisitions . when significant , we identify the estimated impact of foreign currency translation driven by our businesses with functional currencies other than the u.s. dollar , on the period-to-period performance results . the estimate impact of foreign currency translation is calculated as the difference between the prior period results multiplied by the average foreign currency exchange rates in the current period and the prior period results multiplied by the average foreign currency rates in the prior period . non-gaap measures in the accompanying analysis of financial information , we sometimes use information derived from consolidated and segment financial information that is not presented in our financial statements and prepared in accordance with gaap . certain of these measures are considered “ non-gaap financial measures ” under the sec rules . specifically , we have referred to : · segment operating income ( loss ) · total segment operating income ( loss ) · adjusted ebitda · adjusted segment ebitda · total adjusted segment ebitda · adjusted ebitda margin · adjusted segment ebitda margin · adjusted net income · adjusted earnings per diluted share we define segment operating income ( loss ) as a segment 's share of consolidated operating income ( loss ) . we define total segment operating income ( loss ) as the total of segment operating income ( loss ) for all segments , which excludes unallocated corporate expenses . we use segment operating income ( loss ) for the purpose of calculating adjusted segment ebitda . we define adjusted ebitda as consolidated net income ( loss ) before income tax provision , other non-operating income ( expense ) , depreciation , amortization of intangible assets , remeasurement of acquisition-related contingent consideration , special charges , goodwill impairment charges and losses on early extinguishment of debt . we define adjusted segment ebitda as a segment 's share of consolidated operating income ( loss ) before depreciation , amortization of intangible assets , remeasurement of acquisition-related contingent consideration , special charges and goodwill impairment charges . we define total adjusted segment ebitda as the total of adjusted segment ebitda for all segments , which excludes unallocated corporate expenses . we define adjusted ebitda margin as adjusted ebitda as a percentage of total revenues . we define adjusted segment ebitda margin as adjusted segment ebitda as 36 a percentage of a segment 's share of revenue . we use adjusted segment ebitda to internally evaluate the financial performance of our segments because we believe it is a useful supplemental measure which reflects current core o perating performance and provides an indicator of the segment 's ability to generate cash . we also believe that these measures , when considered together with our gaap financial results , provide management and investors with a more complete understanding of our operating results , including underlying trends , by excluding the effects of remeasurement of acquisition-related contingent consideration , special charges and goodwill impairment charges . in addition , ebitda is a common alternative measure of operating performance used by many of our competitors . it is used by investors , financial analysts , rating agencies and others to value and compare the financial performance of companies in our industry . therefore , we also believe that these measures , considered al ong with corresponding gaap measures , provide management and investors with additional information for comparison of our operating results to the operating results of other companies . we define adjusted net income and adjusted earnings per diluted share ( “ adjusted eps ” ) as net income ( loss ) and earnings per diluted share , respectively , excluding the impact of remeasurement of acquisition-related contingent consideration , special charges , goodwill impairment charges and losses on early extinguishment of debt . we use adjusted net income for the purpose of calculating adjusted eps . management uses adjusted eps to assess total company operating performance on a consistent basis . we believe that this measure , when considered together with our gaap financial results , provides management and investors with a more complete understanding of our business operating results , including underlying trends , by excluding the effects of the remeasurement of acquisition-related contingent consideration , special charges , goodwill impairment charges and losses on early extinguishment of debt . non-gaap financial measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies . non-gaap financial measures should be considered in addition to , but not as a substitute for or superior to , the information contained in our consolidated statements of comprehensive income . reconciliations of gaap to non-gaap financial measures are included elsewhere in this filing . full year 2015 executive highlights financial highlights replace_table_token_7_th ( 1 ) excluded from non-gaap measures . story_separator_special_tag revenues revenues increased $ 22.9 million , or 1.3 % to from 2014 to 2015. revenues increased $ 72.0 million , or 4.1 % , excluding a 2.8 % estimated negative impact from foreign currency translation . a prior year acquisition contributed $ 7.4 million of the year-over-year growth . the remaining increase in revenues primarily resulted from higher demand for north america distressed engagements in our corporate finance segment , partially offset by reduced demand for cross-border investigations and financial services litigations in our technology segment . special charges there were no special charges for the year ended december 31 , 2015. special charges for the year ended december 31 , 2014 were $ 16.3 million . see “ special charges ” in “ item 6 . – selected financial information ” for an expanded discussion . 37 adjusted ebi tda adjusted ebitda decreased $ 4.8 million , or 2.3 % , from 2014 to 2015. adjusted editda decreased $ 2.2 million , or 1.1 % , excluding a 1.2 % estimated negative impact from foreign currency translation . adjusted ebitda was unfavorably impacted by underutilization with increased billable headcount in the forensics and litigation consulting segment , and lower demand in our technology segment , partially offset by improved demand for restructuring services at higher realized prices in our corporate finance & restructuring segment . loss on early extinguishment of debt in order to more effectively utilize the company 's growing cash balances , maintain financial flexibility and reduce interest expense , we retired $ 400 million principal amount of 6 ¾ % senior notes due in 2020 ( the “ 2020 notes ” ) during 2015. we recognized a $ 19.6 million loss on early extinguishment of debt for 2015 , consisting primarily of a redemption premium of $ 14.3 million and a $ 4.9 million non-cash write-off of unamortized deferred financing costs . the impact of early extinguishment of debt is excluded from calculation of adjusted ebitda . net income net income increased $ 7.2 million , or 12.3 % from 2014 to 2015. this increase was driven by the business results described above , as well as lower interest expense due to the debt restructuring completed in the third quarter , and lower income tax expense due to the mix of earnings in the current year and a $ 4.6 million charge for a valuation reserve on deferred tax assets related to net operating losses in the company 's australia business which was recorded in 2014. partially offsetting these increases was the $ 11.9 million loss on early extinguishment of debt ( net of taxes ) that was recorded in the third quarter of 2015. earnings ( loss ) per diluted share and adjusted earnings per share earnings per diluted share increased $ 0.14 to $ 1.58 in 2015 compared to $ 1.44 in 2014. adjusted earnings per diluted share , which excludes the impact of special charges , loss on early extinguishment of debt , and the remeasurement of acquisition-related contingent consideration , increased $ 0.20 to $ 1.84 in 2015 compared to $ 1.64 in 2014. liquidity & capital allocation cash balances decreased by $ 133.9 million , or 47.2 % , to $ 149.8 million for the year ended december 31 , 2015. cash provided by operating activities increased $ 4.5 million to $ 139.9 million in 2015 as compared to $ 135.4 million in 2014. the increase was primarily due to lower forgivable loan funding , higher cash collections , lower payments for income taxes and other operating expenses partially offset by increased payments for compensation in the year ended december 31 , 2015. days sales outstanding ( “ dso ” ) at december 31 , 2015 was 97 days unchanged from dso at december 31 , 2014. dso is a measure used to assess how quickly revenues are collected by the company . we calculate dso at the end of each reporting period by dividing net accounts receivable reduced by billings in excess of services provided , by revenue for the quarter , adjusted for changes in foreign exchange rates . we multiply the result by the number of days in the quarter . during the third quarter of 2015 , we purchased $ 192.9 million of the 2020 notes through a tender offer and redeemed $ 207.1 million of the 2020 notes for a total of $ 414.7 million using $ 164.7 million of cash on hand and $ 250 million of borrowings under our senior bank credit facility . subsequent to the debt tender offer and redemption , we repaid $ 50 million of the borrowings under our senior bank credit facility . in addition , we repaid the final $ 11.0 million in notes payable to former shareholders of acquired businesses in 2015. financing activities in 2015 also included the repurchase and retirement of 764,545 shares of our common stock for an average price per share of $ 34.68 , at a total cost of $ 26.5 million . our board of directors authorized a stock repurchase program of up to $ 50 million at any time prior to may 5 , 2016. as of december 31 , 2015 , we have $ 23.5 million available under this program to purchase additional shares . strategic initiatives as a result of an ongoing strategic review of the technology segment , the company has taken actions to realign its workforce to address current business demands and position itself for future growth . these actions include the termination of approximately 50 employees , representing approximately 10 % of the segment 's current workforce . we estimate the impact of these actions will result in a pre-tax income charge of approximately $ 4.5 million to $ 5.5 million , which will be recorded as a special charge in the first quarter of 2016 .
| as a result , the effective tax rates for the adjustments related to the remeasurement of acquisition-related contingent consideration for the years ended december 31 , 2015 , 2014 and 2013 were 40.0 % , 36.9 % and 11.1 % , respectively . the tax expense related to the adjustments related to the remeasurement of acquisition-related contingent consideration for the years ended december 31 , 2015 , 2014 and 2013 were $ 0.7 million or $ 0.02 impact on diluted earnings per share , $ 1.0 million or $ 0.02 impact on diluted earnings per share and $ 1.5 million or $ 0.04 impact on diluted earnings per share respectively . ( 5 ) for the year ended december 31 , 2013 , the company reported a net loss . for the period , the basic weighted average common shares outstanding equals the diluted weighted average common shares outstanding for purposes of calculating gaap earnings per share because potentially dilutive securities would be antidilutive . for non-gaap purposes , the per share and share amounts presented herein reflect the impact of the inclusion of share-based awards and convertible notes that are considered dilutive based on the impact of the add backs included in adjusted net income above . year ended december 31 , 2015 compared to december 31 , 2014 revenues and operating income see “ segment results ” for an expanded discussion of revenue and adjusted segment ebitda . special charges there were no special charges for the year ended december 31 , 2015. special charges for the year ended december 31 , 2014 were $ 16.3 million . see “ special charges ” in item 6 – selected financial information for an expanded disclosure . 44 the following table details the speci al charges by segment . replace_table_token_12_th unallocated corporate expenses unallocated corporate expenses decreased $ 19.2 million , or 19.1 % , to $ 81.3 million in 2015 from $ 100.5 million in 2014. excluding the impact of special charges of $ 15.9 million recorded in 2014 , unallocated corporate expenses decreased $ 3.3 million in 2015 , or 3.9 % . the
| 13,577 |
in an effort to facilitate the growth of our china operation , the company established a new chinese entity in october 2011 that allow s the company to provide services competitively to the domestic market in china and in fiscal year 2015 expanded the company 's manufacturing facility . the company expects the china operation to continue to grow despite increasing costs of operation . the company 's international footprint provides our customers with flexibility within the company to manufacture in china , mexico , vietnam or the u.s. we believe this strategy will continue to serve the company well as its customers continuously evaluate their supply chain strategies . revenues in fiscal year 2016 increased compared to the same period in the prior year . the increase was the result of sales to existing customers , new customers and from new programs with various customers . however , the company experienced a decrease in revenue in the second half of fiscal year 2016 compared to the first six months of fiscal year 2016 . the company believes the decrease is the result of the continuing stagnant global economy . the company remains optimistic , however , that full-year revenues in fiscal year 2017 will continue to increase . critical accounting policies : management estimates and uncertainties - the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the united states of america ( “ gaap ” ) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period . significant estimates made in preparing the consolidated financial statements include depreciation and amortization periods , the allowance for 20 doubtful accounts , reserves for inventory and valuation of long-lived assets . actual results could materially differ from these estimates . revenue recognition - revenues from sales of the company 's electronic manufacturing services business are recognized when the finished good product is shipped to the customer . in general , and except for consignment inventory , it is the company 's policy to recognize reve nue and related costs when the finished goods have been shipped from its facilities , which is also the same point that title passes under the terms of the purchase order . finished goods inventory for certain customers is shipped from the company to an independent warehouse for storage or shipped directly to the customer and stored in a segregated part of the customer 's own facility . upon the customer 's request for finished goods inventory , the inventory is shipped to the customer if the inventory was stored off-site , or transferred from the segregated part of the cust omer 's facility for consumption or use by the customer . the company recognizes revenue upon such shipment or transfer . the company does not earn a fee for such arrangements . the company from time to time may ship finished goods from its facilities , which is also the same point that title passes under the terms of the purchase order , and invoice the customer at the end of the calendar month . this is done only in special circumstances to accommodate a specific customer . further , from time to time customers request the company hold finished goods after they have been invoiced to consolidate finished goods for shipping purposes . the company generally provides a warranty for workmanship , unless the assembly was designed by the company , in which case it warrants assembly/design . the company does not have any installation , acceptance or sales incentives ( although the company has negotiated longer warranty terms in certain instances ) . the company assembles and tests assemblies based on customers ' specifications . historically , the amount of returns for workmanship issues has been de minimis under the company 's standard or extended warranties . inventories - inventories are valued at the lower of cost or market . cost is determined by an average cost method and the company allocates labor and overhead to work-in-process and finished goods . in the event of an inventory write-down , the company records expense to state the inventory at lower of cost or market . the company establishes inventory reserves for valuation , shrinkage , and excess and obsolete inventory . the company records provisions for inventory shrinkage based on historical experience to account for unmeasured usage or loss . actual results differing from these estimates could significantly affect the company 's inventories and cost of products sold . the company records provisions for excess and obsolete inventories for the difference between the cost of inventory and its estimated realizable value based on assumptions about future product demand and market conditions . for convenience , the company reduces inventory cost through a contra asset rather than through a new cost basis . upon a subsequent sale or disposal of the impaired inventory , the corresponding reserve is relieved to ensure the cost basis of the inventory reflects any reductions . actual product demand or market conditions could be different than that projected by management . goodwill - goodwill represents the purchase price in excess of the fair value of assets acquired in business combinations . financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) 350 , “ goodwill and other intangible assets , ” requires the company to assess goodwill and other indefinite-lived intangible assets for impairment at least annually in the absence of an indicator of possible impairment and immediately upon an indicator of possible impairment . t he company is permitted the option to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the fair value of any reporting unit is less than its corresponding carrying value . story_separator_special_tag if , after assessing the totality of events and circumstances , the company concludes that it is not more likely than not that the fair value of any reporting unit is less than its corresponding carrying value , then the company is not required to take further action . however , if the company concludes otherwise , then it is required to perform a quantitative impairment test , including computing the fair value of the reporting unit and comparing that value to its carrying value . if the fair value is less than its carrying value , a second step of the test is required to determine if recorded goodwill is impaired . the company also has the option to bypass the qualitative assessment for goodwill in any period and proceed directly to performing the quantitative impairment test . the company will be able to resume performing the qualitative assessment in any subsequent period . the company performed its annual goodwill impairment test as of february 1 , 201 6 and determined no impairment existed as of that date . intangible assets - intangible assets are comprised of finite life intangible assets including patents , trade names , backlog , non-compete agreements , and customer relationships . finite life intangible assets are amortized on a straight line basis over their estimated useful lives of 5 years for patents , 20 years for trade 21 names , 1 year for backlog and 7 years for non-compete agreements except for customer relationships which are amortized on an accelerated basis over their estimated useful life of 15 years . impairment of long-lived assets - the company reviews long-lived assets , including amortizable intangible assets , for impairment . property , machinery and equipment and finite life intangible assets are reviewed whenever events or changes in circumstances occur that indicate possible impairment . if events or changes in circumstances occur that indicate possible impairment , the company 's impairment review is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of its assets and liabilities . this analysis requires management judgment with respect to changes in technology , the continued success of product lines , and future volume , revenue and expense growth rates . the company conducts annual reviews for idle and underutilized equipment , and reviews business plans for possible impairment . impairment occurs when the carrying value of the assets exceeds the future undiscounted cash flows expected to be earned by the use of the asset group . when impairment is indicated , the estimated future cash flows are then discounted to determine the estimated fair value of the asset or asset group and an impairment charge is recorded for the difference between the carrying value and the estimated fair value . as of april 3 0 , 2016 , there were no indicators of possible impairment of long-lived assets . income tax - the company 's income tax expense , deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management 's best assessment of estimated future taxes to be paid . the company is subject to income taxes in both the u.s. and several foreign jurisdictions . significant judgments and estimates by management are required in determining the consolidated income tax expense assessment . deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bas i s of assets and liabilities , and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse . in evaluating the company 's ability to recover its deferred tax assets within the jurisdiction from which they arise , the company considers all available positive and negative evidence , including scheduled reversals of deferred tax liabilities , projected future taxable income , tax planning strategies and recent financial operations . in projecting future taxable income , the company begins with historical results and changes in accounting policies , and incorporates assumptions including the amount of future state , federal and foreign pre-tax operating income , the reversal of temporary differences , and the implementation of feasible and prudent tax planning strategies . these assumptions require significant judgment and estimates by management about the forecasts of future taxable income and are consistent with the plans and estimates the company uses to manage the underlying businesses . in evaluating the objective evidence that historical results provide , the company considers three years of cumulative operating income and or loss . valuation allowances are established when necessary to reduce deferred income tax assets to an amount more likely than not to be realized . the calculation of the company 's tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across its global operations . changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future . management is not aware of any such changes that would have a material effect on the company 's results of operations , cash flows or financial position . a tax benefit from an uncertain tax position may only be recognized when it is more likely than not that the position will be sustained upon examination , including resolutions of any related appeals or litigation processes , based on the technical merits . the company adjusts its tax liabilities when its judgment changes as a result of the evaluation of new information not previously available . due to the complexity of some of these uncertainties , the ultimate resolution may result in a payment that is materially different from its current estimate of the tax liabilities . these differences will be reflected as increases or decreases to income tax expense in the period in which they are determined . reclassifications - certain reclassifications have been made to the previously reported 2015 financial statements to conform to the 2016 presentation .
| the decrease in the effective rate for the year ended april 30 , 2016 is primarily due to the u.s. tax impact of 25 foreign dividends recognized in the prior year . in addition , t he company recognized higher pretax income in the u.s. in the current year and lower pretax income in mexico compared to the prior year as a result of the filing of an application for an advanced pricing agreement with the mexican tax authorities in december 2015. the agreement is effective for fiscal years beginning with fiscal year 2016 and ending with fiscal year 2019 . the company reported net income of $ 2,082,659 in fiscal year 201 6 compared to $ 9 03 , 412 for fiscal year 201 5 . basic and diluted earnings per share for fiscal year 201 6 were $ 0.5 0 and $ 0 . 49 , respectively , compared to basic and diluted earnings per share of $ 0 . 22 each , for the year ended april 30 , 201 5 . liquidity and capital resources : operating activities . cash flow provided by operating activities was $ 13,130,447 for the fiscal year ended april 30 , 201 6 compared to cash flow used in operating activities of $ 2 , 908 , 494 for the prior fiscal year . cash flow provided by operating activities was primarily the result of net income , the non-cash effects of depreciation and amortization , a decrease in accounts receivable and inventory and an increase in accounts payable and accrued expenses . net cash provided by operations was partially offset by an increase in income tax receivable . cash flow used in operating activities was $ 2 , 908 , 494 for the fiscal year ended april 30 , 201 5 . cash flow used in operating activities was primarily the result of increased inventories and accounts receivable and a decrease in accrued expenses and wages . net cash used in operating activities was partially offset by the result of net income adjusted
| 13,578 |
34 the fund management company serves as the general partner of beijing hongyuan recycling energy investment center , llp ( the “ hyref fund ” ) , a limited liability partnership established on july 18 , 2013 in beijing . the fund management company made an initial capital contribution of rmb 5 million ( $ 830,000 ) to the hyref fund . an initial total amount of rmb 460 million ( $ 75 million ) has been fully subscribed by all partners for the hyref fund . the hyref fund has three limited partners : ( 1 ) china orient asset management co. , ltd. , which made an initial capital contribution of rmb 280 million ( $ 46.67 million ) to the hyref fund and is a preferred limited partner ; ( 2 ) hongyuan huifu , which made an initial capital contribution of rmb 100 million ( $ 16.67 million ) to the hyref fund and is an ordinary limited partner ; and ( 3 ) the company 's wholly-owned subsidiary , xi'an tch , which made an initial capital contribution of rmb 75 million ( $ 12.5 million ) to the hyref fund and is a secondary limited partner . the term of the hyref fund 's partnership is six ( 6 ) years from the date of its establishment , expiring on july 18 , 2019. the term is three ( 3 ) years from the date of contribution for the preferred limited partner , or four ( 4 ) years from the date of contribution for the ordinary limited partner . the total size of the hyref fund is rmb 460 million ( $ 75 million ) . the hyref fund was formed for the purpose of investing in xi'an zhonghong new energy technology co. , ltd. , a 90 % owned subsidiary of xi'an tch , for the construction of two coke dry quenching ( “ cdq ” ) whpg stations with jiangsu tianyu energy and chemical group co. , ltd. ( “ tianyu ” ) and one cdq whpg station with boxing county chengli gas supply co. , ltd. ( “ chengli ” ) . erdos tch – joint venture on april 14 , 2009 , the company formed erdos tch as a joint venture ( the “ jv ” ) with erdos metallurgy co. , ltd. ( “ erdos ” ) to recycle waste heat from erdos ' metal refining plants to generate power and steam to be sold back to erdos . the jv has a term of twenty ( 20 ) years with a total investment for the project estimated at $ 79 million ( rmb 500 million ) and an initial investment of $ 17.55 million ( rmb 120 million ) . erdos contributed 7 % of the total investment for the project , and xi'an tch contributed 93 % . according to xi'an tch and erdos ' agreement on profit distribution , xi'an tch and erdos will receive 80 % and 20 % , respectively , of the profit from the jv until xi'an tch receives the complete return of its investment . xi'an tch and erdos will then receive 60 % and 40 % , respectively , of the profit from the jv . on june 15 , 2013 , xi'an tch and erdos entered into a share transfer agreement , pursuant to which erdos transferred and sold its 7 % ownership interest in the jv to xi'an tch for $ 1.29 million ( rmb 8 million ) , plus certain accumulated profits as described below . xi'an tch paid the $ 1.29 million in july 2013 and , as a result , became the sole shareholder of the jv . in addition , xi'an tch is required to pay erdos accumulated profits from inception up to june 30 , 2013 in accordance with the supplementary agreement entered on august 6 , 2013. in august 2013 , xi'an tch paid 20 % of the accumulated profit ( calculated under prc gaap ) of $ 226,000 to erdos . the jv currently has two power generation systems in phase i with a total of 18mw power capacity , and three power generation systems in phase ii with a total of 27mw power capacity . shanxi datong coal group power generation projects in february 2011 , xi'an tch entered into an agreement with shanxi datong coal group steel co. , ltd ( “ shanxi datong ” ) to recycle gas and steam from groups of blast-furnaces and converters at shanxi datong 's metal refining plants to generate power and pursuant to which xi'an tch agreed to install two 3mw bprt systems , and one 15mw wgpg system with a total of 21mw power capacity for an estimated total investment of $ 28.6 million ( rmb 180 million ) . in june 2013 , the two 3mw bprt power generation systems were completed . the lease term is thirty ( 30 ) years , during which time shanxi datong will pay a service fee to xi'an tch . the service fee is based on an average of 8,000 electricity-generating hours per year and $ 0.05 ( rmb 0.33 ) per kilowatt hour ( “ kwh ” ) for the first five ( 5 ) years from the completion of each power generation station . for each of the leases , at the 6th , 11th and 21st year anniversary of the date of the lease , the rates will change to rmb 0.3 kwh , 0.27 kwh and 0.25 kwh , respectively . on june 10 , 2013 , xi'an tch and shanxi datong entered into a supplemental agreement relating to the minimum service fee . the minimum service fee per month for the first five ( 5 ) years is $ 0.19 million ( rmb 1.2 million ) , $ 0.18 million ( rmb 1.1 million ) for the second five ( 5 ) years , $ 0.16 million ( rmb 1.0 million ) for the following ten ( 10 ) years and $ 0.15 million ( rmb 0.9 million ) for the last ten ( 10 ) years . story_separator_special_tag after thirty ( 30 ) years , the units will be transferred to shanxi datong at no additional charge . as of december 31 , 2014 , the company had construction in progress of $ 18.43 million for the remaining shanxi datong coal group power generation project and is committed to paying an additional $ 2.45 million . 35 shenqiu yuneng biomass power generation projects on may 25 , 2011 , xi'an tch entered into a letter of intent with shenqiu yuneng thermal power co. , ltd. ( “ shenqiu ” ) to reconstruct and transform a thermal power generation system owned by shenqiu into a 75t/h bmpg system for $ 3.57 million ( rmb 22.5 million ) . the project commenced in june 2011 and was completed in the third quarter of 2011. on september 28 , 2011 , xi'an tch entered into a biomass power generation asset transfer agreement with shenqiu ( the “ shenqiu transfer agreement ” ) . pursuant to the shenqiu transfer agreement , shenqiu sold xi'an tch a set of 12 mw bmpg systems ( after xi'an tch converted the system for bmpg purposes ) . as consideration for the bmpg systems , xi'an tch agreed to pay shenqiu $ 10.94 million ( rmb 70 million ) in cash in three installments within six ( 6 ) months upon the transfer of ownership of the systems . by the end of 2012 , all of the consideration was paid . on september 28 , 2011 , xi'an tch and shenqiu also entered into a biomass power generation project lease agreement ( the “ 2011 shenqiu lease ” ) . under the 2011 shenqiu lease , xi'an tch agreed to lease a set of 12mw bmpg systems to shenqiu at a monthly rental rate of $ 286,000 ( rmb 1.8 million ) for eleven ( 11 ) years . upon expiration of the 2011 shenqiu lease , ownership of this system will be transferred from xi'an tch to shenqiu at no additional cost . in connection with the 2011 shenqiu lease , shenqiu paid one ( 1 ) month 's rent as a security deposit to xi'an tch , in addition to providing personal guarantees . on october 8 , 2012 , xi'an tch entered into a letter of intent for technical reformation of shenqiu project phase ii with shenqiu for technical reformation to enlarge the capacity of the shenqiu project phase i ( the “ shenqiu phase ii project ” ) . the technical reformation involved the construction of another 12mw bmpg system . after the reformation , the generation capacity of the power plant increased to 24mw . the project commenced on october 25 , 2012 and was completed during the first quarter of 2013. the total cost of the project was $ 11.1 million ( rmb 68 million ) . on march 30 , 2013 , xi'an tch and shenqiu entered into a bmpg project lease agreement ( the “ 2013 shenqiu lease ” ) . under the 2013 shenqiu lease , xi'an tch agreed to lease the second set of 12mw bmpg systems to shenqiu for $ 239,000 ( rmb 1.5 million ) per month for nine and half ( 9.5 ) years . when the 2013 shenqiu lease expires , ownership of this system will be transferred from xi'an tch to shenqiu at no additional cost . pucheng biomass power generation projects on september 11 , 2013 , xi'an tch entered into a biomass power generation asset transfer agreement ( the “ pucheng transfer agreement ” ) with pucheng xin heng yuan biomass power generation corporation ( “ pucheng ” ) , a limited liability company incorporated in china . the pucheng transfer agreement provided for the sale by pucheng to xi'an tch of a set of 12mw bmpg systems with completion of system transformation for a purchase price of rmb 100 million ( $ 16.48 million ) in the form of 8,766,547 shares of common stock of the company at the price of $ 1.87 per share . also on september 11 , 2013 , xi'an tch also entered into a biomass power generation project lease agreement with pucheng ( the “ pucheng lease ” ) . under the pucheng lease , xi'an tch will lease this same set of 12mw bmpg system to pucheng , and combine this lease with the lease for the 12mw bmpg station of pucheng phase i project , under a single lease to pucheng for rmb 3.8 million ( $ 0.63 million ) per month ( the “ pucheng phase ii project ” ) . the term for the combined lease is from september 2013 to june 2025. the lease agreement for the 12mw station from pucheng phase i project terminated upon the effective date of the pucheng lease . the ownership of two 12 mw bmpg systems will be transferred to pucheng at no additional charge when the pucheng lease expires . jitie power generation projects in may 2013 , xi'an tch signed a contract with sinosteel jilin ferroalloys co. , ltd. ( “ jitie ” ) to build furnace gas whpg systems for electricity generation from recycled heat and steam from groups of ferroalloy furnaces and electric furnaces ( the “ jitie project ” ) . according to the contract , xi'an tch will install a 7.5 mw and a 3 mw turbine power generation system with a total of 10.5 mw power capacity for an estimated total investment of $ 9.71 million ( rmb 60 million ) . the lease term is twenty-four ( 24 ) years . during the term of this lease , jitie will pay service fees to xi'an tch based on the actual generating capacity with a minimum service fee per month of $ 300,000 ( rmb 1.8 million ) . xi'an tch will be responsible for the systems operation and will own the power generation systems . in december 2013 , the jitie project was completed and began operations .
| this decrease was mainly due to only sales of the yida project for the year ended december 31 , 2014 , in comparison to the comparable period in 2013 when the shenqiu phase ii project , shanxi datong phase i project , the pucheng biomass phase ii project , and the jitie project were sold . gross profit . gross profit was $ 5.07 million for the year ended december 31 , 2014 , compared to $ 15.35 million for the comparable period of 2013 , representing a blended gross margin of 26 % and 24 % for the comparable period of 2014 and 2013 , respectively . interest income on sales-type leases . interest income on sales-type leases for the year ended december 31 , 2014 was $ 26.46 million , a $ 7.11 million increase from $ 19.34 million for the comparable period of 2013. this increase was primarily due to a greater number of sales-type leases in the comparable period of 2014. during the year ended december 31 , 2014 , interest income was derived from the following sixteen ( 16 ) sales-type leases : i. one ( 1 ) trt system to zhangzhi ( 13 years ) , sold and terminated on september 24 , 2014 ; ii . one ( 1 ) chpg system to jing yang shengwei ( 5 years ) , expired on june 30 , 2014 ; iii . two ( 2 ) bmpg systems to pucheng phase i and ii ( 15 and 11.9 years , respectively ) ; iv . one ( 1 ) bmpg system to shenqiu phase i ( 11 years ) ; v. one ( 1 ) bmpg system to shenqiu phase ii ( 9.5 years ) ; vi . five ( 5 ) power and steam generating systems to erdos ( 20 years ) ; vii . one ( 1 ) whpg system to zhongbao ( 9 years ) , sold and terminated on december 22 , 2014 ; viii . one ( 1 ) whpg system to jitie ( 24 years ) ; ix . two ( 2 ) bprt systems to shanxi datong ( 30 years ) ; and x. one ( 1 ) wgpg system to yida ( 15 years ) . in comparison , during the comparable period of 2013 , interest income was derived from fifteen ( 15 ) systems : one ( 1 ) trt system , two ( 2 ) chpg systems , two ( 2 ) systems for the erdos
| 13,579 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.